When Sotheby’s announced in September about the sale of the original printed U.S. Constitution, nothing seemed out of the ordinary; instead, it hit headlines when ConstitutionDAO created a buzz on this auction.
The object put up for auction was the extremely rare official first-edition printed copy of the U.S Constitution from 1787 – one of only two, out of the 13 known copies, not held in the collection of an institution.
The plan to buy this Constitution as a DAO started when two friends, Graham Novak and Austin Cain, shared the idea on Twitter on November 11th, a week before the auction.
This unique idea sparked interests and created huge excitement among the internet community, leading many to join the cause. ConstitutionDAO was started with a shared sense of purpose. This DAO collected an astonishing $47M (worth of ETH) in 6 days, albeit the target being set at $20M, on Juicebox, an early stage DAO platform. They also broke records for the most money crowdfunded in less than 72 hours.
A majority of the contributors have done less than 40 transactions and are quite new to the crypto-world. 17,437 donors contributed to the project with a median donation size of $206.26.
But, what followed was quite confusing and daunting for the DAO since it was the first time Sotheby’s worked with a DAO. There were few logistics issues like Sotheby’s not accepting cryptocurrencies for this auction and regulation to conduct KYC compliance checks for DAO contributors. To solve these issues, ConstitutionDAO collaborated with a crypto exchange to convert ETH to USD, a non-profit organization to place bids and an FTX to act as a facilitator.
$PEOPLE is the governance token distributed at a rate of 1,000,000 PEOPLE for each ETH. Initially, the token promised fractional ownership - own a piece of the constitution, but was later changed to governance – making decisions on where to display, how to exhibit. The funds were stored in a wallet controlled by 13 core contributors, with 9 being required to approve transactions (based on, 9 states required to ratify for the constitution to take effect).
Unfortunately, ConstitutionDAO lost the auction to CITADEL CEO, Ken Griffin at a meager margin with the winning bid of $43.2M. Even though the DAO raised $47M, it had to set aside a reserve for taxes, fees, storage with the max auction bid set at $43M. The auction bid was transparent to others through blockchain records which might have put the DAO at a disadvantageous position. After winning the auction, Griffin approached ConstitutionDAO for joint governance of the artifact, deciding on where to display it and also for mining NFT to the contributors; but they couldn’t come to a mutual agreement. Eventually, ConstitutionDAO was shut down on November 24th.
There were 2 options for the contributors – receive a refund for the donations made or continue holding the $PEOPLE token, which has no governance value. There were plans to move the $PEOPLE token to a new token called “We the People” ($WTP) for any future projects, but the idea was shelved later.
ConstitutionDAO’s post-auction message to the community:
Donating to the ConstitutionDAO was a little complex and involved high transaction “fees”. To buy a $PEOPLE token, the contributors had to purchase Ethereum through an exchange that involved a transaction fee. This Ethereum has to be sent to the crypto wallet with a network fee. Then from the wallet ETH is sent to the juicebox platform with a varying “gas” fee. There were cases with contributors paying $75 gas fees to donate roughly $75 to the project. Imagine the exorbitant situation where the total fees for the entire project amounted to nearly $1M. Moreover, the entire process might have to be repeated for refund, potentially losing the entire donation amount in majority of the cases.
According to Dune Analytics, about 56% of the funds have been returned and 44% of the funds is still left with the non-existing DAO ($PEOPLE tokens still circulating in the secondary market).
Instead of losing the entire amount on transaction fees, some donors plan to hold the tokens with hopes of creating meme coins similar to Shiba Inu. The $PEOPLE token is still being traded and has witnessed a surge 900% in value. The current token price is $0.1496.
The major drawback of the DAO is, focusing only on purchasing the rare document and not concentrating on what has to be done after the purchase. The voting infrastructure was not set up and there were no discussions on using the $PEOPLE token to decide on the future of the token. So, when the auction was lost, there was no community decision on the future paths to be taken or how the refund should be handled. It was decided by the “core members”.
ConstitutionDAO can still be seen as a success in the awareness it created about DAOs in general. It, in a way, showcased the power of people/community coming together at a short notice, to compete with wealthy individuals. It also showed that crowdfunding through DAO could be a success, though the process has to evolve to concentrate on intrinsic details.
More and more people are aware of the existence and understand the importance of DAO for the community as a whole!