1. This Week in DAO
I had not planned to share another batch of DAO related articles this week, but the topic has generated lots of interesting takes and opinions, and honestly the rest of the week's news is kinda meh. So let's DAO it up.
Funding is now above $150m and counting. Nathaniel Popper has a nice piece profiling the creators, as well as telling the story of one early supporter, a "French socialist with an appetite for risk" (of course!). Two other articles in the skeptic camp gained attention this week. Daniel Larimer, founder of BitShares, shared his unique perspective as someone who has lived thru the second and third order problems of massively decentralized governance:
Fancy technology can obscure our assessment of what is really going on. The DAO solves a single problem: the corrupt trustee or administrator. It replaces voluntary compliance with a corporation’s charter under threat of lawsuit, with automated compliance with software defined rules. This subtle change may be enough to bypass regulatory hurdles facing traditional trustee’s and administrators, but it doesn’t solve most of the problems the regulations were attempting to address.
What The DAO doesn’t solve is all of the other problems inherent with any joint venture. These are people problems, economic problems, and political problems. In some sense, The DAO creates many new problems caused by its ridged rules and expensive machine-enforced process for change.
Eris Industries' Preston Byrne gives his legal perspective on The DAO, walking thru an (almost) marmot-free example. In summary:
I sympathise with THEDAO’s intentions, in that I believe that the financial markets are currently rigged against the “little guy” and that there is no reason why the kinds of investment opportunities (and returns) available to the super-wealthy should not be available to small investors whose traditional means of accumulating wealth (savings) are all but useless given current, zero interest-rate monetary policy.
I also believe that blockchain tech will one day play a role in facilitating more democratic access to the capital markets. However, the current body of laws governing this sphere of conduct exists to ensure that people to whom investments are marketed can be absolutely certain about what they’re getting in exchange for their money.
In this respect THEDAO clearly falls very short of the mark.
Peter Vessenes gives a sobering take on Ethereum smart contract code, the 'stuff' that DAO folks will be funding. His audit reveals some shocking stats:
Dan Mayer cites research showing industry average bugs per 1000 lines of code at 15-50 and Microsoft released code at 0.5 per 1000, and 0(!) defects in 500,000 lines of code for NASA, with a very expensive and time consuming process.
My review of Ethereum Smart Contracts available for inspection at dapps.ethercasts.com shows a likely error rate of something like 100 per 1000, maybe higher.
FInally, the incomparable Matt Levine focuses in on The DAO with his usual gimlet eye in this longish article:
Smart contracts are cool! Companies are weird bundles of contractual relationships that have become stereotyped and calcified over time, and re-imagining those relationships for a new and more technology-enabled age is a good project. But companies aren't just networks of contracts; they aren't pure agreements negotiated freely between willing participants and no one else. They are also structures that are embedded in society, with rights and responsibilities that are regulated by background rules as well as by contracts. The blockchain-y reinvention of everything in the financial world -- money, contracts, companies -- is fascinating and impressive and, viewed from a certain angle, adorable. But sometimes it could stand to learn from what has gone before. After all, the elements of finance -- money, contracts, companies -- have already been invented. Perhaps their historical development might hold some lessons for their re-inventors.
2. This Week in Bitcoin Gossip
The Mt. Gox implosion is a gift that keeps on giving...to internets reporters at least. The Daily Beast gives an 'insiders' account of all the shenanigans and (mostly) incompetence that went on behind the scenes. And boy was there incompetence. The article also gives more credence to the "Willy Bot" theory. It proves the old trading adage: never trade your way out of an out trade.