Will Constitution DAO Shut down?

Emin gun Sirer Expressed:  Sad to see the Constitution DAO get mired in controversy. As the thread points out, the right way to do redemptions is to have a payback contract, as for The DAO. Any other scheme creates problems due to collateralization and information asymmetry.

Emin points to a thread Nick Bax:  Constitution DAO core team is either incompetent or malicious. They’re making internal decisions that are causing insane volatility. The type that insiders could easily trade on. Anybody know an on-chain analyst who knows what to look for?

ConstitutionDAO gave contributors the PEOPLE ERC-20 token. After the group didn’t win the auction, they said there would be pro-rata refunds (1000000 PEOPLE:1 ETH). The normal way to do this would be a redemption contract; return PEOPLE, get underlying ETH.

The “core team” elected to do something else. They announced a “snapshot” at a specific block Everybody who held the token at that block would be able to claim the underlying ETH. They only gave 24 hours notice at ~1 AM EST on a Friday night.

This means anybody who had ETH in the uniswap-v3 pool who didn’t see the discord announcement (recently edited so I can’t screenshot it) was essentially getting rug pulled. Spending Saturday with your family and not checking your computer? Observing the Sabbath? Tough luck.

A multi-sig members/juicebox dev, as well as people in their discord, told them this was a bad idea and predicted perfectly what would come.

About 11 minutes before the snapshot the core team posted a message basically saying “caveat emptor, if you were providing ETH in uniswap-v3 and get rug pulled thats your fault”.

After the “Snapshot”, people immediately dumped their PEOPLE into the uniswap pool, taking several hundred thousand dollars worth of ETH from uniswap LPs. The odd thing was some accounts were accumulating significant amounts of PEOPLE at 50-90% below the ETH price.

Then bam, last night at 9 PM they make another announcement. They were scrapping the snapshot plan and instead doing a redemption contract. The PEOPLE price immediately rocketed.

Suffice to say, people in the discord channel are livid. I feel bad for people where this was their first experience with DeFi. The “core team” are not representative of the DeFi space as a whole. Simply put, this is *not* how DAO governance works

I haven’t taken a close look at the on-chain activity yet.  It will certainly uncover the winners and the losers, but attaching real world names to accounts is challenging and it will be difficult to prove that the “winners” of this game weren’t just lucky.

If you’re a ConstitutionDAO insider and have interesting information, feel free to make a burner protonmail e-mail and contact me: magicamulets at protonmail dot com. Look through my twitter feed first, figure out what I’m about. Any info will be 100% confidential.

Just to reiterate, decentralization is a spectrum. Some DAOs are quite centralized. However, this is *not* a DAO. This is people who used smart contracts to raise funds with the stated intention of forming a DAO. But the behavior here was *not* DAO-like at all.

$47M in an unaudited smart contract. Those who want to know more should follow the thread.