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Comment by pavlov | Hacker News Reader

Your grandma’s landline rings. It’s some guy asking her to send money to a Delaware corporation's account “for the sick veterans.”

Your Twitter feed lights up. It’s some guy asking you to send money to a Delaware corporation's account “to buy the Constitution.”

These DAO tokens give no actual claim to anything. If the bid had succeeded, this museum piece would be owned by a private corporation. Not even a proper non-profit, just a guy who took advantage of the zeitgeist.

Now that the bid failed, they're refunding the money, but donors have already lost millions on gas and exchange fees. The DAO creators were even bragging about how many of these donors were brand new wallets. So in all, a very typical crypto outcome: nothing actually happened in the real world, but the top of the pyramid extracted some more money from thousands of retail newcomers.

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This is an uncharitable take, and I think you’re on the wrong side of this if you think it won’t work in the future. This team raised $45M from 10k internet strangers in a week, and they almost managed to win the bid. They created a path for bidding with crypto at Sotheby’s, and came up with a legal structure so they could do it with money raised via a DAO. They newly exposed hundreds of thousands of people to the possibilities of crypto beyond BTC.

Sure, it failed, and it sucks that everyone loses a lot of gas fees. But these guys did a lot to lay tracks for the next attempt. I bet with more time to plan they would’ve pulled it off.

I think Spacex’s early failed landing attempts are a good analogy - lots of time and money spent, but lots of learning to improve the next ones.

And you don't see any problem with a legal structure that gives everything to the project's creators and nothing to those 10k internet strangers? Why should we want this kind of thing to be successful?

I know, the answer is "but crypto is just intrinsically amazing and we'll sort out these little legal deficiencies later, hopefully when we're rich enough to buy out all the politicians."

I get the impression you're not open to being curious about this, but I don't agree with your framing.

You can have the DAO as a legal structure where the granted governance tokens do have power, in that case the 10k internet strangers do have a say in what happens.

I'm not saying that was the case here (it happened quickly and I don't know), but it definitely seems likely we'll see stuff like this in the future and I think it's pretty cool.

> "DAO as a legal structure where the granted governance tokens do have power"

I.e. voting shares in a corporation.

And then you need to register your security offering and know who your investors are. You can't just take money into a Delaware corporation and let anonymous wallets vote on what the company does with its assets.

I understand that crypto enthusiasts want to blow up American securities laws. I don't understand why they think it's going to happen if they just persistently keep doing things which are either illegal or just scammy with no legal protections to those whose money is at stake.

> You can't just take money into a Delaware corporation and let anonymous wallets vote on what the company does with its assets.

Anonymous holding companies would like to have a word with you.

> I understand that crypto enthusiasts want to blow up American securities laws. I don't understand why they think it's going to happen if they just persistently keep doing things which are either illegal or just scammy with no legal protections to those whose money is at stake.

I guess you must have also really hated Airbnb when it first came out? Or Uber and Lyft?

The web3 and crypto space is moving very quickly and you are right that regulatory bodies are struggling to keep up. What is welcome is that many people are now iterating and experimenting with these structures and some will fail miserably, while others might create completely new opportunities.

This is how innovation works.

You're setting up a lot of strawmen: I don't think we should blow up securities laws or buy all the politicians. And this project was far from a scam or a pyramid scheme: the core members were known, had good reputations and stated their intentions around community governance.

Each person putting $ in should decide whether that's good enough for them. Totally fair. But I wouldn't wish for failure of the whole approach. We had a group of young ambitious people getting folks excited and organized, raising lots of money for collective action to achieve something. They raised > 2x as much as the biggest kickstarter ever.

The shift in the balance of power towards individuals is empowering. That empowerment can be used for good or bad, but on balance I'd rather live in a world where people are more empowered.

The plan was to form an LLC. Some states have created rulings specifically for LLCs to be driven by DAOs (I forget which states - Oregon maybe?).

I'm completely unsure how you structure legal ownership of an LLC vs crypto ownership of a DAO, but I do know that an LLC's bylaws can bind the officers to the decisions of a voting body, and that's what the DAO would do.

Your smartphone buzzes. It's an alert asking you to send money for an IPO for hot new startup.

This stock gives you no actual claim to anything. The company doesn't even make a profit. Even when it did, it's unlikely to pay a dividend.

Now that the IPO has failed to launch, you're being refunded your money, but you lost a lot of time and effort evaluating the deal and the startup lost a lot on banker fees. The start up CEO even bragged about how many people interested were first time investors.

Whats your point in all this? Something people were enthusiastic about that didn't work out. Not everything always works out. Why do you care?

That's not how IPOs work today, but it is how IPOs and unlisted stock offerings worked in the 1920s (except for the smartphone part).

And it all came crashing down so bad that most Americans still can't invest in companies until after the IPO is concluded.

Is the point of crypto just to retrace the catastrophic steps leading up to post-Depression security laws?

Didn't Rivian go public with exactly 0 revenue and is now the third most valuable car maker on the planet?

I don't think securities laws do what you think they do. I'd rather people wade into the unregulated world where its buyer beware than to get the stamp of approval by regulators. These people are basically crowd sourcing buying a cultural artifact and it didn't work out. Who was harmed?

[0] https://edition.cnn.com/2021/11/16/cars/rivian-value-tesla-t...

"Crowdsourcing buying a cultural artifact" is already a thing. It's called a private museum. They are in fact a quite popular type of non-profit. Billions of dollars are donated annually to private museums. They are run by dedicated professionals who understand the history that makes the collection relevant and the processes required to maintain it in good condition.

But no, all that competence goes out of the window when crypto-bro wakes up one day and comes up with the idea of buying a museum piece with donation money.

You’re right that the relationship between DAOs and corporate entities is a gray area in law right now. But imagine this went to court and the plaintiffs said that it quacked like a duck, so their assumption was for all intents and purposes it was a duck. What do you think the judge is going to say?

I’m not a lawyer and not aware of any precedent here, but I imagine if it’s a total gray area the judge would say they are entitled to the same rights as one might find being a member of a corporation since that was the shared belief system at the time.

If there really was such a shared belief system, then this seems like a security offering by the Howey test definition, and the SEC would have sued the DAO eventually.

Also an open area of law! I think this has already happened, in fact.

And we taxed the planet a little bit as well.

That happens regardless of the number of ethereum transactions.

And will end entirely in a few months.

Ethereum has been saying that for years. Isn't the current timeline end of 2022?

Also there are broader issues with crypto beyond its environmental impact and some issues with proof of stake specifically.

At least they acknowledge the problem and are trying to solve it.

EDIT: Holy smokes, it is absolutely exhausting to say anything even neutral about a cryptocurrency on Hacker News. I'm gonna take a break. I wanna get back to talking about all the other interesting things out there.

They are trying to solve one of the problems, yes but there are broader issues with crypto beyond the large scale environmental issues. And even when Ethereum does switch to proof of stake, it seems likely that many of the people who run large scale mining farms will just move to a different chain that they can still dedicate their GPUs to.

> They are trying to solve one of the problems, yes

That was the only point I was trying to make. It's okay to agree with me, instead of carrying the goal posts off into the distance. :D

> it seems likely that many of the people who run large scale mining farms will just move to a different chain that they can still dedicate their GPUs to

Not likely. Other chains do not have the economic incentives to support these ex-Ethereum miners. Mostly it will just cease.

"We created a problem...as a solution for an issue that didn't exist...and should now get brownie points for trying to solve it unsuccessfully for years"

What crypto friendly forums do you visit?

And everyone will get a free unicorn!

Basically yes. If people on hn got their heads out of the sand they'd learn being in the space was pretty profitable because of all the incentives offered to users.

Didn't they want to end it already a few month ago?

More gas fee -> more profit for miners -> more miners -> higher difficulty -> more energy used

The complaining about ETH/BTC environmental cost is probably the lamest anti-crypto argument. It's just this beaten to death: https://slatestarcodex.com/2014/08/14/beware-isolated-demand...

With the coming proof-of-stake it won't even be true (at least for ETH).

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