Ether is the currency of Ethereum, a distributed computer that runs smart contracts on a public blockchain.

Here is a list of things you can do with ether right now:
1. sell it
2. hold it
3. play betting games
4. buy DAO tokens

For everything else, there’s Mastercard. Or Bitcoin.

This won’t always be the case, but it’s been the case since last summer, when Ethereum launched. People have accumulated a lot of ether with few uses beyond speculation. So! Maybe no surprise that 13% of the total supply of ether has now been invested in The DAO, a Decentralized Autonomous Organization. This represents $117 million at current market rates, and rising!

The DAO’s purpose in life is to disburse crowdsourced funds to projects it deems worthy. CoinDesk does a good job of explaining it here.

More specifically, the organization attempts to achieve a return on investment by backing proposals chosen by token holders. Any token holder may submit a proposal, for example, this one making a smart lock device for the goal of creating a decentralized sharing economy. A Proposal comes attached to a Contractor, who receives payments for building the described Proposal.

The DAO can vote to remove the Contractor at any time and bring in a replacement. This protects DAO investors from things like Kickstarter vaporware. Of course, this doesn’t make The DAO seem like a very attractive place for project founders, but around here we serve the people.

I bought some DAO tokens in the crowdsale, which means I have the ability to submit proposals and vote on future proposals. I have no idea who the other investors are, what their investment objectives might be, or the extent of their understanding of how The DAO works. Come to think of it, this is a terrible way to form an investment partnership.

Fortunately, we share common goals, as defined by The DAO:

The goal of The DAO is to diligently use the ETH it controls to support projects that will:

• Provide a return on investment or benefit to the DAO and its members.
• Benefit the decentralized ecosystem as a whole.

Those are two different goals, equal only in their ambiguity. Hm, I’m generally not a fan of mixing profitability and utility. When proposals arise to “benefit the decentralized ecosystem as a whole,” no two parties will see the same utility from a given expenditure.

That’s okay, because token holders can leave at any time and take their ether with them. There’s a process where anyone can propose to “split”, which creates a second DAO with assets proportional to the number of tokens splitting off.

Early entrants to the crowdsale benefit from the fact that DAO token prices monotonically increase throughout the month, ending at 1.5x the starting price. Thus, anyone who purchased DAO tokens prior to yesterday effectively controls an amount of ether that will be greater than what they put in.

It looks a bit pyramid-shaped, but that helps to lower the risk-aversion hurdles for early investors. I suspect that many will split as quickly as they got in. As for my own participation in The DAO’s crowdsale, I don’t know. I have a lot of ether and I don’t know what to do with it. Someone please build something.