By Eli Levi, Business Editor
One of the most efficient ways to highlight the effects of the blockchain is with the case of the ConstitutionDAO. In the case of DAOs, or decentralized autonomous organizations, decentralized means that there is no central body controlling the decisions (like the CEO and management team of a company), and instead, all of the stakeholders of the DAO decide the DAO’s path. DAOs are built on a blockchain, which lends it all of the immutability and trustlessness of every blockchain. Instead of having to trust what the company says, the limits on the creator of the DAOs power are written clearly in code for anyone to see.
A recent example of a DAO in action was the ConstitutionDAO. This was a single-purpose DAO that was formed solely to purchase the original United States Constitution that was being auctioned off at Sotheby’s. The founders of the ConstitutionDAO’s mission was to “put the Constitution in the hands of the people.” Anyone who wanted to join this DAO could do so.
When it comes to blockchains and DAOs, once the code for a project has been written, it cannot be changed unless a large percentage of the participants agree (usually between 30% – 51%). In the case of the ConstitutionDAO, the purpose was to buy the Constitution, so if purchased, the stakeholders would have the ability to determine how and where the document would be displayed as well as the ongoing mission of the DAO.
Prior to the auction, the Constitution was assumed to go for around $20 million. The ConstitutionDAO managed to raise $40 million+ but in the end, was outbid by Kenneth Griffin, the CEO of Citadel. After losing the auction, the ConstitutionDAO’s stakeholders voted to refund the money raised and their website now states, “The community has taken all actions that it was organized to accomplish: we raised capital, we bid at Sotheby’s, and upon losing, we made full refunds available to the community as promised.”
There are many beneficial uses for DAOs. TechCrunch reflected on the usefulness of DAOs, explaining, “DAOs help large groups of people work together from all over the world. Companies can do that, but they tend to take a long time to get set up and it can be difficult to pay people across borders,” he said. “With DAOs, it’s easy to create a worldwide organization.” One potential drawback is that there is no room in DAOs for niche markets: the more complicated the endeavor, the smaller the number of people that will understand the project, which would translate into fewer people being involved. Based on my understanding of DAOs, I see their greatest utility being when members are aligned on a single goal, like in the case of the ConstitutionDAO.