National Treasure - The Daily Gwei #381

Get in loser, we're buying the constitution.

ConstitutionDAO - a collective formed to buy a copy of the US constitution - has taken the crypto ecosystem by storm over the last few days. So far, the DAO has raised over $40 million and intends to bid on 1 of the only 13 surviving original copies of the constitution which is being auctioned off by Sotheby’s. In return for contributing to the DAO, contributors will be issued a token that will be used to - you guessed it - govern the DAO.

I’ve been seeing a bit of mixed feelings about this project on social media and opinions range from extremely skeptical to some people thinking this is going to be a historic moment for crypto. I would say that I sit in the middle here because I totally understand why people are skeptical of this but I also see the deeper meaning behind the project. Essentially, ConstitutionDAO is showing off one of Ethereum’s superpowers - that is, its ability to coordinate capital globally in an extremely rapid way. To do this sort of capital formation in the traditional finance world, you’d have to use centralized payment processors (who would most likely censor you), it’d be extremely slow, the money raised would be much less and the raise itself would be very exclusionary. You also couldn’t create a DAO out of it and have it be governed by token holders - the traditional system is just not set up to do this in any practical way.

We obviously saw the first showcase of this capital formation power during TheDAO in mid-2016 (which unfortunately blew up) and then we saw it on an even greater scale all throughout ICO mania in 2017. Since then, there hasn’t really been any grand experiments with DAO capital formation and I believe that’s a big reason why people are so excited about ConstitutionDAO - it’s more about the message rather than what the capital is actually being used for. Though of course buying an original copy of the US constitution is nothing to scoff at and I think that the mainstream media will definitely pick up on this whether the DAO wins the auction or not.

In saying all of this, it’s not just the rapid capital formation aspect of DAOs that fascinate me - it’s also the rapid social coordination that can form around a common goal. It has a flywheel effect to it too: more capital raised > more social credibility/marketing the DAO obtains > more capital comes in because of that and so on and so forth. This is why ConstitutionDAO has gone from $0 to over $40 million in less than a week - this is really the true power of a global, decentralized and censorship-resistant internet-native economy - built on Ethereum and powered by humans.

Now, coming back down to Earth a bit, there are still risks presented here as the funds are currently controlled by a multi-sig wallet with 13 signers who could rug the project at any time (though these signers are public). People seem willing to take this risk to watch this experience play out and to be honest, I don’t blame them. It’s not every day that you get the opportunity to participate in bidding on an original copy of the US constitution - may as well make the most of it while it lasts.

We are truly living in a new and very exciting world.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.