The story of the Constitution DAO flooded crypto Twitter last week. In a nutshell, a private copy of the United States Constitution had come up for auction and a group of blockchain enthusiasts pounced on the idea of buying it. Together they agreed the purchase would be a momentous way to celebrate the transparent power of blockchain and decentralized community collaboration.
The idea was inspiring and quickly went viral.
Alameda Research, Endaoment, Graham Novak, Austin Cain, Nicole Ruiz, Packy McCormick, Morning Brew and The Hustle all bought in and spread the word of this historic moment. It was compelling. And in just eight days, the group collectively raised $47m (11,600 Ether) to buy the little slice of history.
Then came the unexpected, memetastic twist in the tail.
Ken Griffin, CEO of Citadel, master of order flow and villain of meme stock mania, outbid the Constitution DAO and snapped up the historical piece for himself.
This took place in an 8-minute, real-world auction event at Sotheby’s in New York. Sotheby’s described the document as an:
“exceptionally rare and extraordinarily historic first printing of the United States constitution”,
For the team behind the mass crowdfunding, the result was disappointing and quickly turned humiliating in a modern story of good vs evil.
In this instance, the transparency of blockchain actually became its downfall because the Constitution DAO max bid was there for all to see on the blockchain, and Griffin just had to top it. He bid $43.2m and won the auction.
Furthermore, he didn't have to pay extortionate gas fees associated with the blockchain fundraise.
It's an expensive lesson for the 17,437 crypto bros that contributed. While they'll get a refund on their bids, the monies lost in gas fees will not be refunded.
Why did $43m beat $47m?
Ken Griffin won the Sotheby’s auction for $41m ($43.2m including auction fees). But the Constitution DAO raised $47m so how does that work? Speculation was rife in the aftermath, with many annoyed that Ethereum’s exorbitant Layer 1 gas fees were the reason for the loss. If they’d used a Layer 2 blockchain this could have been avoided.
Others stated they simply didn’t raise enough to cover the ongoing costs associated with looking after the constitution. This includes fees for insurance, storage, and transportation.
Why did the DAO want to buy this Constitution?
The US Constitution is the supreme law of the country. The founding document defines the national frame of government.
In case you're just tuning in pic.twitter.com/HOOpZaMlDD— Alex Cohen (@anothercohen) November 19, 2021
The specific copy of the US Constitution is one of 13 surviving prints from 1787. There were originally 500. It was first purchased by real estate developer S. Howard Goldman in 1988 for $165,000. His wife recently put it up for sale at Sotheby’s, to gift the proceeds to a charitable foundation, to promote understanding of democracy.
The $43m price tag is nearly three times its lower estimate of $15m.
RIP Constitution DAO
DAO stands for Decentralized Autonomous Organization and DAOs are becoming more popular as the world attempts to transition to decentralization.
While this particular project may have failed, it has spurred the movement and we’re likely to hear many more DAO stories in the coming weeks and months.
We showed the world what crypto and web3, onboarding thousands of people in the process, including museum curators and art directors who are now excited to keep learning.— ConstitutionDAO (📜, 📜) (@ConstitutionDAO) November 19, 2021
We were the first DAO @Sothebys has ever worked with, but we're sure we won't be the last one.
Twitter account @ConstitutionDAO said:
We didn't get the Constitution, but we made history, nonetheless. We broke records for the largest crowdfund for a physical object and most money crowdfunded in 72h, which will of course be refunded to everyone who participated. To all our 17,437 contributors, THANK YOU
We showed the world what crypto and web3, onboarding thousands of people in the process, including museum curators and art directors who are now excited to keep learning. We were the first DAO @Sothebys has ever worked with, but we're sure we won't be the last one.
Why is Ken Griffin a villain?
When the meme stock craze took hold in January and stocks like GameStop (NYSE: GME) and AMC Entertainment Holdings (NYSE: AMC) rocketed up to sensational highs, retail investors were pitted against hedge funds. This was a historic moment in stock market trading.
At the time, brokerages like Robinhood (NYSE: HOOD), froze trading in some of these stocks allowing holders to sell but not buy. This manipulated the natural course of the stock because panic selling caused the stock price to fall.
It is thought Citadel was the main force behind this decision to control the order flow and made Ken Griffin a target of hatred by the retail investor community involved.
Ken Griffin was mad about Gamestop so he decided to rug pull the constitution instead— Dr. Parik Patel, BA, CFA, ACCA Esq. 💸 (@ParikPatelCFA) November 19, 2021
Billionaire Griffin said:
“The US constitution is a sacred document that enshrines the rights of every American and all those who aspire to be, I intend to ensure that this copy of our constitution will be available for all Americans and visitors to view and appreciate in our museums and other public spaces,”
It is believed he intends to initially loan the constitution to the Crystal Bridges Museum of American Art, which was built in 2011 by Alice Walton, an heir to the Walmart fortune.
@ConstitutionDAO responded with “How much for Citadel?”
how much for citadel?— ConstitutionDAO (📜, 📜) (@ConstitutionDAO) November 19, 2021
the virgin dao v. chad ken griffin pic.twitter.com/WIQ0jEqYBj— Kenneth Dredd (@KennethDredd) November 19, 2021