ConstitutionDAO (📜, 📜)
How Crypto Enthusiasts Almost Bought the US Constitution
In case you hadn’t heard, last week, something crazy happened. A group of crypto enthusiasts came together and raised $47 MILLION in an attempt to buy one of the 13 surviving copies of the United States Constitution.
This particular copy of the Constitution last sold in 1988 for $165,000, and it’s one of just two copies that’s not institutionally owned. Most estimates placed its value around $15-20 million before the auction.
Why Buy the Constitution?
I guess the question is, why not? Owning a copy of the Constitution is a cool enough reason to buy it. And being a part of the group that bought it is pretty cool, too.
That said, I’m less interested in why this group wanted to buy the Constitution and more interested in how they did it!
Who’s Behind All This? And How’d They Pull This Off?
This group of crypto geeks came together to form ConstitutionDAO.
The Constitution part of the name is obvious, but what’s a DAO? It’s short for Decentralized Autonomous Organization. DAOs come in all shapes and sizes, but one common way to define a DAO is a decentralized group with a shared bank account (or wallet).
DAOs are a new way of coordinating a group of people. In the past, people created S-Corps and LLCs to effectively share information, run businesses, and distribute profits.
A DAO is sort of a novel way of coordinating that makes use of digitally-native advantages. For instance, for most of history, we needed to be in person to communicate with our business partners effectively. We needed to have joint bank accounts regulated by bank employees so that no one could steal the money from our account without sufficient partner approval. Today, though, we don’t need to be in person to communicate effectively. We can actually build things while living on entirely different sides of the Earth! And thanks to crypto and multisignature wallets, we don’t need to go to a bank to pool our money together. Multisignature wallets have checks built right in so that no one can withdraw money without the other partners’ approval.
Lots of crypto companies and protocols are built by DAOs. Because DAOs are still in their early days, they’re probably not as effective as traditional companies. Work that may take 10 hours at a normal company might take 24 hours at a DAO. Why? We haven’t figured out a way to coordinate effectively in a DAO setting with people distributed all over the world. Most of the talent today isn’t working in DAOs. Personally, I think we’ll get there. Like I said, it’s still early.
But what’s really cool about DAOs is that they allow people to get something off the ground very quickly. To illustrate what I mean, think about how long it would take to spin up the legal entities needed to crowdfund such a large amount. Probably weeks, if not months. Non-profit structures would need to be set up, bank accounts would need to be created, and much more. And even then, so much money flooding into the account so quickly would likely raise some eyebrows.
Quick note: there were some complicated legal things that happened on the back end that took place to make this happen, but these steps are necessary only because our current regulations don’t really play friendly with DAOs. We’re left with a Frankenstein DAO-LLC type structure that could actually work with Sotheby’s to bid on the item. You can read more here.
Instead, ConstitutionDAO was able to set up a Twitter, Discord, and Gnosis Multisig wallet to get started. They were able to explain their mission directly to their potential donors through Twitter and collect donations through Juicebox, a community funding protocol on Ethereum.
What’s also exciting about DAOs is the sheer scale that they’re able to accomplish in such a short time. In under 2 weeks, they raised $47 million - the largest ever crowdfunding campaign from over 17,000 people. Of those 17,000+ wallets, ⅓ had never made a transaction before! The average donation size was just over $200.
What Was the Plan?
After donating to the DAO, contributors would receive $PEOPLE governance tokens (rather than direct fractional ownership, for legal reasons). These tokens gave contributors special voting power over what to do with the document. They could vote on where the document was stored and how it was custodied.
On the DAO side of things, the donations were held in a secure multisig. Taking inspiration from United States history, there were 13 signers on the multisig. And like the Constitution itself, 9 of these members had to approve any decision related to the funds (just like 9 of the 13 colonies had to ratify the Constitution before it went into effect).
Once ConstitutionDAO had won the Constitution at auction, the DAO planned to showcase it in a public institution (likely one that would be free to the public) and even considered paying for the costs associated with housing the document.
What Happened? Who Bought the Constitution
Sadly, on auction day, ConstitutionDAO was outbid by an anonymous bidder. That bidder? Hedge fund manager Ken Griffin, the founder of Citadel, who purchased the document for $43.2 million. I won’t comment on Ken’s reputation among retail investors other than to say he’s not the most popular guy among the Robinhood/crypto crowd. Mr. Griffin intends to make the Constitution available for viewing in a museum in Bentonville, Arkansas.
ConstitutionDAO is now in the process of refunding all of its donors.
While ConstitutionDAO ultimately didn’t achieve its stated goal of buying the Constitution, it did accomplish an insane amount. It ran the largest crowdfunding campaign ever, and it did it in a matter of a couple of weeks. What’s more, it drove up the price of the Constitution, resulting in ~$20 million incremental dollars being donated to charity. And perhaps most importantly, it showcased how powerful DAOs can be when people align on a common goal and use our new, digitally native infrastructure to pursue that goal.