After raising nearly $US49 (A$67) million in the ether in just a few days, the ConstitutionDAO that galvanised blockchain idealists did not win a copy of the US Constitution at Sotheby’s. Last night, the document, one of 13 surviving first edition copies, hammered for $US43.2 (A$60) million (going to — sigh — hedge fund billionaire Ken Griffin, CEO of Citadel, nemesis of the retail investors). We wondered earlier this week whether this is a scam or a demonstration of the blockchain’s equalizing potential; when they issue the promised refunds, we’ll soon find out.
Endaoment, a cryptocurrency donation platform that placed the bids on ConstitutionDAO’s behalf, told Gizmodo that they were unable to bid higher due to Sotheby’s $US6 (A$8) to $US7 ($A10) million fee added to the purchase price. They would have temporarily retained ownership following the purchase and said that it would be transferred to a 501(c)(3) set up by ConstitutionDAO.
In a statement on Twitter, ConstitutionDAO claimed to have broken the record for most money crowdfunded in 72 hours, from 17,437 donors who made median contributions of $US206 (A$284). It added that it was the first time Sotheby’s worked with a DAO. (Sotheby’s was unavailable for comment.)
“We have educated an entire cohort of people around the world — from museum curators and art directors to our grandmothers asking us what eth is when they read about us in the news — about the possibilities of web3,” they said.
For those new to DAOs (decentralized autonomous organisations), they typically work as public investment funds. People buy tokens in exchange for voting power and collectively decide what they should buy (say, stonks or the Wu-Tang album) and when to cash out; the people who buy the most tokens get the most influence over decision-making.
In the case of ConstitutionDAO, donors wouldn’t have owned a piece of the Constitution had the group placed a winning bid; they received “governance tokens” which would have allowed them to collectively decide what to do with the document and define the DAO’s mission. Those who donated funds can allegedly get their money back minus the obligatory gas fee (ConstitutionDAO says it’ll sort this out once the co-founders get some sleep). Those who choose to leave their funds in the reserve have governance tokens that will allow them to vote on what to do with it next. There were some details to iron out (such as which institution might be willing to follow the wishes of the DAO’s governance in perpetuity), but it only went viral three days ago. If the proposed mission went to plan — great! The model’s far more democratic than rich people warehousing art over a couch, waiting to flip it.
The ownership model for the copy of the Constitution smelled fishy — the photoshopped references to Nic Cage in National Treasure, the on-the-nose purchase guaranteed for virality. And then the evasive-sounding explanations from the ConstitutionDAO about who actually owns it. One core contributor told Gizmodo that, following the purchase, “the community will be able to restructure ownership to best reflect the mission and values of the DAO” but offered no indication of what potential ownership models were on the table. They’ve only publicly stated that they hope to partner with an institution that’ll display it and pay for its care. Presumably, ConstitutionDAO’s 501(c)(3) would honour the wishes of DAO donors, but the project is built on trust, so you’ll have to have faith in the co-signers’ Twitter bios.
What would happen to the money also, initially, raised a big red flag, as blockchain-utopianism sceptic David Gerard pointed out when this took off. ConstitutionDAO promises that Juicebox, another DAO that’s processing the payments, will return ether minus obligatory gas fees. Juicebox creator “Jango” is also one of ConstitutionDAO’s co-signers, and Juicebox normally takes 5% of the actual money that flows through Juicebox, which means that Juicebox would have taken a $US978,000 (A$1,351,36) cut. A ConstitutionDAO developer assured followers on Twitter that Juicebox had waived the fee in this case. If Juicebox didn’t, it would have benefitted even more by giving ConstitutionDAO Juicebox tokens (JBX) in exchange for the fee; those tokens are substantially worth nothing unless more people hold JBX.
ConstitutionDAO has also claimed that we should trust it because the co-signers have made their identities public, but Jango is just a mononymous Twitter handle. They’re facing a $US49 ($68) million task to follow up on their promises, and I hope they do.
Neither Jango nor ConstitutionDAO was available for comment.