With the creation of The DAO days away, it is time to move past the unprecedented success of its crowd sale and begin to consider the risks, obstacles, and potential rewards this decentralized autonomous organization is likely to face moving forward.
Without the administrative bloat of a traditional corporate structure, The DAO is potentially positioned to manufacture products and provide services at higher profit margins, utilizing "Contractors" to facilitate the execution of proposals on behalf of The DAO and its token holders.
Once a project proposal is submitted to The DAO, token holders have a preset timeframe to debate and vote on funding the proposal. During this time DAO token holders will have the option of pledging their DAO tokens to the proposal, effectively voting to release ether to fund the venture. Initially, if twenty percent of tokens are pledged to a proposal during the voting time frame, the project will be funded. "Curators" serve as The DAO's internal audit function by validating the identity of Proposers and defending token holders from malicious proposals and various majority attack vectors. It is important to note, these "Curators" are not leaders of The DAO, in the sense a Board of Directors leads a traditional public company. The responsibility for proposing ventures and making funding decisions lies solely with DAO token holders.
If a token holder is unsatisfied with the direction of The DAO, or if a malicious proposal seems likely to pass (such as an attempt to transfer DAO funds with no return on investment), the token holder will have the ability to "split" The DAO. At this point, an identical DAO is created, funded by an amount of ether equal to the token holder's proportional ownership of DAO tokens. This ether is transferred from The DAO funds. This newly formed DAO would be independent of The DAO, with its own Curator(s), proposals, and rewards.
The ability to "split" The DAO opens an endless realm of possibilities. With over one billion DAO tokens created to date, it is conceivable that The DAO may give rise to numerous decentralized autonomous organizations, each with their own Curators, investment objectives, and funded proposals. To date, multiple planned proposals have been made public, such as Slock.it's Universal Sharing Network (centered around the Ethereum Computer) and Mobotiq's modular electric vehicle rental network.
Consider a situation where Slock.it's project is the first proposed to The DAO. If a token holder wanted no part in this venture, they could immediately "split" from The DAO, potentially convincing other token holders to join their new DAO. However, since this DAO would be independent of The DAO, the token holder would miss out on future proposals made to The DAO, such as Mobotiq's p2p rental network.
Clearly this disruptive form of venture capitalism / crowd funding will face obstacles as this concept is actualized. For instance, who is legally responsible for The DAO's actions? Individual token holders? Contractors? Proposers? Is a DAO token a "security" by conventional definition? What government / regulatory agency has authority over this decentralized autonomous entity (if any)? Clearly The DAO's interaction with traditional business and legal structures will have to be considered in depth. Any new laws or regulations will directly affect the reach and scope of this revolutionary venture. Whether in a positive or negative light, only time will tell.
After raising north of $150 million USD in the largest crowd funding effort in history, the international crypto-community is hopeful The DAO will spawn a new age in international finance, free from unnecessary trust, middle men, and corrupt business practices. At the same time, the future of this ground-breaking corporate governance structure is wrought with uncertainty and risk. For a detailed analysis of The DAO concept and its governance contracts, download The DAO white paper.
2016 marks an exciting year for investors eager to own and transact gold in the digital economy. Technological advances are setting the table for tectonic shifts in the way we transact online.
With combined daily transaction volume of approximately $21 million USD and combined assets in excess of $42 million USD, digital assets such as SPDR Gold Shares ETF (GLD) and iShares Gold Trust ETF (IAU) are currently among the most popular options for mainstream investors holding and trading digital gold.
Though backed by physical gold, ETF shares don't represent a specifically identifiable gold bar or coin, rather they represent a share in a large amount of gold bullion held in trust. Constant arbitration on the open market ensures the ETF share price stays in line with the value of the underlying holdings.
Until recently, if an investor wanted to use gold ETF holdings to purchase goods and services online, the investor must first liquidate the ETF position for digital cash before spending the funds. In other words, it isn't possible to purchase a book on Amazon with GLD shares. This demonstrates gold's historic inability to function as a digital currency in the online marketplace.
In comparison, the Digix Proof of Asset (PoA) protocol is the first to successfully 'tokenize' gold bullion on the Ethereum blockchain utilizing the Inter Planetary File System (IPFS). 'Tokenization' is the process of securely storing pertinent asset information onto a unalterable public ledger. That 'token' can than be traded in trust-less peer-to-peer markets. Once a PoA Asset Card representing a specific gold bar is created via the PoA Verification Process, the Minter Smart Contract can be utilized to parse the PoA Asset Card into Digix tokens (DGX). Each DGX represents 1g of specifically-identifiable physical bullion. These DGX tokens can be converted back to PoA Asset Cards via the Recaster smart contract at any time.
With the Digix platform live, now is an opportune time for gold investors to tokenize their bullion holdings via the Digix Proof of Asset (PoA) protocol. As DGX tokens gain traction as a digital store-of-value and online collateral, the tokens may trade at a premium to physical gold prices.
We believe this premium would be justifiable and could represent the market's desire for physical bullion's registration & audit via the Digix PoA Verification Process. As a global DGX market develops, investors could potentially profit from purchasing gold bullion and minting DGX to sell on the open market, increasing DGX supply and the value of the DigixDAO platform.
For a detailed outline of the Digix platform and it's smart contract processes, please see the Digix WhitePaper.
Tyler Logsdon is a CPA and Registered Securities Representative located in Newport Beach, California. He is actively employed in the blockchain industry.
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