IT SOUNDS like a cult, but it wants to be a venture-capital fund of sorts. As The Economist went to press, the DAO (short for decentralised autonomous organisation) had already raised the equivalent of nearly $150m to invest in startups. This, say its fans, makes it the biggest crowdfunding effort ever.
To understand the DAO it helps to keep in mind the concept of “smart contracts”. These are business rules encoded in programs that execute themselves automatically under certain conditions: for example, funds are only transferred if the majority of owners have digitally signed off on a transaction. Such contracts can also be combined to form wholly digital firms that are not based anywhere in the real world, but on a “blockchain”, the sort of globally distributed ledger that underpins crypto-currencies such as bitcoin.
The DAO literally lives in the ether, meaning on the blockchain of Ethereum, one of bitcoin’s rival crypto-currencies. Investors send digital coins (called “ether”) to the fund, which allows them to take part in votes on whether to put money in a given project. Candidates for investment put…
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