A new kind of financial experiment is capturing the imagination of the Ethereum community. The DAO, a decentralized autonomous organization built on the Ethereum blockchain, has raised over $17.5 million in its token crowdsale as of May 4, 2016, with 22 days still remaining in the sale. The fundraiser represents one of the largest crowdfunding events in the brief history of cryptocurrency, and it is being watched closely as a test case for whether decentralized governance of investment capital can work at scale.
The DAO launched its crowdsale in late April 2016, and within its first few days, over 190.5 million DAO tokens have been sold in exchange for Ether. At the current exchange rate, one Ether purchases 100 DAO tokens. With Ethereum trading at approximately $9.41 per coin according to CoinMarketCap data, the sheer volume of ETH flowing into the contract underscores the enthusiasm surrounding this project.
TL;DR
- The DAO raises over $17.5 million in its Ethereum-based crowdsale with 22 days remaining
- 190.5 million DAO tokens sold in the first days of the sale
- Project created by Slock.it, audited by Deja Vu Security
- DAO token holders govern investment decisions through voting
- Ethereum trades at $9.41 with a $750 million market cap as the crowdsale gains momentum
- 11 curators including Ethereum Foundation members oversee the governance process
What Is The DAO and Why Does It Matter
The DAO is a governance platform structured entirely around its token holders. Its foundational values include transparency, democracy, decentralization, voluntary participation, non-exclusion, privacy, and the right to anonymity. The project was created by Slock.it, a Germany-based blockchain and Internet of Things company, but the organization itself operates independently. Slock.it has been clear about the distinction: “Slock.it UG is a Blockchain + IoT solutions company. However Slock.it UG is not a DAO itself — we are a for-profit company registered in Germany.”
The DAO’s code is open source and publicly available on GitHub, and the framework has received contributions from some of Ethereum’s most prominent figures, including creator Vitalik Buterin, Solidity developer Christian Reitwießner, and Ethereum co-founder Gavin Wood. The project has been audited by Deja Vu Security to provide an additional layer of confidence for participants.
How Governance Works in a Decentralized Investment Fund
The DAO’s governance model centers on token holders who vote on which projects receive funding. The organization’s focus is on startups building Ethereum-based applications, particularly those related to the sharing economy, the Internet of Things, and broader blockchain infrastructure. In the DAO’s manifesto, the developers state their ambition to blaze “a new path in business organization for the betterment of its members.”
A key governance mechanism is the curator system. Token holders elect 11 curators who are responsible for protecting the DAO’s decentralized nature and ensuring that proposed projects are legitimate and aligned with the organization’s principles. The curator list includes Ethereum Foundation members, core developers, and other dedicated innovators within the ecosystem.
All investment decisions flow through a voting process where every DAO token represents a voice. The developers emphasize that the organization “will strive toward decentralization and autonomy whenever and wherever it is reasonably possible and beneficial.” Slock.it has already submitted its own proposal — an Ethereum computer designed for IoT applications — and other teams are expected to submit their projects for DAO funding in the coming weeks.
Ethereum’s Moment in the Spotlight
The DAO crowdsale arrives at a pivotal moment for Ethereum. With the Consensus 2016 conference taking place simultaneously in New York, the broader blockchain community is paying close attention to what decentralized applications can actually achieve. Ethereum’s market cap of approximately $750 million reflects growing confidence in the platform’s potential, but projects like The DAO represent the first real test of whether that confidence is justified.
The crowdsale’s structure is notable for its simplicity and ambition. The DAO’s whitepaper and manifesto lay out a vision where code replaces corporate structure, where smart contracts replace legal agreements, and where the collective will of token holders replaces boards of directors. As the developers put it, the organization exists “simultaneously nowhere and everywhere and operating solely with the steadfast iron will of immutable code.”
Risks and Open Questions
Despite the enthusiasm, the DAO experiment comes with significant risks that even its supporters acknowledge. The project’s reliance on smart contract code means that any vulnerability could have catastrophic consequences. The code has been audited and reviewed by some of Ethereum’s brightest minds, but the history of cryptocurrency is littered with projects that appeared secure until they weren’t.
There are also fundamental questions about whether decentralized governance can make effective investment decisions. Traditional venture capital relies on experienced partners conducting due diligence, negotiating terms, and providing hands-on guidance to portfolio companies. The DAO replaces that model with token-weighted voting, which could lead to popular but unwise investment decisions or leave promising but less visible projects without support.
The token sale still has 22 days remaining, with a price change scheduled in eight days. If the current pace continues, the DAO could raise significantly more capital before the crowdsale concludes, making it the largest crowdfunding event in cryptocurrency history by a wide margin.
Why This Matters
The DAO represents one of the earliest and most ambitious attempts to create a decentralized investment vehicle governed entirely by smart contracts and token holder voting. The sheer amount of capital flowing into the project — over $17.5 million in its first days — demonstrates the appetite within the Ethereum community for new forms of financial organization that bypass traditional intermediaries. Whether the experiment succeeds or fails, it is providing invaluable data about the strengths and limitations of decentralized governance. The DAO’s outcome will shape how future decentralized finance projects are structured, governed, and secured.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are highly volatile and crowdfunding projects carry significant risk. Always do your own research before making any investment decisions.
190.5 million DAO tokens sold and not a single person asked what happens when you find a bug in a $17.5M smart contract with no kill switch
Reading this with the benefit of hindsight is wild. The reentrancy vulnerability was already there, waiting.
Deja Vu Security audited this and gave it a pass. Makes you wonder about the state of smart contract auditing in 2016.