The DAO's New Clothes - The Return Of Dotcom Hype

This summer, the now infamous DAO hit the headlines when an attacker, siphoned off millions of dollars worth of of other people's money.

The controversy was of that surrounding the code; many people debated about whether the code is law. The community agonised over whether to hardfork the chain; a process whereby the code of the DAO tokens would be changed, rendering the attacker's stolen funds worthless.

In all the fuss the main issues that were focused on were, the code, the law, the morals and even the integrity of the founders of the DAO.

However one thing that seemed to escape the unyielding scrutiny of public opinion, was the fact that the whole notion of a decentralised venture capital company is a terrible business idea that should never have had a penny in investment in the first place.

The DAO's New Clothes

When I was a young boy, I remember being enthralled with the story of; The Emperor's New Clothes. In this delightful fairy tale, a gullible Emperor along with the subjects of his empire, are duped by a couple of sharp fellows pretending to be tailors.

In the story, they convince the Emperor that they are in possession of the finest threads known to man; and in fact the material they have woven is so fine and sophisticated, that only really clever people can see the cloth, whilst poor simpletons cannot.

Of course the Emperor, who was meant to be the wisest in the land, pretended that he could see the clothes they "made" for him. Equally obvious, none of his court or anyone who was asked, wanted to admit that they saw nothing, for fear of being thought simple.

The story ends with a little boy pointing out the Emperor's nakedness, as he paraded his New Clothes, through the streets.

When I was first told of the DAO, it was pitched to me as a decentralised venture capital company, kind of like the popular crowdfunding site; Kickstarter.

My first thoughts were, that's a terrible idea, I was having a conversation with @bleepcoin at the time, and I believe my negativity towards the idea, led to him eventually pulling out and selling his ETH before the launch; thus saving him a ton of money.

The problem to me was obvious; even without the subsequent hacking, the idea was not good, and was fraught with logistical and legal spiderwebs that would have entangled all involved.

This is a direct copy from the Kickstarter FAQs:

What do backers get in return?

Backers that support a project on Kickstarter get an inside look at
the creative process, and help that project come to life. They also
get to choose from a variety of unique rewards offered by the project
creator. Rewards vary from project to project, but often include a
copy of what is being produced (CD, DVD, book, etc.) or an experience
unique to the project.

Project creators keep 100% ownership of their work, and Kickstarter
cannot be used to offer equity, financial returns, or to solicit
loans.

Notice the last paragraph talking about ownership and equity, financial returns and loans. The reason for this paragraph, is that selling equity of a company will be under the rules and jurisdictions of the country of origin of said company.

Never mind the legal ramifications of selling equity of a real world company via a blockchain based DAO, there is the fact to consider that important financial decisions would eventually have to be made by humans. Lots and lots of humans; a recipe for the disaster.

The DAO as @dantheman was always going to be D.O.A, they were New Clothes that nobody could quite see, but were too ashamed to admit it.

The ICO Dotcom Continuum

Back in the wild west days of the Dotcom Bubble, a company could post losses of $6.8 million in just 3 months, yet raise $112 million at it's IPO on the NASDAQ, just because it had the suffix; .com.

We are seeing a similar thing today, whereby all a company has to do is put the words decentralised or blockchain into their business plan, and hordes of investors are clambering over themselves to throw their Bitcoin at the project.

Some of the projects do carry some credibility, mainly because they have a product that may actually work in the real world. However a lot of them don't, some are simply promises that may never, in fact, probably will never come to fruition.

These projects are the New Clothes of the cryptocurrency world, they have no substance, and are merely bolting on words, phrases, concepts, and half ideas onto the idea of blockchain-based, decentralisation.

There are many examples too numerous to point out, however one that stands out for me, is the idea of a decentralised Netflix.

This is a classic example of somebody taking an already successful model and putting the word decentralised in front of it. If you actually examine those words, and try and imagine them as a business concept, you will realise that it is flawed in the extreme.

To be fair to DTV, the idea of content creators uploading their content and monetising it, isn't too far away from Steemit; however I don't see any Hollywood bigwigs rushing out to put their content on such a platform anytime in the near future, not least because of the huge amounts of money it takes to produce those kind of films.

When Smart Really Means Smart

Unfortunately for the supporters of decentralisation, and Decentralized Autonomous Organisations, the smart contracts that so much trust has been placed, are not smart enough for the majority of the ICO ideas to work.

Artificial intelligence is not enough; we can program these contracts to the best of our ability, but the fact that they need coding in the first place, perhaps indicates where the flaw might lay.

The Target algorithm, that worked out a 15 year old girl was pregnant, before her father did the same, is artificially intelligent. That is to say, it is a seemingly intelligent response to a scenario, brought about in an artificial way.

However expecting the kind of heuristic algorithms that we create today, to be able to cover all legal eventualities is a step too far.

This isn't to say that one day when artificial intelligence, makes the leap to artificial sentience, that we won't be able to leave everything to Skynet.

Until then, we have to beware ICOs bearing invisible gifts.

dotcom source

Cryptogee