Can a group of strangers online buy the constitution?
In an audacious attempt that only goes to show how powerful crypto investors could be, a group of some 17,000 people came together to raise $47 million worth of Ether, the cryptocurrency of the Ethereum network, with the sole mandate of purchasing a rare copy of the first-ever US Constitution.
How did this group come together to raise the money and organize an audacious auction face-off? And what does this mean for groups like this in the future?
It all began on Twitter when a group of individuals began exchanging messages, joking about making a bid to purchase one of the thirteen surviving copies of the original US Constitution.
Originally printed in 1787, it was the first time in 33 years that one of the surviving copies would go on auction. Before now, it had been in the custody of New York philanthropist, Dorothy Tapper Goldman.
The venue for the auction was the world-class auction outfit, Sotheby's. But unlike many typical auctions, this time, an unorthodox group of people was going to make a huge statement.
This group goes by the name; ConstitutionDAO. While being a collection of a team of investors, unlike normal investors, a DAO relies on blockchain technology to track and validate the participation of its group members. It also uses the same technology to manage the fundraising process and disbursement of funds.
What started as a mere joke on Twitter morphed into a 17,000-person army of investors. And in the first five days of the creation of ConstitutionDAO, the group raised more than $4 million.
Just seven days later, that figure had risen to $47 million. By the way, all that money was held in Ether. With $47 million in their coffers, ConstitutionDAO was in the financial position to bid for the much sought-after copy of the US Constitution.
The first challenge was that they held their funds in Ether. And although Sotheby's had recently made an accommodation for bids to be made using cryptocurrency, specifically for two works made by the world-renowned street artist, Bank-see, the outfit was not going to accept anything other than government-issued currency for the 1787 US Constitution printout.
Secondly, DAOs like ConstitutionDAO do not have a central governing authority responsible for making decisions and executing agreements. Instead, because the group relies on Blockchain technology, it utilizes a concept called smart contracts, which are self-executing agreements that are stored and maintained on the blockchain.
Sotheby's does not recognize organizations with such an ambiguous structure. As such, the auction outfit does not allow DAO's to bid directly. In addition to this, Sotheby's also requires bidders to comply with the "know your customer" policy, a policy that is impractical for DAOs to follow due to the sheer size of the organization.
Nevertheless, ConstitutionDAO found a way to work around these bottlenecks to sit at the auction table.
To meet up with the fiat currency requirements, the group teamed up with a crypto exchange to convert their $47 million worth of Ether to US dollars, if the bid was successful.
Next, they agreed with a non-profit that would stand in the place of the group to officially make the bids on the DAO's behalf. And to facilitate the transfer of the actual document, the group also formed a corporation. With all that sorted out, ConstitutionDAO was ready to battle it out at Sotheby's.
Going into battle
What they did not expect, however, was that Ken Griffin, a billionaire, founder and CEO of Citadel, would also be at the auction with a steely determination to come away with that highly coveted document.
Griffin pushed ConstitutionDAO all the way, outbidding the group, one million dollars at a time until he pushed them to the point of no return, winning the bid at the $43 million mark. At that point, ConstitutionDAO decided they could not continue.
Although they would have had some $4 million to spare had they matched Ken Griffin's bid, the group realized that $4 million will not be sufficient to transport and maintain the state of the document if they had it in their custody.
And based on that, the DAO ended the bidding from their side.
Ken Griffin, who is worth an estimated $16.1 billion, admitted that he knew he would be pushed all the way by the highly determined ConstitutionDAO.
With ConstitutionDAO failing to acquire the rare document, the group was left with the small matter of deciding what to do with the funds.
Immediately, after the failed bid, the group announced that they would be returning the funds contributed by the thousands of investors.
However, many of the investors have decided to leave their crypto in the group's wallet while they decide on their next line of action which could be to bid for another high-value asset at yet another auction.
That said, a definite line of action will be agreed upon by the group in future.
You might want to ask, had the DAO been successful in acquiring the document, how would it have been shared amongst over 17,000 investors.
Well, of course, there is no way the document would be shared amongst the investors. Instead, each investor would've become a holder of a crypto token known as "People".
This would have granted them specific voting rights to decide the future of the document.
Despite the failure of ConstitutionDAO to acquire their prized asset, their attempt is an indicator of what the future of investments could be like, all thanks to blockchain technology.
DAOs are gaining traction thanks to their decentralized nature which aids transparency and speed. Because of this, in a matter of days, these groups could come together to raise funds to buy out organisations as huge as sports teams.
That's how powerful they can be. They represent a new type of organization with an ability to work rapidly while maintaining transparency.