Intro to DAOs - The Story of ConstitutionDAO

In November 2021, no one believed Austin Cain when he tweeted that he was going to buy the United States Constitution. After noticing one of the 13 surviving copies of the historic document was up for auction at Sotheby’s with an estimated price tag of $15 million, he put together a group chat of people he met on Twitter. "Ping me if interested in being a part of a monumental moment," he tweeted. There was just one problem. The group had just six days to raise $15 million in time for the auction, and it usually takes longer than that just to set up a company and open a bank account. How could they possibly raise so much money in so little time?

They needed to find thousands of people around the world who could help crowdfund millions and coordinate the purchase, even though they had never met each other in real life. That’s why they started a DAO, or a Decentralized Autonomous Organization. The idea was that anyone around the world could join the ConstitutionDAO server and play their part by helping with marketing, logistics, or funding. By raising funding with the cryptocurrency Ethereum, the more programmable Bitcoin alternative, they could start accepting contributions right away and reward backers with PEOPLE tokens proportional to their contributions that represented voting rights in the DAO. After all, it seems appropriate that a founding document of democracy should be stewarded collectively by the people. The ConstitutionDAO crew illuminated the internet, filling pages in the New York Times and making memes that spread on twitter like wildfire. Viral tweets buoyed the project, and enthusiastic internet users flocked to the chat server.

By the time of the auction, the memes were working. The DAO had raised $47 million, over three times the expected sale price, becoming one of the largest crowdfunds in history. And since the funds were governed by the DAO, they were safe and transparent on a blockchain for all to see. But that posed another problem. In an auction, bidders typically conceal the maximum price they are willing to pay, while in a DAO, funds are transparently recorded on a blockchain. In the hours before the auction, the ConstitutionDAO team started keeping a "dark wallet" where some funds weren't visible. But it was too little too late. Anyone could estimate the DAO's holdings including billionaire crypto-skeptic and Citadel CEO Ken Griffin, who outbid the group and nabbed the document. ConstitutionDAO had lost the auction.

The defeat was not the end, but a new beginning for DAOs. ConstitutionDAO raised more money than any Kickstarter campaign in history and showed that DAOs are a force to be reckoned with — capable of organizing passionate communities and crowdfunding eye-popping amounts of money. The project inspired thousands of people to buy and try cryptocurrency for the first time, laying the foundation for the next generation of DAOs to start their communities. In the months that followed, a new wave DAOs emerged to buy art, digital assets, sports teams, and even real-world property. As this book went to publication, a new project, ConstitutionDAO2 launched with the effort to buy another copy of the Constitution.

While the DAO trying to buy the U.S. Constitution lost, in the chapters that follow, we'll explore how DAOs themselves are constitutions for a new Internet which, much like the U.S. Constitution, could help replace authoritarian, centralized systems with more democratic, participatory ones.