What is the DAO?

DAO: Decentralized Autonomous Organization

**WARNING – THE DAO FAILED** Although a promising concept the implementation was not up to scratch and an exploit was found which led to the “theft” of the Ether tokens which was held in exchange for DAO tokens. In order to reverse this “theft” the Ethereum Foundation led a hard fork to reallocate the Ether tokens to the owners prior to the DAO. In a surprising turn of events the “original” Ethereum chain was supported by those who believed that the “theft” was in fact a valid function of the DAO smart contract and as they believe Ethereum should be ‘Unstoppable code’ and irreversible therefore they backed the “old” fork which did not reallocate the Ether to the original owners. As a result two Ethereum tokens now exist. The main token (ETH) which is supported by the Ethereum foundation and most companies in the space, and the “classic” token (ETC) which has a lower value (~1/10th the value of ETH at the time of writing 09-2016). Nevertheless the DAO was an interesting concept and one which will surely be reconsidered in the future (albeit with stronger measures against unexpected use of the smart contract)

In short anyone could send ether from an account they have control of (NOT an online wallet/exchange) to this address: 0xbb9bc244d798123fde783fcc1c72d3bb8c189413

And they were issued with DAO tokens. (if you are lost already read my article on ethereum and getting ether first)

Ownership of these DAO tokens makes you a part of the decentralized autonomous organization which is called the DAO.

They give you the ability to take part in a vote for which projects the DAO will support (invest in) and, should the investment pay off, the tokens entitle you to receive a return (make profit).

The goals of the DAO are to “diligently use the ETH it controls to support projects that will:

  • Provide a return on investment or benefit to the DAO and its members.
  • Benefit the decentralized ecosystem as a whole.”

Some key features that I believe make the DAO especially interesting and

  1. The number of tokens that can exist is unlimited, for 28 days from the 30th of April 2016 DAO tokens will be created in exchange for ether. As the below graph shows, the cost in ether to acquire DAO tokens will increase throughout the 28 days, rewarding those who get involved within the first 15 days. This means that there is a relatively large window for people to get involved at the theoretically best time, which I believe will get a huge number of people involved as they will feel that they are getting in early even 15 days into the launch.Ether required to obtain 100 DAO tokens throughout the 28 day window. https://daohub.org/creation.htm
      Ether required to obtain 100 DAO tokens throughout the 28 day window. https://daohub.org/creation.htm

    There is no premine – everyone has the same opportunity to get involved, from developers to readers of the magazines that will undoubtedly report on this and viewers of news programs which will report on the record braking amounts of money raised (potentially the largest crowdfunding activity ever made). This will, in my opinion, pull huge numbers of people into an environment has historically been dominated by highly technical people only.

  2. At any time a DAO token holder can retrieve a proportional amount of Ether that is not currently committed to a proposal, providing an escape mechanism for the future further encouraging people to get involved if they are on the fence as risk will be lowered.
  3. Support from big names from the Ethereum Foundation adds validity reducing/removing risk of it being a scam. see here
  4. Many people have ether having diversified from only bitcoin. Many people want to put their cryptocurrency to use rather than have it dormant, this provides a vehicle for them to do just this and potentially make returns at the same time.

Any questions? Email me @ ukcryptocurrency@gmail.com