[eterpstra]

Discussion around the issues outlined in the report have already begun (before the report was published) in the DAO forums. It's not unexpected that there will be problems. This has never been done before. But the fact that this report exists, the problems are being discussed, and there are already talks of proposals for resolving some of the issues is a good sign that the DAO is working as intended... The community discovers problems, the community fixes problems.

Compare this to a traditional investment fund where you hand over your money to a private organization with opaque investment strategies, business operations, and technology. If I invest in a Vanguard or Fidelity fund, they only report back what is required of them by regulators. They take little to no input from investors, and may be running their business on decades old technology filled with flaws and bugs.

I view the DAO as an open source investment fund in the same spirit as "The Cathedral and The Bazaar". It's not perfect, it's messy, some people are more influential than others, there's a lot of noise, and it could collapse on itself at any time. But everyone gets to participate (for better or worse). Lots of eyeballs are constantly watching, and plenty of concerns will be voiced.

I know the HN crowd is a skeptical one, but try to keep an open mind. This could grow into something great. And if it doesn't... hey, it's not your money, so don't sweat it.

[zekevermillion]

The "investors" risk losing all their money, and the curators and contractors risk going to prison because they are conducting an illegal securities offering with no valid exemption.

[eloff]

In a way, this is like Uber or Airbnb, you can't ask permission or you'd be out of business before you managed to change the laws. Asking forgiveness is not only easier than asking permission, sometimes it's the only viable route.

They may lose money, they may make some. But it's a grand experiment of a kind that's never been tried before and I'm curious to see the results.

[zekevermillion]

Uber runs up against municipal taxi regulators. The DAO runs up against the SEC, DOJ, and state securities regulators, just to focus on the US cops. These people are a bit more serious than the City of Austin transit authority. As we've already seen in multiple cases, e.g., SatoshiDice, US regulators are aware of efforts to use profit-sharing contracts to raise funds, and view this (correctly) as a securities offering that should be registered unless there's a valid exemption. I was on a train some months ago and saw Preet Bharara reading the WSJ. At least I'm pretty sure it was him. How long do you think before a failed DAO crowdfunding ends up on the WSJ front page? If investors lose $100mm you can bet it will get that kind of publicity. Then it's just a matter of identifying the ideal defendant for symbolic punishment. If I were involved in slock.it, I would be careful not to travel through the US.

[darawk]

The DAO exists outside of the laws of the United States. If the US curators are arrested, they will be replaced with non-US residents.

This is the fundamental premise of decentralized systems. They are resilient to the interventions of governments. Bitcoin is definitely illegal in many places in the world, and occupies something of a gray area in the US. Yet, it operates just fine.

[zekevermillion]

The "dao" here is not designed in a way that is truly decentralized. It is susceptible to certain centralizing flaws. There could be a dao that is designed in a way that resists censorship, that would be more interesting.

[bunkydoo]

You've obviously never heard of extradition have you?

[darawk]

No country is going to extradite one of its own citizens for selling a financial product that doesn't happen to be approved by the US SEC and isn't a ponzi scheme / scam (the DAO may be a lot of things, but it is likely not an explicit confidence scheme). Not to mention the fact that there are plenty of countries who won't extradite to the US for any reason.

[aminok]

The US doesn't rule the world (yet).

[Vespasian]

Mulitply this times (countries in the world) and you got a legal abyss the DAO is looking into.

At least german authorities will be interested since Slock.it UG is registered there.

NB: They do not even have a website that is conformant with german law. This is not a big deal, however, it does not strengthen my confidence that these guys are able to create code able to manage a few hundred million dollars crowdfunded capital.

[jgalt212]

> you can't ask permission or you'd be out of business before you managed to change the laws.

That strategy didn't work out too well for Zenefits.

[Joof]

But it has worked out for others. Risks are still risks.

[zekevermillion]

It's a matter of degree. It might be a good risk to run a licensed recreational pot business in Colorado. Technically you're committing a federal crime, but there's a non-enforcement policy and as long as there's safety in numbers and a D in the White House you're probably OK. However, it's a bad idea to run a recreational cocaine business in any state. Requires a knowledge of the specific regulators, their views, and unofficial policies, to get this kind of decision right. Bringing this back to bitcoin-land, it seems that many bitcoin exchanges have knowingly operated without required state licenses for some years. However, the founders are not in jail. Why not? I think they have taken a considered approach to "partial" compliance, working out informal agreements with state regulators for eventual compliance, and avoiding operations in states that take a more hardline view. Eventually the top exchanges like Coinbase will get whatever licenses they need to, just a matter of time and $$$.

[jgalt212]

Yes, it comes down to risk management and decision making under uncertainty. i.e. how much of a competitive advantage can we gain by pushing the regulatory limits, and what are the potential downsides and probability associated with such downsides.

PG has expressed a view that he favors start ups that push regulatory boundaries, but I'm sure his view is more nuanced than such a blanket statement.

[cloudjacker]

That is an interesting thing to say, so because the DAO acts as one entity, one could easily rely on a Reg S + Reg D exemption to get around pesky US laws. Reg S because the dao would be a foreign entity, and Reg D because it would be a private placement with only one investor.

So no disclosure laws necessary!

And honestly nobody in the international community cares about other country's securities laws. You can copy and paste some small exemption text from bank's private placements, so something for the UK, Hong Kong, Japan to make it also exempt.

The DAO itself relies on sanctioning from Switzerland just like Ethereum, so I'd say all the bases are covered, until it gets challenged.

But individual liability for all parties is pretty mitigated from the threat of securities regulators.

[statoshi]

All investments carry risk. Thankfully, permissionless innovation platforms don't care what governments think. If it turns out that governments do try to ban DAOs, we'll just need to enhance their privacy.

[eterpstra]

yes, risk is risk. Anyone in the cryptocurrency space is well aware of the fact that tomorrow we could all wake up with a 0 balance. As for the legal aspect, the creators and curators have been assailed on all sides by critics and naysayers from the beginning, and yet they move forward. They either understand the risks, and deem it worthy, or are just plain stupid. Given the credentials of the individuals involved, I doubt it's the latter.

[HappyTypist]

Curators may face legal risk, but contractors are just contracting. Nothing illegal about that.

[zekevermillion]

In many cases, like slock.it, they appear to be the same groups on all sides (curators, contractors, token-holders), but do not necessarily disclose the relationships or voting power.

[dev1n]

Which prison do they go to?

[davidgerard]

Did anyone discuss "even minor bug fixes that would be trivial in centralised code are near-infeasible in a DAO"?

[binaryanomaly]

I absolutely agree with your argumentation. It is a very interesting construct that could be the future - or just a test ballon that disappears as fast as it rose. Personally I found it worth investing 100$ in such an interesting concept to participate and raise it's chances.

If it turns out bad I loose a tiny bit of money and we all have learnt something.

If it turns out good - awesome, curious to learn from it and see how it develops.

PS: At least I can tell my grand-children to have participated at the biggest crowd-funding event so far ;)

[encoderer]

Mutual funds are not hedge funds. They cannot just invest your money in anything.