Shahab Pournaghshband
When Sotheby’s announced that it would be auctioning one of the thirteen remaining copies of the United States Constitution earlier last month, a group of cryptocurrency fanatics created ConstitutionDAO, a decentralized autonomous organization (DAO), in hopes of placing the winning bid.[1] The organization surpassed all expectations and raised a mind-boggling $46 million within a week, receiving donations from 17,437 members.[2] Those interested in joining the DAO could donate Ether in exchange for a token, $PEOPLE, granting them a share of ownership in the Constitution as well as the right to vote on which museum should house it. The movement was inspired by shared underpinnings inherent to web3 (decentralization, blockchain, and cryptocurrency) and the Constitution: democracy, opportunity, and individual empowerment. The effort received significant media attention, exposing millions of Americans and people around the world to the capabilities of crypto and DAOs. A question, however, remains: What exactly is a DAO, and for what purposes may it be used?
A DAO is system of governance using blockchain technology that allows individuals to join forces in the name of a shared mission.[3] DAOs, unlike corporations, have no hierarchy and are fully democratized–there is no CEO, CFO, or board of directors. Instead, members acquire tokens representing a share of ownership and decision-making. Smart contracts, much like bylaws, define the structure and rules of the DAO. For example, the smart contract may provide for a “one person, one vote” construction or, alternatively, allocate one vote to each token. Decision are made through “proposals,” which require a share of vote as designated by the smart contract.[4] The democratization effect of the DAO removes bureaucratic hurdles and offers a solution to the age-old principal-agent problem, where representatives often fail to act in the best interest of people they represent.[5] And because DAOs are built on the blockchain, all transactions and decisions are transparently displayed on a public ledger.
Unfortunately, Ken Griffin, multi-billionaire and founder of hedge fund Citadel, placed the winning bid at the Sotheby’s auction.[6] But ConstitutionDAO put up a good fight, pooling together an impressive amount of capital in just one week and forcing Griffin to increase the winning bid to more than double the $20 million expected.[7] The ConstitutionDAO remained persistent after the loss, tweeting, “how much for citadel?”[8] More importantly, this effort publicized, on a worldwide scale, the possibilities of web3: people may group together to form a charity, create a venture fund, buy land for conservation purposes, or even purchase an unreleased Tupac album[9]. DAOs offer a low-cost and accessible avenue for anybody in the world to support their cause of choice and make a difference. Indeed, members of the ConstitutionDAO certainly felt empowered, with one member commenting, “Wherever there’s people, there’s power . . . Let’s use our power in ways big and small, together.”[10] For these reasons, DAOs align perfectly with the principles our nation was founded upon.
[1]Kevin Roose, They Love Crypto. They’re Trying to Buy the Constitution, N.Y. Times (Nov. 17, 2021), https://www.nytimes.com/2021/11/17/business/crypto-constitution-sothebys.html
[2]Constitution DAO (@ConstitutionDAO), Twitter (Nov. 18, 2021, 9:51 PM), https://mobile.twitter.com/ConstitutionDAO/status/1461527514485035009; Matthew Fox, ConstitutionDAO raises $46 million in a bid to buy a rare copy of the US constitution, Business Insider (Nov. 18, 2021), https://markets.businessinsider.com/news/currencies/constitutiondao-raises-46-million-buy-rare-copy-us-constitution-auction-2021-11?utm_medium=ingest&utm_source=markets
[3]See Decentralized autonomous organizations (DAOs), Ethereum, https://ethereum.org/en/dao/.
[4]See Tokenized Networks: What is a DAO?, Blockchainhub Berlin (July 2019), https://blockchainhub.net/dao-decentralized-autonomous-organization/.
[5]Id.
[6]Lauren Hirsch, Ken Griffin, head of Citadel, bid highest for a copy of the Constitution, N.Y. Times (Nov. 19, 2021), https://www.nytimes.com/2021/11/19/business/ken-griffin-constitution.html.
[7]Id.
[8]Constitution DAO (@ConstitutionDAO), Twitter (Nov. 19, 2021, 3:54 PM), https://mobile.twitter.com/ConstitutionDAO/status/1461800175643639810.
[9]0xBaba.eth (@0xBaba23), Twitter (Dec. 2, 2021, 1:51 PM), https://twitter.com/0xbaba23/status/1466480258664783875?s=21.
[10]See https://juicebox.money/#/p/constitutiondao.