DAOs and the rising phenomenon of crypto crowdfunding
DAOs and the rising phenomenon of crypto crowdfunding

DAOs and the rising phenomenon of crypto crowdfunding

By Vincenzo Cacioppoli - 11 Dec 2021

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The Node newspaper reported on the case of an improvised group of people who managed to organise a DAO and crypto crowdfunding in a few weeks, raising $40 million in ETH

The case of the US constitution 

The aim of the collection was to buy an original copy of the US constitution at auction.

Jonah Elrich, one of the promoters with 30 other people, formed a DAO (called ConstitutionDAO), almost as a joke, as he tells the magazine, to try to receive offers in ETH from all over the world. 

In return, those who donated would have the right to vote on what to do with this copy of the Constitution and what other projects the organization should work on in the future. 

The result was literally explosive, recording perhaps one of the highest DAO collections in history. In fact, the operation failed in the end due to some mistakes made by the promoters, but the staggering amount of money raised shows how the crypto crowdfunding phenomenon is growing.

What is a DAO

In a DAO, thousands of people decide autonomously and democratically on the decisions to be made regarding a specific project for which the organization has been set up. Voting is done using tokens, also known as governance tokens. Those who own these tokens have the right to vote, and sometimes those who own more tokens have the right to vote several times.

Developers, investors and users often first invest money or commit to work in a project to obtain special digital tokens, with which they can vote and which are often available for sale on cryptocurrency exchanges.

The funds raised are managed by a smart contract, which allocates funds only for the purposes approved by the token holders. 

The smart contract can also allow participants to make operational decisions. 

ConstitutionDAO and PleasrDAO

In the case of ConstitutionDAO, participants were promised a governance token with which they could vote on where the purchased constitution would be displayed.

DAOs have been created to manage venture funds, distribute money to non-profit organizations and lend and borrow digital currencies. PleasrDAO for example paid $4 million in July for a copy of a single issue Wu-Tang Clan album once owned by Martin Shkreli.

In a DAO, thousands of people make decisions about a particular project

The blockchain, DAOs and crypto crowdfunding

The feature of decentralization and the trust that is created between parties and transparency in transactions, thanks to blockchain and smart contracts seems to be the ideal solution for crowdfunding projects.

Specifically, blockchain seems to be particularly suitable for initiatives that have crowdfunding as a source of funding. 

Crowdfunding is based on trust between investors and stakeholders. In order to eliminate any kind of uncertainty related to the use of the funds raised – as was also the case with ICOs in the years 2017/2018 – the use of DAOs could be the key tool thanks to which that bond of trust given by the transparency of this system can be created.

According to some estimates, the crowdfunding market, which in 2020 amounted to more than $13 billion in 2026, could exceed $25 billion, and it is very likely that this considerable increase will also be determined by the increasing popularity of blockchain projects.

DAOs also in the NFT world

DAOs are improving upon the ICOs of earlier times and helping to raise more capital, and many are also being set up in the NFT sphere.

In 2018, the Initial Coin Offering bubble was dying down precisely because there was a lack of confidence among investors who didn’t know how and if the money they invested would be used. DAOs helped with this type of crowdfunding. Now something similar is happening in the NFT world.

In fact, more and more collectibles projects are launching their own DAOs which will decide the next steps of the project. While initially these sets of virtual cards were simply launched on the blockchain, DAOs are now also being used in the collectibles sector to give more and more power to the holders and thus to the investors.

Vincenzo Cacioppoli

Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.

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