Oddly enough, this has been the single most useful piece for me in understanding what the folks who created the DAO sought to achieve. It also points out some problems that, no doubt, can be rectified in a future instance.
The folks who created it (slock.it) are planning to be the first proposal voted on. Now you might understand why the incentives are so incredibly slanted towards yes votes (and even more so on the first vote, given the extraPremium or whatever the pyramid aspect of the initial price is called).
If the people behind a DAO elect to commit some illegal act, who's responsible?
The DAO itself is a dumb object, incapable of moral or ethical reasoning, while the people behind it are not.
However, the people behind the DAO are effectively anonymized, are they not? The entity which commits the act is culpable, but the law usually goes after accomplices or enablers as well.
Unless I'm thinking about this all wrongly, this opens up a really messy can of worms and we now live in a world where you have to watch your back at every turn.
Which isn't to say it wasn't already like that, but it's been turned up to eleven now.
As an example:
DAO[A] is created by individuals for the purpose of doxxing one of the founders of slock.it. DAO[B] answer the call and gather the information providing it to DAO[A] who contracts with DAO[C1] to publish the information on a server paid for by DAO[C2], who then does so.
The founder and/or his family (all the founders of slock.it are male, apparently) are now potentially exposed to harm.
Is this a likely scenario? Do we now have to have a Rule 35 that says if there's a thing that can be done, a DAO will exist for it?
when you're a shareholder of a company which commits an illegal act, you're not responsible (limited liability or something?) - why would it be any different with DAO?
First: if you vote to do something illegal as a shareholder, then you can be held responsible. Even in a limited liability corporation. [0]
Second: it's not a company: it's a partnership, by my interpretation. By law (in all countries I know of) partnerships by default do not have limited liability. If you want limited liability, you're going to need to set up a proper corporation/LLP, file the proper paperwork, adhere to various laws, keep books, etc. Otherwise, in the US you are probably jointly and severally liable.[1]
The defense "The DAO did it" wouldn't work, since people are voluntary members of the DAO, and presumably voted/stayed in when it got to the point of criminal acts.
The legal system is not a machine you can bypass with magical internet code. (As opposed to a legal system as a Smart Contract running on Ethereum, perhaps.)
Becuase you get limited liability by being incorporated as a corporation that is legally given limited liability. And the DAO is (intentionally?) not such.
I rarely schizo (at least that's what the voices tell me).
The problem is one of anonymity and tracing ownership. There's not much anonymity in a traditional corporation. Every officer is on file somewhere and every transaction can eventually be traced back to it's originator.
Bringing bitcoin into the equation is definitely a problem for parts of that, as it can be purchased with cash, and then used to purchase Ethereum.
It seems as though some of the principles involved with the creation of the DAO are asking for investment to build a security framework on top of the DAO to secure it from some types of known potential attacks.
Clearly I don't understand the scope of the proposal but my gut thinks either this group should have built security into the system from these known potential attacks before raising $150M.
Alternatively, what I envisioned with my proposals, the security measures should simply be included within the individual contracts. For example: This very security proposal is asking for 125,000 ETH, the contract should provide for a identifiable review team (say 1 well know coder and 1 well known lawyer) and an insurer for the contract their fees will be built into the contract. If the contract meets its investment goal, before the funds are released the reviewers must approve the contract and provide the investors a summary of the terms. If approved the insurance company will guarantee the investors money is not lost due to either fraud or some bug/error in the code causing a loss.
Edit: Submitted a DAO proposal to fund an insurance company to review and insure smart contracts on the DAO in the instance of bug/error in the code.
This is game theoretics at its best: A new game with rules that are executed reliably, huge amounts of money, huge numbers of voting participants.
I think that the most reasonable thing will happen over the long run, but in the meantime there will be some drama. Thankfully the community and leaders are well-prepared and well-equipped.
The DAO should allow the owners more control of funding. Instead of a single "creation period" with arbitrary fixed rules to fund The DAO, new funding rounds should be possible, that can be voted on as any other proposal.
This would prevent The DAO from running out of funds to support a long term but seemingly viable project midway, either due to splits/withdrawals or because of unexpected additional costs.
It also would allow a group of investors to split from The DAO and form a more private organization. They could decide not to have an initial "creation period", thereby preventing outside investors from getting in and upsetting their shared vision. They could also then have a funding round which guarantees they still own more than 50% of their DAO.
Thank you - this paper is the clearest introduction to what the DAO is and what it is trying to achieve that I have read. I found the official website for the DAO confusing and information light.
