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Autonomous corporation “The DAO” has become the biggest crowdfunded project (techcrunch.com)
252 points by sethbannon on May 16, 2016 | hide | past | web | favorite | 206 comments

The DAO isn't actually worth 120 million. For one, it's based on the price of ETH, which would completely crash if you attempted to sell even a few million worth.

Secondly, everyone can withdraw their funds from the DAO before any funds are sent to projects. Many have invested because those who invested early make money from those investing later, since the number of "DAO tokens" you get per "ETH" has gone down over time. (cough pyramid cough)

> The DAO isn't actually worth 120 million.

I you tried to sell all Apple stock in a single day it would also sell at well below market rate- Does that mean Apple is worth less than its market cap?

That said, I personally have not invested/speculated in the DAO because I just don't see it as a good opportunity.

I think an analogy more in line with the parent comment would be - if you tried to sell 30% of Apple stock in a single day would the dollar collapse, wiping out all remaining shareholder value.

> Does that mean Apple is worth less than its market cap?

Well, it means you need to specify what you're talking about when you're talking about a company's "worth." Any time I read something like "public company X is worth Y dollars," I do look closely to see if they're talking about market cap.

Hardly anyone talks about revenue as being part of the "worth" of a tech company (maybe with retail, that makes sense). The Apple stock analogy is dead-on.

I just sold one of my hairs to myself for $10. Is my head now worth a million?

With Apple, there's intrinsic value to consider. And frankly, if you sold enough Apple stock for it to go down 50%, I'd personally start buying. I doubt that's the case for ETH, where there's only early adopters buying it hoping to strike it rich.

So you're saying the intrinsic value is certain to be lower than it's current market value? I have good news for you: You can become rich by simply shorting ether on Kraken and Poloniex!

The cryptocurrency holders can probably stay irrational for longer than I can stay solvent. I'll sit on the sidelines and watch.

You're completly disregarding that timing is far more important than simply knowing that there will be a downward correction. The shorting fees will end up being consuming a large chunk of the profit even though you sold a hundred thousand ether coins at $11 and bought them back at $1.

> The shorting fees

Costs about 16% APR to borrow ETH for shorting on Bitfinex right now. So if you're expecting a >=90% crash in the next ~5 years you'd still make a profit.

That is a valid point.

Plenty of people shorted Bitcoin on Bitcoinica, but they didn't lose their money when BTC went up. They lost their money when Bitcoinica went down.

Looks like the #HairTokens announcement will be made soon.


It actually did go down 50% from $15ish to $6ish and recovered. Early adopters trying to get rich = all early stage investing so what's your point?

That's because of the tiny liquidity. Nowhere near $120 million was sold, and it still lost 50%. Now try selling tens of millions worth, and see what happens.

Market incentives exist for it not to crash. People who put money into ETH/DAO and who want to see growth have strong incentives against this type of bank run.

So I don't really see your point by comparing it to Apple as it's not the same at all. It's not equivalent to cash or public stocks but that doesn't mean it's not a worthy investment to make for someone interested in the technology or potential in Ethereum.

What the currency needs is something of tangible value underpinning it and this project seems like a good way to add real value to back up the currency. It could potentially result in some successful businesses and projects which would compensate early adopters at a higher level both in the value of ETH and in dividends.

But I don't believe there is any doubt that this is speculative. I visited /r/ethereum the other day and someone asked why they backed DAO and a common reply was "I wanted to support this new technology as much as seeing it as a possible investment opportunity for financial return".

It's high-risk speculative investments but also a group of people who are interested in the idea itself and are willing to invest money at a potential loss in the process. Just like any startup founder.

> Market incentives exist for it not to crash. People who put money into ETH/DAO and who want to see growth have strong incentives against this type of bank run.

That's where the pyramid/ponzi/bubble comparison comes in. There's no actual value (yet?); the adopters would have to keep buying more to keep the price up and to keep the "value" of their holdings high. Not because it's so useful; just financial incentives.

> the adopters would have to keep buying more to keep the price up

That's a logical fallacy. As a Ponzi scheme is not the only way, nor the best way, to add value to the investment. So I don't think that fairly represents the market incentives that exist for the early adopters. Especially given the context of it's creation and the community of early adopters around it.

As I mentioned in my comment above, they are incentivized to have the project produce real tangible value if a) they are interested in seeing the technology succeed and b) they want returns on investment via dividends, which is typically the premise of a longer-term investment.

Even if a percentage of investors don't fit that criteria, I highly doubt they represent the majority. It would only require is a sufficient enough sized majority of well-intentioned investors to keep the project operational.

I'm not convinced the only way it could generate returns - and more generally prevent a drop in value - is by continually adding more investors. I expect they will put in some real effort to make it work as a functioning economic entity.

> That's because of the tiny liquidity. Nowhere near $120 million was sold

Actually, more was sold during this period. In just the last 24 hours on Poloniex, the volume was 20 million USD.

You should probably take a look at some charts. Your assumptions are off.

> I [sic] you tried to sell all Apple stock in a single day it would also sell at well below market rate

You are describing a takeover. These commonly come with control premiums [1], not discounts.

Liquidity does not proceed across time and size preferences continuously, or even monotonously. Between a small block sold in minutes and an entire company sold in months, the time component of the liquidity surface tends to dominate the size component.

[1] https://en.m.wikipedia.org/wiki/Control_premium

> Does that mean Apple is worth less than its market cap?


Ethereum's daily volume is around $22 million, and thats just on public exchanges.

So you could sell $120 million in Ether in 4-5 days also using OTC exchanges.

I've had worse liquidity on penny stocks and the options market, so you'll have to drop the meme. Cryptocurrencies are liquid enough and they continue to attract more and more liquidity.

Uh, that's not how volume works. For one, because you'd be adding to it. But also: much of that volume is buying and selling of the same ETH.

I like your comparison to penny stocks.

All that matters is that liquidity begets liquidity. Volume metrics are merely referential, something with $300,000 in daily volume can easily be inferred to be less liquid than $22,000,000 in daily volume.

Yeah it's a scam but people who are afraid of bitcoin love shitcoin

TLDR; A computer program living on the ethereum blockchain is currently in control of 107+ million dollars, making it the second largest crowdfunded project in history. Shareholders vote on proposals to give money to other entities (probably also programs on the ethereum blockchain) that they hope will make money and send it to the parent contract.

All votes are managed by a program written in EVM code, which runs on a sort of "virtual computer" that is designed to be (in theory) 100% secure, 100% reliable, and 100% incontrovertible. No middlemen have any control over this program, it essentially completely outside of any human control (beyond the voting rules encoded within it.)

UPDATE: Apparently this morning it passed $120 million and is now the largest crowdfunded project in history.

Although the "proposals" themselves are Ethereum "contracts" (programs), the thing that the money goes towards doesn't have to be a program.

The most popular proposal for The DAO to invest in is actually a German corporation called Slock.it UG: https://www.online-handelsregister.de/handelsregisterauszug/....

And Slock.it is the creator of The DAO...

It's a long process to check all the boxes for what makes a good proposal, so the fact that Slock.it had such a head start on any other potential proposers is more than a bit suspect. Perhaps there should be a proposal to lock all funds for, say, 45 days so there can be enough of a competitive environment for proposals?

The bigger issue is that the DAO has raised >$120M, and Slock.it hasn't said how mich funding they need. Many people are fully expecting the ask to be much larger than they would have originally asked for. It's a terrible decision on their part and raises a red flag for me

Sounds like money laundering to me

This sounds like a bad way to launder money, the logistics and scale issues make it impractical. Besides I doubt transferring $→ETH→DAO→ETH→$ is adding any extra obfuscation compared to $→ETH→$.

nope, but I wouldn't argue if you called it an unregistered security.

For what it's worth, I follow this space closely and have seen several recent things that look like money laundering to me that I won't name- This project is not one of them (though I have other concerns with this project)

More like a pyramid scheme?

100% secure

AFAIK the formal verification mechanism for EVM programs is not yet complete, so that's a risky claim. Not to mention that the people involved are interacting with it using ordinary PCs, so spear-phishing them might be the easiest way to steal the $120m.

And, to the best of my knowledge, it has not been reviewed by experts. Platforms like this are notoriously difficult to build securely.

Not to mention, there are huge liabilities from a legal/securities perspective.

I'm wondering how this is different from a game of Nomic (the game where people vote on the rules of the game) played for money.

Now, Nomic can be fun. But a game of Nomic typically ends up with someone winning, not by gradually achieving the intended goals of the game that people wrote into the rules, but by exploiting a major flaw in the ruleset that lets them rewrite the game to be one that they instantly win.

When someone wins at the game of Ethereum, how much of other people's money do they walk away with?

If someone breaks Ethereum most of the money is destroyed. Once people realize that it's happened no one will trade anything for ether.

They don't have to break Ethereum, just the DAO code or surrounding systems.

Last time I checked, Apple Computers is worth $500+ Billion and is a public company.

Don't forget that the stock market is the original mass-crowdfunded project. Anyone can become an owner if you go to a brokerage account, and ownership rights entitles you to a vote for the board of directors and a share of the profits (ie: the dividend)

Agreed, "crowd funding" is an inexact term- I described it that way to help explain why some people think the project is novel. Certainly there is a lot of arbitrariness as to what belongs on a list of "top crowdfunded projects".

Yup. I just want to bring up the fact that this thing seems more akin to a classical public company, but in many regards is less transparent.

There's the fact that all the code and mechanisms is public, but that's the part that everybody trusts anyway. When you're a shareholder in Apple, the votes are tallied, all relevant information from the board of directors is published, etc. etc. And the SEC forces the company to publicly disclose financial information in the form of 10k, 8k, and publicly announce insider trades.

At the moment: I don't know who the "insiders" of this company are. Maybe one dude has $50 Million USD and effectively controls the entire damn "movement". Or maybe not. Knowing the identities of large shareholders is a BIG DEAL in public companies.

Still, the digital form probably has some advantages. Maybe future companies will find a compromise and manage to exist as digital contracts akin to this DAO? But I don't expect this first version to actually work. Its pretty much a learning experiment, to see what is and isn't possible with technology.

If any lessons are to be learned from Bitcoin: politics will affect this entity eventually. The technology currently serves as a mask to the politics. But politics always rears its ugly head eventually.

Apparently 0.8% of DAO token holders own >50% of the tokens. There is lots of potential for conflict of interest

ya but they are publicly traded. crowd-funded refers to group funding for privately owned companies

Your summary somehow reminds me of TRON... ;)

I guess it comes down to the question whether one beliefs that mankind is naturally good or bad. As I still believe in the first one I may give this idea a chance. I still have a dream...

>I guess it comes down to the question whether one beliefs that mankind is naturally good or bad.

Incentives and structures rule all. They're much more powerful than the individual goodness of people, or even their collective goodness.

A corporation, being a legal fiction, can only act through physical persons. So in that respect, no corporation can be truly autonomous. It sounds like what they have done is taken all the paperwork associated with corporate activity: by-laws, annual meeting minutes, resolutions, etc., and put them into a block chain. A more proper description would be a paperless corporation.

They have put hardly any of the paperwork associated with companies on the blockchain. Here's my brief comparison between The DAO and some of the features of regular corporations: http://www.cameronhuff.com/blog/slock-it-dao-paper/index.htm....

This is more like a group of people pooling their money to invest. A savings club. The contract also gives them the right to withdraw their money if they don't like the direction it's headed.

Furthermore it's not a corporation. A "corporation" requires complying with a number of jurisdiction-specific rules (such as filing fees and certain paperwork). If you don't complete the steps, you generally don't have a corporation. In some places you would have a partnership or some other structure that's different from just a group of individuals. The laws differ by jurisdiction.

And in fact, in many countries, the DAO actually is a legal company/association, just not officially incorporated. But incorporating is not required everywhere for the normal laws to apply.

Just the fact that people put their money together and are acting as a group gives them various legal requirements. The fact that the DAO limits what they can do might interfere with their ability to follow the laws; that does not mean that the laws do not apply. You don't get to throw your hands in the air and say "we cannot pay taxes on our profits, it's physically impossible" when you made it impossible yourself by creating and/or associating with the DAO.

Right. In fact, an business entity that doesn't go through the formalities of becoming a legal corporation, LLC, etc., may expose its members to unexpected legal responsibilities. E.g., if the agreement were seen as forming a general partnership, each member would be jointly and severally liable for all legal liabilities of the partnership.

Two of the big advantages of a modern joint-stock company are: limited financial liability and professional management. Management limits the need for input and activity of the investor. (You don't even need to vote your shares.) Do the members of the DAO want to vote on every little thing?

Could they not just vote for professional managers to handle the small tasks for x compensation?

However, the members are anonymous, so it may be impossible to track down 100% of participants.

Self propagating code can perform all the functions of a corporation. The only difference is that in the past the code had no way to acquire goods and resources from humans and other corporations because it couldn't control and transmit value.

Now code can.

The DAO is a start, code can do everything the DAO does.

What stops non-blockchain code from making purchases, hiring people, etc? Just because it uses a third party (A bank account) to store value doesn't make my WidgetFactoryFactory AI any less of an autonomous corporation.

That entirely depends on if we are talking about this DAO or DAOs in general.

A DAO focused on gaining revenue doesn't need to hire people to achieve that.

There a decentralized asset exchanges where other companies have raised capital. A DAO could access those to buy shares completely programmatically, for example. It could trade oil futures till eternity if it wanted. It could create a contract for an agent at a particular address that promises payment for the construction of a robot factory in Shenzen, in that example a human would be the agent on the other side of that address, but the DAO doesn't need to know that.

How does the DOA know that the robot factory in Shenzen was built successfully and to specification?

Presumably when new robots start executing based on the signature of the smart contract and conducting tasks in line with the contract. The main goal would be the new machines, not necessarily the means to the end.

Presumably when new robots start executing based on the signature of the smart contract and conducting tasks in line with the contract.

What if they don't build the robots but instead execute whatever payload the contract anticipates using a laptop?

It could hire human agents to inspect and confirm. I guess you could treat the DAO as an exceptional manager who has no domain knowledge at all, but knows to delegate to people with domain knowledge.

What if the human employees lie, are incompetent, or collude with the subject of their inspection in exchange for part of the pay out?

Funny enough, these autonomous anonymous corporations will require the exact opposite to carry out many trust-required operations

It's inspectors all the way down. Recursive inspection.

I'm sure that eventually services will start up that target DAO's as consumers directly, but until that time it seems that there is an opportunity for a company to start up that could provide a "translation layer" for DAO's.

It could provide the ability to hire marketing services, rent servers, perform accounting and auditing, hire employees, perform security audits, provide legal services, and interface with "real world" legacy companies like manufacturers and shipping services.

That's like saying a car can't be autonomous because some programmers wrote the software that it uses.

No, a corporation is a legal entity that must have directors and officers, aka people. Without that, you don't have a corporation.

And after reading the article, they aren't a legally recognized corporation.

> No, a corporation is a legal entity that must have directors and officers, aka people.

OR, a corporation is a legal entity formed by a corporate charter that is treated as a person under the law. In any case, whatever these ethereum-based things are, they aren't corporations.

>In any case, whatever these ethereum-based things are, they aren't corporations.

They may end up creating and operating corporations, but DAOs are their own thing.

To expand on Dragonwriter's point just a little.

Lets pretend DAO somehow autonomously filed Articles of Incorporation in DE. What is required by DE? A DE physical address for the corp.; a registered agent located in DE; and a incorporator (doesn't need to be shareholder, but must be an individual). Already we see it is an impossibility for DAO to do this autonomously.

But lets pretend it wasn't impossible, DAO autonomously entered into a Lease, contacted with a registered agent, contracted with a corporate lawyer too be the incorporator and file the Articles. Whats the next step? A bank account, well DAO doesn't have a social security, and doesn't qualify for TIN. The Corp. can't get an EIN, which means it can't open a bank account, which effectively means it can't do business. Well again, lets pretend the DAO C-Corp doesn't need a bank account because well Bitcoin is perfect right? DAO autonomously creates a Bitcoin wallet for the corp and does all business through that, well the company still doesn't have an EIN, which means it won't be able to pay taxes.

> won't be able to pay taxes

Sounds like the ultimate corporation to me.

Until now, corporations have had to spends millions of dollars on accountants and lobbyists to avoid paying taxes. Well, friends ... no more. Because this organization is genetically incapable of paying taxes!

Forgot the Cayman Islands and Nicaragua! Forget double Dutch reverse corporate inverse backdoor Irish LLCs with a post office box in Nevada! Gentlemen, put down your cigars and cognac and get to know your new best friend: little DAO ...

> They may end up creating and operating corporations

Sure, if people ever make the rather radical changes to law that would be required for them to create, operate, or even merely passively own shares in corporations, that might be the case.

I should have been more clear, that is what I meant. However, I don't think it's far fetched that some tiny island nation will do exactly that

Ethereum still exists?


The ownership chain also has to ultimately go back to people.

Not always:

> In February 2004, for example, Formations House created three companies: Corporate Nominees, Legal Nominees, and Professional Nominees. The second company owns the other two, while itself being owned by the first company. The third company is secretary for the other two, while its own secretary is the first company. The second company is director of the other two, while its own director is the first company. These three companies then became directors, secretaries and shareholders of other structures, in an increasingly baffling multidimensional web of crisscrossing lines of control. If you looked for the companies’ real owners, the most you could eventually discover was that the original three all owned, controlled and managed each other.


This was fixed in law in 2008 in the UK, but for all I know there are jurisdictions that allow these sorts of shenanigans still.

I don't see why a tree couldn't own it.


No, it's a bit more like saying a car can't be autonomous because it still has people telling it where to go.

Agreed, your analogy is even better.

This is really cool for all of us in the Ethereum space, and as mentioned before, I'm a part of the Augur team which is a dapp on Ethereum.

I did sort of see this coming eventually as Augur, Digix as well as Ethereum itself have been really successful using this method. It's a pretty cool way to fund open source projects and I think with something that incentivizes contributions like Code Valley there will be a boom in these projects.

Charlie Stross is smiling somewhere.


Closer to Daniel Suarez, Daemon & Freedom. http://www.amazon.com/DAEMON-Daniel-Suarez/dp/0451228731

This fiction starts the autonomous corporation from a vide game. The second book shows society's evolution to cope with the new corporation.

@CharlesMeeriam2 You beat me to it, I came here to post just this!!!

This article reads as though it were a page straight out of Suarez's Daemon series.


Daemon and Freedom™ are excellent books – a frightening but plausible view into the not-so-distant future.

Probably around here as he has been seen on HN quite a bit.

Proof : https://news.ycombinator.com/user?id=cstross

Slock.it here, creators of the DAO framework. Huge fans of Daniel Suarez and Charles Stross :)

You beat me to it. Very reminiscent of Manfred Macx's Python-based autonomous corporations if I'm remembering the book correctly.

An interesting concept, but I'm not buying the hype.

At the end of the day a bunch of people bought shares in a company (or did they? Legality is weird) with the special condition that in addition to owning a share of said company they also get to vote on what the company actually does, and even submit proposals for what it should do.

Oh, and they also bought said shares with cryptocurrency. Magic internet money guys!

Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required.

Meanwhile, even though one might assume that the shareholders might be more informed than "the common mob", they might still propose and vote on more misses than, say, a corporation where new products and services are proposed through an informed internal decision making process that ultimately ends in the CEO using the information at his or her disposable to make the final decision. In a good corporation, bad decisions are self-correcting, in some cases leading to such extremes as a leadership shuffle.

By contrast, who's to blame if the DAO votes on a proposal that wound up being a miss? How do they learn from their mistakes so it doesn't happen again?

And I'm sure there are many other issues, but those are at the top of my list. I'd rather a company be run by those most capable, rather than the crowd.

You shouldn't buy into the hype, especially from that hyperbolic story with silly blurbs like "The DAO is a paradigm shift in the very idea of economic organization."

However, I don't think we should be flippantly dismissing the idea with phrases like "magic internet money", because if it proves itself to be minimally viable, it would really speak to a young demographic of investors who don't trust financial institutions or their products.

Granted, this sort of tool is probably very ill suited for running a large corporation, but it might be ideal for Kickstarter-like organizations who want to fund a series of ideas or companies for equity. Some tasks are better suited for experienced professionals, while other tasks are better suited toward the wisdom of the crowds. (Tasks that great benefit from semi-informed polling)

My best guess is this might become a useful tool for a niche investment market.

Yeah, maybe I was too harsh with the magic internet money thing. I still have fresh memories of when Bitcoin went past the $1000 mark before cooling down again. Just strikes me that the people genuinely wanting to use Bitcoin as an actual form of value exchange are overshadowed by people treating it as "the new gold"

The notion of having a very democratically run autonomous corporation seems a bit too far, but I'd be pretty excited to see someone using cryptocurrency to invest and buy shares in a company in a more accessible fashion than what we have now.

In other words, I think cryptocurrency could potentially provide a better alternative than the way the current stock market works, but I don't know if this is necessarily a better alternative.

I'm still not sure if even polling shareholders for product ideas works, unless product proposals are done effectively enough to where shareholders have a very clear vision on what the company is going to do, versus someone saying "So, we have this idea for an IoT product. There's no physical prototype you can hold yet, but here's how we think it'll work".

There is the fascinating history of Athens and direct democratic voting that comes to mind. The citizens could all vote on anything, and that turned out to be a bad way to fight a war, especially with Sparta. Athens wasted their greater strength if I recall correctly. Could it happen with dao vs other companies? Sure, who can tell at this point.


The DAO will probably end up being more like a hedge fund / VC firm than a normal corporation. It will more likely invest in other companies than try to execute its own ideas. At least, that is my hope for it, and I think that is the path that makes the most sense.

We will see what the crowd decides.

I think this is how it will pan out, too.

However, I keep wondering what kind of company would raise funding from DAO? One that can't from anywhere else?

I guess it will be companies tied into the yet to be established ETH ecosystem, that are seen too risky by trad VCs. That will help to kickstart the creation of some ETH companies, but still doesn't solve the general user adoption of ETH, beyond speculators.

Will be interesting to see where the killer use cases are.

I'm a big ethereum fan but I agree 100% with your analysis.

> Admittedly I think enabling this kind of democracy in a company is a bad idea. It might actually wind up being less nimble than an actual corporation because of the extra consensus required.

This stuff is also known as a cooperative, and is a very common concept for democratic companies – almost all housing in europe is owned like this.

> […] almost all housing in europe is owned like this.

Did you mean social housing rather than housing in general? Because home ownership exceeds 50% in most European countries, just like the US.

Social housing is often managed by cooperatives, but decades of neoliberalist thinking caused a lot of the larger of these cooperatives to invest in boondoggles and grandiose development projects completely unrelated to their core task rather than build more affordable housing. Coupled with the immoral self enrichment of upper management, mentioning European social housing cooperatives may not exactly support the point you are making.

In the UK flats - apartments - are often run by a limited liability management company which collects maintenance fees and makes sure maintenance is performed.

Some or all of the flat owners are directors, and company accounts have to be filed in the usual way.

They're not co-ops in the usual sense, but they're not so different in practice. Obviously these companies aren't run for profit, but it's not unusual for companies to accumulate rainy day reserves and to make a little from interest.

In the UK, both The Co-operative and John Lewis companies are cooperatives and account for over 10% of the supermarket industry. Various building societies are very similar, and the largest has 10-20% of the banking market (depending on how you measure it).

I'm vaguely familiar with the co-op model through organic co-op grocery stores.

I actually like the notion of grocery stores being run this way, but members participate in a grocery co-op primarily so they can get less expensive organic groceries and even have a say in what the co-op carries. Really it's just buying in bulk with strangers.

But then I look at a corporation where members are ultimately voting on their best idea for making the corporation profitable, and presumably also mixing in ethics as well, that's where things could get hairy.

Well, I am member of a cooperative grocery store chain, which has 10k employees and an annual income of about a billion.

A regional chain, not national or international, but sizeable.

And it works, mostly because people aren’t members to become rich.

A few years ago the sibling chains in other states (which were organized in the same model) fused into one public corporation, quickly focused on profits, and ended up with corruption, and bankruptcy.

So, we’re not going to focus too much on profit anytime soon.

Some actual businesses exist in the coop model. You don't see it much outside of the crunchy granola parts of the US.

Kind of a shame, seems like a nice way to work.

The DAO crowd could hire a CEO, similar to how regular shareholders can vote for board members who appoint a CEO.

I presume the community is to blame and they learn from the mistakes.

If you vote a proposal is because you agree with it and you can't blame someone else.

There's more flexibility than traditional structures with concepts like "splits" where if you don't agree with a proposal you can opt to not participate.

It's new ground , has new concepts and it's still evolving. Really interesting stuff.

the article doesn't actually explain the "autonomous" bit imo.

This looks rather more like a distributed decision making platform. Say, liquid democracy + ethereum, rather than Accelerando-style "sentient alien corporations".

Noticeably, the DAO does not seem to be able to make any decision, it does things through proposals suggested by people which are voted on.

Still cool anyway.

I suppose there are a couple of ways to view this:

- The DAO is a tool for people to make decisions collectively, by pooling their resources, voting on activities, and having Ethereum take care of trust issues. This is what you've described.

- Alternatively, The DAO could be described as similar to a computer virus: it tries to survive by spreading into as many systems as possible, using their computational resources to propagate itself further; but crucially its behaviour is completely determined by its code, rather than acting as an interpreter for centrally-issued commands (like, say, a botnet or Seti@Home).

While most computer viruses are parasitic, The DAO could be seen as symbiotic: in return for the resources it uses, it provides the services described above. It could be described as social engineering, like that of the ILOVEYOU virus, although it's not a trick (as far as we know).

In the case of The DAO in particular, the first description probably makes the most sense. However, I'd say Ethereum applications in general are better described by the latter. For example, a gambling application like etheroll could persist completely independently on the network for as long as people are willing to gamble with it, spending part of its commission on resources ("gas").

This is correct. When the Decentralized Autonomous Organization/Corporation is a term that has undergone quite a few changes, and Ethereum projects definitely use it very loosely. As you pointed out, not much is autonomous at all. The DAO in this case appoints one company per project who is responsible for the entire project and its management. They are free to be as competent or incompetent, until voted out.

Most decision making is in fact choosing between choices, it's not that different from a regular CEO.

> While The DAO is a group of people authorized to act as a single economic entity, no governmental body recognizes it as such.

They're really not legally incorporated anywhere?

Foregoing the limitation of liability that goes along with a corporation seems awfully legally risky -- any of the individual members can be sued, likely succesfully, for something done by the aggregate, with possible damages exceeding their 'investment'.

I'd think you could legally incorporate the thing how they wanted it with few problems, have bylaws saying decisions will be made with blockchain votes or whatever.

I guess the automated "splitting" the corp would be a problem.

Still, I don't think I'd want to be involved in such a thing without legal corporate limited liability protections.

Right, and there are people that do want to be involved.

They want to be part of the case law incongruences that will arise to solve disputes. They want to bring this to light so that the legacy system is presented with a better or more efficient way.

Anyway, Slock.it a germany company is managing this asset, their liability is limited.

If they think they can somehow get limited liability protections in the U.S. without a legal incorporation, I think nearly any lawyer will tell them they won't have much of a case. No judge is going to decide that. You don't get limited liability protections just by acting like a corporation, you need to actually incorporate. It's pretty straightforward law with regard to that much. (I am not a lawyer).

The point is that they don't care about the US, or France, or Hong Kong, or Zimbabwe.

Also, the individual owners of DAO are not known and are entirely bearer assets. You and I could Shapeshift some bitcoin to Ether right now, exchange for DAO tokens, vote on proposals for the DAO that eventually cause a gigantic oil disaster and whatever unlimited liability a court finds for shareholders will stall forever because they can neither find the shareholder or freeze the assets on the DAO.

This actually does a much better job explaining the project than the website does. I'm glad I have something to show friends/interested parties that is understandable!

What a bunch of snake oil.

If you invested or are thinking of investing ask yourself a few simple questions. Who are the Shareholders/Directors/Officers of this corporation? Do you know what state it is incorporated in or going to be incorporated in?

Just a few buzz words. Decentralized? No shit, any corporation with more than one shareholder is decentralized. Smart contracts? Defined as a self enforcing contract, guess what they don't exist. Autonomous? I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously, because that alone would be an enterprise solution every single corporation in the US would pay top dollar for, because DAO just singlehandedly replaced corporate compliance lawyers and CPAs with code.

Still not convinced and eager to get in on this? Then why not cut out the middle man? Create your own "DAO" as an Investment Club (Corp or LLC) the only issue is you will be capped at 100 members/voters/token holders and $25M in investment. But you will be able to tell people your created your own decentralized corporation every bit as autonomous as DAO, complete with 100 tokens people can buy to become a member/shareholder and use to vote on investment opportunities presented by the DAO or members/shareholders of the DAO.

> Defined as a self enforcing contract, guess what they don't exist

This changed in July 2015, when the ethereum network went live.

> I'd like to see how this code is independently filing annual reports and preparing taxes sending out K-1's to its shareholders autonomously

Just wait- It's pretty likely the DAO shareholders will vote to have a contractor produce this information on behalf of the DAO.

> ... for your own "DAO" as an Investment Club

Go for it! An ethereum smart contract would be a great way to implement the operational details for this.

>This changed in July 2015, when the ethereum network went live.

I know the term exists and I know people are operating as though it is a thing. But if you and I enter a contract whether it is a written agreement or a smart contract on Ethereum network, that has no more or less bearing on the legal enforcement in the event of a breach. In either case the non-breaching party must file suit for the breach and there must be a finding of fact, and the smart contract does not replace the fact finder in a court of law any more than a traditional contract.

I know you don't speak on their behalf but DAO has raised $100+M and the answer to a simple tax question is just wait? That is my point, investments are inherently risky, but when the most basic questions regarding operation and governance can't be answered that is a red flag.

>But if you and I enter a contract whether it is a written agreement or a smart contract on Ethereum network, that has no more or less bearing on the legal enforcement in the event of a breach.

These contracts are enforced by math. Breaking them isn't a possibility.

Whether or not The DAO works out or is a scam, I think it's a sign of things to come. We're in the beginning stages of seeing our traditional corporations and nation states morphing into something new and barely recognizable.

> These contracts are enforced by math. Breaking them isn't a possibility.

Math cannot "enforce" a contract, it can't even understand the terms of the agreement, much less enforce it.

> We're in the beginning stages of seeing our traditional corporations and nation states morphing into something new and barely recognizable.

This kind of hyperbolic nonsense strains credulity.

Smart contracts are enforced programmatically, that's kind of the point.

The future is always hard to believe until it's here.

You can say you disagree and state why. But please don't call me a gullible idiot and then try to dress it up in fancy vocabulary. This kind of reply seems common in your comment history, like you're just generally angry around blockchain threads for some reason.

>Smart contracts are enforced programmatically, that's kind of the point.

Can you give hard examples of how enforcement can be done programmatically and mathematically?

For example, I contract you to do X in exchange I will pay $Y and to get things started I give you a 10% down payment. If you don't do X, even in a court of law, it would be extremely rare for a court to order you to do X, rather they will generally order you to return my deposit and any additional damages I can prove as a result of your breach. Explain how the smart contract programatically forces you to do X, or how the smart contract can calculate real world damages above and beyond the 10% deposit? Alternatively, if you do X, but I think its subpar and refuse to pay unless you redue X to my standards, explain how the smart contract can determine who is in breach you for X not being up to standard or me for not paying.

Trust me it sounds great to say math and code enforces a contract and ensures it can't be breached, the point is putting a contact on the block chain may prove the contract exists (though even that is debatable) but it can't self enforce.

More generally in law, almost everyone knows less than 10% of cases go to trial, yes the typically settle, but this is also because when there is no "issue of material facts" a judgment can be awarded without trial, this is almost never the case in breach of contract cases, because there is always a question of fact: was the contract breached or not?

As a hard example consider the typical crowdfunding protocol. The contract (in english) is roughly: if this campaign hits goal before a deadline passes, all the backers pledge their money; or if the deadline comes before hitting the goal the money is returned to backers.

In today's world we rely on kickstarter programs or staff, credit cards and banking. Codified using a smart contract these rules can be executed automatically such that the backers are never at risk. This is what we mean when we say enforcement is automated.

This is a canonical example, as seen here http://ether.fund/contracts/crowdfund

The reason the contract can be enforced is because in many of these smart contracts funds are held in escrow and are transacted only by the distributed app without the requirement or possibility of human involvement.

Also check out Section 1.5(3) in [1].

Not all contracts can be executed and evaluated as smart contracts. The kinds of work agreement contracts you describe wouldn't be a natural fit. Some folks have suggested novel alternatives which could fit into smart contracts such as voting to elect delegates, arbitration courts, reputation systems, etc. when things get fuzzy.

Obviously it's not a 1:1 replacement and I didn't mean to imply that it was.

I just think it could be a mistake to dismiss this technology and the changes that could be coming.

[1] A LAWYER’S INTRODUCTION TO SMART CONTRACTS http://www.crypto-law.com/doc/A%20Lawyer's%20Introduction%20...

>if this campaign hits goal before a deadline passes, all the backers pledge their money; or if the deadline comes before hitting the goal the money is returned to backers.

Let's pretend the campaign hits its goal and gets all the funding. There are still a number of breaches that can occur after the fact at which point the contract/math/programming is not going to be able to enforce anything one way or the other.

For example, as part of my pledge to the campaign the campaign promised me (and thousands of other backers) prizes. The contract can't do anything to enforce me getting my prize or it can't return my funds because they have been released to to company already. We have seen this time and again where the projects fail and refuse to return the money, the contracts themselves state the backers remedy is at law.

Another example, I pledge $10,000 and funds get released to the campaign, but turns out I am a minor and as such a contract is legally unenforceable against me, not only that it turns out I used my parents credit card without permission, the smart contract isn't going to be of any help here either. Funny enough this only raises another potential breach, bc without my $10k the goal wasn't reached, so some backers now want their money back and others don't, is the campaign in breach if it doesn't return the funds? That is a question of fact for the court not one a smart contract can resolve.

How about if I back something, funds are released, and then I do a charge-back and the CC company reverses the charge, I am likely in breach, but again nothing the smart contract can do about it.

>I just think it could be a mistake to dismiss this technology and the changes that could be coming.

Trust me I have no problem with technology and escrow accounts, they certainly help facilitate the performance contracts. But marketing of "smart contracts" as something self-enforcing based on math and programming? That doesn't exist even in the canonical example of smart contracts.

You bring up a few interesting points.

In my example there wouldn't be any room for a CC chargeback because we can assume all of the transactions are denoted in ETH itself. This is one of the qualities that enable the smart contracts to transact currency automatically. The programming language used to codify the smart contracts includes primitives to transact ETH.

The possibility of a minor transacting is interesting and I know there has been some discussion on implementing an identity framework on Ethereum (https://github.com/tradle/about/wiki/Identity-on-Ethereum). One can imagine then a contract which further limits participants by age.

I think you'll find though that many early adopter/enthusiasts don't care about age or jurisdiction. It's not obvious why US law should apply.

As a thought experiment though, I should ask about the properties which US courts hold that enable them to enforce contracts. Ultimately doesn't it come down to a court order, which if ignored ends in garnishment, imprisonment, or worse?

In theory, in a blockchain-enabled contract world, garnishments would either no longer be necessary or could automatically be enforced.

At the scary extreme you could even imagine a future where security drones owned by the "Sovereign State of Etheria" which fly around enforcing smart contracts with hunt/capture/kill orders. Slock.it is the most popular example bridging the real world/IoT with a DAO. And would this really be altogether different from how contracts are enforced manually in egregious cases?

I'm not stating any of this is good or bad, I'm just illustrating what is possible now and imagining what is conceivably possible in the future. I don't have a position in Ethereum (never owned any) nor The DAO, and I'm certainly not "marketing smart contracts". But you seem to insist that none of this is possible for some reason, and from what I can tell it certainly is.

If my interpretation of anything I've read about the technology is wrong though, I'd appreciate the corrections.

To find some common ground we should be able to agree on: how many contracts end up in litigation because one or both parties misinterpret the language of the agreement? Wouldn't it be desirable if there was a system that left no room for misinterpretation?

I think the point the user was making is that most of the language of the agreement is not readily convertible to code for most conceivable agreements (including "deliver goods that are a good faith attempt to produce what was promised"; obviously you can code for "send something by $DATE" or "purchase X units of stock Y")

What is being automated is the least risky parts of a crowdfunding arrangement (counterparty risk on the part of the crowdfunding company and the bank its client accounts are held with). But the ability of humans to override payments (e.g. if the card was stolen, or the fundraising campaign is judged to be a scam) is a risk mitigation feature rather than a bug of a real world payment system. Guaranteeing one side of a contract is honoured instantly, efficiently and anonymously can actually increase the likelihood of contracts not being honoured in many real world use cases.

> Smart contracts are enforced programmatically, that's kind of the point.

That is a tautological statement. Smart contracts are not "enforced" programmatically in any sense of the word that is distinct from all other pieces of software since the rules of all programs are "enforced programmatically" by definition. "These contracts are enforced by math" is a meaningless platitude.

> But please don't call me a gullible idiot and then try to dress it up in fancy vocabulary

I didn't call or imply that you're a gullible idiot. I chose my words for their specific meaning, not for the sake of "fancy vocabulary". I might be mistaken but I think you're misinterpreting the meaning of the phrase "strains credulity", I'm not calling you gullible, I'm saying that your statement invokes feelings of skepticism because it's grandiose, wildly speculative, and generally unsubstantiated.

> The future is always hard to believe until it's here.

Not really. The future is pretty believable most of the time, it's relatively rare to face a paradigm shift that alters our expectations of the future in a fundamental way; most of the time, things move along more or less as expected from an arbitrary point in time (of course, the farther you go in time from a given point, the more unexpected things may become, but they are also exponentially more difficult to predict with any expectations of certitude).

> This kind of reply seems common in your comment history, like you're just generally angry around blockchain threads for some reason.

I won't comment on your assumptions about my emotional state, but I'll say that I think blockchains are a very cool technology (including bitcoin), but I find the excessively bombastic claims about how these technologies are going to alter the course of human history to be absurd and worthy of rebuffing.

> "These contracts are enforced by math" is a meaningless platitude.

Not quite. For example, assuming you accept cryptocurrencies have an actual monetary value, now I can pay any amount of money I want to a "smart contract" that will then proceed to pay that money to whomever solves a mathematical problem of interest to me (for example, I could give it to someone who gives me the cheapest route to visit 50 cities of my choosing, given the point to point cost). Once the contract is defined and created, the following is true: a) I no longer can choose not to pay, even if I change my mind, b) Only someone who solves the problem I posed will be able to claim that payment, and c) They will be able to cash in the prize without ever needing to reveal their identity to me.

Now there is two potential problems with this. First, it might very well be that the kind of "contracts" we care about for running organizations are beyond what can be expressed and enforced by smart-contracts (specially "enforced" in the sense of the example above, versus simply "reported"). Second, the above guarantees hold only as long as the underlying network holds, and that is a social system in the final degree, made of people who can as a whole destroy or subvert it. However, regarding the not-turtles-all-the-way-down argument about the cryptocurrency networks being social systems in the end, well... so is the Internet, the international trade system, the national governments, etc. Smart-contracts are not magic, but they are a different way of organizing resources and bootstrapping trust between parties. Will they eliminate the need for governments and traditional corporations? Probably not. Some people said that about the internet too, and they were, in the short to medium term at least, wrong. But if it has even 1% of the impact in the world the Internet had, well...

If you pay a contractor to do something AFK and they take the money and run, how do you enforce the contract?

You're referencing US law here, but it looks like most of the people involved in the DAO are neither US citizens nor US residents. Slock.it is a German company and dao.link will be incorporated in Switzerland.

The exact details differ, of course, by where it is incorporated (and also where it is doing business, as there are requirements for foreign corporations doing business in various jurisdictions), but generally similar kinds of application, registration, disclosure, management/agent desgination, etc., requirements exist in most jurisdictions.

I think there are many legitimate concerns about this project, but what you are saying address none of them. In fact your first questions mean you don't understand it.

I think as a lawyer who practices a great deal of corporate transactions, I have a much better idea than most on the legal structure and compliance issue with corporations on a state by state basis.

But instead of telling me my question shows I don't understand, please answer any of the following:

-Are the token holders shareholders?

-If shareholders do the token holders also get to vote for the board, or are their tokens/shares non-voting?

-How many members are on this board? Since it is all autonomous how do you know the DAO has the minimum amount of board members are required by law? If say DAO is a DE corp (min 3 board members) and DE amends the law, how is DAO's code going to keep up?

Viewing this as a corporate attorney is the wrong approach as it's not a "corporation" and there is not really any legal framework as the idea is too new (CFTC commissioner just mentioned to "do no harm" to blockchain tech).

1. no, but they have a vote and can transfer a token which also represents their vote

2. there is no board

3. there is no board

I think the key thing to emphasize as well is that "The DAO" is just a program which now has clearly defined rules for managing its assets in the form of cryptocurrency. When it interacts with the real world, it will do so by transferring or receiving digital assets and entering into real-world contracts with outside parties (Contractors). Whether those contracts with outside parties are enforceable, and how they will be enforced is within the realm of "to be determined" at this point. That does not at all mean the prospects for this type of setup/idea (DAO) are negative going forward.

> When it interacts with the real world, it will do so by transferring or receiving digital assets and entering into real-world contracts with outside parties (Contractors).

Is the DAO a legal entity with recognized agents with authority to enter into contracts on its behalf? If not, how can this possibly work?

Like I said "to be determined" is what I understand, however they appear initially to be employing a real-world company avatar: DAO.Link, based in Switzerland. [0]

[0] http://www.coindesk.com/the-dao-just-raised-50-million-but-w...

Edit: Also, do keep in mind that the Contractor would be able to see the contract is in effect by viewing it in the "blockchain". The question is only a matter of real-world enforcement in the specific case of the smart contract criteria not being satisfied at contract completion, due to incorrect/false data inputs to it by people in The DAO.

> Like I said "to be determined" is what I understand, however they appear initially to be employing a real-world company avatar: DAO.Link, based in Switzerland.

Sounds to me like DAO.Link (which appears to be an offering of Slock.it) is the actual legal business entity involved, and that the legal basis and enforcement mechanisms for assuring that it acts as expected by the participants of the blockchain-based entities it interacts with is...somewhat murky.

"The DAO" in this instance sounds like it'd be a great target for a fuzzer. ;)

> I think as a lawyer who practices a great deal of corporate transaction

Well, I think we can both see these systems are an attempt to circumvent individuals like yourself (At least partially, some human legal representation will likely still be used.)

Taxi drivers similarly complained a lot about the legality of Uber.

(BTW, my wife is also a corporate lawyer.)

This isn't a complaint about the legality of the DAO, but that the description of it as a "corporation" is simply false. A corporation refers to a specific type of legal entity, which the DAO simply is not.

All the questions will_brown asks are simple and straightforward and meaningful for any corporation. They are in some cases murky and/or inapplicable for the DAO, because the DAO is very much unlike a corporation.

I'm not sure if you are trying to compare my legal knowledge to that of a Taxi driver, or suggesting my position is not based on law but an irrational fear of competition, or maybe you are implying taxi drivers were wrong about Uber so I must be about DAO.

Maybe it helps my point, maybe not, but Uber is certainly illegal in many jurisdictions. Take Miami-Dade county, there are 10,000 Uber drivers and nearly 3,000 tickets have been issued ($1,010/ticket) something like $2.9M in fines. Moreover, Uber sends out training for Miami Drivers on how to avoid getting stopped/ticketed/impounded in Miami as an unlicensed ride for hire and when Uber drivers do get ticketed/impounded Uber provides the drivers a lawyer for their case (oddly its their FL corporate lobbyist not a traffic/criminal defense lawyer). Finally, the Miami-Dade ordinance carries a potential penalty of 45 days jail.

> I'm not sure if you are trying to compare my legal knowledge to that of a Taxi driver ...

Certainly not, I see no evidence that you don't have a strong understanding of the law, far beyond my own.

I guess what I'm saying is that Uber and the DAO both operate in a legal grey zone- And both of them likely have aspects that directly conflict with current law. However, I think it's clear that the legal system is a "living institution" and has been surprisingly welcoming of new innovative business models and technologies recently (as with Uber and things related to the DAO like Bitcoin) and is one of the reasons I still feel relatively optimistic about the future of the US economy.

What made Uber succeed, to a large degree, is that clearly a lot of societal pressure had built up over decades due to poor experiences with the taxi system- I think it's undeniable that this had an influence on the positive legal rulings around Uber, so far as those exist in many parts of the country.

Similarly, alternative governance systems like the DAO will keep appearing and I think eventually are likely to get some support from the existing legal system.

> Take Miami-Dade county...

Yikes! Glad I don't live there anymore, as my lifestyle depends significantly on access to ride sharing services.

> I guess what I'm saying is that Uber and the DAO both operate in a legal grey zone-

What is required to be a corporation is not really a legal gray zone. The DAO doesn't operate in a legal gray zone as to that characterization, its just flat inaccurate.

Insofar as the DAO is a mechanism for constructing contracts between actual legal persons (either natural persons or corporations), it may operate in a poorly-tested area as to whether valid contracts are formed, how those contracts are interpreted and what law they are governed by, and whether and to what extent they are enforceable, true.

I hear you, but I don't think I've ever used the word "corporation" in this forum or claimed that the DAO is a corporation, or directly disputed any claim made by another comment as to whether the DAO is or isn't a corporation.

Whether or not the DAO meets the definition of a "corporation" doesn't seem like a very interesting question to me, and I think it's too early to know how/if it matters if the legal system uses the word "corporation" to refer to the DAO.

I would define DAO as blockchain based investment club software[1]. The problem is, whether you called DAO a corporation or not, DAO raised $100+M on the basis of being an autonomous corporation, something that can not exist under the law any more than a corporation owned by cats. If the investors are not educated enough to know they invested in a legal fiction, its safe to say they bought it hook link and sink that DAO offers more transparency, shareholder control or flexibility than existing corporate structures...and even if they could exist, there is nothing to suggest any of that is true.

If people want to pool their money in a corporate structure (LLC or partnership) and vote on various investment opportunities, that's great, but its nothing new or paradigm shifting. Corporations without shareholders/owners? Nothing new, but that does not make them autonomous.

[1] https://en.wikipedia.org/wiki/Investment_club_software

Actually, his first question indicates that the people calling this a "corporation" have no idea what that word means.

It's not a question of whether or not ETH (and now the "DAO") is a scam. It is probably a scam. The question is whether or not ETH/DAO can become entrenched as <something> before it dies. As someone that got in this game early and has watched altcoins for years, that is pretty much the whole history of ETH, folks. Just do some research.

There's a reason corporations developed as they did. With a large number of owners, it becomes very difficult to tell what is actually going on in a company and making consistent, sensical decisions is difficult. The result is that we developed a board of directors who are elected by the owners to oversee the performance of the top employees at that company, and a complex of system of accounting to communicate the financial position of the company directly to investors.

I don't see how this project addresses the two main problems that corporations attempt to solve: a lack of complete information about a company of reasonable size, and a coordinating a large number of people who may not want to devote a full-time job to overseeing the company.

I would be much more impressed if they described this as an open-source investment algorithm or something like. Instead, it seems as if they're trying to sell us on the benefits of a corporation to people who think "corporation" means "big, evil company."

> There's a reason corporations developed as they did.

Well, the counterargument would be "Because they didn't have computers back then and therefore couldn't develop alternative systems that are better but are impractical to implement manually."

Sure, but I don't see how this actually addresses the problems that corporations solve.

I agree that question doesn't have a good answer yet, and is why I am not participating in this experiment.

So I might be reading into it too much, but it seems to me that part 1 (a lack of complete information about a company of reasonable size) Is basically totally solved by this system. The assets are completely documented on a massive publicly distributed system. The procedures for making decisions are similarly well documented. Basically everything you'd want to know about the [entity] is totally freely available. It's not hard to write some frontend to query all the data from the blockchain and keep an up-to-the minute accurate accounting of the resources of the [entity]

Now the second part I can't vouch for - coordinating a large number of people is hard. But the code for the system is available for inspection. If someone thinks they can come up with a way to align incentives and such so that people cooperate better in the system (quadratic instead of linear voting? vote delegation? temporary dictatorships?) then (I think?) they can submit those as amendments to the system and improve it. I'm really guessing here as I haven't looked into it in that much detail.

It's not just that the visibility of the assets, it's not knowing that your employees are tired or angry or thinking about leaving; it's not knowing what tone of voice your customers have when they return a product; it's basically everything unpredictable without someone being there to individually assess an unpredictable situation and make a decision. There are already some domains which are highly automated - finance comes to mind. But you still have someone ultimately in charge to oversee it. If the sales pitch is that this is some kind of open-source trading algorithm where investors get to vote on code, that's neat, but I don't see what's so special about calling them tokens instead of stock or how this will lead to automated corporations (or how this is not a corporation for that matter). Actually, now that I think about it, if this thing isn't going to be registered as a corporation, who will be held responsible for it's finances?

> Currently only the privileged can found and fund new companies.

What? It's about $200 in Seattle to file to register a Limited Liability Company. It's a stretch to call that 'only the privileged'.

"Do the paperwork for creation" has only a passing resemblance to "found and fund."

"found" means to do the paperwork and setup a bank account. that's it. there's no deeper meaning.

"fund" just means putting some money into a bank account for it. you could fund a company with a dollar (and many people do, for symbolic reasons).

You have just enumerated the "passing resemblance" noted above.

Connotations matter.

i've done it multiple times.

believe me when i tell you a huge, huge number of wantrapreneurs never even get around to organizing an LLC and opening a bank account.

want to know why? it takes at least 10 hours of work and when faced with doing 10 hours of actual fucking work, most people won't.

"With reasonable hope of success" is an implied clause of the original sentence. You might have not considered this aspect.

At a certain point we have to stop beating around the bush and admit that being successful isn't something people are entitled to and it is something you actually have to work at.

Or course, no one is entitled to it. And I do think focusing on disadvantages can be a problem, and make it harder to succeed.

There is also the Small-Business Administration, which can fast-track certain well-known types of companies. As an example: say you were a woman who had served time in the military and are trying to setup a hair salon. There are two incentive programs for your demographic specifically, and an additional set of resources for your business specifically. You'd basically get an "account manager" from the SBA who has setup several of these before, such that the experience is practically turnkey and requires very little of your own money.

Now, if you're trying to do something really risky like make a smartphone app, no, you're probably not going to get anywhere with the SBA. They aren't VCs making bets on long-shots. But they are more willing than a bank to work with you and help you get set up.

Especially now Title III campaigns are live and anyone can raise from anyone. See www.wefunder.com for example.

I'm pretty convinced the vast majority of tech startups were started by individuals who relied on their family supporting them through the initial phases of their business.

pretty convinced from what data? source please? thanks!

I don't know if anyone has collected any formal data, I'm basing it on my personal experience. Certainly plenty of other people make the same observation. http://www.sfchronicle.com/business/article/Why-do-so-few-st...

Yeah, a couple of studies have been done on it. http://qz.com/455109/entrepreneurs-dont-have-a-special-gene-...

Vast majority? Really?

> The individual must have a net worth greater than $1 million, either individually or jointly with the individual’s spouse.

[1] http://www.sec.gov/info/smallbus/secg/accredited-investor-ne...

That's the requirement to be an accredited investor, not to register a small business.

Think about how many of the major and wonderful companies we have today wouldn't exist if this were true.

Anyone know how to legally assign a corporation over to an autonomous system?

The company Articles could require its directors to obey the direction of the autonomous system. And if it doesn't the autonomous system could direct the creation of another corporation with a mandate to sue the non compliant one.

It's a legal interop layer! Now we just need to create a code-generation utility that takes the conceptual source code for the contract and generates legal code that can adequately enforce it... oh, wait...

realistic & efficient, good thought

The DAO isn't constrained to simply giving money to some individual and hoping for the best. Its owners could decide to approve proposals that structure deals in ways that mitigate risk, such as providing funds in tranches and using custodians who are contracted to return unspent money in certain conditions.

> Anyone know how to legally assign a corporation over to an autonomous system?

Step 1: Lobby for laws which allow legally assigning a corporations over to an autonomous system (or, more simply, laws which allow granting legal personhood to an autonomous system.)

Under current laws, I don't think there is any place in the world where this can be done. The creation of a corporation is an act of government (often, but not always, done at the request of a non-government person through a publicly-available application process, but some are directly created by the government on its own initiative.)

I don't think so, this is totally uncharted legal territory- Nobody will know until the first legal precedents are established (IANAL)

The first truly successful autonomous corporation will be a 419 scam. Even if it is not on Ethereum.

The concept of a decentralized organization is cool. The implementation in DAOhub is dangerous to all participants. Both curators and contractors of DAOhub projects risk violating US securities laws if they use the platform to "crowdfund" projects. Participants, as is obvious, risk losing all their contributions, paid into the pockets of "contractors" who may possess voting control over project funds.

This could be interesting. What does this mean for hostile take overs though?

I think you're asking "what happens when someone captures 51% of the voting shares?" - This is actually the #1 problem with these types of systems, since the majority could just vote to put 100% of the funds into their own bank account.

The slockit-authored DAO in the article addresses this through two failsafes:

1. Shareholders can vote to split the company in two at any point to extricate their funds from majority control.

2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder.

Whether these safeguards will work remains to be seen.

Anyone can 'split' the DAO at any point of time, which renders the 51% attack moot. A 51% attack works only when the attacker can get more than what he puts in.

Consider this obvious attack vector: Let's say today is the last crowdfunding day, and the DAO has raised $150 million so far. A wealthy attacker can immediately put another $150 million, effectively controlling 50% of the voting for the DAO, and then vote to send all the money to his own Ethereum address. This is perfectly possible, since this is all written in Ethereum contracts anyway.

To avoid this, the rest of the people can 'fork' the DAO, effectively leaving the attacker with 100% control over his share of 50%. The attacker gains nothing. The other 'fork' can now continue on.

This forking described above is also going to be used (I think) when it comes to funding new projects. I am sure some people will disagree with some proposal, and they would fork the DAO away to not invest in that proposal even though the majority agreed they would. They are free to do so.

> which renders the 51% attack moot.

Well, I'm not sure I'd use such absolute language. For one thing, people can still perform a 51% attack and try to influence decisions covertly, without triggering a split.

Also, the spectre of a 51% attack required for some major compromises to be made in the DAO design- Having a company that can arbitrarily split at any moment is likely to have a major impact on the future operations of the DAO.

You're right, I shouldn't have used an absolute language. There is also the issue of voter apathy so yes, a 51% attack might be worthy of a try for a wealthy enough adversary.

In terms of the split, if the community broadly agrees that there is an attack, then I don't see it having a long-term detriment. However, as you said, if it is more 'stealthy' then it would be harder to detect and correct.

All that being said, I think there is a theoretical safety mechanism in place. Whether that will work in real life or not, we'll wait and see. I am sure some good lessons will come out of this in either case and the next generation of applications can improve upon some shortcomings.

>2. There is an extra layer of "curators" (kind of a misnomer) who are trusted members in the community who make sure payments aren't being funneled through an intermediary to a majority shareholder.

If there are humans involved that can exercise this level of control over The DAO, is it really autonomous?

It is a very limited for of control, for what it's worth.

I'm not 100% familiar with it yet, but there is some code where anyone on the losing side of a majority vote can opt to fork the DAO and retain their original tokens with all investments, instead of going along with the group (similar idea to a Bitcoin hard fork). This prevents someone with 51% ownership voting to send 100% of the assets to themselves.


I think the idea is great, but only if the ETH can never be withdrawn without the board's consent, much like funding a a corporation where you'd need to be paid a distribution or something, etc. - you don't just withdraw your money after the next VC enters the scene and drives the price up. If the ETH can be withdrawn at any time, then this is no different than a publicly traded stock... which is currently undergoing a pump-and...

As such, I've flagged the post, to avoid contributing to what's turning out to be a free(?) viral marketing campaign.

Am I wrong about the "withdraw" part?

So, a sort of Distributed Digital Democratic Dragon's Den then.

I suspect the contestants will make more money than the Distibuted-Dragons.

It's a shockingly bad idea. I support the right of people to invest in whatever they like, but VC has notoriously poor returns, decentralized VC run by a committee that can only invest in other decentralized technologies seems like a really, really bad idea. DAOs like Augur are actually interesting, even if you think they'll never work. This just seems crazy.

As long as nobody's putting in more than they intend to lose, it's at least a very pretty way to fund a bunch of distributed app code being written I guess.

And if they all take what's left of their money out again, the code will still exist. Presumably has to be mostly free-software if it's gonna run distributed anyway.

At $120 million, it's the largest security bug bounty in history! Someone will 'claim' it soon...

So how can I buy into this ponzi? I'd throw $50 at it and see what happens. How do I do that?

Unless you have some ETH or BTC laying around, it's a bit of a hassle, but if you go to https://daohub.org/ and click "Get DAO Tokens" and then "Start Wizard" it will walk you through the process.

Self driving company

bitshares is an autonomous corporation that was created last year, developed using its own coin. I don't see any advantages that "The DAO" has over it.


If you gave ai seed funding and ago on the stock market.. Would that still be a conpany when you leave?

> imagine that being able to accept payments from renters and unlock accordingly was a function of a lock itself

My word.

Another speculators' playground!

Can someone point me to an sample smart contract?

so, it's like twitch but for business?

Time to go reread Daemon!

What's to stop someone from putting in $108M worth of etherium coins and then voting to give all the money to that same person?

see the information above regarding "splits"

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