Quick recap for the uninitiated: Ether is digital money, and the DAO is a Decentralized Autonomous Organization. The DAO acts like an investment fund, but is actually software on a blockchain. The investments are made using ether, and the fund was raised through the crowdsale of “tokens”, which would be like corporate shares except that the corporation is a piece of software. Tokenholders get voting rights when it comes to deciding how the software should operate (voting on proposals), and proportional rewards if the DAO ever manages to generate a profit.
So I put some ether into the DAO, got some tokens, and now the DAO tokens are trading at a discount to intrinsic value on crypto exchanges.
The intrinsic value is what you would get if you picked the DAO up by its ankles and shook out all the ether that investors put in. And for some reason, the market doesn’t think it’ll be easy for tokenholders to take that ether back out.
I decided to try. The DAO has a function that allows tokenholders to split, a secession where the splitting tokenholders create a separate organization and take their share of the ether with them. Here’s my split, E’s Castle Rock.
The plan was to split, then have Castle Rock pass a proposal that sends all the ether back to myself. Annoyingly, splits sit as an open proposal for at least 7 days. During this time, any other DAO tokenholder may join the split, no invitation needed.
Already, a tokenholder with nearly twice my tokens has joined Castle Rock. If we complete the split, this person can outvote me on any proposal, forever locking my ether into Castle Rock. This sets him up nicely for an extortion scheme where I have to create a proposal that sends most of the ether to him if I want anything back at all*.
The DAO wiki proposes two solutions to this problem:
The first is to create a large number of decoy splits, and then wait until the last second to complete the split. There’s a single 10-second window between blocks during which I could safely do this.
Or, I could salt the earth and refuse to do anything at all, leaving both our funds locked up forever.
With all due respect, both responses kinda suck. But there might exist a third possibility. Stay tuned…
How to Split the DAO