I had my reasons to join a DAO organized to buy an original copy of the U.S. Constitution. My reasons, though, were probably much different than those of the other thousands of participants.
For me, it was simply to learn something new. Prior to this week, I had only a vague understanding of DAOs (decentralized autonomous organizations). So what better way to really internalize how the blockchain works, than to actually participate in a DAO? As they say—and I wholeheartedly believe—the best way to learn something is to do it. Which is why I proposed to my husband that we get our feet wet in the future world by joining the bid to buy one of the last remaining privately held copies of the U.S. Constitution. Here’s how we did it.
As a Boomer, I find it increasingly important to keep learning, and tech provides so many cool ways to do that. We made our contribution (more than $40 million was raised in total), but most importantly, we learned a ton.
What’s all this noise about the U.S. Constitution?
When my Twitter timeline was dotted with mentions of the U.S. Constitution over the weekend, I paid no attention. It was just noise. However, on Monday when I received Packy McCormick’s weekly newsletter, Not Boring, and his subject line was, “Let’s Buy the U.S. Constitution,” I figured I’d better learn more.
In a nutshell, Sotheby’s was auctioning a copy of the U.S. Constitution on Thursday, November 18. This was one of only 13 original copies, and one of only two that are privately owned. Seeing this, a group of crypto-forward geeks put together a plan and a platform to crowdsource contributions in a DAO to bid on the artifact. Full information is here. If the bid were successful, the DAO members would vote on issues such as the museum that should house it. If the bid were unsuccessful, the DAO would refund members’ donations (minus fees). Well, ultimately, the DAO was unsuccessful, and an unknown competitor won the Constitution at $41 million.
DAO leadership explained what happened this way: “The proper care and maintenance of the Constitution requires a reserve that is needed to insure, store, and transport the document, and we calculated the absolute max we could go to while still meeting these requirements. The opposing bidder passed that max, and we were unable to go any higher while still ensuring that we could properly care for the document. Additionally, Sotheby’s takes a cut of every auction sale with their fees, and this amount had to be accounted for as well.”
But never mind that, our goal was just to learn. Here are some lessons the exercise taught us.
Transaction fees: Ouch!
I’ve heard plenty of complaints about fees (called “gas” for Ethereum) in the crypto world. But when it’s your money evaporating, it’s really painful. For this project, fees were taken from every step in the process:
- by Coinbase to buy Ethereum,
- by Coinbase to move the Ethereum to a Metamask wallet,
- by Metamask to contribute via Juicebox, and
- by Juicebox to make the contribution.
In total, we were left with about 80% of our original Ethereum to donate. As the cryptocurrency user base grows and new companies enter, there will no doubt be competitive pressure to reduce fees. In the meantime, buyer beware.
Password management is a headache
Ironically, the biggest stumbling block in the whole project was something very mundane—password and account confusion. I wanted to use PayPal to buy the Ethereum, but I don’t use Paypal so I needed to set up an account. Suffice it to say we had a lot of missteps before we realized my email address was connected to my husband’s account as a secondary email, so PayPal wouldn’t allow me to open my own account. Unfortunately, it took 20 minutes to unravel this. Which turned out to be the most confusing aspect of the whole Constitution project. Poor digital housekeeping strikes again!
We also hit some password friction when setting up our wallet on MetaMask. This requires creating a “secret recovery phrase,” which is like an ultimate password. It cannot be changed, nor can it ever be retrieved by anyone except you. So if you lose it, you have no recourse. The phrase must be twelve words, and we thought we had to come up with the phrase ourselves. We spent at least 10 minutes trying to devise this. (And we learned it is extremely difficult to come up with twelve words that you’ll never forget.) It turns out, though, that MetaMask auto-generates it for you. Just another of our stupid time-wasters!
How do I see my ownership?
It was a bit anticlimactic when we finally hit the Contribute button. We looked at each like, “And….?” It was as if we expected a digital burst of confetti. My next impulse was to check my email for confirmation, because that’s how all transactions these days work. But then I realized my email address played no part in the DAO relationship. Instead, it’s a blockchain address unique to me, a long string of random letters, numbers, and symbols.
The beauty of blockchain is the unique proof of ownership mechanism. But for those of us unaccustomed to such a world, the impersonalness feels a little funky.
Moving from asset to voting rights thinking
We had some discussion on the amount to contribute. A key point—which was a mindshift for us—was that this DAO is not an asset, it’s more like a membership. It would not provide a financial return on investment. Instead, you receive governance rights relative to your donation amount. That’s fine with me, as our primary goal was to learn more about how crypto and DAOs work.
But this project raised some questions for me. Blockchain is all about decentralization. Wouldn’t, though, the person who made a mega-donation of about $4 million, have an outsized impact on governance votes? In this case, it won’t matter much. But just like in traditional investing, you can buy your way into power.
We hoped we’d be part of history, collectively owning this amazing document. Even though we lost, it’s historic in the sense that it’s the first time a DAO has participated in an auction of this magnitude. Our personal goal was to learn, which we did. In the meantime, keep an eye on the Constitution DAO. I suspect some interesting developments are ahead. The story is not over.