(English: Crowd - crowd, Funding - financing) - a method of attracting investment for a project.

The most famous progenitor crowdfunding- American. More than 10 million people have supported projects on Kickstarter. The Indiegogo service is also popular around the world. There are several analogues in Russia: Planet and Boomstarter.

Here is a link to my Boomstarter project: The Business of Reality TV from Japan. In 40 days I was able to collect 202,034 rubles. It wasn't easy. Below are tips to help you with your campaign.

1) Create value

Your project should be useful to you, your environment and other people. Think about how your product will change our lives for the better? One of the most popular areas of crowdfunding is Technology. The guys create holders for flash drives, desktop air conditioners, and keys with a GPS tracker. Absolutely everything that appears in a bright head.

In my case, with the Japanese trip, it was more difficult to convey the value to others. I had to prove that this was not just a vacation.

2) Make an honest video

The video in the title of your project is one of the decisive factors. For many sponsors of your project, a short video presentation where you honestly tell them what you have in mind will be enough.

Here is my video:

3) Set reasonable numbers

Once you have a brilliant idea in your head, you will want to bet a decent amount to raise it. But more than 90% of projects do not raise the required amount.

I recommend clearly defining your minimum budget: what you need money for and how much. Let your audience know that if successful, you will continue collecting money and add additional bonuses. For example, in the production of clothing, such a bonus could be a new color or an additional model.

Remember a simple thing: if you don't collect the full amount, you won't get ANYTHING. All money will go back to your sponsors on the cards.

4) Choose reasonable incentives

As an incentive to sponsors, you can give a product that you create with the money raised. Typically production takes 1-5 months after the campaign ends.

If you have an intangible product, as in my case, you can give symbolic gifts. I sent UniFashion sweatshirts, postcards from Japan. I also gave a video message from the Japanese and the opportunity to participate in my press conference.

Don't settle for banal T-shirts - come up with the most daring things!

5) Don't expect miracle support

When I was just starting my project, the Boomstarter manager said that he would post an announcement in the company group and provide media contacts. I relaxed and thought that the money would flow like a river. The project is incredibly significant! 🙂

They didn't leak. The repost gave absolutely nothing. 0 rubles. The media was not interested in the zero project. I had to work. Every day I sent messages to newspapers and online publications. Every day I received refusals. This is the reality of crowdfunding.

Be prepared for everyone to tell you to fuck off

Keep communicating is the key!

6) Make a fundraising plan

But the plan works! After all, this is mathematics. Divide your amount by the number of days and you get the amount you should collect daily. In my case, 200,000 rubles/40 days = 5,000 rubles daily.

In addition to the monetary plan, put the number of successful information partnerships. They wrote to 10 newspapers and published 1. A conversion of 0.1 is simply amazing!

The DAO made headlines, raising $150 million, or nearly 12% of the total Ether in circulation. This unconventional crowdfunding mechanism allows investors to invest collected ether (ETH) into specific projects .

The idea and structure of a DAO is appealing to lawyers because courts will have to deal with a network of contracts that mimic an entity rather than a legally incorporated entity. The law is simply not ready for DAOs, but it can be predicted that the Securities and Exchange Commission (SEC) will consider tokens purchased by investors as securities(securities) or investment contracts subject to its jurisdiction.

The voting system implemented for The DAO is also controversial due to the mixed motivations of participants and the potential tendency to reduce the price of ether and their own tokens. Because investing in The DAO is risky and appears to fall under the jurisdiction of the SEC, The DAO may attract the attention of regulators.

What is DAO? What's happened The DAO?

DAO is a decentralized or . Generally speaking, a DAO is a structure that uses smart contracts to extend the functionality of blockchains.

Individual DAO implementations, such as The DAO, can include non-trivial rights distribution schemes encoded using smart contracts and emulate the attributes and actions of business entities or regulated financial contracts, including insurance policies, futures, options, etc. The DAO attempts to simulate a crowdfunding entity, with its members voting on the projects on which it should spend the funds raised.

For many, DAOs are more attractive than traditional companies because (a) all their possible actions are written in the code that controls them, (b) information about the conditions for participation in DAOs is open and available to investors, and (c) DAOs are based on blockchains, which provides greater transparency.

The DAO has three main functions. First, it aggregates investors' assets by accepting Ether in exchange for DAO tokens. Secondly, it invests the collected ether in projects selected based on investor voting. Third, it pays dividends to DAO token holders.

“The goal of The DAO is to use controlled ether to implement projects that promise to bring profit to the DAO itself and its participants.”

Traditional business entities exist because legislation allows groups of individuals to incorporate to shift risks and obtain legal protection. In exchange for these privileges, groups of individuals organizing in essence agree to abide by the financial and operational restrictions imposed by the government. Unlike traditional business entities, DAOs exist only on their own blockchains and, by default, cannot interact with external financial and/or regulatory entities.

Participants in The DAO are divided into four categories: platform creators, curators, contractors, and DAO token holders (i.e. investors). The creators of the platform write open code that allows The DAO to perform its functions and can be freely used in other projects. Investors in The DAO receive shares in it by exchanging ether for DAO tokens. Along with tokens, investors receive voting rights.

Contractors make offers to The DAO to invest in a particular project, clearly setting out the terms of cooperation and the prospects for profit. Curators review proposals and whitelist them without expressing their opinions on the merits or demerits of the proposals. Thus, The DAO receives investor capital, investor voting results, contractor projects, and information about whether a particular project has been accepted by curators from the outside world.

Will the DAO be recognized by law?

Currently, DAOs are not recognized legal entities in the United States, which raises many questions about the rights and responsibilities of DAOs. For example, it is unclear whether its creators, curators, contractors, or investors will be held accountable for the actions of a DAO. While it may be beneficial for a DAO to hire a human representative, holders of DAO tokens may choose not to disclose the main actors.

If someone decides to file a lawsuit against DAO, the problem of identifying the defendant will immediately arise. The plaintiff will have to prove that this person represents the DAO, and prove that it is subject to the jurisdiction of the court. Any party involved in a lawsuit on behalf of the DAO will likely want to have the lawsuit dismissed on the grounds that it is not an authorized representative of the DAO. After this, the court will have to determine what a DAO is from a legal point of view.

Andrew Hinkes

On May 28, the largest crowdsale in history ended, which was organized by a decentralized automated organization DAO, an investment platform without a management center. The platform has raised more than $132 million.

The organization accepted investments in the form of ether, the “crypto-fuel” of the Ethereum platform. During the last 4 days of attracting investments, the price of one hundred DAO tokens remained unchanged at 1.5 ETH. Initially, the stated price of one hundred tokens was 1 ETH, but then it gradually changed during a ten-day growth period, which started on the fifteenth day of the crowdsale.

During the 28 days of the crowdsale, the DAO platform itself was created, the website states, because this is how its financial base is formed. The tokens that the user receives in exchange for his ether are issued here and now, and their number is unlimited (in total, more than 1,172 million were created during sales). However, from May 28, at the end of the investment attraction period, the number of DAO tokens will remain unchanged. Unlike Bitcoin or other digital currencies (including ether), DAO does not imply any mining.

The success of the crowdsale generated a strong reaction in the cryptocurrency community. Over the course of a month, specialized media outlets closely monitored the investment rise of DAO. Thanks to the rapid growth, especially in the first period (over 100 million dollars were collected in the first two weeks), the organization’s weight in the Ethereum ecosystem has sharply increased: in total there are about 80 million ether in the world, the company has currently collected more than 11 million - it turns out that more 1/8 of the total reserves of this cryptocurrency are now held by DAO. Due to the popularity of the project, the price of ether also increased: from the end of April to May 22, it almost doubled and exceeded 0.03 bitcoins, although by now it has dropped again to 0.024 bitcoins.

However, many users do not agree with the very term “crowdsale” in relation to this case. Wikipedia is up in arms over whether DAO can be considered a “crowdsale record holder.” This is not a project or an enterprise, writes one of the users, but a pool of funds with no special purpose, so this word is unacceptable here. Rather, the DAO share can be compared to an initial public offering, writes another.

The DAO (although, to emphasize its exclusivity, the organization calls itself The DAO) offers an innovative way of making decisions for investment funds. Drawing parallels with politics, one could call this direct democracy with elements of property qualifications. Each participant (that is, each token owner) has the right to vote in voting for a particular project. But the weight of this vote depends on how many tokens the participant owns.

Depending on the amount of ether required for a particular project, 20% of the community or higher should participate in voting on it. Debates are held on the project for two weeks, followed by a vote in which the project is either rejected or accepted. In the latter case, the DAO can provide funding either in a lump sum or in stages, in installments over a certain period. This decision, like all others, is made not by some body, but in a decentralized manner.

The organization intends to give preference primarily to projects related to the Internet of things and the distributed economy, but it does not intend to limit itself to these areas. Any innovative proposal may be submitted to DAO participants for consideration.

Once the project is implemented, the DAO plans to benefit from its results (which is very likely if the projects are aimed at developing blockchain technology and related areas), as well as receive monetary rewards for the investments made. In the future, this money should be partially used for the development of the DAO, and partially returned to investors. The platform, however, allows investing in projects that do not promise profit, for example, in charity.

To ensure that a given project proposal comes from a specific person or organization, the DAO has a curator figure. Currently, this function is performed by several prominent representatives of the Ethereum community, starting with the founder of the platform, Vitalik Buterin. However, the organization emphasizes that the presence of a curator position does not lead to centralization. The curator does not decide which project to accept or reject; The curator, in addition, can always be removed by voting.

The DAO also provides a mechanism against the so-called “tyranny of the majority.” What if someone buys 51% of an organization's tokens and then votes to transfer all the funds to their account? Theoretically, such a situation cannot be excluded. In this case, a “fork” will occur - the organization will split into two new ones. The minority will form a new decentralized autonomous organization, and everyone will keep their money. The same mechanism, by the way, will work in case of an insoluble conflict around the figure of the curator.

This mechanism implements the principle of “subjectivocracy”, defined by Buterin for cryptoeconomics as a whole. In case of disagreement on important issues, the developer writes, the block chain is divided in two, and each one adheres to the option that is closer to him. According to the founder of Ethereum, “subjectivocracy” may generally become the preferred form of government – ​​in the future, of course, when almost all resources become digital. For now, he proposes to limit ourselves to cryptoeconomics.

In its “manifesto,” the DAO organization proclaimed, among other things, the principles of democracy and decentralization. However, the idea of ​​decentralization that underlies blockchain technology itself may not only have its benefits, but also its dangers. Collective management of the fund's funds may not be effective, claims a recent article by cryptocurrency news outlet BitScan. Unlike a qualified manager, the average user may not have experience, understand digital finance, or understand the general situation of the fund. He may not have the opportunity to analyze the history of the fund in order to make a decision based on this.

This is why DAOs (and this particular organization, and other decentralized organizations of this type) may ultimately lose out to decentralized conglomerates (DCs), the article cites the opinion of Larry Christopher Bates, a blockchain specialist and DC entrepreneur. DC is a group of companies that work in symbiosis and have common goals, but without a parent company. Decentralization takes place, but it does not go below a certain level: within the conglomerate, there are completely centralized enterprises. From Bates’s point of view, it is structures like DC (and not DAO) that offer the currently optimal balance of democracy and professionalism.

Be that as it may, this Saturday the DAO will begin to fully function. The Gatecoin and Bittrex exchanges have already announced their readiness to trade the organization’s tokens. The experimental nature of the enterprise is obvious, and given its scale, failure can turn into a real disaster in the market; but maybe the DAO will be another victory for the principle of decentralization.

Andrey Levich

On June 17, 2016, an unknown attacker siphoned about a third of the DAO project funds into his accounts. The attack continued for several hours. During this time, he managed to capture more than 3.6 million ethers - an amount equivalent to approximately $50 million.

What is DAO

When it comes to DAOs, confusion is inevitable. In addition to the DAO project (The DAO), which became a victim of the attack, there is also simply DAO - a term that refers to Distributed Autonomous Organizations. Such organizations differ from ordinary ones in much the same way as smart contracts differ from traditional ones: in both cases, people remain behind the scenes. The structure, goals and internal processes of such an organization are determined not by its managers and employees, but by the program code.

The most obvious example of distributed autonomous organizations is cryptocurrencies themselves. They belong to no one and obey no one. They involve thousands of people, but they do not control Bitcoin or Ethereum. Nobody controls. The structure and principle of operation of cryptocurrency depend not on people, but on its protocol. People just follow him.

All these qualities fully describe the ill-fated DAO project. It was supposed to become something like a cryptocurrency “Kickstarter” - transparent, decentralized and sacredly respecting the will of each participant. The project was invented and implemented by the German startup Slock.it, which develops electronic door locks. Its founders hoped to use DAO to find investments for their ideas.

From a technical point of view, the DAO project is an Ethereum smart contract. And this is a very difficult contract. It describes all aspects of the functioning of this organization. After the creation of the DAO, the stage of initial capital accumulation follows - 27 days, during which anyone can buy the organization’s tokens and become its full participant. Then the work begins: those interested present their ideas to the public, and token holders vote. The winners receive funding. Voting, financing, and profit distribution occur automatically.

The sale of DAO project tokens began on April 30, 2016. After 27 days, more than 11 thousand people purchased them. As a result, a huge amount was concentrated under the control of a single smart contract - more than $150 million. No one has ever raised such money using crowdfunding.

Slock.it definitely did not expect such a development of events, but by that time their expectations and plans no longer played a role. The fate of $150 million now depended not on them, but on the contract code.

Distributed Autonomous Heist

Just three weeks after the opening of the DAO, members of the Ethereum community looked at the millions of dollars floating away from them in confusion and could not do anything. Money that could not have belonged to him went to the account of the organization of one of the project participants. At the same time, there was nothing to complain about. Ethereum worked exactly as it should. The DAO project code did exactly what it was designed to do. Everything was correct except the result.

The cause of the leak was found almost immediately. The attacker noticed an interesting feature of the splitDAO function, designed to leave the DAO project. It creates a subsidiary, transfers the founder's share to its account, and only then, at the very end, updates the balance sheet. If you recursively call the same function again while the balance is not recalculated, there is nothing stopping it from re-sending the money it has already spent to the child DAO.

The recursive process of division continues until it hits the technical limitations of Ethereum. As a result, 20–30 times more funds are transferred than expected. Another bug in the withdrawRewardFor function allows you to repeat this trick as often as necessary. The organizer of the attack did it hundreds of times.

Here you need to realize all the madness of what is happening. This is no ordinary robbery at all. Strictly speaking, this is not a robbery at all. And this is not a repeat of Mt. Gox. Then even more money disappeared, but in this case the interest is not in the money. The organization affected by this incident is so unusual that both the problem and its solutions have a completely fantastic connotation.

The DAO project does not have servers that can be shut down. He has no bank accounts that can be frozen. It doesn't even have an owner who will be responsible. There are $150 million on the balance sheet, controlled by a crazed program written in a language similar to JavaScript. She is convinced that this money should be sent to the attacker - and she sends, sends, sends.

Ethereum's machinery ensures that smart contracts are not broken. It does not guarantee that they are error-free. Moreover, the very concept of “error” is alien to his logic. For Ethereum, what is more important is what is allowed and what is prohibited. And this completely determines the contract code. The DAO contract code, albeit unintentionally, allows you to siphon off other people's millions. Therefore, from the point of view of Ethereum, the actions of the attacker are completely legal.

Thousands of mining nodes executing the faulty contract automatically verify every transaction it initiates. They see that everything is correct, everything is legal, all conditions are met. As a result, other people's money goes to the organizer of the attack, and information about this is irreversibly stored in the blockchain. It is impossible to return them without the consent of the new owner.

This is the first autonomous distributed crime. One uncontrolled program deceives another, and the third checks the legality, following its own, not at all human logic, and counts the money. People would like to intervene, but there is no place for them here.

No exit

If we were talking about a regular program and a regular hack, further tactics would be clear. First you need to fix the vulnerability. The missing money will not be returned, but at least the remainder will be safe. Then you should use any means to get him out of the attack.

But a smart contract is not a simple program. A smart contract is a contract, and contracts cannot just be changed. They are concluded in order to secure once and for all the terms of the transaction and the obligations of the parties. They are unchanging - that's the whole point. Correction or cancellation of an erroneous contract can be achieved through the courts, but in Ethereum this is understandably impossible.

Neither Ethereum nor the DAO contract itself provides a mechanism that would allow the contract code to be updated. It is impossible to transfer a project from one version of the program to another and preserve its internal state. This means, among other things, that the contents of the extraBalance variable will inevitably be lost. The DAO project has several million dollars stored on it.

DAO participants can leave the project at any time and take their share with them. During the height of the attack, many tried to take advantage of this opportunity and found that it was of no use in the current situation. The fact is that money from a DAO account cannot be converted into ether directly. First, they will be transferred to the subsidiary organization using the same splitDAO function that was used in the attack. This is long and also pointless, because the newborn DAOs are controlled by the same vulnerable code. If they took money from the parent DAO, they will take it from them too.

The less money remained in the DAO accounts, the more obvious it became that there was no easy way out. An error in a contract cannot be corrected - at least not quickly and without loss. Money cannot be saved either - at least not quickly and without loss. The created system is not suitable for either one or the other.

What to do next? The founders of the DAO project called on their supporters to break the system. They published code, mass execution of which would overload the Ethereum network. DDoS will not stop an attack on the DAO, but it will slow it down and give it time to find a solution.

Extraordinary measures

A few hours later, the creator of Ethereum, Vitalik Buterin, intervened in the events. Through the official cryptocurrency blog, Buterin proposed conducting a so-called soft fork of the Ethereum software and blocking the stolen money.

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Can a company function normally without executives or a board of directors? The experience of one of the companies in the IT market will help you figure this out. The company is called a DAO (short for Decentralized Autonomous Organization), and is run by a computer program. All details of corporate functioning, from general management to day-to-day operations and salary schedules, are written into the program code. It has no directors.

In some ways, a DAO resembles a regular one venture fund designed to make a profit. However, traditional venture capitalists cannot decide who gets funding. Meanwhile, any owner of DAO tokens (internal currency) gets the opportunity to participate in the election of funding objects, the number of votes for each is proportional to the number of tokens he has. A startup that passes the vote receives funding, and everything regarding the volume and form of this funding, as well as the DAO’s share of subsequent profits, is agreed upon in advance. “And this is not regulated by any laws or regulators, everything is determined by the program,” explains Stefan Thual, head of the startup slock.it.

DAO has been crowdfunding since April 30, collecting not ordinary money, but ethers, a cryptocurrency used in the Ethereum platform (see inset). For every ether invested, the investor receives 100 new DAO tokens. Ethereum virtual money is placed in a digital wallet, all transactions with it are open, and can be tracked on a number of sites like Etherscan.

Creator of the Ether

Ethereum is a platform for applications working with blockchain technology, its creator, Vitalik Buterin, told Vedomosti. Its main difference from existing virtual currencies is its versatility: Ethereum creates a programming environment in which any rules can be laid down.

The funds raised should be used to finance startups creating applications for Ethereum. By mid-May, the company managed to raise more than $107 million, as evidenced by the Ethereum digital wallet available for public viewing. Thus, in terms of capitalization, DAO is already among the leaders among startups working with cryptocurrency. The record here so far belongs to the company 21 Inc., which attracted $116 million in investments in March 2015. For comparison: the startup Coinbase managed to raise $75 million, Digital Asset Holdings – $60 million, Blockstream – $55 million.

The group that created the DAO mostly consists of Ethereum developers; the business management program was written by employees of the startup slock.it, led by Tual. DAO crowdfunding will continue until May 28, the company expects to raise about $20 million in the remaining days. “The volume of funds raised is amazing,” says Tual.