Associated Incidents
The History of the DAO and Lessons Learned
Christoph Jentzsch Blocked Unblock Follow Following Aug 24, 2016
There are some things which one can only learn through experience, either one’s own, or that of others. In this post, We would like to offer a better understanding of what we have learned during the last 9 months.
Various people have attempted to tell the story of the DAO, but only observed a small part of it’s history. There is a large amount of false information circulating, we hope that throughout this post, we can offer a clear historical timeline of the DAO and the lessons we have learned in the last 9 months.
The Quest for Autonomy
Slock.it started over a year ago with an ambitious vision: connecting all kind of smart locks to the blockchain, enabling them to receive payments directly and be used to rent, sell or share just about anything. We call this the Universal Sharing Network, and at its core lies the Ethereum Computer, a small home server mediating interactions from legacy locks to the blockchain.
After developing the prototypes, we immediately recognized their potential and, in turn, the need to scale the business in order to build the foundation of a decentralized sharing economy. We presented our vision and the prototypes at devcon1 in London, and received amazing feedback.
When you need funds to grow your company in the cryptospace, doing a token sale is a promising option and in this case would have helped guarantee an initial, decentralized user base for the Ethereum Computer and the Universal Sharing Network.
But after coding up a simple crowdfunding contract, we could not stop ourselves from giving the token holders more power. And with this, the story of the DAO started.
In the beginning, we created a slock.it specific smart contract and gave token holders voting power about what we — slock.it — should do with the funds received.
After further consideration, we gave token holders even more power, by giving them full control over the funds, which would be released only after a successful vote on detailed proposals backed by smart contracts. This was already a few steps beyond the Kickstarter model, but we would have been the only recipient of funds in this narrow slock.it-specific DAO.
We wanted to go even further and create a ‘true’ DAO one that would be the only and direct recipient of the funds, and would represent the creation of an organization similar to a company, with potentially thousands of Founders.
In this truly decentralized and autonomous model which we detailed in a whitepaper, people would create an organization together, and we as Slock.it, would be just one of the many companies that would offer products and services to it. Offers would take the form of Proposals detailed in smart contracts and giving the project even more flexibility.
After getting as much legal advice as we could, we came to the conclusion this model was also superior to token crowdsales in general. Nothing like this had ever happened before though, and therefore all legal advice was just that, advice. But we already believed in the dream of Decentralized Autonomous Organisations and were excited to be part of this revolution.
We made all the code open source so anyone could start one of these DAOs, audit their code and make improvements to their feature set.
The Birth of “The DAO”
In the meantime, a strong community developed in the DAO Slack (~5000 members), a lot of volunteers joined the effort, and the project became increasingly decentralized with different individuals taking different responsibilities.
For the DAO to be truly independent of Slock.it, the default service provider to the DAO would have to be replaced by a set of independent curators. A lot of well known experts from the Ethereum community volunteered to do this job, which gave the project additional traction. Slock.it saw its main responsibility as continuing to help with the development of the DAO framework, alongside many volunteers on github.
After the release of the Framework code version 1.0, multiple DAOs were immediately deployed to the Ethereum Blockchain by several individuals. One address was chosen at random by the community, and the creation of what will be known as “The DAO” began.
During the following 4 weeks the DAO surpassed everyone’s expectations. Day after day, it grew and grew. Its formation period ended with an astonishing ~12M ETH inside the DAO’s smart contract, worth roughly USD 150m at the time.
This was an order of magnitude larger than we or anyone could have expected. With this record breaking amount came a lot of media attention as well as very critical views regarding the governance model of the DAO.
The code of the DAO had been purposely kept very simple, and more complex governance models (such as liquid democracy, futarchy and others) had not been included for the sake of simplicity.
Being a modular framework, the DAO was able to update its code on a per proposal basis. We wanted to keep the