
Is the DAO going to be DOA? - Osiris30
https://steemit.com/crypto-news/@dan/is-the-dao-going-to-be-doa
======
Animats
He makes three key points:

1\. Funding a startup makes the value of Etherium go down. So holders have an
incentive not to fund anything. This would be less of a problem if Etherium
was bigger. The currency you're using needs to be much bigger than the biggest
individual transactions, or the money system stresses out.

2\. "The DAO is just a committee of non-professional voters who have
relatively little ability to do proper due diligence."

3\. All this complexity solves a non-problem. VCs seldom take the money and
run. The things they fund sometimes do, but not the people who put the fund
together. On the other hand, taking the money and running is close to standard
operating procedure in the crypto-currency world.

~~~
api
1\. is a fundamental problem with all deflationary currencies

~~~
hackcasual
Ethereum is fundamentally inflationary now, with no clear indication on how
inflationary if and when PoS is implemented.

~~~
api
How? Does it have no mining cap?

~~~
hackcasual
Correct. The plan is to move to proof of stake once that's done.

------
joosters
I'm still pretty sure that the thing will be hacked before long, or will have
critical bugs that will necessitate complex negotiations to fix.

It's not just the size of the code that is the problem, although that alone
practically guarantees that there will be bugs. Ethereum has a couple of
unique properties that can cause all sorts of chaos in ways that 'normal'
language developers never need worry about.

First of all, code requires 'gas' to run. If there isn't enough gas, then the
execution stops. But critically, some _but not all_ of the code's actions are
rolled back. Transfers from one party to another still take place. You can
imagine a situation where an attacker runs a contract with just enough gas to
make the code transfer some money but halt before it records the payout,
allowing the withdrawal to be repeated.

Secondly, there's a stack limit for code, again triggering an exception and a
_partial_ rollback. Developers are used to having to reason about stack
overflows in normal programming situations, e.g. a recursive algorithm. But
Ethereum's stack has more problems. It allows attackers to control the
available stack space before your code gets run. e.g. an evil-doer could use
up almost all of the stack, then call your contract. If the stack runs out at
a select inopportune moment, there is potential for abuse.

~~~
brianpgordon
Do you have any more information about the stack overflow attack? It's quite
concerning to me and searching google for "ethereum stack overflow" is as
useless as you might expect.

~~~
joosters
Sorry, I can't find the good example which I read recently, which detailed the
problem well. The best source I have right now is:

[https://github.com/ethereum/wiki/wiki/Subtleties](https://github.com/ethereum/wiki/wiki/Subtleties)

Which details many of the corner cases of the virtual machine, including the
stack limits - but it's just a single line mention.

------
jackgavigan
Even if TheDAO "fails", we'll have learnt something very important. We'll have
found a DAO configuration that doesn't work. That knowledge will mean that
future DAOs will have a higher chance of "succeeding".

~~~
cal5k
You're making the critically flawed assumption that the space of all DAOs is a
finite set!

~~~
jackgavigan
Elucidate.

------
sethbannon
He writes: "It was because of these articles that Vitalik Buterin, one of the
founders of The DAO, started exploring the concepts in a three part series."

Vitalik is in no way a founder of The DAO. He's a "curator" which only means
he can whitelist wallet addresses that can receive funds. He had no hand in
it's creation or in the white paper that inspired it.

Getting such a basic fact wrong makes me doubt his understanding in general.

~~~
dmix
I wouldn't be so quick to judge. Most of this Ethereum stuff even confuses me
half the time and I've been following BTC closely for a long time now. I'm not
surprised the journo mixed up him being a co-founder of Ethereum, which
underpins the tech behind DAO, and being a co-founder of The DAO.

 _Off-topic_ : This type of nerd superiority complex comes up in every article
written for a non-technical audience on a tech subject. Can't we ever just
point out the error and move on, without turning it into an attack? It'd do a
lot to improve the civility around here.

------
brianpgordon
> Perhaps even more interesting with The DAO, once you vote for something you
> are no longer allowed to split your ETH out and form a new DAO. This means
> that you have much to lose by voting and much to gain by not voting.

I'm not an expert on the DAO but I don't think this is correct. I think that
voting on a proposal prevents you from splitting the DAO for a certain period
of time, but not forever.

Looking at various discussions happening around the web on this blog post,
it's alarming how many people are disagreeing about this point. Even the
author admits that he's not clear on it:

> The DAO is complicated and I admit that I am not sure I fully understand
> how, when, and where ETH can be split relative to payouts and rewards.

How exactly has this project accumulated over $100 million in funding, when
there's no real understanding among the community about how the DAO actually
works on a day-to-day basis? This telegraphs the sickly condition of the DAO
investing community, in my opinion. People seem to have bought DAO tokens to
speculate, not to vote. That's a problem for the DAO because the only way for
it to take more ETH into the system is for projects to be profitable.

~~~
cjbprime
You're right! It's just for the duration of the voting period (two weeks) of
the proposal that you voted on, to avoid people being able to vote for a
proposal without the outcome having any potential to affect them (because they
split away).

This massively undermines the OP's article criticism.

------
StevePerkins
I'm surprised that this is posted to a (mostly) technical forum, and no one
else assumed that it was talking about data access objects.

TL;DR - It's really about Bitcoin-ish stuff

------
songzme
This is the first time I've read content on Steem, and out of curiosity I went
to check out the site. Its a pretty impressive alternative to reddit. Here's
the whitepaper:
[https://steem.io/SteemWhitePaper.pdf](https://steem.io/SteemWhitePaper.pdf)

------
quinndupont
Time will tell. While he makes some interesting points, I think he misses a
core distinction on this point "BitShares had all of the tools, the talent,
and the money... [and failed]."

I had never heard of "BitShares" before, and I'm an active researcher in this
area. The DAO made it to the front page of the New York Times, and not because
of its amazing coding. Sometimes life is just a popularity contest, or
nepotism (landing Buterin surely helped, since he is proving to be a masterful
marketer). If the DAO succeeds where BitShares failed, it is probably due to
completely _social_ reasons.

~~~
jnbiche
> I had never heard of "BitShares" before, and I'm an active researcher in
> this area.

How long have you been researching this area? I've never invested or
participated in the project, but Bitshares or one of the other Larimer/Hoskins
DAC projects/renames/reincarnations filled most of the top search results for
"Distributed Autonomous Corporation" and "Distributed Autonomous Organization"
for several years, up to this past year (indeed, I'm surprised that Ethereum's
success has pushed out almost all trace of the project from the top search
results).

They promoted it pretty heavily, so you either are very new to the field or
you didn't spend much time looking around for actual implementations of the
technology.

In fact, to the best of recollection, Larimer actually coined the phrase
"distributed autonomous corporation". And Larimer and Bitshares are even
featured prominently in the Wikipedia article on "Distributed Autonomous
Corporations" (and it's not a new addition to the WP article).

Here's an earlier piece from 2013 discussing DACs and Larimer by none other
than Vitalik Buterin himself, back when he was a writer:

[https://bitcoinmagazine.com/articles/bootstrapping-a-
decentr...](https://bitcoinmagazine.com/articles/bootstrapping-a-
decentralized-autonomous-corporation-part-i-1379644274)

Also, most of Larimer's criticisms in this piece address problems with The
DAO's incentives. If the DAO gets those wrong, it won't matter how well it's
marketed.

That said, I do agree that these kinds of projects frequently fail or succeed
for social, not technological, reasons (indeed, that's one of the main thrusts
of the article).

~~~
quinndupont
Well, in my defense, I have not been actively looking for actual
implementations (I'm an academic researcher), so I'll have to concede naivety.
But, I think my point still stands, and I think we agree about the capricious
nature of these things.

------
dmix
> Who is right? Well odds are in favor of it being wasted as 9 in 10 startups
> fail.

This commonly cited 90% startup failure rate is actually based on a 7yr
timescale (if I'm not mistaken). I remember it being an example of a common
misconception in the book "The Illusions of Entrepreneurship" [1]. Just
because a small company eventually fails, it doesn't mean the investors didn't
get any amount of ROI out of it.

For example: It's possible a company makes 10's of millions in revenue but
fails from cash flow issues after a long-term of being operational.

So this isn't a good way to measure return potential when investing in
companies. Unlike VC-style investments, not all businesses (even with $1
million capital) are billion dollar or nothing businesses.

Not everything The DAO invests in has to be 100x return to be viable (unless
they want to be VCs). So this changes the math quite a bit.

[1] [http://www.amazon.com/Illusions-Entrepreneurship-Costly-
Entr...](http://www.amazon.com/Illusions-Entrepreneurship-Costly-
Entrepreneurs-Investors/dp/0300158564/r)

------
cjbprime
> With an initial quorum of 20% it will be very challenging to get enough
> agreement, especially with the downsides associated with actually voting.

20% of tokens are held by the top 12 account holders. Getting 12 people
(perhaps fewer, if someone had multiple wallets) who each invested millions of
dollars into the DAO to vote doesn't seem that hard.

~~~
hackcasual
The DAO represents about 13% of all Ethereum in existence. Considering over
75% of Ethereum was part of a premine crowd sale for a price between 2,000 -
1,337 BTC per ETH it's a reasonable assumption that the DAO was mostly founded
with severely discounted ETH, and doesn't really represent +100M USD
investment.

~~~
cjbprime
Anyone could have sold their ETH at around USD $8 per 1 ETH just prior to
joining the Dao. I don't think "it's not real money" applies.

~~~
hackcasual
Do you think they could have raised ~150 million USD by selling 12% of the
existing ETH? I suspect $150 million couldn't be raised by selling all the
ETH.

It's disingenuous to take the current ETH-USD conversion rate based on a
relatively low trading volume and imply that's what the DAO is worth,
especially when so much ETH was bought so cheaply.

------
bakhy
Forgive me, but the website of DAO reminds me a bit of this one ->
[http://zombo.com/](http://zombo.com/) :)

~~~
drcode
I know ethereum and "The DAO" sounds like a ton of mumbo-jumbo, but I assure
you at its heart everything is actually very straight forward- For instance,
the DAO is mainly just this small piece of computer code that is very
readable:
[https://github.com/slockit/DAO/blob/master/DAO.sol](https://github.com/slockit/DAO/blob/master/DAO.sol)

(Whether the DAO is good idea though is another matter entirely)

------
mark_l_watson
I thought the application for DAOs was far broader than setting up VC type
corporations.

Another problem in general with blockchain technologies is that the power
elite will eventually get around to trying to squash them. Anything that
facilitates local businesses keeping value inside communities, businesses that
don't give up value to the centralized monetary system, etc. will probably be
targets.

------
andrewfromx
here's a typical deleware court lawsuit
[http://courts.state.de.us/opinions/download.aspx?ID=207080](http://courts.state.de.us/opinions/download.aspx?ID=207080)
skim thru that and now imagine that same disagreement over a DAO company vs.
deleware court. Power players need to learn all sorts of different rules.

~~~
nekopa
I read through the whole thing, and honestly, that whole thing seemed really
straightforward.

What would you see the issue as?

~~~
andrewfromx
I guess I'm a DAO novice, but when I heard about an org with 150 million and
it's NOT a deleware company, I wonder how the power dynamic changes when
things go wrong. The company in that pdf had a huge disagreement over who was
running that company. Board members were forced out. New CEO placed in. In DOA
what takes the place of the deleware court when there is this type of fight?

~~~
DennisP
For TheDAO itself, there's no possibility of such a dispute or resolution.
There's a little bit of code that runs everything, and what it does can't be
overridden. With this particular code, you get a vote in proportion to how
many shares you own.

The companies employed by TheDAO will resolve things like any other company.

~~~
andrewfromx
this explains it well:
[https://news.ycombinator.com/item?id=11787475](https://news.ycombinator.com/item?id=11787475)

------
Paul_S
All this assumes that people who invested in DAO are random blokes off the
street which they are demonstrably not. Have a little faith.

------
craigvn
DAO was dead as soon as ODBC entered the room.

