The Breakdown - Did ConstitutionDAO Shift the Overton Window on What DAOs Can Accomplish?

Episode Date: November 20, 2021

This episode is sponsored by NYDIG. Last night the crypto community waited with bated breath to see who had won the first printing of the U.S. Constitution. Despite raising over $40 million from 17,000 people, the ConstitutionDAO was ultimately outbid. In this episode, NLW discusses how the DAO came together, how the bidding went down and how the community should feel about its near miss.  NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Michele Musso & Adrian Blust, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit:  Alexi Rosenfeld/Getty Images Plus, modified by CoinDesk.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Friday, November 19th, and what a wild ride. I'm actually recording this late on Thursday night, and I've just watched Constitution Dow fall just. just short in their quest to buy the Constitution, or at least one of the first printed editions of the Constitution, a primary source document that was used to help the Continental Congress

and States ratify the longest running governing document in the world. It is a gutshot, of course, for everyone who has become emotionally invested in this strange and crazy and wild attempt over the last week. And of course, those involved are trying to rationalize, to regroup, to reimagine, to reclaim a win for the way that they've shifted, they believe, the Overton window on Dow's. But let's try to be dispassionate and break down how we should actually look at this. First, the background of the piece.

Sotheby's was auctioning off one of an original edition of about 500 printed copies of the Constitution. They were printed in mid-September 1787. The Constitutional Convention had been ongoing for about four months at that point, trying to strengthen the original Articles of Confederation that had come after the Declaration of Independence. This printed copy was meant to be sent to states to help decide whether they were going to ratify this Constitution, as well as members of the Congress. The reason to point that out is this was not just a random copy distributed for newspapers, it had a practical purpose. It was meant to go help convince the rest of the nascent country to get behind this long, long effort. The document includes not only the first time

the full constitution as we know it was printed, but also the list of the delegates who had been at the Constitutional Convention, as well as a letter from George Washington to the states and congressmen who are meant to now give their seal of approval. Sotheby says that the document was one of 13 remaining versions of this document and one of only two in private collections. The point here is that this is a document of unique historical significance. Well, last week on Thursday the 11th, a strange little seed of an idea started to come together in the minds and the chat rooms of a number of crypto folks. What if they could spin up a Dow to buy the Constitution, to have it be a public

good, shareable for everyone. As crypto people are wont to do, they took that idea and ran with it. Over the weekend, we started to hear about it on social. Constitution Dow, the Twitter account, was formed. ConstitutionDow.com, nascent though it was, got spun up. Originally, there was a Google form asking for people who wanted to announce their soft contributions before there was a way to actually send Eath. And by Monday, things had started to heat up. There were a couple thousand people hanging around in the discord. Having this conversation getting involved, it seemed like there was some momentum behind the effort. By Tuesday morning, $3 million raised. This was not going to be just some random effort. This was going to be a real thing that people were trying to do. The wind was at

their backs, and they were ready to charge forward. By Wednesday, 11 million, and the mainstream press started noticing. Sure, the characterizations were still just a bunch of crazy crypto nerds, but that's kind of what everyone was. And it didn't so much matter how they were characterized. What mattered was that mainstream non-crypto press, not even just business and economics press, was picking up the story. By Wednesday night, $25 million by Thursday morning, over $40 million had been raised. Pretty soon some began to ask whether they should keep resetting the gold tally on the website or whether they should start to be opaque. In the hours before the auction was actually slated to happen, the donations went down as they prepared. Now, one of the accomplishments of the

group was that they got Sotheby's to recognize the balance in an ETH wallet as a proof of funds, to actually allow the Dow to go and participate. The Dow had also sorted out a number of issues around custody, conversion to Fiat, thanks to exchange partners like FTX. And so the stage was set for the Constitution Dow, a group that didn't exist just seven days earlier, and that had brought thousands of people together to pull in the equivalent of more than $40 million to bid on the Constitution. NIDIG sponsors this podcast, and they're helping CFOs, traders, and risk managers safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at NIDIG.com slash NLW. That's NYDIIG.com slash NLW. The Sotheby's auction kicked

off with a modern lot, and actually its own type of one-of-a-kind thing. Two Banksy pieces were auctioned off, trolley hunters, and love is in the air, and it was the first time that Sotheby's had denominated an auction in ETH. They were expected to sell for between 5 and 7 million and 4 and 6 million, and that pretty much happened. One went for 6.698 million and the other for 8,07,000, which added up to 3,093 ETH in total. Still, it was very clear that everyone was there for the main show. The YouTube, YouTube link was being shared around Twitter and the chat was electric. 7,000, then 8,000, then 10,000 people crowded into this room waiting for the auction to begin.

And W-A-G-B-T-Cs were all going to buy the constitutions as far as the eye could see. The auctioneer, quigg-bruning, and no, I'm not kidding, that was his actual name. He could only have been an auctioneer, came to the podium and introduced the sale. The bidding would start at 10 million. almost immediately went to 11, then 12, then 13, then 14, then 30. The house was in shock at the rapid jump from 14 to 30 million within seconds of the auction starting. Quig was taken aback and gave everyone a chance to catch their breath without trying to force them forward too quickly. The stakes had been reset so rapidly, it was soon down to two bidders.

Now remember, bidding is done by proxy, so it wasn't like someone with a Constitution Dow team. t-shirt and some other collector billionaire Scooby-Doo villain were sitting there glaring at each other as they raised their little paddles over and over again. It was instead David versus Brooke. At least that's how our little corner of the internet would come to know them on this night. Brooke was the one who had sent the bidding straight to 30 million. But as the auction proceeded, David seemed to have the more aggressive strategy, bidding up quite quickly while Brooke faltered several times. There are incredible theatrics, by the way, around an auction. Brooke kept her arm at half-mast, ready to raise up at the last possible second if she needed to, and that's exactly what happened,

at least twice, where it seemed like the bidding was going to go David's way, but at the last minute, Brooke and the buyer that she represented, raised her hand and sent the bidding up again. Finally, the bidding got to $40 million, and after a long moment, Brooke went higher by $1 to $41 million, Almost immediately, David shook his head and hung up the phone. Brooke had won. But we didn't know who Brooke had won for, and it was the most gut-wrenching few minutes. Twitter was alive with Brooks or Davids? Who was it? Memes were rapidly emerging. I'm talking their faces everywhere.

Some were claiming victory, but there was no official word. People poured into any channel they could trying to figure out what had happened. The Constitution Dow discord with its tens of thousands of people was an absolute mess. There was no good information to be had. People poured into an official Twitter spaces from Constitution Dow that had 5,000 people, including Justin Blow the musician and Kimball Musk, Elon's brother. But still, there was no confirmation until one of the speakers in the Twitter spaces said he was texting with one of the multi-sig members of the Constitution Dow,

and they confirmed that we had in fact won. Triumph, jubilation, the crypto internet lit up as everyone reported the good news. That was until the Constitution Dow dropped this note. Community, we did not win the bid for the copy of the U.S. Constitution. While this wasn't the outcome we hoped for, we still made history tonight with Constitution Dow. This is the largest crowd fund for a physical object that we are aware of, crypto or fiat. We are so incredibly grateful to have done this together with you all and are still in shock that we even got this far. So the Bees has never worked with the Dow community before.

We broke records for the most money crowdfunded in less than 72 hours. We've educated an entire cohort of people around the world, from museum curators and art directors to our grandmothers asking us what ETH is when they read about us in the news, about the possibilities of Web 3. And on the flip side, many of you have learned about what it means to steward an asset like the U.S. Constitution across museums and collections, or watched an art auction for the first time. We had 17,437 donors, with a median donation size of $206.26.

A significant percentage of these donations came from wallets that were initialized for the first time. You will be able to get a refund of your pro-Rata amount, effectively minus gas fees through Juice Box. Please expect more details from us about this tomorrow. Our team has not slept in the past week, and we're giving people the night to get some rest before we're back at it tomorrow.

Every one of you are a part of this. We want to also thank all our partners in this work. Alameda Research, Endowment, FtXUS, Juicebox, Morning Brew, and Syndicate Dow. Now, a few minutes later, we also got a little bit more details in the Discord about why. Liminal warmth writes, lots of questions coming up about why we stopped the bidding where we did. The proper care and maintenance of the Constitution requires a reserve that is needed to ensure, store, and transport the document. And we calculated the absolute max we could go to while still meeting the. 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. If you're an old like me, you might remember that classic poem Casey at the Bat by Ernest Lawrence Thayer from the early 20th century. The story is one of this baseball hero who knows that he's got it in the bag. It's his job to rescue his team at the last minute, but with two strikes in, he's facing the worst scenario. The poem ends, The sneer is gone from Casey's lip. His teeth are clenched in hate. He pounds with cruel violence is bad upon the plate. And now the pitcher holds the ball and now he lets it go. And now the air is shattered by the force of Casey's blow. Oh, somewhere in this favored land, the sun is shining bright. The band is playing somewhere and somewhere hearts are light. And somewhere men are laughing and

somewhere children shout. But there is no joy in Mudville. Mighty Casey has struck out. That's what it felt like to me. Just this absolute utter deflation. And of course, the folks in the Twitter spaces tried to shift the tone almost immediately to the, But look what we dids. But it's still hard. And so let's discuss and look at this from a few angles. First, from a purely auction tactic angle.

This is a real challenge, right? On the one hand, public tallies and fundraising goals are great for getting people to FOMO in. watching this thing go from 3 million to 11 million to 25 million in three days was crazy. It made you want to be a part of things. However, it is clearly and transparently terrible for auctions where you've just completely telegraphed what you have to spend. Nick Majuli said, I think Constitution Dow messed up by publicly stating that they'd raised $40 million.

How does the Constitution copy sell for less than $40 million now? If you know a bidder's willingness to pay, it's public, there can be also sorts of sham bids and whatnot. Going to be interesting to watch. And also, this isn't me throwing shade at the people running the project. This is a new and complex problem to solve. No one has ever done a Dow for an auction, so not sure if there's a good way to be secretive about your intentions when you are a public entity. This is one to be figured out later. I think there's all sorts of things that we could do differently in the future, but it is a really interesting example of how these fundamental structures come at odds with one another, secretive versus public. The second

angle I want to come at this from, I'm calling Dow or GoFundMe. And even before the Constitution Dow came up short of buying the copy of the Constitution, there were questions from some around whether this was even actually a Dow, right? The point of a Dow is to make decisions, and that part hadn't really gotten worked out yet about what decisions members of this Dow were going to make. Obviously, everyone was aligned around the first decision, which is go by the Constitution, but there were probably some pretty fierce debates to come. There were, for example, a fair number of people who, I don't necessarily think jokingly, suggested that members of this Dow should burn the Constitution and NFT it. Now, of course, this isn't, again, a knock on the Constitution

Dow. They were coming together extraordinarily fast. They were iterating in real time. They were as transparent as they could be about their intentions. And by the end of it, they had introduced a token. They were calling people and rewarding contributors with people based on how much they were contributing. Perhaps that would have been the start of a governance process whereby people could actually help contribute to decisions, but still, that wasn't clear and what decisions people were going to be able to make wasn't clear. It's not impossible that Constitution Dow, not for any lack of intent or malintent, might have been a very bad steward of what is truly a priceless document, even though someone was able to buy it for $40 million. I bring these things up not to throw cold

water on the endeavor, but simply to point out that if DAOs are going to be a big part of our future, these are the types of questions that have to be addressed. But finally, let's look at this from an Overton window perspective. Did this shift people's perceptions of DAWS either within the community who participated or outside? First, from the outside, there are a large number of people one has to assume after all of this press across so many different types of outlets that have heard of Dow's for the first time. And while perhaps they don't totally get it, what they know is that a group of internet people came together to try to buy an incredibly significant US historical document with the intention of preserving it and sharing it with the country. That strikes me as standing

pretty at odds with what people thought they might have known about crypto, and so you have to think there's some residual benefit in that way. Now, when it comes to the members of this community, when all was said and done 17,437 people contributed. Are they going to be bummed out, or are they going to be ready for the next thing? There is at once a sense of deflation but also of inevitability. There is a sense borne out in reality that economic bases can be mobilized like never before. What's more, the infrastructure to actually do something like this, while hacked together with MacGyver-esque duct tape and paper clips this time,

now has some precedent for the next time some interesting opportunity arises. Sotheby's PR for their part certainly seems to laud the effort, saying, the Constitution was directly underbid by Constitution Dow, a group of 17,000-plus people from around the world who banded together through social media to raise money to acquire the document, making the largest crowdfunding initiative ever put together. I don't know what comes next for Dow's, and I don't know what comes next for Constitution Dow.

What I do know is that while I didn't put much into a, it, I'm going to leave what I did put in. I like the idea of this group and whatever set of funders remain when all is said and done, figuring out what it looks like to actually be part of a doubt to preserve them in the physical world, but also bring them into the digital world in such a way that we can glean more and understand more of our history. There's a lot more out there to preserve, to protect, and to propagate, and while this group may not have won this battle tonight, as the archaeological art thief says at the beginning of Indiana Jones

in the last crusade when he puts his hat on Young River Phoenix, i.e. Indiana Jones's head. You lost today, kid, but you don't have to like it. Until tomorrow, guys, be safe, take care of each other. Peace.