7 ms·

Notes on ConstitutionDAO

26 points by enigmatic02 5y ago

ajross 5y ago
Seems like most of the technical blame here is being placed on the lack of agility of the process. There were bidders available in the crypto world, but you can't turn those into dollars on the time scales required by a physical auction. Which is to say, this failed in exactly the way that all us curmudgeons knew it was going to: DAO's and other software constructions are and remain software constructions and they can't make things happen outside their realm. If you want to buy things in the world of people you have to be able to actually make things happen with people. And web3 can't. In some sense this was the best failure mode, anyway. Now it just goes away and we worry about the next big crypto thing. What if they'd succeeded? It's a physical thing. Someone has to store it, and guard it, and curate it, and all of that is labor that has to be done by people paid in dollars. A pure software construction isn't going to be able, more or less by definition, to supervise that. Frankly I was half expecting this to succeed, and then see the thing disappear in a high profile theft or mysterious disappearance, or just outright fraud.
kashprime 5y ago
I share the author's personal investment in this topic. It was my first introduction to the web3 world, and it really showcases the potential of truly decentralized communities. Some of the flaws were visible, but overall how this community evolves and incorporates the input of its 17K participants will set up the norms and practices for DAOs for some time to come. I'm hoping that the community created here endures and continues to test and expand the boundaries of this new type of organization.
chillacy 5y ago
> Nobody knew who won, and there was a lot of misinformation spreading. It was also very confusing to watch the live chat on YouTube. There was no authoritative communication on the official twitter or website about who would be bidding on their behalf. Nobody knew who the person representing ConstitutionDAO was, or if Constitution DAO was even participating at all. A good number of commenters were convinced it was a "rugpull" / scam. Then as the article says, in the twitter audio room afterwards there was the "Dewey Defeats Truman" thing. Having gone through a few election cycles in the US, I must say it did remind me of election day results, but that's not a compliment.
- wallacoloo 5y ago
  i don’t understand people who will loudly proclaim “x is true” without themselves having any reason to believe x is actually true. but that seemed to be the case just about everywhere. even coindesk — an entity that i’ve considered decently reliable in this space — published their “ConstitutionDAO wins” article before reliable confirmation (since redacted). i get the pressure for a news outlet to call the shot early, but for everyday twitter/discord users? why propagate beliefs that you yourself haven’t heard from a reliable source? don’t people care that the things they say are actually true?
- seanhunter 5y ago
  If you spend any time at all on crypto discord servers you will constantly get commentators saying that any particular project is a rugpull. That is par for the course and the skepticism is justifiable given the track record of frequent scams in this space. That said I think this is an interesting idea but flawed execution, given that: 1)The most important part of the strategy in an auction is how high to bid (it's almost the only decision you make in the process). If the other side knows your maximum bid but you don't know that info for them you clearly place yourself at a huge disadvantage. A bad actor could bid you up to just below your max price and then stop just to screw you over, so you pay your max for something you would in normal circumstances get much cheaper, or conversely you are guaranteed to lose if someone knows your max and just wants to pay more. They can wait until you bid completely up to your max before putting in their first bid so they are guaranteed to get it very cheaply above your bid assuming noone else is involved. 2)They didn't seem to have much of a plan for success. That's pretty normal in the web3 world in my experience. There's a lot of "let's get there and then see what happens", but I think in this case it would have been great and more in the spirit of DAOs to have a vote and declare ahead of time "if we win we immediately donate it to x museum or whatever" so they don't have to pay for conservation and security.
- spky333 5y ago
  it was pretty funny to watch. also a lot of "rugpull" comments are a meme that get repeated in any uncertainty or accident, i spill my coffee "rugged again". in this case the team didn't know who their bidder was until after the auction ended.
zemnmez 5y ago
It's interesting that the exchange (juicebox.money) takes a 3% cut, so they made about $5M off of this, despite its apparent failure.
- debt 5y ago
  They waived the fee.
- wallacoloo 5y ago
  even if they hadn’t waived the fee as sibling comment points out, check your math: 3% on 50-ish million isn’t $5M.
lottin 5y ago
How was this different from any other fund raiser? Some guys set up an LLC, raised funds and attempted to do something with the funds. They call it a DAO, but there's nothing 'decentralised' or 'autonomous' about it. It was a CO —centralised organisation— that managed the funds and placed the bid. And this is how it has to be if you intend to interact with anything else other than imaginary tokens on a blockchain, you need to be a legal person, which is antithetical to the idea of a DAO.
- theplumber 5y ago
  People could contribute "anonymously" without to go through banks and payment processors. Now eth fees are not that low and transfers not as fast as we want but if we can cut the middle man(banks) I think it's worth it(for some people).
  - rvz 5y ago
    Not only that, They have to refund the ETH to everyone. (minus the high gas fees that were paid) It is perhaps due to the high gas fees with the ETH price volatility and showing the total amount funded publicly which costed them since they were unable to afford the additional auction costs. Perhaps better alternative blockchains that are designed to scale with very low transaction fees and support smart contracts with EVM compatibility, would have been better for this use case. Clearly Ethereum has let down the web3 crowd once again on this occasion. What a shame.
    - theplumber 5y ago
      Yes, but the banks are worse because they are run by bad people. ETH will only get better.
      - rvz 5y ago
        Never mentioned anything about 'the banks' but regardless, they are still around because everyone needs to eat and you can still pay for your groceries with your card linked to your bank account which payments provide very low transaction costs and it is still fast. Unlike Ethereum which it has gotten worse to use over time to the point that it is useless to pay for your groceries. Perhaps there are other blockchains that are better for both for setting up DAOs and paying for your food. Oh dear.
debt 5y ago
The most fascinating part was that they raised $45mm in seven days from people from all over the world using really nothing but solidity contracts on the ethereum blockchain(no complicated PayPal integration, or Stripe etc., no web hooks or callbacks or AWS lambdas etc) https://github.com/jbx-protocol/juice-contracts https://github.com/jbx-protocol/juice-contracts
- meheleventyone 5y ago
  Did they actually hold $45 million or was it the equivalent in ETH? My understanding at least is it would be hard to turn large amount of ETH into dollars without taking a chunk out of the worth of ETH.
  - spky333 5y ago
    you can pretty easily buy and sell that much otc with any of the big exchanges. happens every day.
    - meheleventyone 5y ago
      As much as I'd like to take your word on that you'll need to offer something more to actually demonstrate it's true as there is other speculation here it caused a dip and I have no idea which of you is correct. I get the daily trading volume of ETH itself is large but don't see ready statistics for ETH->USD.
- arcticbull 5y ago
  Maybe a nice GoFundMe.
- seanhunter 5y ago
  Take a look at any of the defi providers and you'll see that there is a lot of money floating around in pure crypto payment infrastructure. If you're not in the defi world, you could pick https://curve.fi https://curve.fi as a good example because you might have heard of uniswap but probably haven't heard of curve. I see on their website that the weekly volume of deposits and withdrawals to their liquidity pools is $7bn. All done on solidity, no direct payments infrastructure at all. If you looked at any of the others (aave, balancer, yearn) you would mostly see a similar story. People who onramp and offramp to fiat currencies and therefore handle real money are actually in the minority. As a tangential aside we wanted to be able to handle crypto and real money payments for something so actually used stripe for credit cards and "coinbase commerce" who offer a stripe-like slick checkout experience and api for accepting crypto payments. The only real downside to the coinbase checkout that we've found is that the blockchains take long enough to accept transactions and the price fluctuates enough that you constantly get people under or overpaying by very small amounts that are expensive to deal with. Still not sure what if anything to do to elegantly handle this.
DantesKite 5y ago
The saga isn’t over yet. They still have to refund the money. Let’s see how that plays out.
- dharma1 5y ago
  They will just return the eth. People who deposited will need to pay gas fees to claim it back though. And yes the saga definitely isn’t over - there will be many more collective fundraising DAOs going forward!
  - samwillis 5y ago
    Not only that, I believe they had to exchange the ETH for USD before the auction to prove their holding. They now need to turn the USD back to ETH. ETH crashed by about 10% yesterday afternoon (which could be due to them liquidating that much ETH, that would be a big story itself) and so they will have lost a fair bit there!
    - dharma1 5y ago
      I think FTX agreed to return the same amount of ETH regardless of fx rates but let’s see. ETH daily volume is over $20b wouldn’t have made a material difference.
      - danuker 5y ago
        You underestimate how much of that volume is bots echoing and amplifying any tiny market jitter.
    - dcposch 5y ago
      If they were holding USD during the crash, that is great for them. Means they may end up with more than they started with. It would be a pretty funny outcome: "hey sorry we couldn't buy the Constitution, thanks for sending us 10 eth last week, here's 11 eth back"
      - 5y ago
provablynothing 5y ago
1. I’m concerned with who won this. The game was stacked for the opponent of the DAO who had all of the information. Maybe it’s tinfoil hat but I think there was an ideological battle at hand - the preservation of centralization vs decentralization. Worst yet the DAO lost due to an inherent value it represents: transparency. 2. Some people were speculating at the 10% drop in ETH was some sort of manipulation to depress the buying power. After reading this, it feels like the liquidation of the DAO’s ETH might have caused that... probably bot momentum. I don’t know crypto markets that well.
- piva00 5y ago
  > 1. I’m concerned with who won this. The game was stacked for the opponent of the DAO who had all of the information. Maybe it’s tinfoil hat but I think there was an ideological battle at hand - the preservation of centralization vs decentralization. Worst yet the DAO lost due to an inherent value it represents: transparency. There is nothing maliciously being done against a DAO here. It was an auction, the stupidest thing a bidder at an auction can do is announce their maximum bid limit way before an auction take place. That's what happened here, it is a given in any auction that you will either be outbidded if your maximum bid is known or you will be pushed to spend it all, it's a pretty simple game theory setup.
  - provablynothing 5y ago
    malicious isn’t what is happening here. Ideological. You are saying it’s “simple game theory.” Which I’m highlighting is WHY it was important that someone won this knowing there was a stockpile of 40million dollars that the DAO represented. They knew the price they had to pay was over double the estimate. We could argue someone was just really passionate about the constitution or my point... they felt like the DAO winning this was part of greater ideological battle. The meme in crypto is its “probably nothing”
Animats 5y ago
If you can raise that kind of money, you can get enough cash to do a leveraged buyout of something about 10x as big. DAO private equity, here we come.
a1371 5y ago
DAOs are what crowdfunding platforms should have been. Kickstarter and what not ended up being all the risk and none of the upside if the idea actually got traction. One can argue, this DAO was neither Decentralized nor Autonomous; what it did right was giving people a sense of ownership. We tend to focus on the costs and weaknesses of DAOs, but hardly any non-crypto services operate on "we let you hedge some money on a random idea". Turned out if you let people play, they play.

26 points by enigmatic02 5y ago

Seems like most of the technical blame here is being placed on the lack of agility of the process. There were bidders available in the crypto world, but you can't turn those into dollars on the time scales required by a physical auction. Which is to say, this failed in exactly the way that all us curmudgeons knew it was going to: DAO's and other software constructions are and remain software constructions and they can't make things happen outside their realm. If you want to buy things in the world of people you have to be able to actually make things happen with people. And web3 can't. In some sense this was the best failure mode, anyway. Now it just goes away and we worry about the next big crypto thing. What if they'd succeeded? It's a physical thing. Someone has to store it, and guard it, and curate it, and all of that is labor that has to be done by people paid in dollars. A pure software construction isn't going to be able, more or less by definition, to supervise that. Frankly I was half expecting this to succeed, and then see the thing disappear in a high profile theft or mysterious disappearance, or just outright fraud.

kashprime 5y ago

I share the author's personal investment in this topic. It was my first introduction to the web3 world, and it really showcases the potential of truly decentralized communities. Some of the flaws were visible, but overall how this community evolves and incorporates the input of its 17K participants will set up the norms and practices for DAOs for some time to come. I'm hoping that the community created here endures and continues to test and expand the boundaries of this new type of organization.

chillacy 5y ago

> Nobody knew who won, and there was a lot of misinformation spreading. It was also very confusing to watch the live chat on YouTube. There was no authoritative communication on the official twitter or website about who would be bidding on their behalf. Nobody knew who the person representing ConstitutionDAO was, or if Constitution DAO was even participating at all. A good number of commenters were convinced it was a "rugpull" / scam. Then as the article says, in the twitter audio room afterwards there was the "Dewey Defeats Truman" thing. Having gone through a few election cycles in the US, I must say it did remind me of election day results, but that's not a compliment.

wallacoloo 5y ago
i don’t understand people who will loudly proclaim “x is true” without themselves having any reason to believe x is actually true. but that seemed to be the case just about everywhere. even coindesk — an entity that i’ve considered decently reliable in this space — published their “ConstitutionDAO wins” article before reliable confirmation (since redacted). i get the pressure for a news outlet to call the shot early, but for everyday twitter/discord users? why propagate beliefs that you yourself haven’t heard from a reliable source? don’t people care that the things they say are actually true?
seanhunter 5y ago
If you spend any time at all on crypto discord servers you will constantly get commentators saying that any particular project is a rugpull. That is par for the course and the skepticism is justifiable given the track record of frequent scams in this space. That said I think this is an interesting idea but flawed execution, given that: 1)The most important part of the strategy in an auction is how high to bid (it's almost the only decision you make in the process). If the other side knows your maximum bid but you don't know that info for them you clearly place yourself at a huge disadvantage. A bad actor could bid you up to just below your max price and then stop just to screw you over, so you pay your max for something you would in normal circumstances get much cheaper, or conversely you are guaranteed to lose if someone knows your max and just wants to pay more. They can wait until you bid completely up to your max before putting in their first bid so they are guaranteed to get it very cheaply above your bid assuming noone else is involved. 2)They didn't seem to have much of a plan for success. That's pretty normal in the web3 world in my experience. There's a lot of "let's get there and then see what happens", but I think in this case it would have been great and more in the spirit of DAOs to have a vote and declare ahead of time "if we win we immediately donate it to x museum or whatever" so they don't have to pay for conservation and security.
spky333 5y ago
it was pretty funny to watch. also a lot of "rugpull" comments are a meme that get repeated in any uncertainty or accident, i spill my coffee "rugged again". in this case the team didn't know who their bidder was until after the auction ended.

zemnmez 5y ago

It's interesting that the exchange (juicebox.money) takes a 3% cut, so they made about $5M off of this, despite its apparent failure.

debt 5y ago
They waived the fee.
wallacoloo 5y ago
even if they hadn’t waived the fee as sibling comment points out, check your math: 3% on 50-ish million isn’t $5M.

lottin 5y ago

How was this different from any other fund raiser? Some guys set up an LLC, raised funds and attempted to do something with the funds. They call it a DAO, but there's nothing 'decentralised' or 'autonomous' about it. It was a CO —centralised organisation— that managed the funds and placed the bid. And this is how it has to be if you intend to interact with anything else other than imaginary tokens on a blockchain, you need to be a legal person, which is antithetical to the idea of a DAO.

theplumber 5y ago
People could contribute "anonymously" without to go through banks and payment processors. Now eth fees are not that low and transfers not as fast as we want but if we can cut the middle man(banks) I think it's worth it(for some people).
- rvz 5y ago
  Not only that, They have to refund the ETH to everyone. (minus the high gas fees that were paid) It is perhaps due to the high gas fees with the ETH price volatility and showing the total amount funded publicly which costed them since they were unable to afford the additional auction costs. Perhaps better alternative blockchains that are designed to scale with very low transaction fees and support smart contracts with EVM compatibility, would have been better for this use case. Clearly Ethereum has let down the web3 crowd once again on this occasion. What a shame.
  - theplumber 5y ago
    Yes, but the banks are worse because they are run by bad people. ETH will only get better.
    - rvz 5y ago
      Never mentioned anything about 'the banks' but regardless, they are still around because everyone needs to eat and you can still pay for your groceries with your card linked to your bank account which payments provide very low transaction costs and it is still fast. Unlike Ethereum which it has gotten worse to use over time to the point that it is useless to pay for your groceries. Perhaps there are other blockchains that are better for both for setting up DAOs and paying for your food. Oh dear.

debt 5y ago

The most fascinating part was that they raised $45mm in seven days from people from all over the world using really nothing but solidity contracts on the ethereum blockchain(no complicated PayPal integration, or Stripe etc., no web hooks or callbacks or AWS lambdas etc) https://github.com/jbx-protocol/juice-contracts https://github.com/jbx-protocol/juice-contracts

meheleventyone 5y ago
Did they actually hold $45 million or was it the equivalent in ETH? My understanding at least is it would be hard to turn large amount of ETH into dollars without taking a chunk out of the worth of ETH.
- spky333 5y ago
  you can pretty easily buy and sell that much otc with any of the big exchanges. happens every day.
  - meheleventyone 5y ago
    As much as I'd like to take your word on that you'll need to offer something more to actually demonstrate it's true as there is other speculation here it caused a dip and I have no idea which of you is correct. I get the daily trading volume of ETH itself is large but don't see ready statistics for ETH->USD.
arcticbull 5y ago
Maybe a nice GoFundMe.
seanhunter 5y ago
Take a look at any of the defi providers and you'll see that there is a lot of money floating around in pure crypto payment infrastructure. If you're not in the defi world, you could pick https://curve.fi https://curve.fi as a good example because you might have heard of uniswap but probably haven't heard of curve. I see on their website that the weekly volume of deposits and withdrawals to their liquidity pools is $7bn. All done on solidity, no direct payments infrastructure at all. If you looked at any of the others (aave, balancer, yearn) you would mostly see a similar story. People who onramp and offramp to fiat currencies and therefore handle real money are actually in the minority. As a tangential aside we wanted to be able to handle crypto and real money payments for something so actually used stripe for credit cards and "coinbase commerce" who offer a stripe-like slick checkout experience and api for accepting crypto payments. The only real downside to the coinbase checkout that we've found is that the blockchains take long enough to accept transactions and the price fluctuates enough that you constantly get people under or overpaying by very small amounts that are expensive to deal with. Still not sure what if anything to do to elegantly handle this.

DantesKite 5y ago

The saga isn’t over yet. They still have to refund the money. Let’s see how that plays out.

dharma1 5y ago
They will just return the eth. People who deposited will need to pay gas fees to claim it back though. And yes the saga definitely isn’t over - there will be many more collective fundraising DAOs going forward!
- samwillis 5y ago
  Not only that, I believe they had to exchange the ETH for USD before the auction to prove their holding. They now need to turn the USD back to ETH. ETH crashed by about 10% yesterday afternoon (which could be due to them liquidating that much ETH, that would be a big story itself) and so they will have lost a fair bit there!
  - dharma1 5y ago
    I think FTX agreed to return the same amount of ETH regardless of fx rates but let’s see. ETH daily volume is over $20b wouldn’t have made a material difference.
    - danuker 5y ago
      You underestimate how much of that volume is bots echoing and amplifying any tiny market jitter.
  - dcposch 5y ago
    If they were holding USD during the crash, that is great for them. Means they may end up with more than they started with. It would be a pretty funny outcome: "hey sorry we couldn't buy the Constitution, thanks for sending us 10 eth last week, here's 11 eth back"
    - 5y ago

provablynothing 5y ago

1. I’m concerned with who won this. The game was stacked for the opponent of the DAO who had all of the information. Maybe it’s tinfoil hat but I think there was an ideological battle at hand - the preservation of centralization vs decentralization. Worst yet the DAO lost due to an inherent value it represents: transparency. 2. Some people were speculating at the 10% drop in ETH was some sort of manipulation to depress the buying power. After reading this, it feels like the liquidation of the DAO’s ETH might have caused that... probably bot momentum. I don’t know crypto markets that well.

piva00 5y ago
> 1. I’m concerned with who won this. The game was stacked for the opponent of the DAO who had all of the information. Maybe it’s tinfoil hat but I think there was an ideological battle at hand - the preservation of centralization vs decentralization. Worst yet the DAO lost due to an inherent value it represents: transparency. There is nothing maliciously being done against a DAO here. It was an auction, the stupidest thing a bidder at an auction can do is announce their maximum bid limit way before an auction take place. That's what happened here, it is a given in any auction that you will either be outbidded if your maximum bid is known or you will be pushed to spend it all, it's a pretty simple game theory setup.
- provablynothing 5y ago
  malicious isn’t what is happening here. Ideological. You are saying it’s “simple game theory.” Which I’m highlighting is WHY it was important that someone won this knowing there was a stockpile of 40million dollars that the DAO represented. They knew the price they had to pay was over double the estimate. We could argue someone was just really passionate about the constitution or my point... they felt like the DAO winning this was part of greater ideological battle. The meme in crypto is its “probably nothing”

Animats 5y ago

If you can raise that kind of money, you can get enough cash to do a leveraged buyout of something about 10x as big. DAO private equity, here we come.

a1371 5y ago

DAOs are what crowdfunding platforms should have been. Kickstarter and what not ended up being all the risk and none of the upside if the idea actually got traction. One can argue, this DAO was neither Decentralized nor Autonomous; what it did right was giving people a sense of ownership. We tend to focus on the costs and weaknesses of DAOs, but hardly any non-crypto services operate on "we let you hedge some money on a random idea". Turned out if you let people play, they play.