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Autonomous corporation “The DAO” has become the biggest crowdfunded project

252 points by sethbannon 10y ago

carlob 10y ago
Self driving company
alttab 10y ago
This could be interesting. What does this mean for hostile take overs though?
- drcode 10y ago
  I think you're asking "what happens when someone captures 51% of the voting shares?" - This is actually the #1 problem with these types of systems, since the majority could just vote to put 100% of the funds into their own bank account. The slockit-authored DAO in the article addresses this through two failsafes: 1. Shareholders can vote to split the company in two at any point to extricate their funds from majority control. 2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder. Whether these safeguards will work remains to be seen.
  - tinkerrr 10y ago
    Anyone can 'split' the DAO at any point of time, which renders the 51% attack moot. A 51% attack works only when the attacker can get more than what he puts in. Consider this obvious attack vector: Let's say today is the last crowdfunding day, and the DAO has raised $150 million so far. A wealthy attacker can immediately put another $150 million, effectively controlling 50% of the voting for the DAO, and then vote to send all the money to his own Ethereum address. This is perfectly possible, since this is all written in Ethereum contracts anyway. To avoid this, the rest of the people can 'fork' the DAO, effectively leaving the attacker with 100% control over his share of 50%. The attacker gains nothing. The other 'fork' can now continue on. This forking described above is also going to be used (I think) when it comes to funding new projects. I am sure some people will disagree with some proposal, and they would fork the DAO away to not invest in that proposal even though the majority agreed they would. They are free to do so.
    - drcode 10y ago
      > which renders the 51% attack moot. Well, I'm not sure I'd use such absolute language. For one thing, people can still perform a 51% attack and try to influence decisions covertly, without triggering a split. Also, the spectre of a 51% attack required for some major compromises to be made in the DAO design- Having a company that can arbitrarily split at any moment is likely to have a major impact on the future operations of the DAO.
      - tinkerrr 10y ago
        You're right, I shouldn't have used an absolute language. There is also the issue of voter apathy so yes, a 51% attack might be worthy of a try for a wealthy enough adversary. In terms of the split, if the community broadly agrees that there is an attack, then I don't see it having a long-term detriment. However, as you said, if it is more 'stealthy' then it would be harder to detect and correct. All that being said, I think there is a theoretical safety mechanism in place. Whether that will work in real life or not, we'll wait and see. I am sure some good lessons will come out of this in either case and the next generation of applications can improve upon some shortcomings.
  - TD-Linux 10y ago
    >2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder. If there are humans involved that can exercise this level of control over The DAO, is it really autonomous?
    - drcode 10y ago
      It is a very limited for of control, for what it's worth.
- adrianmacneil 10y ago
  I'm not 100% familiar with it yet, but there is some code where anyone on the losing side of a majority vote can opt to fork the DAO and retain their original tokens with all investments, instead of going along with the group (similar idea to a Bitcoin hard fork). This prevents someone with 51% ownership voting to send 100% of the assets to themselves. https://download.slock.it/public/DAO/WhitePaper.pdf https://download.slock.it/public/DAO/WhitePaper.pdf
deleted 10y ago
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riffraff 10y ago
the article doesn't actually explain the "autonomous" bit imo. This looks rather more like a distributed decision making platform. Say, liquid democracy + ethereum, rather than Accelerando-style "sentient alien corporations". Noticeably, the DAO does not seem to be able to make any decision, it does things through proposals suggested by people which are voted on. Still cool anyway.
- tinkerrr 10y ago
  This is correct. When the Decentralized Autonomous Organization/Corporation is a term that has undergone quite a few changes, and Ethereum projects definitely use it very loosely. As you pointed out, not much is autonomous at all. The DAO in this case appoints one company per project who is responsible for the entire project and its management. They are free to be as competent or incompetent, until voted out.
- JetSpiegel 10y ago
  Most decision making is in fact choosing between choices, it's not that different from a regular CEO.
- chriswarbo 10y ago
  I suppose there are a couple of ways to view this: - The DAO is a tool for people to make decisions collectively, by pooling their resources, voting on activities, and having Ethereum take care of trust issues. This is what you've described. - Alternatively, The DAO could be described as similar to a computer virus: it tries to survive by spreading into as many systems as possible, using their computational resources to propagate itself further; but crucially its behaviour is completely determined by its code, rather than acting as an interpreter for centrally-issued commands (like, say, a botnet or Seti@Home). While most computer viruses are parasitic, The DAO could be seen as symbiotic: in return for the resources it uses, it provides the services described above. It could be described as social engineering, like that of the ILOVEYOU virus, although it's not a trick (as far as we know). In the case of The DAO in particular, the first description probably makes the most sense. However, I'd say Ethereum applications in general are better described by the latter. For example, a gambling application like etheroll could persist completely independently on the network for as long as people are willing to gamble with it, spending part of its commission on resources ("gas").
drcode 10y ago
TLDR; A computer program living on the ethereum blockchain is currently in control of 107+ million dollars, making it the second largest crowdfunded project in history. Shareholders vote on proposals to give money to other entities (probably also programs on the ethereum blockchain) that they hope will make money and send it to the parent contract. All votes are managed by a program written in EVM code, which runs on a sort of "virtual computer" that is designed to be (in theory) 100% secure, 100% reliable, and 100% incontrovertible. No middlemen have any control over this program, it essentially completely outside of any human control (beyond the voting rules encoded within it.) UPDATE: Apparently this morning it passed $120 million and is now the largest crowdfunded project in history.
- dragontamer 10y ago
  Last time I checked, Apple Computers is worth $500+ Billion and is a public company. Don't forget that the stock market is the original mass-crowdfunded project. Anyone can become an owner if you go to a brokerage account, and ownership rights entitles you to a vote for the board of directors and a share of the profits (ie: the dividend)
  - drcode 10y ago
    Agreed, "crowd funding" is an inexact term- I described it that way to help explain why some people think the project is novel. Certainly there is a lot of arbitrariness as to what belongs on a list of "top crowdfunded projects".
    - dragontamer 10y ago
      Yup. I just want to bring up the fact that this thing seems more akin to a classical public company, but in many regards is less transparent. There's the fact that all the code and mechanisms is public, but that's the part that everybody trusts anyway. When you're a shareholder in Apple, the votes are tallied, all relevant information from the board of directors is published, etc. etc. And the SEC forces the company to publicly disclose financial information in the form of 10k, 8k, and publicly announce insider trades. At the moment: I don't know who the "insiders" of this company are. Maybe one dude has $50 Million USD and effectively controls the entire damn "movement". Or maybe not. Knowing the identities of large shareholders is a BIG DEAL in public companies. Still, the digital form probably has some advantages. Maybe future companies will find a compromise and manage to exist as digital contracts akin to this DAO? But I don't expect this first version to actually work. Its pretty much a learning experiment, to see what is and isn't possible with technology. If any lessons are to be learned from Bitcoin: politics will affect this entity eventually. The technology currently serves as a mask to the politics. But politics always rears its ugly head eventually.
archgoon 10y ago
> Currently only the privileged can found and fund new companies. What? It's about $200 in Seattle to file to register a Limited Liability Company. It's a stretch to call that 'only the privileged'.
- drcode 10y ago
  I'm pretty convinced the vast majority of tech startups were started by individuals who relied on their family supporting them through the initial phases of their business.
  - reviseddamage 10y ago
    pretty convinced from what data? source please? thanks!
    - drcode 10y ago
      I don't know if anyone has collected any formal data, I'm basing it on my personal experience. Certainly plenty of other people make the same observation. http://www.sfchronicle.com/business/article/Why-do-so-few-startup-founders-grow-up-6794214.php http://www.sfchronicle.com/business/article/Why-do-so-few-st...
    - sp332 10y ago
      Yeah, a couple of studies have been done on it. http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money/ http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-...
  - deelowe 10y ago
    Vast majority? Really?
- mfringel 10y ago
  "Do the paperwork for creation" has only a passing resemblance to "found and fund."
deleted 10y ago
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joshuaheard 10y ago
A corporation, being a legal fiction, can only act through physical persons. So in that respect, no corporation can be truly autonomous. It sounds like what they have done is taken all the paperwork associated with corporate activity: by-laws, annual meeting minutes, resolutions, etc., and put them into a block chain. A more proper description would be a paperless corporation.
- drcode 10y ago
  That's like saying a car can't be autonomous because some programmers wrote the software that it uses.
  - DigitalJack 10y ago
    No, a corporation is a legal entity that must have directors and officers, aka people. Without that, you don't have a corporation. And after reading the article, they aren't a legally recognized corporation.
    - dragonwriter 10y ago
      > No, a corporation is a legal entity that must have directors and officers, aka people. OR, a corporation is a legal entity formed by a corporate charter that is treated as a person under the law. In any case, whatever these ethereum-based things are, they aren't corporations.
      - zardo 10y ago
        >In any case, whatever these ethereum-based things are, they aren't corporations. They may end up creating and operating corporations, but DAOs are their own thing.
        dragonwriter 10y ago
        > They may end up creating and operating corporations Sure, if people ever make the rather radical changes to law that would be required for them to create, operate, or even merely passively own shares in corporations, that might be the case.
noonespecial 10y ago
Charlie Stross is smiling somewhere. https://en.wikipedia.org/wiki/Accelerando https://en.wikipedia.org/wiki/Accelerando
- cfontes 10y ago
  Probably around here as he has been seen on HN quite a bit. Proof : https://news.ycombinator.com/user?id=cstross https://news.ycombinator.com/user?id=cstross
- CharlesMerriam2 10y ago
  Closer to Daniel Suarez, Daemon & Freedom. http://www.amazon.com/DAEMON-Daniel-Suarez/dp/0451228731 http://www.amazon.com/DAEMON-Daniel-Suarez/dp/0451228731 This fiction starts the autonomous corporation from a vide game. The second book shows society's evolution to cope with the new corporation.
  - jaytaylor 10y ago
    @CharlesMeeriam2 You beat me to it, I came here to post just this!!! This article reads as though it were a page straight out of Suarez's Daemon series. https://en.wikipedia.org/wiki/Daemon_(novel_series) https://en.wikipedia.org/wiki/Daemon_(novel_series)
  - Mindless2112 10y ago
    Daemon and Freedom™ are excellent books – a frightening but plausible view into the not-so-distant future.
- Ursium 10y ago
  Slock.it here, creators of the DAO framework. Huge fans of Daniel Suarez and Charles Stross :)
- mrbill 10y ago
  You beat me to it. Very reminiscent of Manfred Macx's Python-based autonomous corporations if I'm remembering the book correctly.
nxzero 10y ago
Anyone know how to legally assign a corporation over to an autonomous system?
- drcode 10y ago
  I don't think so, this is totally uncharted legal territory- Nobody will know until the first legal precedents are established (IANAL)
- dragonwriter 10y ago
  > Anyone know how to legally assign a corporation over to an autonomous system? Step 1: Lobby for laws which allow legally assigning a corporations over to an autonomous system (or, more simply, laws which allow granting legal personhood to an autonomous system.) Under current laws, I don't think there is any place in the world where this can be done. The creation of a corporation is an act of government (often, but not always, done at the request of a non-government person through a publicly-available application process, but some are directly created by the government on its own initiative.)
- Canada 10y ago
  The company Articles could require its directors to obey the direction of the autonomous system. And if it doesn't the autonomous system could direct the creation of another corporation with a mandate to sue the non compliant one.
  - btown 10y ago
    It's a legal interop layer! Now we just need to create a code-generation utility that takes the conceptual source code for the contract and generates legal code that can adequately enforce it... oh, wait...
  - lsseckman 10y ago
    realistic & efficient, good thought
    - Canada 10y ago
street 10y ago
The DAO isn't actually worth 120 million. For one, it's based on the price of ETH, which would completely crash if you attempted to sell even a few million worth. Secondly, everyone can withdraw their funds from the DAO before any funds are sent to projects. Many have invested because those who invested early make money from those investing later, since the number of "DAO tokens" you get per "ETH" has gone down over time. (cough pyramid cough)
- drcode 10y ago
  > The DAO isn't actually worth 120 million. I you tried to sell all Apple stock in a single day it would also sell at well below market rate- Does that mean Apple is worth less than its market cap? That said, I personally have not invested/speculated in the DAO because I just don't see it as a good opportunity.
  - Alexx 10y ago
    I think an analogy more in line with the parent comment would be - if you tried to sell 30% of Apple stock in a single day would the dollar collapse, wiping out all remaining shareholder value.
  - hn9780470248775 10y ago
    > Does that mean Apple is worth less than its market cap? Yes.
  - street 10y ago
    I just sold one of my hairs to myself for $10. Is my head now worth a million? With Apple, there's intrinsic value to consider. And frankly, if you sold enough Apple stock for it to go down 50%, I'd personally start buying. I doubt that's the case for ETH, where there's only early adopters buying it hoping to strike it rich.
    - drcode 10y ago
      So you're saying the intrinsic value is certain to be lower than it's current market value? I have good news for you: You can become rich by simply shorting ether on Kraken and Poloniex!
tonyswish 10y ago
This actually does a much better job explaining the project than the website does. I'm glad I have something to show friends/interested parties that is understandable!
Bjorkbat 10y ago
An interesting concept, but I'm not buying the hype. At the end of the day a bunch of people bought shares in a company (or did they? Legality is weird) with the special condition that in addition to owning a share of said company they also get to vote on what the company actually does, and even submit proposals for what it should do. Oh, and they also bought said shares with cryptocurrency. Magic internet money guys! Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required. Meanwhile, even though one might assume that the shareholders might be more informed than "the common mob", they might still propose and vote on more misses than, say, a corporation where new products and services are proposed through an informed internal decision making process that ultimately ends in the CEO using the information at his or her disposable to make the final decision. In a good corporation, bad decisions are self-correcting, in some cases leading to such extremes as a leadership shuffle. By contrast, who's to blame if the DAO votes on a proposal that wound up being a miss? How do they learn from their mistakes so it doesn't happen again? And I'm sure there are many other issues, but those are at the top of my list. I'd rather a company be run by those most capable, rather than the crowd.
- drcode 10y ago
  I'm a big ethereum fan but I agree 100% with your analysis.
- hugozap 10y ago
  If you vote a proposal is because you agree with it and you can't blame someone else. There's more flexibility than traditional structures with concepts like "splits" where if you don't agree with a proposal you can opt to not participate. It's new ground , has new concepts and it's still evolving. Really interesting stuff.
  - deleted 10y ago
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- kuschku 10y ago
  > Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required. This stuff is also known as a cooperative, and is a very common concept for democratic companies – almost all housing in europe is owned like this.
will_brown 10y ago
What a bunch of snake oil. If you invested or are thinking of investing ask yourself a few simple questions. Who are the Shareholders/Directors/Officers of this corporation? Do you know what state it is incorporated in or going to be incorporated in? Just a few buzz words. Decentralized? No shit, any corporation with more than one shareholder is decentralized. Smart contracts? Defined as a self enforcing contract, guess what they don't exist. Autonomous? I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously, because that alone would be an enterprise solution every single corporation in the US would pay top dollar for, because DAO just singlehandedly replaced corporate compliance lawyers and CPAs with code. Still not convinced and eager to get in on this? Then why not cut out the middle man? Create your own "DAO" as an Investment Club (Corp or LLC) the only issue is you will be capped at 100 members/voters/token holders and $25M in investment. But you will be able to tell people your created your own decentralized corporation every bit as autonomous as DAO, complete with 100 tokens people can buy to become a member/shareholder and use to vote on investment opportunities presented by the DAO or members/shareholders of the DAO.
- tonyswish 10y ago
  I think there are many legitimate concerns about this project, but what you are saying address none of them. In fact your first questions mean you don't understand it.
  - dragonwriter 10y ago
    Actually, his first question indicates that the people calling this a "corporation" have no idea what that word means.
  - will_brown 10y ago
    I think as a lawyer who practices a great deal of corporate transactions, I have a much better idea than most on the legal structure and compliance issue with corporations on a state by state basis. But instead of telling me my question shows I don't understand, please answer any of the following: -Are the token holders shareholders? -If shareholders do the token holders also get to vote for the board, or are their tokens/shares non-voting? -How many members are on this board? Since it is all autonomous how do you know the DAO has the minimum amount of board members are required by law? If say DAO is a DE corp (min 3 board members) and DE amends the law, how is DAO's code going to keep up?
mangeletti 10y ago
I think the idea is great, but only if the ETH can never be withdrawn without the board's consent, much like funding a a corporation where you'd need to be paid a distribution or something, etc. - you don't just withdraw your money after the next VC enters the scene and drives the price up. If the ETH can be withdrawn at any time, then this is no different than a publicly traded stock... which is currently undergoing a pump-and... As such, I've flagged the post, to avoid contributing to what's turning out to be a free(?) viral marketing campaign. Am I wrong about the "withdraw" part?
zekevermillion 10y ago
The concept of a decentralized organization is cool. The implementation in DAOhub is dangerous to all participants. Both curators and contractors of DAOhub projects risk violating US securities laws if they use the platform to "crowdfund" projects. Participants, as is obvious, risk losing all their contributions, paid into the pockets of "contractors" who may possess voting control over project funds.
pweissbrod 10y ago
so, it's like twitch but for business?
tonyswish 10y ago
This is really cool for all of us in the Ethereum space, and as mentioned before, I'm a part of the Augur team which is a dapp on Ethereum. I did sort of see this coming eventually as Augur, Digix as well as Ethereum itself have been really successful using this method. It's a pretty cool way to fund open source projects and I think with something that incentivizes contributions like Code Valley there will be a boom in these projects.
c3534l 10y ago
There's a reason corporations developed as they did. With a large number of owners, it becomes very difficult to tell what is actually going on in a company and making consistent, sensical decisions is difficult. The result is that we developed a board of directors who are elected by the owners to oversee the performance of the top employees at that company, and a complex of system of accounting to communicate the financial position of the company directly to investors. I don't see how this project addresses the two main problems that corporations attempt to solve: a lack of complete information about a company of reasonable size, and a coordinating a large number of people who may not want to devote a full-time job to overseeing the company. I would be much more impressed if they described this as an open-source investment algorithm or something like. Instead, it seems as if they're trying to sell us on the benefits of a corporation to people who think "corporation" means "big, evil company."
- drcode 10y ago
  > There's a reason corporations developed as they did. Well, the counterargument would be "Because they didn't have computers back then and therefore couldn't develop alternative systems that are better but are impractical to implement manually."
  - c3534l 10y ago
    Sure, but I don't see how this actually addresses the problems that corporations solve.
    - drcode 10y ago
      I agree that question doesn't have a good answer yet, and is why I am not participating in this experiment.
- natosaichek 10y ago
  So I might be reading into it too much, but it seems to me that part 1 (a lack of complete information about a company of reasonable size) Is basically totally solved by this system. The assets are completely documented on a massive publicly distributed system. The procedures for making decisions are similarly well documented. Basically everything you'd want to know about the [entity] is totally freely available. It's not hard to write some frontend to query all the data from the blockchain and keep an up-to-the minute accurate accounting of the resources of the [entity] Now the second part I can't vouch for - coordinating a large number of people is hard. But the code for the system is available for inspection. If someone thinks they can come up with a way to align incentives and such so that people cooperate better in the system (quadratic instead of linear voting? vote delegation? temporary dictatorships?) then (I think?) they can submit those as amendments to the system and improve it. I'm really guessing here as I haven't looked into it in that much detail.
dragonbonheur 10y ago
The first truly successful autonomous corporation will be a 419 scam. Even if it is not on Ethereum.
jrochkind1 10y ago
> While The DAO is a group of people authorized to act as a single economic entity, no governmental body recognizes it as such. They're really not legally incorporated anywhere? Foregoing the limitation of liability that goes along with a corporation seems awfully legally risky -- any of the individual members can be sued, likely succesfully, for something done by the aggregate, with possible damages exceeding their 'investment'. I'd think you could legally incorporate the thing how they wanted it with few problems, have bylaws saying decisions will be made with blockchain votes or whatever. I guess the automated "splitting" the corp would be a problem. Still, I don't think I'd want to be involved in such a thing without legal corporate limited liability protections.
- cloudjacker 10y ago
  Right, and there are people that do want to be involved. They want to be part of the case law incongruences that will arise to solve disputes. They want to bring this to light so that the legacy system is presented with a better or more efficient way. Anyway, Slock.it a germany company is managing this asset, their liability is limited.
  - jrochkind1 10y ago
    If they think they can somehow get limited liability protections in the U.S. without a legal incorporation, I think nearly any lawyer will tell them they won't have much of a case. No judge is going to decide that. You don't get limited liability protections just by acting like a corporation, you need to actually incorporate. It's pretty straightforward law with regard to that much. (I am not a lawyer).
    - cloudjacker 10y ago
      The point is that they don't care about the US, or France, or Hong Kong, or Zimbabwe. Also, the individual owners of DAO are not known and are entirely bearer assets. You and I could Shapeshift some bitcoin to Ether right now, exchange for DAO tokens, vote on proposals for the DAO that eventually cause a gigantic oil disaster and whatever unlimited liability a court finds for shareholders will stall forever because they can neither find the shareholder or freeze the assets on the DAO.
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findjinn 10y ago
Time to go reread Daemon!
pre 10y ago
So, a sort of Distributed Digital Democratic Dragon's Den then. I suspect the contestants will make more money than the Distibuted-Dragons.
- Moshe_Silnorin 10y ago
  It's a shockingly bad idea. I support the right of people to invest in whatever they like, but VC has notoriously poor returns, decentralized VC run by a committee that can only invest in other decentralized technologies seems like a really, really bad idea. DAOs like Augur are actually interesting, even if you think they'll never work. This just seems crazy.
  - pre 10y ago
    As long as nobody's putting in more than they intend to lose, it's at least a very pretty way to fund a bunch of distributed app code being written I guess. And if they all take what's left of their money out again, the code will still exist. Presumably has to be mostly free-software if it's gonna run distributed anyway.
zanchey 10y ago
> imagine that being able to accept payments from renters and unlock accordingly was a function of a lock itself My word.
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oh_sigh 10y ago
What's to stop someone from putting in $108M worth of etherium coins and then voting to give all the money to that same person?
- drcode 10y ago
  see the information above regarding "splits"
tqi 10y ago
Can someone point me to an sample smart contract?
nikolay 10y ago
Another speculators' playground!
reddytowns 10y ago
bitshares is an autonomous corporation that was created last year, developed using its own coin. I don't see any advantages that "The DAO" has over it. https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-doa https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-...
joosters 10y ago
At $120 million, it's the largest security bug bounty in history! Someone will 'claim' it soon...
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fapjacks 10y ago
It's not a question of whether or not ETH (and now the "DAO") is a scam. It is probably a scam. The question is whether or not ETH/DAO can become entrenched as <something> before it dies. As someone that got in this game early and has watched altcoins for years, that is pretty much the whole history of ETH, folks. Just do some research.
1337biz 10y ago
So how can I buy into this ponzi? I'd throw $50 at it and see what happens. How do I do that?
- humbledrone 10y ago
  Unless you have some ETH or BTC laying around, it's a bit of a hassle, but if you go to https://daohub.org/ https://daohub.org/ and click "Get DAO Tokens" and then "Start Wizard" it will walk you through the process.
otempomores 10y ago
If you gave ai seed funding and ago on the stock market.. Would that still be a conpany when you leave?

252 points by sethbannon 10y ago

carlob 10y ago

Self driving company

alttab 10y ago

This could be interesting. What does this mean for hostile take overs though?

drcode 10y ago
I think you're asking "what happens when someone captures 51% of the voting shares?" - This is actually the #1 problem with these types of systems, since the majority could just vote to put 100% of the funds into their own bank account. The slockit-authored DAO in the article addresses this through two failsafes: 1. Shareholders can vote to split the company in two at any point to extricate their funds from majority control. 2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder. Whether these safeguards will work remains to be seen.
- tinkerrr 10y ago
  Anyone can 'split' the DAO at any point of time, which renders the 51% attack moot. A 51% attack works only when the attacker can get more than what he puts in. Consider this obvious attack vector: Let's say today is the last crowdfunding day, and the DAO has raised $150 million so far. A wealthy attacker can immediately put another $150 million, effectively controlling 50% of the voting for the DAO, and then vote to send all the money to his own Ethereum address. This is perfectly possible, since this is all written in Ethereum contracts anyway. To avoid this, the rest of the people can 'fork' the DAO, effectively leaving the attacker with 100% control over his share of 50%. The attacker gains nothing. The other 'fork' can now continue on. This forking described above is also going to be used (I think) when it comes to funding new projects. I am sure some people will disagree with some proposal, and they would fork the DAO away to not invest in that proposal even though the majority agreed they would. They are free to do so.
  - drcode 10y ago
    > which renders the 51% attack moot. Well, I'm not sure I'd use such absolute language. For one thing, people can still perform a 51% attack and try to influence decisions covertly, without triggering a split. Also, the spectre of a 51% attack required for some major compromises to be made in the DAO design- Having a company that can arbitrarily split at any moment is likely to have a major impact on the future operations of the DAO.
    - tinkerrr 10y ago
      You're right, I shouldn't have used an absolute language. There is also the issue of voter apathy so yes, a 51% attack might be worthy of a try for a wealthy enough adversary. In terms of the split, if the community broadly agrees that there is an attack, then I don't see it having a long-term detriment. However, as you said, if it is more 'stealthy' then it would be harder to detect and correct. All that being said, I think there is a theoretical safety mechanism in place. Whether that will work in real life or not, we'll wait and see. I am sure some good lessons will come out of this in either case and the next generation of applications can improve upon some shortcomings.
- TD-Linux 10y ago
  >2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder. If there are humans involved that can exercise this level of control over The DAO, is it really autonomous?
  - drcode 10y ago
    It is a very limited for of control, for what it's worth.
adrianmacneil 10y ago
I'm not 100% familiar with it yet, but there is some code where anyone on the losing side of a majority vote can opt to fork the DAO and retain their original tokens with all investments, instead of going along with the group (similar idea to a Bitcoin hard fork). This prevents someone with 51% ownership voting to send 100% of the assets to themselves. https://download.slock.it/public/DAO/WhitePaper.pdf https://download.slock.it/public/DAO/WhitePaper.pdf

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riffraff 10y ago

the article doesn't actually explain the "autonomous" bit imo. This looks rather more like a distributed decision making platform. Say, liquid democracy + ethereum, rather than Accelerando-style "sentient alien corporations". Noticeably, the DAO does not seem to be able to make any decision, it does things through proposals suggested by people which are voted on. Still cool anyway.

tinkerrr 10y ago
This is correct. When the Decentralized Autonomous Organization/Corporation is a term that has undergone quite a few changes, and Ethereum projects definitely use it very loosely. As you pointed out, not much is autonomous at all. The DAO in this case appoints one company per project who is responsible for the entire project and its management. They are free to be as competent or incompetent, until voted out.
JetSpiegel 10y ago
Most decision making is in fact choosing between choices, it's not that different from a regular CEO.
chriswarbo 10y ago
I suppose there are a couple of ways to view this: - The DAO is a tool for people to make decisions collectively, by pooling their resources, voting on activities, and having Ethereum take care of trust issues. This is what you've described. - Alternatively, The DAO could be described as similar to a computer virus: it tries to survive by spreading into as many systems as possible, using their computational resources to propagate itself further; but crucially its behaviour is completely determined by its code, rather than acting as an interpreter for centrally-issued commands (like, say, a botnet or Seti@Home). While most computer viruses are parasitic, The DAO could be seen as symbiotic: in return for the resources it uses, it provides the services described above. It could be described as social engineering, like that of the ILOVEYOU virus, although it's not a trick (as far as we know). In the case of The DAO in particular, the first description probably makes the most sense. However, I'd say Ethereum applications in general are better described by the latter. For example, a gambling application like etheroll could persist completely independently on the network for as long as people are willing to gamble with it, spending part of its commission on resources ("gas").

drcode 10y ago

TLDR; A computer program living on the ethereum blockchain is currently in control of 107+ million dollars, making it the second largest crowdfunded project in history. Shareholders vote on proposals to give money to other entities (probably also programs on the ethereum blockchain) that they hope will make money and send it to the parent contract. All votes are managed by a program written in EVM code, which runs on a sort of "virtual computer" that is designed to be (in theory) 100% secure, 100% reliable, and 100% incontrovertible. No middlemen have any control over this program, it essentially completely outside of any human control (beyond the voting rules encoded within it.) UPDATE: Apparently this morning it passed $120 million and is now the largest crowdfunded project in history.

dragontamer 10y ago
Last time I checked, Apple Computers is worth $500+ Billion and is a public company. Don't forget that the stock market is the original mass-crowdfunded project. Anyone can become an owner if you go to a brokerage account, and ownership rights entitles you to a vote for the board of directors and a share of the profits (ie: the dividend)
- drcode 10y ago
  Agreed, "crowd funding" is an inexact term- I described it that way to help explain why some people think the project is novel. Certainly there is a lot of arbitrariness as to what belongs on a list of "top crowdfunded projects".
  - dragontamer 10y ago
    Yup. I just want to bring up the fact that this thing seems more akin to a classical public company, but in many regards is less transparent. There's the fact that all the code and mechanisms is public, but that's the part that everybody trusts anyway. When you're a shareholder in Apple, the votes are tallied, all relevant information from the board of directors is published, etc. etc. And the SEC forces the company to publicly disclose financial information in the form of 10k, 8k, and publicly announce insider trades. At the moment: I don't know who the "insiders" of this company are. Maybe one dude has $50 Million USD and effectively controls the entire damn "movement". Or maybe not. Knowing the identities of large shareholders is a BIG DEAL in public companies. Still, the digital form probably has some advantages. Maybe future companies will find a compromise and manage to exist as digital contracts akin to this DAO? But I don't expect this first version to actually work. Its pretty much a learning experiment, to see what is and isn't possible with technology. If any lessons are to be learned from Bitcoin: politics will affect this entity eventually. The technology currently serves as a mask to the politics. But politics always rears its ugly head eventually.

archgoon 10y ago

> Currently only the privileged can found and fund new companies. What? It's about $200 in Seattle to file to register a Limited Liability Company. It's a stretch to call that 'only the privileged'.

drcode 10y ago
I'm pretty convinced the vast majority of tech startups were started by individuals who relied on their family supporting them through the initial phases of their business.
- reviseddamage 10y ago
  pretty convinced from what data? source please? thanks!
  - drcode 10y ago
    I don't know if anyone has collected any formal data, I'm basing it on my personal experience. Certainly plenty of other people make the same observation. http://www.sfchronicle.com/business/article/Why-do-so-few-startup-founders-grow-up-6794214.php http://www.sfchronicle.com/business/article/Why-do-so-few-st...
  - sp332 10y ago
    Yeah, a couple of studies have been done on it. http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-for-risk-they-come-from-families-with-money/ http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-...
- deelowe 10y ago
  Vast majority? Really?
mfringel 10y ago
"Do the paperwork for creation" has only a passing resemblance to "found and fund."

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joshuaheard 10y ago

A corporation, being a legal fiction, can only act through physical persons. So in that respect, no corporation can be truly autonomous. It sounds like what they have done is taken all the paperwork associated with corporate activity: by-laws, annual meeting minutes, resolutions, etc., and put them into a block chain. A more proper description would be a paperless corporation.

drcode 10y ago
That's like saying a car can't be autonomous because some programmers wrote the software that it uses.
- DigitalJack 10y ago
  No, a corporation is a legal entity that must have directors and officers, aka people. Without that, you don't have a corporation. And after reading the article, they aren't a legally recognized corporation.
  - dragonwriter 10y ago
    > No, a corporation is a legal entity that must have directors and officers, aka people. OR, a corporation is a legal entity formed by a corporate charter that is treated as a person under the law. In any case, whatever these ethereum-based things are, they aren't corporations.
    - zardo 10y ago
      >In any case, whatever these ethereum-based things are, they aren't corporations. They may end up creating and operating corporations, but DAOs are their own thing.
      - dragonwriter 10y ago
        > They may end up creating and operating corporations Sure, if people ever make the rather radical changes to law that would be required for them to create, operate, or even merely passively own shares in corporations, that might be the case.

noonespecial 10y ago

Charlie Stross is smiling somewhere. https://en.wikipedia.org/wiki/Accelerando https://en.wikipedia.org/wiki/Accelerando

cfontes 10y ago
Probably around here as he has been seen on HN quite a bit. Proof : https://news.ycombinator.com/user?id=cstross https://news.ycombinator.com/user?id=cstross
CharlesMerriam2 10y ago
Closer to Daniel Suarez, Daemon & Freedom. http://www.amazon.com/DAEMON-Daniel-Suarez/dp/0451228731 http://www.amazon.com/DAEMON-Daniel-Suarez/dp/0451228731 This fiction starts the autonomous corporation from a vide game. The second book shows society's evolution to cope with the new corporation.
- jaytaylor 10y ago
  @CharlesMeeriam2 You beat me to it, I came here to post just this!!! This article reads as though it were a page straight out of Suarez's Daemon series. https://en.wikipedia.org/wiki/Daemon_(novel_series) https://en.wikipedia.org/wiki/Daemon_(novel_series)
- Mindless2112 10y ago
  Daemon and Freedom™ are excellent books – a frightening but plausible view into the not-so-distant future.
Ursium 10y ago
Slock.it here, creators of the DAO framework. Huge fans of Daniel Suarez and Charles Stross :)
mrbill 10y ago
You beat me to it. Very reminiscent of Manfred Macx's Python-based autonomous corporations if I'm remembering the book correctly.

nxzero 10y ago

Anyone know how to legally assign a corporation over to an autonomous system?

drcode 10y ago
I don't think so, this is totally uncharted legal territory- Nobody will know until the first legal precedents are established (IANAL)
dragonwriter 10y ago
> Anyone know how to legally assign a corporation over to an autonomous system? Step 1: Lobby for laws which allow legally assigning a corporations over to an autonomous system (or, more simply, laws which allow granting legal personhood to an autonomous system.) Under current laws, I don't think there is any place in the world where this can be done. The creation of a corporation is an act of government (often, but not always, done at the request of a non-government person through a publicly-available application process, but some are directly created by the government on its own initiative.)
Canada 10y ago
The company Articles could require its directors to obey the direction of the autonomous system. And if it doesn't the autonomous system could direct the creation of another corporation with a mandate to sue the non compliant one.
- btown 10y ago
  It's a legal interop layer! Now we just need to create a code-generation utility that takes the conceptual source code for the contract and generates legal code that can adequately enforce it... oh, wait...
- lsseckman 10y ago
  realistic & efficient, good thought
  - Canada 10y ago

street 10y ago

The DAO isn't actually worth 120 million. For one, it's based on the price of ETH, which would completely crash if you attempted to sell even a few million worth. Secondly, everyone can withdraw their funds from the DAO before any funds are sent to projects. Many have invested because those who invested early make money from those investing later, since the number of "DAO tokens" you get per "ETH" has gone down over time. (cough pyramid cough)

drcode 10y ago
> The DAO isn't actually worth 120 million. I you tried to sell all Apple stock in a single day it would also sell at well below market rate- Does that mean Apple is worth less than its market cap? That said, I personally have not invested/speculated in the DAO because I just don't see it as a good opportunity.
- Alexx 10y ago
  I think an analogy more in line with the parent comment would be - if you tried to sell 30% of Apple stock in a single day would the dollar collapse, wiping out all remaining shareholder value.
- hn9780470248775 10y ago
  > Does that mean Apple is worth less than its market cap? Yes.
- street 10y ago
  I just sold one of my hairs to myself for $10. Is my head now worth a million? With Apple, there's intrinsic value to consider. And frankly, if you sold enough Apple stock for it to go down 50%, I'd personally start buying. I doubt that's the case for ETH, where there's only early adopters buying it hoping to strike it rich.
  - drcode 10y ago
    So you're saying the intrinsic value is certain to be lower than it's current market value? I have good news for you: You can become rich by simply shorting ether on Kraken and Poloniex!

tonyswish 10y ago

This actually does a much better job explaining the project than the website does. I'm glad I have something to show friends/interested parties that is understandable!

Bjorkbat 10y ago

An interesting concept, but I'm not buying the hype. At the end of the day a bunch of people bought shares in a company (or did they? Legality is weird) with the special condition that in addition to owning a share of said company they also get to vote on what the company actually does, and even submit proposals for what it should do. Oh, and they also bought said shares with cryptocurrency. Magic internet money guys! Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required. Meanwhile, even though one might assume that the shareholders might be more informed than "the common mob", they might still propose and vote on more misses than, say, a corporation where new products and services are proposed through an informed internal decision making process that ultimately ends in the CEO using the information at his or her disposable to make the final decision. In a good corporation, bad decisions are self-correcting, in some cases leading to such extremes as a leadership shuffle. By contrast, who's to blame if the DAO votes on a proposal that wound up being a miss? How do they learn from their mistakes so it doesn't happen again? And I'm sure there are many other issues, but those are at the top of my list. I'd rather a company be run by those most capable, rather than the crowd.

drcode 10y ago
I'm a big ethereum fan but I agree 100% with your analysis.
hugozap 10y ago
If you vote a proposal is because you agree with it and you can't blame someone else. There's more flexibility than traditional structures with concepts like "splits" where if you don't agree with a proposal you can opt to not participate. It's new ground , has new concepts and it's still evolving. Really interesting stuff.
- deleted 10y ago
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kuschku 10y ago
> Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required. This stuff is also known as a cooperative, and is a very common concept for democratic companies – almost all housing in europe is owned like this.

will_brown 10y ago

What a bunch of snake oil. If you invested or are thinking of investing ask yourself a few simple questions. Who are the Shareholders/Directors/Officers of this corporation? Do you know what state it is incorporated in or going to be incorporated in? Just a few buzz words. Decentralized? No shit, any corporation with more than one shareholder is decentralized. Smart contracts? Defined as a self enforcing contract, guess what they don't exist. Autonomous? I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously, because that alone would be an enterprise solution every single corporation in the US would pay top dollar for, because DAO just singlehandedly replaced corporate compliance lawyers and CPAs with code. Still not convinced and eager to get in on this? Then why not cut out the middle man? Create your own "DAO" as an Investment Club (Corp or LLC) the only issue is you will be capped at 100 members/voters/token holders and $25M in investment. But you will be able to tell people your created your own decentralized corporation every bit as autonomous as DAO, complete with 100 tokens people can buy to become a member/shareholder and use to vote on investment opportunities presented by the DAO or members/shareholders of the DAO.

tonyswish 10y ago
I think there are many legitimate concerns about this project, but what you are saying address none of them. In fact your first questions mean you don't understand it.
- dragonwriter 10y ago
  Actually, his first question indicates that the people calling this a "corporation" have no idea what that word means.
- will_brown 10y ago
  I think as a lawyer who practices a great deal of corporate transactions, I have a much better idea than most on the legal structure and compliance issue with corporations on a state by state basis. But instead of telling me my question shows I don't understand, please answer any of the following: -Are the token holders shareholders? -If shareholders do the token holders also get to vote for the board, or are their tokens/shares non-voting? -How many members are on this board? Since it is all autonomous how do you know the DAO has the minimum amount of board members are required by law? If say DAO is a DE corp (min 3 board members) and DE amends the law, how is DAO's code going to keep up?

mangeletti 10y ago

I think the idea is great, but only if the ETH can never be withdrawn without the board's consent, much like funding a a corporation where you'd need to be paid a distribution or something, etc. - you don't just withdraw your money after the next VC enters the scene and drives the price up. If the ETH can be withdrawn at any time, then this is no different than a publicly traded stock... which is currently undergoing a pump-and... As such, I've flagged the post, to avoid contributing to what's turning out to be a free(?) viral marketing campaign. Am I wrong about the "withdraw" part?

zekevermillion 10y ago

The concept of a decentralized organization is cool. The implementation in DAOhub is dangerous to all participants. Both curators and contractors of DAOhub projects risk violating US securities laws if they use the platform to "crowdfund" projects. Participants, as is obvious, risk losing all their contributions, paid into the pockets of "contractors" who may possess voting control over project funds.

pweissbrod 10y ago

so, it's like twitch but for business?

tonyswish 10y ago

This is really cool for all of us in the Ethereum space, and as mentioned before, I'm a part of the Augur team which is a dapp on Ethereum. I did sort of see this coming eventually as Augur, Digix as well as Ethereum itself have been really successful using this method. It's a pretty cool way to fund open source projects and I think with something that incentivizes contributions like Code Valley there will be a boom in these projects.

c3534l 10y ago

There's a reason corporations developed as they did. With a large number of owners, it becomes very difficult to tell what is actually going on in a company and making consistent, sensical decisions is difficult. The result is that we developed a board of directors who are elected by the owners to oversee the performance of the top employees at that company, and a complex of system of accounting to communicate the financial position of the company directly to investors. I don't see how this project addresses the two main problems that corporations attempt to solve: a lack of complete information about a company of reasonable size, and a coordinating a large number of people who may not want to devote a full-time job to overseeing the company. I would be much more impressed if they described this as an open-source investment algorithm or something like. Instead, it seems as if they're trying to sell us on the benefits of a corporation to people who think "corporation" means "big, evil company."

drcode 10y ago
> There's a reason corporations developed as they did. Well, the counterargument would be "Because they didn't have computers back then and therefore couldn't develop alternative systems that are better but are impractical to implement manually."
- c3534l 10y ago
  Sure, but I don't see how this actually addresses the problems that corporations solve.
  - drcode 10y ago
    I agree that question doesn't have a good answer yet, and is why I am not participating in this experiment.
natosaichek 10y ago
So I might be reading into it too much, but it seems to me that part 1 (a lack of complete information about a company of reasonable size) Is basically totally solved by this system. The assets are completely documented on a massive publicly distributed system. The procedures for making decisions are similarly well documented. Basically everything you'd want to know about the [entity] is totally freely available. It's not hard to write some frontend to query all the data from the blockchain and keep an up-to-the minute accurate accounting of the resources of the [entity] Now the second part I can't vouch for - coordinating a large number of people is hard. But the code for the system is available for inspection. If someone thinks they can come up with a way to align incentives and such so that people cooperate better in the system (quadratic instead of linear voting? vote delegation? temporary dictatorships?) then (I think?) they can submit those as amendments to the system and improve it. I'm really guessing here as I haven't looked into it in that much detail.

dragonbonheur 10y ago

The first truly successful autonomous corporation will be a 419 scam. Even if it is not on Ethereum.

jrochkind1 10y ago

> While The DAO is a group of people authorized to act as a single economic entity, no governmental body recognizes it as such. They're really not legally incorporated anywhere? Foregoing the limitation of liability that goes along with a corporation seems awfully legally risky -- any of the individual members can be sued, likely succesfully, for something done by the aggregate, with possible damages exceeding their 'investment'. I'd think you could legally incorporate the thing how they wanted it with few problems, have bylaws saying decisions will be made with blockchain votes or whatever. I guess the automated "splitting" the corp would be a problem. Still, I don't think I'd want to be involved in such a thing without legal corporate limited liability protections.

cloudjacker 10y ago
Right, and there are people that do want to be involved. They want to be part of the case law incongruences that will arise to solve disputes. They want to bring this to light so that the legacy system is presented with a better or more efficient way. Anyway, Slock.it a germany company is managing this asset, their liability is limited.
- jrochkind1 10y ago
  If they think they can somehow get limited liability protections in the U.S. without a legal incorporation, I think nearly any lawyer will tell them they won't have much of a case. No judge is going to decide that. You don't get limited liability protections just by acting like a corporation, you need to actually incorporate. It's pretty straightforward law with regard to that much. (I am not a lawyer).
  - cloudjacker 10y ago
    The point is that they don't care about the US, or France, or Hong Kong, or Zimbabwe. Also, the individual owners of DAO are not known and are entirely bearer assets. You and I could Shapeshift some bitcoin to Ether right now, exchange for DAO tokens, vote on proposals for the DAO that eventually cause a gigantic oil disaster and whatever unlimited liability a court finds for shareholders will stall forever because they can neither find the shareholder or freeze the assets on the DAO.

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findjinn 10y ago

Time to go reread Daemon!

pre 10y ago

So, a sort of Distributed Digital Democratic Dragon's Den then. I suspect the contestants will make more money than the Distibuted-Dragons.

Moshe_Silnorin 10y ago
It's a shockingly bad idea. I support the right of people to invest in whatever they like, but VC has notoriously poor returns, decentralized VC run by a committee that can only invest in other decentralized technologies seems like a really, really bad idea. DAOs like Augur are actually interesting, even if you think they'll never work. This just seems crazy.
- pre 10y ago
  As long as nobody's putting in more than they intend to lose, it's at least a very pretty way to fund a bunch of distributed app code being written I guess. And if they all take what's left of their money out again, the code will still exist. Presumably has to be mostly free-software if it's gonna run distributed anyway.

zanchey 10y ago

> imagine that being able to accept payments from renters and unlock accordingly was a function of a lock itself My word.

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oh_sigh 10y ago

What's to stop someone from putting in $108M worth of etherium coins and then voting to give all the money to that same person?

drcode 10y ago
see the information above regarding "splits"

tqi 10y ago

Can someone point me to an sample smart contract?

nikolay 10y ago

Another speculators' playground!

reddytowns 10y ago

bitshares is an autonomous corporation that was created last year, developed using its own coin. I don't see any advantages that "The DAO" has over it. https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-doa https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-...

joosters 10y ago

At $120 million, it's the largest security bug bounty in history! Someone will 'claim' it soon...

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fapjacks 10y ago

It's not a question of whether or not ETH (and now the "DAO") is a scam. It is probably a scam. The question is whether or not ETH/DAO can become entrenched as <something> before it dies. As someone that got in this game early and has watched altcoins for years, that is pretty much the whole history of ETH, folks. Just do some research.

1337biz 10y ago

So how can I buy into this ponzi? I'd throw $50 at it and see what happens. How do I do that?

humbledrone 10y ago
Unless you have some ETH or BTC laying around, it's a bit of a hassle, but if you go to https://daohub.org/ https://daohub.org/ and click "Get DAO Tokens" and then "Start Wizard" it will walk you through the process.

otempomores 10y ago

If you gave ai seed funding and ago on the stock market.. Would that still be a conpany when you leave?