Domain: Venture capital financing platform.
Problem identification:
A paper published in 2016 noted a number of security vulnerabilities associated with DAO, and recommended that investors in hold off from directing the DAO to invest in projects until the problems had been resolved. As a blockchain enabled organization, the DAO claimed to be completely transparent, and everything had to be done by the code, which anyone could see and audit. However, the complexity of the code base and the rapid deployment of the DAO meant that the intended behavior of the organization and its actual behavior differed in serious ways that were not apparent until after the attack occurred.
Why Blockchain:
Promised an investment platform organized and functioned as a decentralized autonomous organization.
Functional Description
The DAO was a decentralized autonomous organization that existed as a set of contracts among people that did reside on the Ethereum blockchain. DAO had no physical address, nor people in formal management roles. The original theory underlying the DAO was that by removing delegated power from directors and placing it directly in the hands of owners, the DAO removed the ability of directors and fund managers to misdirect and waste investor funds.
Technology used
- The DAO was instantiated on the Ethereum blockchain, and had no conventional management structure or board of directors. The code of the DAO was open source. It had an objective to provide a new decentralized business model for organizing both commercial and non-profit enterprises. The DAO was intended to operate as a hub that dispersed Ether funds to projects. Investors then received voting rights by means of a digital share token. They voted on proposals that were submitted by contractors, and a group of volunteers called curators check the identity of people submitting proposals and make sure the projects were legal before whitelisting them. The profits from the investments should then flow back to its stakeholders. The DAO did not hold the money of investors, instead the investors owned DAO tokens that gave them rights to vote on potential projects. Anyone could pull out their funds until the time they first voted. The DAO’s reliance on Ether allowed people to send their money to it from anywhere in the world without providing any identifying information.
Current status
- Defunct as of late 2016 due to hack.
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