ConstitutionDAO auction fails but will continue to move forward! Token redemption mechanism flaws lead to community complaints

The decentralized autonomous organization ConstitutionDAO rallied the efforts of many to aim for acquiring a copy of the U.S. Constitution at a Sotheby's auction. Although ultimately unsuccessful in the bid, it marked a prestigious chapter in DAO history. Over the weekend, the organization announced its future plans and affirmed that it would not dissolve despite the failed bid. However, there seem to be some issues regarding the refund of funds raised.

Hey frens! 📜

Over the past few days we've shown the world what a group of internet friends can do with the powers of web3.

Raising +$47M, uniting 21k people on Discord and 42k on twitter in just 4 days. That's all thanks to you, and we couldn't be more grateful.

So, what now?

— ConstitutionDAO (📜, 📜) (@ConstitutionDAO) November 20, 2021

Developments of ConstitutionDAO

ConstitutionDAO, which raised over $40 million from 17,437 addresses in just 72 hours, faced various opinions within the community after the failed auction. People are curious about the future of this large organization with substantial funds, wondering whether it will dissolve or take further actions.

Today, ConstitutionDAO announced on Twitter that they have heard the community's desire to move forward and will soon propose plans regarding governance guidelines, vision, and values for community review and feedback. For those who do not wish to continue participating and only participated in the auction of the constitution, ConstitutionDAO stated that they will provide a channel to redeem the ETH they provided, deducting Gas Fee as initially described.

Token Redemption Mechanism

When users provided ETH to ConstitutionDAO, they received governance tokens called PEOPLE. The official plan is to snapshot the amount of PEOPLE tokens held by each user. After the launch of the fund redemption website, users can initially exchange PEOPLE for ETH. Users who do not wish to redeem their funds can invest them in the DAO treasury in exchange for new governance tokens called WTP We The People.

However, the official mechanism seems to have been insufficiently considered. After the announcement and snapshot, the PEOPLE token experienced significant selling pressure in the market, dropping by over 90%. With the emergence of new governance tokens, the old tokens lost their value, and users could redeem the tokens after the snapshot without needing to hold them, allowing them to sell the tokens for profit.

After realizing the flaws in the original token redemption mechanism concept, the ConstitutionDAO team announced a new redemption method on Twitter today. The original snapshot method will be scrapped in favor of a token exchange where 1 million PEOPLE tokens can be exchanged for 1 ETH. This means that selling PEOPLE tokens will no longer allow for the redemption of the original ETH.

After the announcement, the price of PEOPLE tokens immediately rebounded to its original level within just 20 minutes.

Hi everyone! We know you've been awaiting further news about the refund, and we're ready to go live with it now 😌

We plan to issue refunds through the same Juicebox mechanism by which donations were originally collected.

— ConstitutionDAO (📜, 📜) (@ConstitutionDAO) November 22, 2021

While ConstitutionDAO's actions aim to address the flaws in the original mechanism, there has been significant backlash within the community. Some criticize the decision to change the policy without prior discussion with the community, while others claim it is a scam, suggesting that the team purchased tokens at a low point and profited through rule changes.

Although some users still support ConstitutionDAO and are optimistic about their future development, the team's once promising image has been tarnished by these events.