The people behind a failed bid to buy a rare original copy of the US constitution are facing an avalanche of refunds – up to $40m for 17,000 donors.
The ConstitutionDAO team amassed the fortune through a “decentralised” approach that was largely unregulated and based on cryptocurrency.
Large fees for those crypto-transactions, on the other hand, eat up huge sums of money in the refund process.
The organisation stated that issuing refunds was its top priority.
Despite initially promising to continue, it later announced the project’s closure on its website.
“We know everyone is eager to hear what the next steps for ConstitutionDAO are – and we’ve been thoroughly exploring several options,” the statement said.
“While we would have loved to, we have determined that building and maintaining an ongoing project is not something that we as a core team are able to support, given the technical and administrative requirements of doing it properly.”
However, the group also encouraged scheme participants to claim their refunds, stating that there was “no time limit.”
ConstitutionDAO, which stands for “decentralised autonomous organisation,” raised large sums of money in Ethereum cryptocurrency to bid on an extremely rare privately-owned copy of the original printing of the United States Constitution.
The group had promised to maintain the historic document “for the people”.
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But they were outbid by a private investor, and the document sold for more than double the auction house’s original estimate.
Now, some investors in the scheme are reporting that they must pay fees of up to half their refund.
This is due to the Ethereum network’s use of the blockchain, which is the same basic technology concept that underpins other cryptocurrencies such as Bitcoin.
And, like Bitcoin mining, it necessitates computational power to function.
“Gas” is the fee paid to those who run the computer systems that allow transactions to take place. It also adjusts the price based on supply and demand.
That means that depending on how busy the Ethereum network is, any type of transaction can be much more expensive at times.
And the network has recently experienced high usage – as well as high gas prices.
The group reported 17,437 donors with a median donation of $206.26 on its official Discord – the chat app that allows anyone to create rooms and discussion channels for enthusiasts on almost any topic.
Due to high gas prices, “small” donations may be severely impacted by the transaction fee.
According to one Discord user, in order to get $400 refunded, they would have to pay $168 in gas. Others complained that the fees exceeded the relatively small amount of their refund.
“Wow, lessons learned, [Ethereum] is a shambles. Too much gas, “Another was written in the support channel.
Another contributor expressed concern that the experience would sour cryptocurrency for those who were not already investors but became engrossed in the drama of “buying the constitution.”
“Almost a third of those who contributed are new to [Ethereum], and this is their first experience. Not only that, but they’ll have to endure the agony of spending $200 or more on gas for literally nothing “They stated.
Senior figures in the Discord- known as delegates – said there was no clear solution.
“We looked into it and did everything we could to find a gas-free refund option. There was, however, nothing that could be set up in a timely manner “one was written
“The primary goal was to provide a safe refund process as soon as possible.”
Another administrator on the server informed users: “This was a very difficult decision, and we’ve all spent the last several days at our computers every waking hour trying to find the least bad option. There was no solution that would satisfy everyone.”
The group was formed just days before Sotheby’s auction of the historic document, so it had little time to establish its desired decentralised structure. Instead, the project was managed by a core group of insiders known as delegates, who wrote and rewrote the rules and FAQs as they went.
The group had originally planned to use ownership of digital tokens as a way of allocating voting power over the care and display of the constitution document, and briefly proposed a new type of token to decide its future.
Signing off, the group said: “The project was a landmark event that showed the entire world that a group of internet friends can use the power of Web3 to face a seemingly insurmountable goal and achieve incredible results on an impossible timeline.”