The centrifugal force of blockchain technology brought about many disruptions that we see and experience today. Seemingly, mainstream adoption is just waiting on the wings as conventional systems struggle to keep the ways they were used to and precariously holding on just to keep afloat. While ideal use cases are left untinkered, several mavericks took flight and managed to pull one proof after another in bids to finally break the status quo that had long been the source of underdevelopment in a lot of economies. Another blockchain reality was the creation of a new line of investment instruments designed to outrightly eliminate the need for expensive intermediaries that hamper the speed of financial service deliveries and unnecessarily halt the influx of the unbanked and underserved groups of the populace.
One of the astounding offshoots of the blockchain phenomenon was the DAO, or decentralized autonomous organizations. It was conceived to run on open-source code automation without any management structure as it raised venture capital funding. Its design is to run borderless on smart contracts via the Ethereum network. Incredulous as it may seem, DAO developers were on the notion that investor funds are safe in the care of automated computer systems without human intervention that, most often than not, are error-prone and subject to manipulation. The DAO design will make use of the ether as its medium of payment for investors to use in anonymity anywhere in the world. Token owners then will be enabled to vote on future ventures. Worthy of note was that the money generated by the crowdfunding campaign rose to over $150 million in a month’s time, making the DAO launch in April of 2016 the largest of such, ever.
While the DAO was riding high on the wheels of an amassing fortune, a fortuitous paper came out in May 2016 pointing to critical security vulnerabilities that must first be resolved before investors go on voting for the next DAO projects worth investing on. True enough, by June 2016, hackers took advantage of those vulnerabilities and attacked DAO, getting their hands on around $50 million worth of ETH at the time. Heated discussions erupted following the attack on whether DAO should still continue or not. The DAO controversy led to the hard forking of Ethereum, to the dismay of its community, who argued that the bug did not come from the Ethereum platform and that the hard fork is in gross violation of the basics of blockchain technology.
Besides the vulnerabilities, the fact that it was blazing on an unbeaten path, the DAO was also thrown books on laws and regulations referring to the sale of deemed securities as it failed the Howey test. Investors who felt were potentially facing lawsuits due to DAO expansions were found scampering to convert their ETH into fiat, further impacting ether’s value.
By September of 2016, one by one, leading crypto exchanges de-listed the DAO token, marking a sad end to the promising status the DAO once had.
Conclusion
All is not over, though, for decentralized autonomous organizations. Many still believed in the principles it advocates that interest in DAOs actually are perceived to be making a comeback. With hard lessons learned and weaknesses addressed, its disruptive force is seen to shake the very foundations of legacy industries for an envisioned takeover.
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