ConstitutionDAO raised $47 million to purchase a rare copy of the US Constitution, with token buyers getting the right to vote to do something with it.
Now, new DAO has raised $11 million to buy a golf course in the latest example of crypto-crowdfunding startups from entrepreneurs rather than looking for seed investors, angel investors, or venture capital.
Touted as the latest trend in crypto, Bloomberg announced on November 17 – two days after a plan to purchase the historic document at auction was disrupted and burned under the weight of the bidding billionaire’s wallet – that “crypto crowdfunding is going with the bidding of ConstitutionDAO.”
CoinDesk, the largest news outlet in the cryptocurrency industry, called it the next gold rush.
Successful crowdfunding startups. Tile and VR tracker maker Oculus VR started this way, and tens of billions have been invested in platforms like Kickstarter and Indiegogo.
However, cryptocurrency investing fads can sometimes be a little ridiculous — and that doesn’t mean they’re going to fail, as Elon Musk explains the joke backed by a tweet Memecoin Dogecoin that has a $22.5 billion market capitalization.
This one is built on DAOs, or Decentralized Autonomous Organizations. It is the smart, voting-based, contract-powered governance mechanism at the heart of decentralized finance, or DeFi, projects.
See also: PYMNTS DeFi Series: DeFi Dump and DAO
This is not the first time crowdfunding of the crypto industry based on DAO has been tried.
The structure of the DAO in cryptocurrency came to prominence in April 2016 with the launch of The DAO, a decentralized crowd-funded venture capital fund that was to support projects selected by investors. It was hugely successful upon launch, raising $150 million from over 11,000 governance token buyers in less than a month.
On New Year’s Day and January 2, LinksDAO sold 9,090 NFT tokens on the OpenSea Marketplace that serve as membership cards for the Project Golf Course.
To be clear, NFTs do not offer any ownership rights to the course, or even club membership. What they offer is the right to vote on course purchase and design – the goal being to turn it back into a first-class course – as well as things like pricing and rules, as well as the right to purchase membership and various club perks such as preferred tee times and discounts.
There is also a members-only Discord channel.
Those voting rights will come when the project’s $LINKS governance token is dropped to NFT buyers, with global members who paid 0.72 ether ($2,700) getting four times as much as Leisure members, who paid 0.18 ether (about $675).
In an industry where fraud – starting a project and running away with investors’ money – is a growing problem, LinksDAO has one big thing: the project is headed by someone well known and respected in the crypto community, Mike Dudas, who founded The Block, a crypto news and research site. Crypto is well known, as well as many other successful startups.
Read more: Cryptocurrency scams fueled by DeFi-friendly “rug pulls”
The timeline calls for a purchase of the club in mid-2022, an opening in early 2023, and future club purchases after that.
While the LinksDAO venture’s business plan is much more detailed than Constoretto DO’s (i.e. it has a business plan), it’s still very light compared to a traditional startup seeking venture capital funds.
That’s something Dudas admits, telling Golf magazine it’s a “great experience” that you might not see an actual golf course open.
He added that $11 million would not go to purchase a course, but rather to manage, plan and develop the project.
That process isn’t too far—and certainly not far enough for angel investors or venture capitalists to cut $11 million.
How much is the distance? Dudas said that he only started considering LinksDAO in early December — just weeks after ConstitutionDAO got a wave of success by capturing the attention of the crypto audience.
Back to DAO
DAOs are ubiquitous in DeFi – it is the only decentralized governance-free, human-management method that has been reached – with almost all projects managed by DAOs or by founders intending to convert them to a DAO.
However, in the case of a decentralized lending platform or exchange, the basic business plan is well tested.
Which points to another gap in DAO-based crypto crowdfunding: Decentralized investment projects do not necessarily have any professionals scrutinizing the business plan, or even the DAO token itself.
The DAO model relies on knowledgeable community members to examine things like coding and smart contract language – sometimes with devastating results.
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Most notably DAO. It was launched in April, by May and June, members of the community were warning of vulnerabilities in the code. Then, on June 17, it was hacked. About a third of her ETH was stolen with the thief stealing about $50 million.
It was such a disaster for the credibility of both the DAO and even the Ethereum blockchain project – which was only a year old at the time – that node runners voted to create a hard fork, returning to a pre-theft block, which effectively returned investors’ money. It was so controversial that it caused a split, as opponents were using the original blockchain under the name Ethereum Classic.
As for DAO, its token was quickly deleted by various exchanges, and the project with its tokens was discontinued. Which was a good thing in a way: A year later, on July 25, 2017, the US Securities and Exchange Commission (SEC) released a DAO report — a posthumous investigation that marked the first time it had confirmed that ICOs were actually token sales. Securities – a problem that has hindered and hampered investing in cryptocurrencies to this day.
Read more: SEC chief wants more crypto oversight authority
slice of reality
So, what does this bode for the future of LinksDAO?
Actually hard to say. In cryptography, failure can succeed on abundance alone. Again, check out Dogecoin, a smart contract platform like Ethereum, but with almost no projects built on it.
Look what happened to ConstitutionDAO’s people tokens after losing the auction.
After a failed redemption, many of the original investors either stuck to their Governance tokens or sold them. Results? PEOPLE now has a market capitalization of over $800 million.
why? Well, there are really only two possible explanations: it is seen as a meme token like Dogecoin, or valuable as long as the joke goes on, or there is a DAO investment core out there – if the governance token community is lagging behind some suggestion.