ConstitutionDAO's Failed Bid for the US Constitution
The ConstitutionDAO Bid and the Rise of Decentralized Autonomous Organizations
Only 13 original prints of the U.S. Constitution remain in existence. Recently, a Decentralized Autonomous Organization (DAO) encountered defeat in its attempt to purchase one from Sotheby’s auction house, following an intensely followed bidding process that garnered significant online attention. Nevertheless, the DAO’s ambitious undertaking represents a noteworthy example of how to introduce a broad audience to the world of cryptocurrency, utilizing both internet culture and auction dynamics.
Initial Excitement and Subsequent Outcome
Following a brief period of optimistic announcements on Twitter – where some members prematurely declared victory during a live Twitter Spaces discussion – the group issued a statement confirming their unsuccessful bid. The statement highlighted that the DAO had “broken records for the most money crowdfunded in under 72 hours.”
An organizer explained within the group’s Discord channel that the failure stemmed from an inability to raise sufficient funds to establish a necessary reserve. This reserve would be crucial for the ongoing maintenance and preservation of the historical document. Participants in the ConstitutionDAO will receive refunds, excluding any associated gas fees. The return of funds may be complicated by the absence of currently distributed governance tokens, potentially leading some members to desire continued participation.
The Formation and Rapid Growth of ConstitutionDAO
The initiative was initially launched by Austin Cain and Graham Novak, two 25-year-old finance professionals based in Atlanta, through a Discord chat. This chat quickly expanded to encompass over 8,000 members. Within a single week, the DAO successfully raised more than $40 million in ETH via Juicebox, a platform designed for early-stage DAOs.
This effort, primarily driven by activity on Twitter and a rapidly growing Discord server, provides insight into the potential dynamics of community-driven initiatives within a Web3 environment. This environment prioritizes shared ownership and transparency. The opportunities presented by the DAO structure are attracting considerable interest, with estimates placing the value governed by DAO treasuries at over $6 billion.
The Human Element Behind the DAO
Daniel Monteagudo received a message at 7:57 p.m. from a friend, inquiring about joining a call with others interested in acquiring the Constitution using ETH. After completing a movie, he joined the call and pledged his support, contributing $1,000 of his own funds and subsequently taking on the role of managing the Twitter account for ConstitutionDAO.
Unlike many DAOs, ConstitutionDAO does not require token ownership for participation. Anyone can join the Discord community without making an initial investment. This contrasts with projects like the Bored Ape Yacht Club, which necessitate the purchase of a costly NFT to gain access to the exclusive community.
Onboarding New Users to Crypto
Monteagudo described the project’s momentum as “really weird,” noting the influx of over 19,000 members, including Grimes. However, he believes that people are enthusiastic about the possibility of rapidly raising substantial funds to achieve a specific objective.
A third-party dashboard indicates that 13% of ConstitutionDAO contributors are utilizing ETH for the first time. Furthermore, approximately 44% of contributors have fewer than 40 transactions associated with their accounts.
The process of introducing individuals to cryptocurrency is a significant, albeit perhaps unexpected, benefit of ConstitutionDAO. It provides a tangible way to understand the impact and experience of a decentralized community, appealing to emotions in a manner that the U.S. Constitution itself might achieve over abstract art.
The Potential of DAOs and the Need for Education
DAOs facilitate collaboration among large groups of people globally. While traditional companies can achieve this, the setup process is often lengthy and cross-border payments can be complex. DAOs, conversely, simplify the creation of worldwide organizations.
The influx of new users necessitates responsible education regarding the destination of their funds and the potential for reimbursement. Initially, the ConstitutionDAO team adjusted their messaging from “own a piece of the Constitution” to “you will get governance tokens” to ensure clarity regarding fund allocation.
Monteagudo expressed a sense of responsibility for ensuring that the approximately 3,000 individuals who entered the crypto space through this initiative do so effectively.
Reframing the DAO Concept
Alexander Taub, founder of Upstream, proposes abandoning the term “DAO” in favor of “collectives,” drawing inspiration from Dapper Labs’ approach. He argues that pooling money with friends and communities has a long history, and DAOs simply represent a modern iteration of this practice.
Taub believes that DAOs are driven by a desire for either financial gain or a sense of ownership and transparency within a community, with the latter being a less explored but potentially more promising aspect.
Building Infrastructure for DAOs
Upstream is developing a platform to offer “DAOs-in-a-box,” enabling collective members to contribute funds to a shared ETH wallet, propose spending strategies, vote on decisions, and delegate voting power. This aims to enhance clarity around governance and compliance.
Taub anticipates that Upstream will serve as many users’ initial experience with a DAO and tools like MetaMask and Ethereum, fostering broader understanding of the future of money.
Growing Investment in DAO Development
Upstream is not alone in its efforts to accelerate DAO development. Andreessen Horowitz invested in DAO tool builder Syndicate in August, and Utopia Labs secured $1.5 million in funding for a DAO operating system in October.
Critiques and the Broader Context of Crypto
While ConstitutionDAO exemplifies the potential of DAOs, it also faces criticism. Some view it as a symbolic gesture, questioning the allocation of millions of dollars towards acquiring a historical document when those funds could be used for other purposes.
Attention-grabbing initiatives, like those involving NFTs, can help people grasp the power of new technologies, but they shouldn’t be the sole basis for engaging with crypto. However, events that resonate with those unfamiliar with cryptocurrency can be valuable for education, even if imperfect.
Diverse Use Cases for DAOs
Beyond bidding on historical artifacts, DAOs have a wide range of potential applications. Creator DAOs like Mirror enable fractional monetization of work, while projects like PieDAO utilize the structure for corporate-style decision-making. Many prominent DeFi platforms, including Uniswap and AAVE, are governed by DAOs.
Evolution and Future Potential
Some DAOs initially formed for one-off purchases have expanded their scope. PleasrDAO, originally created to acquire a Uniswap NFT artwork, has since ventured into DeFi and launched an incubator. ConstitutionDAO could potentially follow a similar trajectory.
Taub envisions DAOs playing a role in public service, such as enabling residents to directly vote on the allocation of local government funds. However, he acknowledges the need for DAOs to address issues of diversity and inclusivity, given their current demographic composition.
Governance and Regulatory Challenges
Many DAOs utilize a governance token structure that assigns voting rights based on financial contributions. While ConstitutionDAO’s Discord remains open to all, it is likely to adopt this structure in the future. This raises questions about whether DAOs are truly democratic, as those with limited financial resources may have less influence.
DAOs operate within a regulatory grey area, lacking a concrete legal structure in most U.S. states. This exposes protocol developers and participants to heightened liability compared to shareholders of regulated corporations.
Looking Ahead
Until these challenges are addressed, DAOs are likely to remain focused on social groups and niche communities. However, with the development of robust infrastructure, DAOs could evolve into serious collective entities that function like companies but are more agile and inclusive in their decision-making processes.
