The room was filled with a new sort of enthusiasm and excitement. No matter how everything ended, history was bound to be created on that day when a DAO caught the eye of the mainstream media as it went against a room full of filthy rich investors in a bidding war.
The situation: Bid for one of the original copies of the US Constitution. ConstitutionDAO is up against several other bidders, particularly Ken Griffin.
How did it end? Constitution DAO lost that day but paved the way for DAOs to become part of the mainstream by adding another impressive use case of cryptocurrency.
Let’s see how everything unfolded on that day and how DAOs are an excellent asset for investment. What is ConstitutionDAO all about, and how it raised $41 million in a matter of 4 days is quite an extraordinary thing to discover. This guide will take you through this journey and help you know better how DAO works.
Ever heard a company raise $41-whopping-million in a matter of four days. That is more than the GDP of over 100 countries today. How can a company raise so much money in just over a hundred hours? We are here today with an amazing story, lesson, and excerpt from the crypto world.
On November 11, a group of crypto aficionados agreed over a Zoom call to raise funds to purchase a first-edition copy of the United States Constitution that was being auctioned through Sotheby’s. And this marked the birth of ConstitutionDAO.
In less than a week, the DAO had raised more than $5 million from about 2,300 contributors through the sale of PEOPLE tokens. The birth of ConstitutionDAO was inspired by participating in an auction for the US Constitution, hence the name.
But after failing to make the winning bid, the platform shut its operations only to dabble with options for returning the contributions made by the community. It was a consortium of people unknown to each other who were motivated by the action to buy the constitution.
ConstitutionDAO may not have bought the constitution, but they opened up a wide array of opportunities for the future. They made sure that given a chance, the crypto enthusiast community could come together to help complete an action and then reap the benefits in the aftermath of its success.
Source: CoinGecko
Above is a screenshot of all-time transactions of the ConstitutionDAO token, PEOPLE. Besides it, you will also see the graphs for BTC and ETH.
In terms of growth, PEOPLE had the same upheavals at par with the price of BTC and ETH. It would be safe to say that in the few of its existence, ConstitutionDAO could do what BTC and ETH have taken years to accomplish, that is, the popularity and increase in price.
So, in total, ConstitutionDAO raised $41 million in a matter of four days to bid for the US Constitution. That’s a lot of money considering the fact that ConstitutionDAO was a new entrant into the market and still the native token, PEOPLE got a stellar response.
Maybe the response was due to the fact that they had a clear purpose of creating the platform in the first place. Buying the US Constitution’s rare and original copy is no child’s play. The money raised by ConstitutionDAO happened through Juicebox, which is a crowdfunding platform (more on JuiceBox later).
The bid fight to buy the constitution was between ConstitutionDAO and Ken Griffin, a hedge fund CEO who won the round and shed $43 million to get his hands on the original copy of the constitution.
With Ken Griffin making the winning bid, the contributors to the DAO platform felt betrayed by the developers of the platform as now their profits are not assured. It all went haywire after Ken Griffin bought the rare document.
The contributors were promised 1 million $PEOPLE token in exchange for 1 ETH token. The transaction was to be completed via Juicebok. But everything was dependent on the ability of ConstitutionDAO to make the winning bid, and they tried.
The users or contributors were supposed to earn voting rights on what should be done with the constitution document, but that was not clear and not set until after winning the bid.
Besides making those who had contributed to buying the Constitution miserable, Ken Griffin has gathered a lot of hatred from the people. We found a Reddit page exposing his activities, Ken Griffin EXPOSED.
Ken Griffin was not wrong here when he came to Sotheby’s to buy an original copy of the constitution, but he shattered the dreams of thousands of people with his winning bid.
Although the world learned a great deal about the possibilities of crypto with this attempt, those who had become a part of this community were left hanging.
The people who had contributed inETH to buy the constitution via Juicebox also paid gas fees. In total, 199.38 ETH were burned, amounting to $890,000. Now even if ConstitutionDAO is determined to refund the money given by the people, they cannot return the gas fees.
It was not that Ken Griffin deliberately put people in this mess, but they were because he won the bid, albeit fairly. So, now that the contributors are hanging in a difficult position, they are given three choices by the ConstitutionDAO;
In any instance, the users were not getting what they hoped for and somehow had to compensate for their contributions. This inability to get what they wanted and then undergo the pressure of losing some money is what made people hate Ken Griffin.
Juicebox.money is a community-driven crowdfunding platform meant to help people fund projects, and ConstitutionDAO is one of the examples. The platform allows developers to raise funds for their projects and commit the portions of the revenue they might earn to go to the people.
The platform is compatible with ERC20 community tokens and is built on the principles of transparency & accountability. On Juicebox.money, ConstitutionDAO is still an active project, and people are still contributing to the project.
One of the reasons people are still buying $PEOPLE is that they want to exchange it for the next best alternative, the WTP token. As we understand more about ConstitutionDAO, don’t you have a question in mind regarding its authenticity?
Well, there has been some chatter on the web that ConstitutionDAO was never a DAO even after it has been billed as such. The answer to this question lies in the sections ahead where we will understand the concepts associated with a DAO.
DAOs are a powerful and secure method to collaborate with like-minded people all across the world. Consider them an online business collectively owned and governed by the members of the community. The community can consist of any person who is either a holder of the tokens associated with the DAO, an investor, developer, etc.
They have built-in treasuries to which no one can have access without the group’s permission. Proposals and voting are used to make decisions, ensuring that everyone in the organization gets a say.
No CEO can spend money on their own whims, and no risk of a shady CFO tampering with the accounts. Everything is out in the open, and the DAO’s spending restrictions are encoded into its code.
ConstitutionDAO is one of the many examples of such an organization having no ties to any form of power or authority and still making people filthy rich in a matter of days.
The DAO was created to be a decentralized and automated organization. It functioned as a sort of open-source venture capital fund with no normal management structure or board of directors.
The DAO was unaffiliated with any nation-state in order to be totally decentralized, even though it used the Ethereum network.
By putting decision-making power in the hands of an automated system and a crowdsourced process, the DAO’s creators hoped to minimize human mistake and manipulation of investor funds.
The DAO, which runs on ether, was created to allow investors to send money anonymously from anywhere globally. The DAO would then issue tokens to those owners, letting them vote on potential initiatives.
A blockchain records the financial transactions and rules of a DAO. This eliminates the requirement for a third party in a financial transaction, allowing smart contracts to streamline those transactions.
A smart contract also determines the firmness of a DAO. The smart contract holds the organization’s storage and symbolizes the organization’s regulations. Because DAOs are transparent and public, no one can change the rules without others noticing.
Although we are accustomed to organizations with legal status, a DAO can function very well without it because it can be constituted as a general partnership.
For a DAO to work, it needs to follow some rules and regulations that define its movements, user participation, and other similar aspects. To be fully functioning, DAOs require the following components:
DAOs operate on blockchain technology, and smart contracts, which are collections of code that operate on the blockchain, are used by the majority of DAOs.
A blockchain is a digital ledger that is decentralized. While blockchains are most known for publicly documenting transactions of various cryptocurrencies, such as bitcoin, and other digital assets, such as NFTs, they can also be utilized in a variety of other ways. The blockchain can serve as a backbone for DAOs, maintaining the structure and regulations of each on-chain.
There is usually a hierarchy in traditional organizations. The structure is determined by a formal board of directors, executives, or higher management, who have the capacity to make changes.
Decentralized autonomous organizations, or DAOs, on the other hand, are not governed by a single person or entity. Each DAO’s rules and governance are written in smart contracts on the blockchain and cannot be changed until the DAO’s members choose to do so.
Members of each DAO can vote on choices jointly, usually on an equal footing, rather than a chosen few having the bulk of say.
ConstitutionDAO also has a similar system in that it was created on the basis of some rules that were automated to execute upon the completion of the intended results. But there was one issue here;
“PEOPLE is a governance token, and the same was echoed amongst the community time and again. This means that even if ConstitutionDAO had won the bid to buy the Constitution document, the people who had given the money could not claim ownership of the same. Rather, they were only to participate in the voting round that will decide what happens to the document.”
Moreover, with ConstitutionDAO, the governance rules and regulations were not set earlier. This means that there was no clear indication about how the governance rights were to be distributed.
The structure of each DAO is different, but when you join a DAO, you normally agree to the set of practices or a code in place. It’s not straightforward to update the code, and most changes require a vote among the members.
DAOs are “highly participatory, and to make a decision; you don’t need to wait for a quorum or a sufficient number of individuals to vote. It’s kind of like the internet in terms of how it functions and operates, says Aaron Wright, co-founder, and CEO of Open Law.
In certain DAOs, governance tokens are only available through organized investment rounds, and demand can sometimes outstrip supply. Members can often possess stock in the DAO and help shape their destiny by holding these tokens. The weight of a member’s vote is usually determined by the amount they contributed to the project. However, this varies from DAO to DAO.
Since the Ethereum blockchain powers most DAOs, if a DAO doesn’t employ governance tokens, it may accept other kinds of investment, such as ether, the second-largest cryptocurrency by market value,
Members can work for their DAO in addition to voting. There are usually a variety of internal positions available, such as token distribution and treasury management. Working for ownership entails working for tokens.
A startup or a company is different from a DAO in several ways, starting with the fact that the former organizations have a centralized structure. Still, a DAO has no single point of control.
The origins of a DAO and a startup might be similar, but they are very different in terms of execution. For instance, the startup owner cannot give the right to make any decision to its employees, but in a DAO, the community members holding the governance tokens get voting rights.
For instance, suppose a company wants to obtain funds for a new project. Instead of struggling with red-tapism and going to all sorts of investors and pitching them the idea individually, the DAO’s pre-programming helps get access to a large number of investors in one go.
Plus, the returns from the project in a startup are to be paid manually or via initiation wire transfers, but with a DAO, the returns are delivered to the appropriate parties immediately, with no additional administration or paperwork required.
To raise funds needed to run a DAO, the protocol will distribute governance tokens to investors, reflecting membership and voting rights (similar to the shareholder rights) required to make changes.
DAO membership can be obtained in different forms. The membership can influence the voting system and other important aspects of the DAO.
Depending on the token used, it is usually completely permissionless. Generally, these governance tokens can be traded on a decentralized exchange without authorization.
Others must be gained through liquidity or other proof-of-work methods. In either case, simply holding the token allows you to vote. Usually used to govern large-scale decentralized protocols and tokens.
For instance, MakerDAO – MakerDAO’s token MKR can be found on several decentralized exchanges. As a result, anyone can invest in voting power over the Maker protocol’s destiny.
In this setting, DAOs based on shares are more permissioned, although they are still very open. Any potential member can submit a proposal to join the DAO, usually in exchange for tokens or work.
Direct voting power and ownership are represented by shares. Members can withdraw their fair share of the treasury at any moment. Usually reserved for smaller, more human-centered organizations such as charities, worker cooperatives, and investing clubs. It’s also possible to manage protocols and tokens.
For instance, MolochDAO – MolochDAO focuses on Ethereum project finance. They demand a membership proposal. The organization can determine whether you have the required skills and financial resources to make informed decisions regarding potential grantees. The DAO is not available for purchase on the general market.
Participating in DAOs involves a similar transaction we do to buy a cryptocoin. You need to access the website of the DAO, identify the ticker, and go to the DEX that allows exchanging your current assets with the DAO’s token.
Despite their increasing popularity, DAOs still have a long way to go before becoming widely accepted. Not every DAO achieves success, as some are doomed to fail in the long run. Experts have termed them as “extremely transitory in character.
It’s always possible for a DAO’s governance token value to go to zero. Potential investors should first do their research and only invest what they can afford to lose.
However, the potential benefits could be enormous. Consider governance tokens, which frequently have a secondary market value. Owning a governance token is similar to owning stock in a startup in its early stages; if the company succeeds later, the stock will be enormously valuable.
DAOs will also face numerous regulatory and legal difficulties, particularly in the United States. There are a number of unknowns about how a hypothetical legal framework in the United States could affect DAOs and how they operate.
Since DAOs work with crypto tokens, investing in them is simple and pretty straightforward. If you have an existing platform that you visit for buying crypto tokens, check for DAO token name, whether it’s listed on the platform or not.
Subject to its listing, you can buy it according to the system set in place. If not, you need to find a DEX that has listed the DAO token and buy it from there. Some of the best places to buy DAO tokens are;
DAOs have been utilized for a variety of reasons thus far, including investment, charity, fundraising, borrowing, and buying NFTs, all without the involvement of intermediaries.
Despite the unknowns, several industry experts believe that DAOs will upset established company models. There are numerous unanswered questions about legality, security, and structure. Some analysts and investors predict that this sort of organization could eventually gain traction, possibly even replacing traditional organizations.
The recent wave of institutional investment in DAOs is also an indicator of the industry’s expansion. It also demonstrates the possibility for broader adoption, potentially putting established businesses and organizations in competition.
ConstitutionDAO is only one example of how we can use DAO to interact with the physical world. Yes, there have been some issues in the past, but there isn’t anything that cannot be worked out with some more research and effort.
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