Autonomous corporation “The DAO” has become the biggest crowdfunded project
techcrunch.com
techcrunch.com
Secondly, everyone can withdraw their funds from the DAO before any funds are sent to projects. Many have invested because those who invested early make money from those investing later, since the number of "DAO tokens" you get per "ETH" has gone down over time. (cough pyramid cough)
I you tried to sell all Apple stock in a single day it would also sell at well below market rate- Does that mean Apple is worth less than its market cap?
That said, I personally have not invested/speculated in the DAO because I just don't see it as a good opportunity.
Yes.
With Apple, there's intrinsic value to consider. And frankly, if you sold enough Apple stock for it to go down 50%, I'd personally start buying. I doubt that's the case for ETH, where there's only early adopters buying it hoping to strike it rich.
Costs about 16% APR to borrow ETH for shorting on Bitfinex right now. So if you're expecting a >=90% crash in the next ~5 years you'd still make a profit.
So I don't really see your point by comparing it to Apple as it's not the same at all. It's not equivalent to cash or public stocks but that doesn't mean it's not a worthy investment to make for someone interested in the technology or potential in Ethereum.
What the currency needs is something of tangible value underpinning it and this project seems like a good way to add real value to back up the currency. It could potentially result in some successful businesses and projects which would compensate early adopters at a higher level both in the value of ETH and in dividends.
But I don't believe there is any doubt that this is speculative. I visited /r/ethereum the other day and someone asked why they backed DAO and a common reply was "I wanted to support this new technology as much as seeing it as a possible investment opportunity for financial return".
It's high-risk speculative investments but also a group of people who are interested in the idea itself and are willing to invest money at a potential loss in the process. Just like any startup founder.
That's where the pyramid/ponzi/bubble comparison comes in. There's no actual value (yet?); the adopters would have to keep buying more to keep the price up and to keep the "value" of their holdings high. Not because it's so useful; just financial incentives.
That's a logical fallacy. As a Ponzi scheme is not the only way, nor the best way, to add value to the investment. So I don't think that fairly represents the market incentives that exist for the early adopters. Especially given the context of it's creation and the community of early adopters around it.
As I mentioned in my comment above, they are incentivized to have the project produce real tangible value if a) they are interested in seeing the technology succeed and b) they want returns on investment via dividends, which is typically the premise of a longer-term investment.
Even if a percentage of investors don't fit that criteria, I highly doubt they represent the majority. It would only require is a sufficient enough sized majority of well-intentioned investors to keep the project operational.
I'm not convinced the only way it could generate returns - and more generally prevent a drop in value - is by continually adding more investors. I expect they will put in some real effort to make it work as a functioning economic entity.
Actually, more was sold during this period. In just the last 24 hours on Poloniex, the volume was 20 million USD.
Well, it means you need to specify what you're talking about when you're talking about a company's "worth." Any time I read something like "public company X is worth Y dollars," I do look closely to see if they're talking about market cap.
You are describing a takeover. These commonly come with control premiums [1], not discounts.
Liquidity does not proceed across time and size preferences continuously, or even monotonously. Between a small block sold in minutes and an entire company sold in months, the time component of the liquidity surface tends to dominate the size component.
So you could sell $120 million in Ether in 4-5 days also using OTC exchanges.
I've had worse liquidity on penny stocks and the options market, so you'll have to drop the meme. Cryptocurrencies are liquid enough and they continue to attract more and more liquidity.
I like your comparison to penny stocks.
All votes are managed by a program written in EVM code, which runs on a sort of "virtual computer" that is designed to be (in theory) 100% secure, 100% reliable, and 100% incontrovertible. No middlemen have any control over this program, it essentially completely outside of any human control (beyond the voting rules encoded within it.)
UPDATE: Apparently this morning it passed $120 million and is now the largest crowdfunded project in history.
Don't forget that the stock market is the original mass-crowdfunded project. Anyone can become an owner if you go to a brokerage account, and ownership rights entitles you to a vote for the board of directors and a share of the profits (ie: the dividend)
There's the fact that all the code and mechanisms is public, but that's the part that everybody trusts anyway. When you're a shareholder in Apple, the votes are tallied, all relevant information from the board of directors is published, etc. etc. And the SEC forces the company to publicly disclose financial information in the form of 10k, 8k, and publicly announce insider trades.
At the moment: I don't know who the "insiders" of this company are. Maybe one dude has $50 Million USD and effectively controls the entire damn "movement". Or maybe not. Knowing the identities of large shareholders is a BIG DEAL in public companies.
Still, the digital form probably has some advantages. Maybe future companies will find a compromise and manage to exist as digital contracts akin to this DAO? But I don't expect this first version to actually work. Its pretty much a learning experiment, to see what is and isn't possible with technology.
If any lessons are to be learned from Bitcoin: politics will affect this entity eventually. The technology currently serves as a mask to the politics. But politics always rears its ugly head eventually.
The most popular proposal for The DAO to invest in is actually a German corporation called Slock.it UG: https://www.online-handelsregister.de/handelsregisterauszug/....
I guess it comes down to the question whether one beliefs that mankind is naturally good or bad. As I still believe in the first one I may give this idea a chance. I still have a dream...
Incentives and structures rule all. They're much more powerful than the individual goodness of people, or even their collective goodness.
AFAIK the formal verification mechanism for EVM programs is not yet complete, so that's a risky claim. Not to mention that the people involved are interacting with it using ordinary PCs, so spear-phishing them might be the easiest way to steal the $120m.
Not to mention, there are huge liabilities from a legal/securities perspective.
Now, Nomic can be fun. But a game of Nomic typically ends up with someone winning, not by gradually achieving the intended goals of the game that people wrote into the rules, but by exploiting a major flaw in the ruleset that lets them rewrite the game to be one that they instantly win.
When someone wins at the game of Ethereum, how much of other people's money do they walk away with?
And after reading the article, they aren't a legally recognized corporation.
OR, a corporation is a legal entity formed by a corporate charter that is treated as a person under the law. In any case, whatever these ethereum-based things are, they aren't corporations.
They may end up creating and operating corporations, but DAOs are their own thing.
Sure, if people ever make the rather radical changes to law that would be required for them to create, operate, or even merely passively own shares in corporations, that might be the case.
Lets pretend DAO somehow autonomously filed Articles of Incorporation in DE. What is required by DE? A DE physical address for the corp.; a registered agent located in DE; and a incorporator (doesn't need to be shareholder, but must be an individual). Already we see it is an impossibility for DAO to do this autonomously.
But lets pretend it wasn't impossible, DAO autonomously entered into a Lease, contacted with a registered agent, contracted with a corporate lawyer too be the incorporator and file the Articles. Whats the next step? A bank account, well DAO doesn't have a social security, and doesn't qualify for TIN. The Corp. can't get an EIN, which means it can't open a bank account, which effectively means it can't do business. Well again, lets pretend the DAO C-Corp doesn't need a bank account because well Bitcoin is perfect right? DAO autonomously creates a Bitcoin wallet for the corp and does all business through that, well the company still doesn't have an EIN, which means it won't be able to pay taxes.
Sounds like the ultimate corporation to me.
Until now, corporations have had to spends millions of dollars on accountants and lobbyists to avoid paying taxes. Well, friends ... no more. Because this organization is genetically incapable of paying taxes!
Forgot the Cayman Islands and Nicaragua! Forget double Dutch reverse corporate inverse backdoor Irish LLCs with a post office box in Nevada! Gentlemen, put down your cigars and cognac and get to know your new best friend: little DAO ...
> In February 2004, for example, Formations House created three companies: Corporate Nominees, Legal Nominees, and Professional Nominees. The second company owns the other two, while itself being owned by the first company. The third company is secretary for the other two, while its own secretary is the first company. The second company is director of the other two, while its own director is the first company. These three companies then became directors, secretaries and shareholders of other structures, in an increasingly baffling multidimensional web of crisscrossing lines of control. If you looked for the companies’ real owners, the most you could eventually discover was that the original three all owned, controlled and managed each other.
https://www.theguardian.com/business/2016/apr/19/offshore-ce...
This was fixed in law in 2008 in the UK, but for all I know there are jurisdictions that allow these sorts of shenanigans still.
Just the fact that people put their money together and are acting as a group gives them various legal requirements. The fact that the DAO limits what they can do might interfere with their ability to follow the laws; that does not mean that the laws do not apply. You don't get to throw your hands in the air and say "we cannot pay taxes on our profits, it's physically impossible" when you made it impossible yourself by creating and/or associating with the DAO.
Now code can.
The DAO is a start, code can do everything the DAO does.
A DAO focused on gaining revenue doesn't need to hire people to achieve that.
There a decentralized asset exchanges where other companies have raised capital. A DAO could access those to buy shares completely programmatically, for example. It could trade oil futures till eternity if it wanted. It could create a contract for an agent at a particular address that promises payment for the construction of a robot factory in Shenzen, in that example a human would be the agent on the other side of that address, but the DAO doesn't need to know that.
What if they don't build the robots but instead execute whatever payload the contract anticipates using a laptop?
It could provide the ability to hire marketing services, rent servers, perform accounting and auditing, hire employees, perform security audits, provide legal services, and interface with "real world" legacy companies like manufacturers and shipping services.
This is more like a group of people pooling their money to invest. A savings club. The contract also gives them the right to withdraw their money if they don't like the direction it's headed.
Furthermore it's not a corporation. A "corporation" requires complying with a number of jurisdiction-specific rules (such as filing fees and certain paperwork). If you don't complete the steps, you generally don't have a corporation. In some places you would have a partnership or some other structure that's different from just a group of individuals. The laws differ by jurisdiction.
I did sort of see this coming eventually as Augur, Digix as well as Ethereum itself have been really successful using this method. It's a pretty cool way to fund open source projects and I think with something that incentivizes contributions like Code Valley there will be a boom in these projects.
This fiction starts the autonomous corporation from a vide game. The second book shows society's evolution to cope with the new corporation.
This article reads as though it were a page straight out of Suarez's Daemon series.
At the end of the day a bunch of people bought shares in a company (or did they? Legality is weird) with the special condition that in addition to owning a share of said company they also get to vote on what the company actually does, and even submit proposals for what it should do.
Oh, and they also bought said shares with cryptocurrency. Magic internet money guys!
Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required.
Meanwhile, even though one might assume that the shareholders might be more informed than "the common mob", they might still propose and vote on more misses than, say, a corporation where new products and services are proposed through an informed internal decision making process that ultimately ends in the CEO using the information at his or her disposable to make the final decision. In a good corporation, bad decisions are self-correcting, in some cases leading to such extremes as a leadership shuffle.
By contrast, who's to blame if the DAO votes on a proposal that wound up being a miss? How do they learn from their mistakes so it doesn't happen again?
And I'm sure there are many other issues, but those are at the top of my list. I'd rather a company be run by those most capable, rather than the crowd.
There's more flexibility than traditional structures with concepts like "splits" where if you don't agree with a proposal you can opt to not participate.
It's new ground , has new concepts and it's still evolving. Really interesting stuff.
This stuff is also known as a cooperative, and is a very common concept for democratic companies – almost all housing in europe is owned like this.
Kind of a shame, seems like a nice way to work.
Did you mean social housing rather than housing in general? Because home ownership exceeds 50% in most European countries, just like the US.
Social housing is often managed by cooperatives, but decades of neoliberalist thinking caused a lot of the larger of these cooperatives to invest in boondoggles and grandiose development projects completely unrelated to their core task rather than build more affordable housing. Coupled with the immoral self enrichment of upper management, mentioning European social housing cooperatives may not exactly support the point you are making.
Some or all of the flat owners are directors, and company accounts have to be filed in the usual way.
They're not co-ops in the usual sense, but they're not so different in practice. Obviously these companies aren't run for profit, but it's not unusual for companies to accumulate rainy day reserves and to make a little from interest.
I actually like the notion of grocery stores being run this way, but members participate in a grocery co-op primarily so they can get less expensive organic groceries and even have a say in what the co-op carries. Really it's just buying in bulk with strangers.
But then I look at a corporation where members are ultimately voting on their best idea for making the corporation profitable, and presumably also mixing in ethics as well, that's where things could get hairy.
A regional chain, not national or international, but sizeable.
And it works, mostly because people aren’t members to become rich.
A few years ago the sibling chains in other states (which were organized in the same model) fused into one public corporation, quickly focused on profits, and ended up with corruption, and bankruptcy.
So, we’re not going to focus too much on profit anytime soon.
However, I don't think we should be flippantly dismissing the idea with phrases like "magic internet money", because if it proves itself to be minimally viable, it would really speak to a young demographic of investors who don't trust financial institutions or their products.
Granted, this sort of tool is probably very ill suited for running a large corporation, but it might be ideal for Kickstarter-like organizations who want to fund a series of ideas or companies for equity. Some tasks are better suited for experienced professionals, while other tasks are better suited toward the wisdom of the crowds. (Tasks that great benefit from semi-informed polling)
My best guess is this might become a useful tool for a niche investment market.
The notion of having a very democratically run autonomous corporation seems a bit too far, but I'd be pretty excited to see someone using cryptocurrency to invest and buy shares in a company in a more accessible fashion than what we have now.
In other words, I think cryptocurrency could potentially provide a better alternative than the way the current stock market works, but I don't know if this is necessarily a better alternative.
I'm still not sure if even polling shareholders for product ideas works, unless product proposals are done effectively enough to where shareholders have a very clear vision on what the company is going to do, versus someone saying "So, we have this idea for an IoT product. There's no physical prototype you can hold yet, but here's how we think it'll work".
We will see what the crowd decides.
However, I keep wondering what kind of company would raise funding from DAO? One that can't from anywhere else?
I guess it will be companies tied into the yet to be established ETH ecosystem, that are seen too risky by trad VCs. That will help to kickstart the creation of some ETH companies, but still doesn't solve the general user adoption of ETH, beyond speculators.
Will be interesting to see where the killer use cases are.
This looks rather more like a distributed decision making platform. Say, liquid democracy + ethereum, rather than Accelerando-style "sentient alien corporations".
Noticeably, the DAO does not seem to be able to make any decision, it does things through proposals suggested by people which are voted on.
Still cool anyway.
- The DAO is a tool for people to make decisions collectively, by pooling their resources, voting on activities, and having Ethereum take care of trust issues. This is what you've described.
- Alternatively, The DAO could be described as similar to a computer virus: it tries to survive by spreading into as many systems as possible, using their computational resources to propagate itself further; but crucially its behaviour is completely determined by its code, rather than acting as an interpreter for centrally-issued commands (like, say, a botnet or Seti@Home).
While most computer viruses are parasitic, The DAO could be seen as symbiotic: in return for the resources it uses, it provides the services described above. It could be described as social engineering, like that of the ILOVEYOU virus, although it's not a trick (as far as we know).
In the case of The DAO in particular, the first description probably makes the most sense. However, I'd say Ethereum applications in general are better described by the latter. For example, a gambling application like etheroll could persist completely independently on the network for as long as people are willing to gamble with it, spending part of its commission on resources ("gas").
They're really not legally incorporated anywhere?
Foregoing the limitation of liability that goes along with a corporation seems awfully legally risky -- any of the individual members can be sued, likely succesfully, for something done by the aggregate, with possible damages exceeding their 'investment'.
I'd think you could legally incorporate the thing how they wanted it with few problems, have bylaws saying decisions will be made with blockchain votes or whatever.
I guess the automated "splitting" the corp would be a problem.
Still, I don't think I'd want to be involved in such a thing without legal corporate limited liability protections.
They want to be part of the case law incongruences that will arise to solve disputes. They want to bring this to light so that the legacy system is presented with a better or more efficient way.
Anyway, Slock.it a germany company is managing this asset, their liability is limited.
Also, the individual owners of DAO are not known and are entirely bearer assets. You and I could Shapeshift some bitcoin to Ether right now, exchange for DAO tokens, vote on proposals for the DAO that eventually cause a gigantic oil disaster and whatever unlimited liability a court finds for shareholders will stall forever because they can neither find the shareholder or freeze the assets on the DAO.
If you invested or are thinking of investing ask yourself a few simple questions. Who are the Shareholders/Directors/Officers of this corporation? Do you know what state it is incorporated in or going to be incorporated in?
Just a few buzz words. Decentralized? No shit, any corporation with more than one shareholder is decentralized. Smart contracts? Defined as a self enforcing contract, guess what they don't exist. Autonomous? I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously, because that alone would be an enterprise solution every single corporation in the US would pay top dollar for, because DAO just singlehandedly replaced corporate compliance lawyers and CPAs with code.
Still not convinced and eager to get in on this? Then why not cut out the middle man? Create your own "DAO" as an Investment Club (Corp or LLC) the only issue is you will be capped at 100 members/voters/token holders and $25M in investment. But you will be able to tell people your created your own decentralized corporation every bit as autonomous as DAO, complete with 100 tokens people can buy to become a member/shareholder and use to vote on investment opportunities presented by the DAO or members/shareholders of the DAO.
But instead of telling me my question shows I don't understand, please answer any of the following:
-Are the token holders shareholders?
-If shareholders do the token holders also get to vote for the board, or are their tokens/shares non-voting?
-How many members are on this board? Since it is all autonomous how do you know the DAO has the minimum amount of board members are required by law? If say DAO is a DE corp (min 3 board members) and DE amends the law, how is DAO's code going to keep up?
1. no, but they have a vote and can transfer a token which also represents their vote
2. there is no board
3. there is no board
Is the DAO a legal entity with recognized agents with authority to enter into contracts on its behalf? If not, how can this possibly work?
[0] http://www.coindesk.com/the-dao-just-raised-50-million-but-w...
Edit: Also, do keep in mind that the Contractor would be able to see the contract is in effect by viewing it in the "blockchain". The question is only a matter of real-world enforcement in the specific case of the smart contract criteria not being satisfied at contract completion, due to incorrect/false data inputs to it by people in The DAO.
Sounds to me like DAO.Link (which appears to be an offering of Slock.it) is the actual legal business entity involved, and that the legal basis and enforcement mechanisms for assuring that it acts as expected by the participants of the blockchain-based entities it interacts with is...somewhat murky.
Well, I think we can both see these systems are an attempt to circumvent individuals like yourself (At least partially, some human legal representation will likely still be used.)
Taxi drivers similarly complained a lot about the legality of Uber.
(BTW, my wife is also a corporate lawyer.)
All the questions will_brown asks are simple and straightforward and meaningful for any corporation. They are in some cases murky and/or inapplicable for the DAO, because the DAO is very much unlike a corporation.
Maybe it helps my point, maybe not, but Uber is certainly illegal in many jurisdictions. Take Miami-Dade county, there are 10,000 Uber drivers and nearly 3,000 tickets have been issued ($1,010/ticket) something like $2.9M in fines. Moreover, Uber sends out training for Miami Drivers on how to avoid getting stopped/ticketed/impounded in Miami as an unlicensed ride for hire and when Uber drivers do get ticketed/impounded Uber provides the drivers a lawyer for their case (oddly its their FL corporate lobbyist not a traffic/criminal defense lawyer). Finally, the Miami-Dade ordinance carries a potential penalty of 45 days jail.
Certainly not, I see no evidence that you don't have a strong understanding of the law, far beyond my own.
I guess what I'm saying is that Uber and the DAO both operate in a legal grey zone- And both of them likely have aspects that directly conflict with current law. However, I think it's clear that the legal system is a "living institution" and has been surprisingly welcoming of new innovative business models and technologies recently (as with Uber and things related to the DAO like Bitcoin) and is one of the reasons I still feel relatively optimistic about the future of the US economy.
What made Uber succeed, to a large degree, is that clearly a lot of societal pressure had built up over decades due to poor experiences with the taxi system- I think it's undeniable that this had an influence on the positive legal rulings around Uber, so far as those exist in many parts of the country.
Similarly, alternative governance systems like the DAO will keep appearing and I think eventually are likely to get some support from the existing legal system.
> Take Miami-Dade county...
Yikes! Glad I don't live there anymore, as my lifestyle depends significantly on access to ride sharing services.
What is required to be a corporation is not really a legal gray zone. The DAO doesn't operate in a legal gray zone as to that characterization, its just flat inaccurate.
Insofar as the DAO is a mechanism for constructing contracts between actual legal persons (either natural persons or corporations), it may operate in a poorly-tested area as to whether valid contracts are formed, how those contracts are interpreted and what law they are governed by, and whether and to what extent they are enforceable, true.
Whether or not the DAO meets the definition of a "corporation" doesn't seem like a very interesting question to me, and I think it's too early to know how/if it matters if the legal system uses the word "corporation" to refer to the DAO.
If people want to pool their money in a corporate structure (LLC or partnership) and vote on various investment opportunities, that's great, but its nothing new or paradigm shifting. Corporations without shareholders/owners? Nothing new, but that does not make them autonomous.
This changed in July 2015, when the ethereum network went live.
> I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously
Just wait- It's pretty likely the DAO shareholders will vote to have a contractor produce this information on behalf of the DAO.
> ... for your own "DAO" as an Investment Club
Go for it! An ethereum smart contract would be a great way to implement the operational details for this.
I know the term exists and I know people are operating as though it is a thing. But if you and I enter a contract whether it is a written agreement or a smart contract on Ethereum network, that has no more or less bearing on the legal enforcement in the event of a breach. In either case the non-breaching party must file suit for the breach and there must be a finding of fact, and the smart contract does not replace the fact finder in a court of law any more than a traditional contract.
I know you don't speak on their behalf but DAO has raised $100+M and the answer to a simple tax question is just wait? That is my point, investments are inherently risky, but when the most basic questions regarding operation and governance can't be answered that is a red flag.
These contracts are enforced by math. Breaking them isn't a possibility.
Whether or not The DAO works out or is a scam, I think it's a sign of things to come. We're in the beginning stages of seeing our traditional corporations and nation states morphing into something new and barely recognizable.
Math cannot "enforce" a contract, it can't even understand the terms of the agreement, much less enforce it.
> We're in the beginning stages of seeing our traditional corporations and nation states morphing into something new and barely recognizable.
This kind of hyperbolic nonsense strains credulity.
The future is always hard to believe until it's here.
You can say you disagree and state why. But please don't call me a gullible idiot and then try to dress it up in fancy vocabulary. This kind of reply seems common in your comment history, like you're just generally angry around blockchain threads for some reason.
Can you give hard examples of how enforcement can be done programmatically and mathematically?
For example, I contract you to do X in exchange I will pay $Y and to get things started I give you a 10% down payment. If you don't do X, even in a court of law, it would be extremely rare for a court to order you to do X, rather they will generally order you to return my deposit and any additional damages I can prove as a result of your breach. Explain how the smart contract programatically forces you to do X, or how the smart contract can calculate real world damages above and beyond the 10% deposit? Alternatively, if you do X, but I think its subpar and refuse to pay unless you redue X to my standards, explain how the smart contract can determine who is in breach you for X not being up to standard or me for not paying.
Trust me it sounds great to say math and code enforces a contract and ensures it can't be breached, the point is putting a contact on the block chain may prove the contract exists (though even that is debatable) but it can't self enforce.
More generally in law, almost everyone knows less than 10% of cases go to trial, yes the typically settle, but this is also because when there is no "issue of material facts" a judgment can be awarded without trial, this is almost never the case in breach of contract cases, because there is always a question of fact: was the contract breached or not?
In today's world we rely on kickstarter programs or staff, credit cards and banking. Codified using a smart contract these rules can be executed automatically such that the backers are never at risk. This is what we mean when we say enforcement is automated.
This is a canonical example, as seen here http://ether.fund/contracts/crowdfund
The reason the contract can be enforced is because in many of these smart contracts funds are held in escrow and are transacted only by the distributed app without the requirement or possibility of human involvement.
Also check out Section 1.5(3) in [1].
Not all contracts can be executed and evaluated as smart contracts. The kinds of work agreement contracts you describe wouldn't be a natural fit. Some folks have suggested novel alternatives which could fit into smart contracts such as voting to elect delegates, arbitration courts, reputation systems, etc. when things get fuzzy.
Obviously it's not a 1:1 replacement and I didn't mean to imply that it was.
I just think it could be a mistake to dismiss this technology and the changes that could be coming.
[1] A LAWYER’S INTRODUCTION TO SMART CONTRACTS http://www.crypto-law.com/doc/A%20Lawyer's%20Introduction%20...
Let's pretend the campaign hits its goal and gets all the funding. There are still a number of breaches that can occur after the fact at which point the contract/math/programming is not going to be able to enforce anything one way or the other.
For example, as part of my pledge to the campaign the campaign promised me (and thousands of other backers) prizes. The contract can't do anything to enforce me getting my prize or it can't return my funds because they have been released to to company already. We have seen this time and again where the projects fail and refuse to return the money, the contracts themselves state the backers remedy is at law.
Another example, I pledge $10,000 and funds get released to the campaign, but turns out I am a minor and as such a contract is legally unenforceable against me, not only that it turns out I used my parents credit card without permission, the smart contract isn't going to be of any help here either. Funny enough this only raises another potential breach, bc without my $10k the goal wasn't reached, so some backers now want their money back and others don't, is the campaign in breach if it doesn't return the funds? That is a question of fact for the court not one a smart contract can resolve.
How about if I back something, funds are released, and then I do a charge-back and the CC company reverses the charge, I am likely in breach, but again nothing the smart contract can do about it.
>I just think it could be a mistake to dismiss this technology and the changes that could be coming.
Trust me I have no problem with technology and escrow accounts, they certainly help facilitate the performance contracts. But marketing of "smart contracts" as something self-enforcing based on math and programming? That doesn't exist even in the canonical example of smart contracts.
In my example there wouldn't be any room for a CC chargeback because we can assume all of the transactions are denoted in ETH itself. This is one of the qualities that enable the smart contracts to transact currency automatically. The programming language used to codify the smart contracts includes primitives to transact ETH.
The possibility of a minor transacting is interesting and I know there has been some discussion on implementing an identity framework on Ethereum (https://github.com/tradle/about/wiki/Identity-on-Ethereum). One can imagine then a contract which further limits participants by age.
I think you'll find though that many early adopter/enthusiasts don't care about age or jurisdiction. It's not obvious why US law should apply.
As a thought experiment though, I should ask about the properties which US courts hold that enable them to enforce contracts. Ultimately doesn't it come down to a court order, which if ignored ends in garnishment, imprisonment, or worse?
In theory, in a blockchain-enabled contract world, garnishments would either no longer be necessary or could automatically be enforced.
At the scary extreme you could even imagine a future where security drones owned by the "Sovereign State of Etheria" which fly around enforcing smart contracts with hunt/capture/kill orders. Slock.it is the most popular example bridging the real world/IoT with a DAO. And would this really be altogether different from how contracts are enforced manually in egregious cases?
I'm not stating any of this is good or bad, I'm just illustrating what is possible now and imagining what is conceivably possible in the future. I don't have a position in Ethereum (never owned any) nor The DAO, and I'm certainly not "marketing smart contracts". But you seem to insist that none of this is possible for some reason, and from what I can tell it certainly is.
If my interpretation of anything I've read about the technology is wrong though, I'd appreciate the corrections.
To find some common ground we should be able to agree on: how many contracts end up in litigation because one or both parties misinterpret the language of the agreement? Wouldn't it be desirable if there was a system that left no room for misinterpretation?
What is being automated is the least risky parts of a crowdfunding arrangement (counterparty risk on the part of the crowdfunding company and the bank its client accounts are held with). But the ability of humans to override payments (e.g. if the card was stolen, or the fundraising campaign is judged to be a scam) is a risk mitigation feature rather than a bug of a real world payment system. Guaranteeing one side of a contract is honoured instantly, efficiently and anonymously can actually increase the likelihood of contracts not being honoured in many real world use cases.
That is a tautological statement. Smart contracts are not "enforced" programmatically in any sense of the word that is distinct from all other pieces of software since the rules of all programs are "enforced programmatically" by definition. "These contracts are enforced by math" is a meaningless platitude.
> But please don't call me a gullible idiot and then try to dress it up in fancy vocabulary
I didn't call or imply that you're a gullible idiot. I chose my words for their specific meaning, not for the sake of "fancy vocabulary". I might be mistaken but I think you're misinterpreting the meaning of the phrase "strains credulity", I'm not calling you gullible, I'm saying that your statement invokes feelings of skepticism because it's grandiose, wildly speculative, and generally unsubstantiated.
> The future is always hard to believe until it's here.
Not really. The future is pretty believable most of the time, it's relatively rare to face a paradigm shift that alters our expectations of the future in a fundamental way; most of the time, things move along more or less as expected from an arbitrary point in time (of course, the farther you go in time from a given point, the more unexpected things may become, but they are also exponentially more difficult to predict with any expectations of certitude).
> This kind of reply seems common in your comment history, like you're just generally angry around blockchain threads for some reason.
I won't comment on your assumptions about my emotional state, but I'll say that I think blockchains are a very cool technology (including bitcoin), but I find the excessively bombastic claims about how these technologies are going to alter the course of human history to be absurd and worthy of rebuffing.
Not quite. For example, assuming you accept cryptocurrencies have an actual monetary value, now I can pay any amount of money I want to a "smart contract" that will then proceed to pay that money to whomever solves a mathematical problem of interest to me (for example, I could give it to someone who gives me the cheapest route to visit 50 cities of my choosing, given the point to point cost). Once the contract is defined and created, the following is true: a) I no longer can choose not to pay, even if I change my mind, b) Only someone who solves the problem I posed will be able to claim that payment, and c) They will be able to cash in the prize without ever needing to reveal their identity to me.
Now there is two potential problems with this. First, it might very well be that the kind of "contracts" we care about for running organizations are beyond what can be expressed and enforced by smart-contracts (specially "enforced" in the sense of the example above, versus simply "reported"). Second, the above guarantees hold only as long as the underlying network holds, and that is a social system in the final degree, made of people who can as a whole destroy or subvert it. However, regarding the not-turtles-all-the-way-down argument about the cryptocurrency networks being social systems in the end, well... so is the Internet, the international trade system, the national governments, etc. Smart-contracts are not magic, but they are a different way of organizing resources and bootstrapping trust between parties. Will they eliminate the need for governments and traditional corporations? Probably not. Some people said that about the internet too, and they were, in the short to medium term at least, wrong. But if it has even 1% of the impact in the world the Internet had, well...
I don't see how this project addresses the two main problems that corporations attempt to solve: a lack of complete information about a company of reasonable size, and a coordinating a large number of people who may not want to devote a full-time job to overseeing the company.
I would be much more impressed if they described this as an open-source investment algorithm or something like. Instead, it seems as if they're trying to sell us on the benefits of a corporation to people who think "corporation" means "big, evil company."
Well, the counterargument would be "Because they didn't have computers back then and therefore couldn't develop alternative systems that are better but are impractical to implement manually."
Now the second part I can't vouch for - coordinating a large number of people is hard. But the code for the system is available for inspection. If someone thinks they can come up with a way to align incentives and such so that people cooperate better in the system (quadratic instead of linear voting? vote delegation? temporary dictatorships?) then (I think?) they can submit those as amendments to the system and improve it. I'm really guessing here as I haven't looked into it in that much detail.
What? It's about $200 in Seattle to file to register a Limited Liability Company. It's a stretch to call that 'only the privileged'.
"fund" just means putting some money into a bank account for it. you could fund a company with a dollar (and many people do, for symbolic reasons).
Connotations matter.
believe me when i tell you a huge, huge number of wantrapreneurs never even get around to organizing an LLC and opening a bank account.
want to know why? it takes at least 10 hours of work and when faced with doing 10 hours of actual fucking work, most people won't.
[1] http://www.sec.gov/info/smallbus/secg/accredited-investor-ne...
Now, if you're trying to do something really risky like make a smartphone app, no, you're probably not going to get anywhere with the SBA. They aren't VCs making bets on long-shots. But they are more willing than a bank to work with you and help you get set up.
Step 1: Lobby for laws which allow legally assigning a corporations over to an autonomous system (or, more simply, laws which allow granting legal personhood to an autonomous system.)
Under current laws, I don't think there is any place in the world where this can be done. The creation of a corporation is an act of government (often, but not always, done at the request of a non-government person through a publicly-available application process, but some are directly created by the government on its own initiative.)
The slockit-authored DAO in the article addresses this through two failsafes:
1. Shareholders can vote to split the company in two at any point to extricate their funds from majority control.
2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder.
Whether these safeguards will work remains to be seen.
Consider this obvious attack vector: Let's say today is the last crowdfunding day, and the DAO has raised $150 million so far. A wealthy attacker can immediately put another $150 million, effectively controlling 50% of the voting for the DAO, and then vote to send all the money to his own Ethereum address. This is perfectly possible, since this is all written in Ethereum contracts anyway.
To avoid this, the rest of the people can 'fork' the DAO, effectively leaving the attacker with 100% control over his share of 50%. The attacker gains nothing. The other 'fork' can now continue on.
This forking described above is also going to be used (I think) when it comes to funding new projects. I am sure some people will disagree with some proposal, and they would fork the DAO away to not invest in that proposal even though the majority agreed they would. They are free to do so.
Well, I'm not sure I'd use such absolute language. For one thing, people can still perform a 51% attack and try to influence decisions covertly, without triggering a split.
Also, the spectre of a 51% attack required for some major compromises to be made in the DAO design- Having a company that can arbitrarily split at any moment is likely to have a major impact on the future operations of the DAO.
In terms of the split, if the community broadly agrees that there is an attack, then I don't see it having a long-term detriment. However, as you said, if it is more 'stealthy' then it would be harder to detect and correct.
All that being said, I think there is a theoretical safety mechanism in place. Whether that will work in real life or not, we'll wait and see. I am sure some good lessons will come out of this in either case and the next generation of applications can improve upon some shortcomings.
If there are humans involved that can exercise this level of control over The DAO, is it really autonomous?
As such, I've flagged the post, to avoid contributing to what's turning out to be a free(?) viral marketing campaign.
Am I wrong about the "withdraw" part?
I suspect the contestants will make more money than the Distibuted-Dragons.
And if they all take what's left of their money out again, the code will still exist. Presumably has to be mostly free-software if it's gonna run distributed anyway.
https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-...
My word.