The biggest flaw with ConstitutionDAO
This past Thursday we experienced quite a feat, 17,437 donators with a median donation of $206.26 came together to make an attempt to buy one of the last original prints of the U.S. Constitution. Unfortunately, the ConstitutionDAO team did not succeed in winning the bid, being outbid by Ken Griffin, CEO at Citadel who purchased the rare artifact for $42.3 million.
The first place I saw the news break about the loss was on the ConstitutionDAO Discord. While I was certainly bummed about the loss, I had a revelation of sorts after the auction ended and the news dropped that we didn't win.
Here's what I realized: it's going to be extremely difficult for any DAO to win an auction and here's why: wallets are public. Yep, I (well, everyone) knew exactly how much money the DAO was raising as they were raising it. In fact, if you go to the Juicebox website (where the DAO setup its page to collect donations), you can see there is currently just over $49 million in the wallet.
So what's that mean for auctions? Well, anyone with deep pockets, a la, Ken Griffin, knows exactly how much they will need to spend to outbid the competing DAO. The only solution as far as I can tell is to raise so much money that you're able to just keep raising your bid, but that really hurts any DAOs chance of success. On top of that, since there's no way to hide the amount of funds you have, you lose out on the gamesmanship that you would otherwise see when you have no idea who's bidding and what's in their bank account.
It will definitely be interesting to see if something like this happens again. What do you think?
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