Notes on ConstitutionDAO

it was basically free to set up.

You are very short sighted. Yes, due to current laws and customs, they had to form an LLC as a workaround. But the laws will continue to adapt over time to support DAOs that don't need such workaround.

From the great Daily Gwei newsletter: "To do this sort of capital formation in the traditional finance world, you’d have to use centralized payment processors (who would most likely censor you), it’d be extremely slow, the money raised would be much less and the raise itself would be very exclusionary. You also couldn’t create a DAO out of it and have it be governed by token holders - the traditional system is just not set up to do this in any practical way. ... In saying all of this, it’s not just the rapid capital formation aspect of DAOs that fascinate me - it’s also the rapid social coordination that can form around a common goal. It has a flywheel effect to it too: more capital raised > more social credibility/marketing the DAO obtains > more capital comes in because of that and so on and so forth. This is why ConstitutionDAO has gone from $0 to over $40 million in less than a week - this is really the true power of a global, decentralized and censorship-resistant internet-native economy - built on Ethereum and powered by humans."

If you don't agree or see that this is qualitatively different from "any other fund raiser", I don't know what else to say. What other examples do you have of spinning up $40M in short order for something like this? It's a qualitative difference in speed, scale, decentralization, etc., that will continue to grow. This is just the start.

People could contribute "anonymously" without to go through banks and payment processors. Now eth fees are not that low and transfers not as fast as we want but if we can cut the middle man(banks) I think it's worth it(for some people).

Because the cost of a contract initiation on a DAO is much less than that expensive lawyer you must hire to make that LLC a reality. Your LLC collects the funds but in exchange, you can't issue a security that easily. Selling shares to random online folk isn't easy either. But the most important thing is convincing people. DAOs are now an initiated concept. A centralized version of that needs to emerge again and find its stable model over many years, just like DAOs. This will hopefully happen.

They will just return the eth. People who deposited will need to pay gas fees to claim it back though. And yes the saga definitely isn’t over - there will be many more collective fundraising DAOs going forward!

yea i had the same thought as well. Wondering how that'll pane out since the refunded amount wouldn't be the same as the initial amount they paid due to gas fees.

> 1. I’m concerned with who won this. The game was stacked for the opponent of the DAO who had all of the information. Maybe it’s tinfoil hat but I think there was an ideological battle at hand - the preservation of centralization vs decentralization. Worst yet the DAO lost due to an inherent value it represents: transparency.

There is nothing maliciously being done against a DAO here. It was an auction, the stupidest thing a bidder at an auction can do is announce their maximum bid limit way before an auction take place. That's what happened here, it is a given in any auction that you will either be outbidded if your maximum bid is known or you will be pushed to spend it all, it's a pretty simple game theory setup.

i don’t understand people who will loudly proclaim “x is true” without themselves having any reason to believe x is actually true. but that seemed to be the case just about everywhere. even coindesk — an entity that i’ve considered decently reliable in this space — published their “ConstitutionDAO wins” article before reliable confirmation (since redacted).

i get the pressure for a news outlet to call the shot early, but for everyday twitter/discord users? why propagate beliefs that you yourself haven’t heard from a reliable source? don’t people care that the things they say are actually true?

If you spend any time at all on crypto discord servers you will constantly get commentators saying that any particular project is a rugpull. That is par for the course and the skepticism is justifiable given the track record of frequent scams in this space.

That said I think this is an interesting idea but flawed execution, given that: 1)The most important part of the strategy in an auction is how high to bid (it's almost the only decision you make in the process). If the other side knows your maximum bid but you don't know that info for them you clearly place yourself at a huge disadvantage. A bad actor could bid you up to just below your max price and then stop just to screw you over, so you pay your max for something you would in normal circumstances get much cheaper, or conversely you are guaranteed to lose if someone knows your max and just wants to pay more. They can wait until you bid completely up to your max before putting in their first bid so they are guaranteed to get it very cheaply above your bid assuming noone else is involved. 2)They didn't seem to have much of a plan for success. That's pretty normal in the web3 world in my experience. There's a lot of "let's get there and then see what happens", but I think in this case it would have been great and more in the spirit of DAOs to have a vote and declare ahead of time "if we win we immediately donate it to x museum or whatever" so they don't have to pay for conservation and security.

it was pretty funny to watch.

also a lot of "rugpull" comments are a meme that get repeated in any uncertainty or accident, i spill my coffee "rugged again". in this case the team didn't know who their bidder was until after the auction ended.

They waived the fee.

even if they hadn’t waived the fee as sibling comment points out, check your math: 3% on 50-ish million isn’t $5M.

Did they actually hold $45 million or was it the equivalent in ETH? My understanding at least is it would be hard to turn large amount of ETH into dollars without taking a chunk out of the worth of ETH.

Maybe a nice GoFundMe.

Take a look at any of the defi providers and you'll see that there is a lot of money floating around in pure crypto payment infrastructure. If you're not in the defi world, you could pick https://curve.fi as a good example because you might have heard of uniswap but probably haven't heard of curve. I see on their website that the weekly volume of deposits and withdrawals to their liquidity pools is $7bn. All done on solidity, no direct payments infrastructure at all. If you looked at any of the others (aave, balancer, yearn) you would mostly see a similar story. People who onramp and offramp to fiat currencies and therefore handle real money are actually in the minority.

As a tangential aside we wanted to be able to handle crypto and real money payments for something so actually used stripe for credit cards and "coinbase commerce" who offer a stripe-like slick checkout experience and api for accepting crypto payments. The only real downside to the coinbase checkout that we've found is that the blockchains take long enough to accept transactions and the price fluctuates enough that you constantly get people under or overpaying by very small amounts that are expensive to deal with. Still not sure what if anything to do to elegantly handle this.