What is the DAO that even the old lady came to ask?

How much does it cost to buy an NBA team? Two years ago, Alibaba co-founder Cai Chongxin acquired 100% of the Brooklyn Nets, spending a total of US$2.35 billion. Now, ordinary fans who can’t afford so much money have a new way.

In November 2021, a DAO (Decentralized Autonomous Organization) named “Krause House” began to issue NFTs (virtual tickets of three denominations), with the goal of raising 1,000 ETH (market price of approximately US$4 million) for use Preparation for buying an NBA team-although the money is only equivalent to the team’s one-year charter fee. The fundraising speed is amazing, and the initial raising of 200 ETH only took 15 minutes.

What is the DAO that even the old lady came to ask?

Three different denominations of NFT tickets issued by Krause House丨Krause House

“Crowdfunding to buy a team” was inspired by a more bizarre DAO fundraising event not long ago-an organization called “ConstitutionDAO” wanted to buy the first printed copy of the 1787 US Constitution that was publicly auctioned.

There are only 13 copies of the first printed copy of the “United States Constitution”, and the one to be auctioned this time is one of the copies flowing into the public. The estimate given by Sotheby’s is 20 million U.S. dollars. But on November 18th, the six pages were finally sold with a hammer for $43.2 million, setting the world’s highest price record for historical documents at auction.

What is the DAO that even the old lady came to ask?

The U.S. Constitution enacted 235 years ago丨Wikipedia

The eagerly watched ConstitutionDAO failed to do so, and they finally lost to Chicago’s richest man Ken Griffin at a slight disadvantage. The important reason for the failure is that the ConstitutionDAO fundraising process is open and transparent, and the bottom line of the bid has been figured out in advance by competitors. Subsequently, ConstitutionDAO opened a refund application for funders.

The New York Times, BBC and other media have focused the attention of this auction on ConstitutionDAO: More than 17,000 netizens from all over the world contributed funds and raised funds worth more than 40 million US dollars in just 72 hours. ETH. “Some museum personnel are very surprised,” said a core organizer of ConstitutionDAO. “They can raise so much money in half a year. They asked us why we can do it in three days.”

People pay attention to ConstitutionDAO, in addition to “making money” fast, but also because this is a historic event of cryptocurrency impacting the real world. These 17,000 strangers have the same mission: to buy printed copies of historical documents, and then jointly vote on where the documents should be displayed.

“We did make history… Even grannies came to ask’What is Ethereum?'” ConstitutionDAO wrote on Twitter.

  We chatted with the participants  

It all started a week before the public auction of the printed copy of the “U.S. Constitution.” “Why don’t we participate in the auction?” Some people in the cryptocurrency circle suddenly thought. The auction of the printed copy of the “U.S. Constitution” starts at 10 million U.S. dollars, and it is difficult to get “admission tickets” even with a single contribution. Some people suggested that the DAO organization crowdfunding for this auction project should be established. The leader started a video conference and worked out plans in full swing.

First of all, DAO has to solve its own “identity problem.” This “decentralized autonomous organization” is not registered in any jurisdiction in accordance with specific management regulations, and therefore does not have a corresponding legal status. In the beginning, Sotheby’s didn’t even know how to deal with a “DAO”, and didn’t know what to do to comply.

In essence, DAO is a kind of public computer code written on the blockchain, which can be understood as an electronic contract, but how the contract is executed is determined by its code, not by people.

What is the DAO that even the old lady came to ask?

DAO can be regarded as a kind of electronic contract, how to execute is determined by its code, not by people丨Unsplash

The core members of ConstitutionDAO immediately recruited the people who know the relevant legal issues best, and together they established a legal entity that can deal with Sotheby’s; they found the non-profit organization Endaoment to discuss matters such as document preservation and bidding; and selected a third party. The platform Juicebox serves as the entrance to fundraising.

The fundraising webpage soon went live. The announcement on it pointed out: if you raise 14 million US dollars, you will have auction tickets; if you raise 30 million US dollars, you can compete with others; if you raise more than 40 million dollars, there will be a lot of money. Great chance to win. The announcement also pointed out that what the funders share is not the ownership of the lot. What they get is the governance right of this printed copy-according to the proportion of capital contribution, the corresponding token will be obtained as a voucher. And this kind of voucher can be used to initiate proposals and votes, and decide what else the entire pool of funds can do in the future.

“When the participants see this printed copy in the future, they will remember that they have participated in this historic moment. They have a say in the whereabouts of the documents. This is a completely different experience from visiting the National Archives.” One of the organizations Said.

We found Z, who was involved in fundraising, and chatted with him about this interesting experience.

“Everyone’s motivation is different. I think it’s fun, and I think there are people who raise money like this.” Z first saw someone reposting ConstitutionDAO’s announcement on Twitter. “More people think this is a historic event. To be part of it. There are also many people who are speculative. There are some big Vs and small Vs on Weibo who can buy this to increase. Then many people enter the Discord chat room and find that this is just a simple donation and feel cheated.”

What is the DAO that even the old lady came to ask?

When Z clicked to enter the fundraising page, the progress had just reached 27%丨Photo courtesy of respondent Z

When Z clicked to enter the fundraising page for the first time, the fundraising progress had just reached 27%. After clicking donate, you will be redirected to a third-party fundraising service called Juicebox, and then click “Connect Wallet”, and the ETH that Z put in MetaMask will be donated.

After completing the donation, Z received the token “$PEOPLE”, which is not only his proof of capital contribution, but also his identity as a member of the DAO, or a proof of his rights and interests in the future.

The question is, will the project organizer run away with the money? The organizers of ConstitutionDAO stated that they would transfer the money to an account similar to a “blockchain safe”. If you want to use the money, a certain amount of administrators (just the project organizer, not the decision-making party) need to agree and sign . Z told us that they set 13 organizers as administrators in advance. If they want to move funds, 9 of them must sign their digital signatures at the same time.

The setting of 13 and 9 “is to maintain tradition and pay tribute to history.” On June 21, 1788, the “U.S. Constitution” was approved by 9 of the first 13 states and became a national law.

“Even if the final bid fails, most people think it’s okay. This has made history. But they are also reflecting on the fact that auctioning on the blockchain is not good for fundraising because the other party will know your hole cards. There are others. It is proposed not to dissolve, but to save the coins to auction the cheaper printed copy of the American Bill of Rights.” Z said.

Can DAO be trusted?  

There are more than 17,000 funders in ConstitutionDAO, and they come from all over the world. Why are they willing to trust an “organization” that does not even have a formal legal identity?

In this incident, people’s trust was not built on written contracts, nor did they rely on the judicial authorities that have the authority to interpret these contracts. The core of it lies in a series of cryptography and computer technology-people trust the organizers of ConstitutionDAO, not because of them. The promises were made, but because their promises became public computer codes, and the execution of these codes was not subject to human intervention.

The technical basis is first of all digital signatures.

Digital signature technology is based on “public key cryptography” that appeared in the 1970s. Public key cryptography groundbreakingly allows users to disclose a piece of information (called a “public key”) for encryption, and a corresponding piece of confidential information (called a “private key”) for decryption; the public key is one-way by the private key It is calculated that there is a one-to-one correspondence, but the private key cannot be deduced by the public key. In communication, the sending party uses the other party’s public key to encrypt the information, and the receiving party uses its own private key to decrypt it-this is also the basis of Internet secure communication.

What is the DAO that even the old lady came to ask?

The public key is calculated one-way from the private key, and is one-to-one, but the private key cannot be deduced by the public key丨Ledger

Later, public key cryptography extended the digital signature technology: after using a private key to generate a signature on a message, others can verify whether the signature is from you as long as they know the message, your public key, and your signature.

In systems such as banks, digital signatures are used as an identity certification scheme, such as the bank’s USB. But in the access-free blockchains such as Bitcoin and Ethereum, digital signatures have become an account system: the public key is like an account number (which can be made public), and the private key is equivalent to a password (which cannot be made public). Assets are directly recorded under each public key name, and when transferring assets, the signature of the corresponding private key must be presented. Since the signature cannot be forged, others cannot directly steal your assets.

What is the DAO that even the old lady came to ask?

Correspondingly, the theft or loss of the private key will also lead to the loss of control of the asset丨Unsplash

This system solves many problems: It allows us to issue accounts without a bank or some institutions. A pair of public and private keys is an account, and the private key is a long string of numbers, and individuals can use software to generate countless numbers at will.

Similarly, such a system is inherently borderless and access-free, so ConstitutionDAO can allow people from different countries and regions around the world to participate.

But when a public key claims how much funds it has, how do we know the truth? This requires another set of technologies-blockchain.

In a narrow sense, blockchain technology can be seen as a method in which many computers that do not trust each other are connected together to form a shared and ordered database.

Blockchain is a set of technologies that allows many computers that do not trust each other to reach a consensus on the sequence of events that occur in the network丨Unsplash

In blockchain networks such as Bitcoin and Ethereum, what is shared between computers is the history of transfer messages and signatures—that is, the records of funds flowing between different public keys. As long as a computer has complete blockchain data, and interprets and verifies these data according to the same code rules as other computers, the results obtained must be consistent with other computers in the same blockchain network.

Because the records of funds flowing between public keys are all made public, even if there is no third-party authority, how much funds are under each public key will become a definite consensus-as long as you download the latest shared data in real time.

Therefore, ConstitutionDAO can safely accept donations without the need for banks to verify the funders’ funds.

The last component for ConstitutionDAO to be established comes from a subdivision design area of ​​the blockchain-smart contracts (distributed computing programs that can be triggered after certain conditions are met).

When each public key wants to transfer funds on the blockchain, it must provide a corresponding signature; on the one hand, the computer receiving the transfer message checks the balance under the public key name, on the other hand, it verifies the validity of the signature-this essence The above is the process of performing calculations. Can the computers in these blockchain networks perform other calculations?

Ethereum is a set of blockchain protocols that fully implements this idea. On the Ethereum blockchain, users can upload any code by themselves and pay a certain price to require all computers to execute it. Just as the transfer message will be executed (verified) by every computer, this kind of message that requires code to run will also be executed by every computer in the Ethereum network.

The code itself is public and everyone can see it; once the code is triggered, it will be executed once on every computer in the Ethereum network. This execution process can be considered as non-human intervention, mechanical ; Finally, if you don’t trust the results of others, you can run the computer software that implements the Ethereum protocol by yourself to verify the results of other people’s execution.

Therefore, when the organizers of ConstitutionDAO said that at least 9 signatures out of 13 public keys must be collected for capital use decisions, it is the publicity of the blockchain and the characteristics of Ethereum that make it a credible promise.

The code says it all.

This kind of computer code that can coordinate human economic affairs is called “smart contract”. As early as 1996, it was proposed by computer scientist Nick Szabo.

What is the DAO that even the old lady came to ask?

As of this writing, the Ethereum network has 5,006 public computers (data from ethernodes.org); the Bitcoin network has 14,921 public computers (data from bitnodes.io). The operators of these computers voluntarily run the corresponding software and join these networks|Unsplash

Can’t get on DAO?  

The initiator of ConstitutionDAO also made another “self-limitation”: it does not invest funds itself, and has no ability to determine the purpose of the funds-the initiator just gives the project a name and uploads the code to the blockchain.

The reason why this event has received such eager attention is that it has inspired people to reflect on the existing business organization and resource allocation methods.

Throughout the fundraising process, ConstitutionDAO did not pay any compensation to those organizers and contributors. This group of smart minds gathered together to achieve the goal of “buying the printed copy of the U.S. Constitution.” This unprecedented synergy has particularly challenged the traditional “company” employment system.

DAO decentralizes management power to all participants. The organizational structure is flatter than that of ordinary companies. Some managers’ decision-making behaviors can be replaced by token-based voting behavior. All the distribution and flow of funds are recorded in the “chain”, open and transparent.

In addition, DAO can express identity and authorize operations only with digital signature technology, and the account does not contain real identity information, so this kind of organization is inherently global, and people distributed in any region can join; in the incentive system, contribute The more people can get more DAO governance tokens-in other words, all employees can hold the company’s stock according to their work, and the efforts of talents and the company’s income will enter a positive cycle.

What is the DAO that even the old lady came to ask?

DAO challenges existing business organization forms and resource allocation methods丨Unsplash

But not all DAOs are efficient, it is essentially some computer code. And the code written by humans can be good or bad; the economic cooperation model assisted by the code will also have a difference in efficiency.

DAO now has two limitations. One is that there are not many jurisdictions that recognize DAO, and most countries are still in a gray area with regard to the legal definition of DAO. This is why ConstitutionDAO needs to set up a company entity to participate in the Sotheby’s auction; second, its security is almost exclusively determined by code To ensure that if the smart contract code is not properly written, it may be maliciously attacked and cause participants to lose funds.

As early as April 2016, the first DAO “The DAO” appeared, with a crowdfunding of US$150 million to launch a venture capital fund. But within two months, one-third of the money was stolen by hackers due to code loopholes.

In September 2021, 10 ministries and commissions including the Central Bank jointly issued the “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Hype.” The currency circle that has been wandering in the gray area has also been hit hard under the clarification of the policy.

In today’s environment of “talking about currency discoloration”, a practitioner said: “I hope everyone will not demonize technology. The technology to check identity consistency; secondly, don’t deify the technology and exaggerate the actual effect of the technology. Eventually, the technology concept will lose its meaning and become a bad street propaganda slogan, which further hinders everyone’s understanding and acceptance.”

Although the industry is constantly questioning the sustainability and safety of the DAO, the recent frequent “out of the circle” of the DAO has also made many outsiders curious: “What can I use it for?”

What is the DAO that even the old lady came to ask?

Today, there are more than 100 core DAO organizations (including social DAO, collector DAO, media DAO, service DAO, etc.), which control more than 10 billion U.S. dollars in assets丨Organized by @Cooopahtroopa

Looking back at the ConstitutionDAO incident, the direct reason why the organization is so efficient is the rapid allocation and organization of resources within a week. The deep reason is that this technology already has a great foundation of trust, and the deeper, perhaps a strong social consensus is emerging at the right time, and people are eager for a more decentralized Internet. People call it Web 3.0.

“Some members of ConstitutionDAO have also suggested that if the auction fails, don’t dissolve it. You can write Constitution of Web 3.0 together.” Participant Z told us.


[1] https://www.theverge.com/22820563/constitution-meme-47-million-crypto-crowdfunding-blockchain-ethereum-constitution

[2] https://learnmeabitcoin.com/

[3] https://decrypt.co/86601/krause-house-dao-has-quickly-raised-1-7m-aims-to-buy-nba-team

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-the-dao-that-even-the-old-lady-came-to-ask/
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