Imperfect Union: How ConstitutionDAO didn't raise enough money

https://www.fwb.help/wip/imperfect-union-how-constitutiondao-lost-its-way

by conanxin • 4 years ago

27 52 4 years ago

Article does not support the assertion in the title. To be clear, I'm a cryptoskeptic. But by the article's account, ConstitutionDAO never "lost its way." They just didn't raise enough money to accomplish their goal. It seems like the founders acted with integrity throughout and did not make any moves that could even clearly be labeled as a mistake.

rvz2• 4 years ago

Perhaps the choice of the cryptocurrency that they used and showing how much they raised publicly was their 'mistake' then.

asdfasgasdgasdg2• 4 years ago

Maybe. Those are not clearly indicated as mistakes either (i.e. the article does not demonstrate or even argue that another choice would more likely than not have led to a better outcome).

And the article conveys some justification for the choices that did get made. For example, they couldn't use certain "second tier" Ethereum features that would have reduced gas fees, because they aren't approved in states like New York? So maybe you argue that such features should have been used, but then you're optimizing for a different outcome -- the outcome where you don't win the auction. With the benefit of hindsight, sure, but the leaders didn't know before the auction that they would lose. So it was certainly a reasonable choice to take the approach that seemed most likely to raise the most money.

throwawaycities• 4 years ago

showing how much they raised publicly was their 'mistake' then.

I’ve seen countless people mention this as an issue, but the only time this would really matter is if you win, but the other bidders used the information to bid up the sale price. The fact is the other bidder had unlimited resources and desire to win the auction and so would have outbid the ConsitutionDAO even if they didn’t have knowledge of their budget, it’s not as though Ken Griffin would have given up before his maximum budget because he didn’t know ConstitutionDAO’s total funding.

dang• 4 years ago

Ok, we've put that in the title above.

dmitriid3• 4 years ago

On the other hand, there's SpiceDAO who spent three million dollars to buy a copy of Dune sketchbook (whose starting price was 25k), and pretend it gives them the right to produce new IP based on Dune.

So what does that tell you about decentralized decision making other than "people are stupid"?

miracle2k3• 4 years ago

Did they pretend and/or think this? The widely shared tweet I have seen simply stated that they want to develop IP based on Dune. It did not say that permission to do so is derived from the book.

(whose starting price was 25k)

That is how auctions work. The only concern with such setups is that information about the amount of money available to such a DAO bidder is public knowledge and thus can be exploited.

dmitriid3• 4 years ago

The tweet is this: https://twitter.com/TheSpiceDAO/status/1482404318347153413

And I'll quote it in it's entirety for posterity:

--- start quote ---

We won the auction for €2.66M. Now our mission is to:

1. Make the book public (to the extent permitted by law)

2. Produce an original animated limited series inspired by the book and sell it to a streaming service

3. Support derivative projects from the community

--- end quote ---

Since then they've backtracked saying that they are looking to develop "completely original IP", but that raises the question "why spend money on the Dune book then?".

weego• 4 years ago

To correct some information, the 25k-35k euros was the estimated price even inflated for the success of the film. The book is rare, but not unique.

You don't pay 100x est to own a physical copy of a non-unique book, a scan of which is available in full online, for 100x without thinking there is some additional benefit to winning.

Even if you remove the 'they thought it would give them IP rights' stupidity defense you're left with blowing 100x estimated value of other people's money stupidity situation, which is just as bad.

You're just swapping one stupidity that should discredit them from running any kind of DAO for another that should do the same.

eqmvii• 4 years ago

So what does that tell you about decentralized decision making other than "people are stupid"?

That people are also greedy, and prone to motivated reasoning.

j4yav• 4 years ago

Are they still planning to mint NFTs of the book and then burn it to increase the NFT price?

ramphastidae• 4 years ago

I’m shocked people believe such a simple story … they didn’t mistakenly pay 30x the value of the asset based on a legal misunderstanding … it’s money laundering.

splintercell• 4 years ago

For this to be money laundering (and not a donation) they need to be on the other side of the trade.

shubik22• 4 years ago

The article mentions high gas fees impacting refunds, and I was wondering what the extent of that impact was. The article doesn’t answer that question, but it does link to a tweet which links to a page of stats about ConstitutionDAO that does: https://dune.xyz/ilemi/ConstitutionDAO-Funding-Tracker

55.78% of funds returned! Truly an incredible accomplishment, and not in a positive way.

(edit: On second thought, does the 44% of original funds remaining include people who haven’t tried getting refunds? Curious if there’s an estimate of ETH lost purely to transaction fees.)

jfk13• 4 years ago

not in a positive way

Presumably it's positive for the people collecting the fees, so that's OK then.

oefrha• 4 years ago

Which is negative for those of us who want to buy a frigging graphics card at a reasonable price.

hanklazard• 4 years ago

Yea, if you don’t request a refund, you don’t get it so yes, that % includes people who haven’t requested a refund.

Also, this token became a “meme coin” in the weeks that followed the auction loss, returning something like 10x or more on Uniswap. More sophisticated users traded their tokens there, rather than going through the official refund process.

ShamelessC6• 4 years ago

Another reason people wouldn't request a refund would be that they would actually lose money by doing so if their original spend was under 200$ because of "gas fees".

X6S1x6Okd1st3• 4 years ago

I might have the query wrong, but I am seeing 0.8% of redeemed fees were lost to transaction fees. I'm sure someone could also generate something that looks better into the effects of redeemtion size & whether people are just not redeeming because too much would be lost in txn fees.

Anyway here's the query:

``` WITH burnt as ( SELECT SUM(gas_used * (gas_price + priority_fee_per_gas))/1e18 as eth_burnt FROM ethereum."transactions" WHERE SUBSTRING("data",1,4) = '\x3015a5b5' --redeem AND "to" = '\xd569d3cce55b71a8a3f3c418c329a66e5f714431' AND SUBSTRING("data", 37,32) = '\x0000000000000000000000000000000000000000000000000000000000000024' --constitutiondao projectid ), ), returned as ( SELECT SUM(bytea2numeric(SUBSTRING("data", 101,32))/1e18) as returned FROM ethereum."transactions" WHERE SUBSTRING("data",1,4) = '\x3015a5b5' --redeem AND "to" = '\xd569d3cce55b71a8a3f3c418c329a66e5f714431' AND SUBSTRING("data", 37,32) = '\x0000000000000000000000000000000000000000000000000000000000000024' --constitutiondao projectid AND "success" )

SELECT (SELECT * FROM burnt)/(SELECT * FROM returned)*100 ```

To be used on dune analytics: https://dune.xyz/home

ShamelessC6• 4 years ago

There were other issues standing in the way of the DAO’s egalitarian ambitions. As VICE’s Motherboard points out, the median ConstitutionDAO donation was $206.26. Those small-dollar donors are seeing most or all of their refunds getting eaten up by Ethereum network gas fees, which remain static regardless of the size of the transaction.

This is kind of insane to me. People were shilling ConstitutionDAO _pretty_ hard on here back when this happened. My biggest concern was this was a scam, or that people would use the opportunity to scam in some fashion (still a reasonable theory). Instead, it turns out their supposedly superior financial system can't even handle refunds? Come on.

pavlov• 4 years ago

The scam is the Ethereum ecosystem itself. It succeeded once again in pulling in a few more millions of real money from retail investors who won’t see their $200 donations again.

Where did the money go? It provided liquidity to the top of the pyramid, of course.

dragonwriter• 4 years ago

investors [...] donations

one of those is the wrong word.

X6S1x6Okd1st3• 4 years ago

I generally disagree that willing participants who gave their money without expectation of future return are getting fleeced in this particular project.

You don't need to look far to find rugpulls https://twitter.com/RugDocIO regularaly tweets out ongoing rugpulls.

Interestingly though after a technical change in where gas/txn fees go (EIP-1559) any payment of fees actually does go to all holders of ETH proportionally due to fees fueling deflation. Of course even still this is not like a traditional pyramid scheme, but more similar to stock buy backs being fueled by each individual sale that a company makes.

DennisP6• 4 years ago

Gas fees are high because there's so much demand for limited block space. This is being addressed by moving things to rollups, and later by expanding rollup capacity with shards. Some stuff is in production on rollups already, but everything's in flux because the tech is still improving at a rapid pace.

Rollups take transaction capacity from a couple dozen transactions per second to a couple thousand, and sharding will multiply rollup capacity by a factor of twenty initially, and significantly more later as hardware improves.

ShamelessC6• 4 years ago

This is being addressed by moving things to rollups, and later by expanding rollup capacity with shards.

First, it may be worth considering that non-crypto people don't know or care about any of this jargon. Anyway, I hope it works. To me it just sounds like deferring trust to smaller but faster institutions/coins with proven track records. Doesn't seem all that different from the current financial system. At any rate, there are more issues than just gas fees.

raesene92• 4 years ago

I'm sure it can improve in the future, but it seems that at the moment Ethereum is very unsuited for small transaction style fundraising, like this. The level of transaction fees is orders of magnitude higher than other options (heck in some countries the fees to move money to another bank account is 0)

freewilly1040• 4 years ago

Side note, the term “gas fee” is a nice example of how crypto projects pick needlessly obtuse vocabulary. It’s a transaction fee. There’s no “gas” involved. Why call it that?

Perhaps I’m jaded but my feeling is that using plain terms would reveal the emptiness of the space. A non technical person can see that a $200 “transaction fee” is a rip off.

_jal• 4 years ago

Jargon is inevitable.

Have you ever listened to an investment banker in their native habitat?

delabay• 4 years ago

Gas (as in a car) is a useful analogy to the function of this fee in the protocol.

Transaction fee implies something else all together.

DennisP6• 4 years ago

Since you asked, here's where the terminology comes from.

The Ethereum VM has a bunch of different opcodes, some physically more costly than others. To account for this, each opcode has its own "gas cost." Storing a value costs much more gas than adding two values.

The gas price is the current price in ETH for one unit of gas. The gas price fluctuates with demand.

The transaction fee is the total ETH paid for your transaction. If you have a complex transaction that executes a lot of expensive opcodes, you will have a higher transaction fee than someone doing something simpler, even though you're both paying the same gas price.

andylynch• 4 years ago

It’s very ironic that of all the people for ConstitutionDAO to lose the auction too, it happened to be Ken Griffin.

chaosharmonic• 4 years ago

This is tangential (and just an observation on poking around their homepage to find out what fwb.help is), but if landing pages are going to swing back toward having 90s-styled tickers, then is there a reason we don't just bring back the <marquee> tag in some form? (Or standardize a modern equivalent, like <ticker> or something?)

Asking as someone who actually used these in my nascent dabblings in HTML and is really confused that modern webdev has moved to replacing them all with non-semantic (and manually-styled) <div> tags. I'm sure there's a reason that I missed sometime between my junior high message board days and when I actually picked this up as a profession, but whenever I get an immediate glance at one it's always kind of seemed like kind of a regression. (At the least, having a dedicated standard for this again would allow for element-specific CSS options, like what <li> has for instance.)

otikik• 4 years ago

DAOs are just another convoluted scheme to try to make people buy cryptocurrency.

"The Problem With NFTs" explains it very well https://www.youtube.com/watch?v=YQ_xWvX1n9g

Imperfect Union: How ConstitutionDAO didn't raise enough money

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