Two Funds, Two Entities

A key differentiator between The LifeDAO and traditional Takaful companies is that there are two independent entities to consider. In the case of traditional Takaful, there is only one entity, the Takaful operator, who represents both themselves and the participants of the Takaful risk fund. The traditional Takaful operator owns and manages all the monies from contributions and participants have no ability to take part in the management of the takaful risk fund.

In the case of The LifeDAO, TLD is an independent entity that is owned and managed by its members. In place of the Takaful operator is the technology services provider, Takadao, a separate entity that works for TLD as a service provider. Membership and ownership in TLD is based on Membership Credits. If an individual owns Membership Credits of TLD, then he is part owner of TLD. In the same way, if an individual owns shares in a company, he is part owner of the company.

To represent their interests, TLD elects Operational Committee Contributors from among its members. TLD members cast votes with each Credit representing one vote. The Committee Contributors are responsible for screening proposals that are subsequently put to a vote by TLD members. In case there are insufficient votes to reach quorum, then the Contributors may vote on behalf of the members.

The monies contributed by members are owned by TLD and held in smart contracts controlled by TLD members through voting. TLD pays Takadao a protocol fee for the use of the smart contracts developed by Takadao. However, TLD is the legal owner of these smart contracts and exercizes control through multisig wallets controlled by Committee Contributors. Takadao will edit and update smart contracts only with the approval of TLD.

By extension, the underwriting surplus, which is the monies left over in the TLD fund after benefits are paid and investment returns realized, is owned by TLD. TLD members have a legal right to these monies which they can claim according to the bylaws of TLD. These interactions are enforced by smart contracts.

The LifeDAO is a not-for-profit organization that engages in voluntary risk sharing among members. The contributions are considered donations for a specific purpose without a commercial interest being exchanged. In addition, the nature of such an arrangement means that Benefit Payouts will always outpace investment returns, so participants of TLD cannot reasonably expect a profit. Hence the use case perfectly fits that of a non-profit organization.

On the other hand, Takadao, the technology services provider, is a for-profit entity that acts as a service provider to The LifeDAO. Takadao is engaged by The LifeDAO and develops, maintains and updates smart contracts on behalf of TLD. Takadao serves at the pleasure of The LifeDAO.