An $11M Crypto Crowdfunded Golf Course Highlights DeFi’s Big Holes


ConstitutionDAO raised $47 million to buy a rare copy of the U.S. Constitution, with token buyers getting the right to vote to do, well, something with it.

Now a new DAO has raised $11 million to buy a golf course in the latest example of entrepreneurs crypto crowdfunding startups rather than seeking seed, angel or venture capital investors.

It’s being pitched as the latest trend in crypto, with Bloomberg announcing on Nov. 17 — two days after the plan to purchase the historic document at auction crashed and burned under the weight of a billionaire bidder’s wallet — that “Crypto Crowdfunding Goes Mainstream With ConstitutionDAO Bid.”

CoinDesk, the largest crypto industry news outlet, called it the next gold rush.

Crowdfunding start-ups does work. Tracking device maker Tile and VR headset maker Oculus VR started that way, and tens of billions have been invested in platforms like Kickstarter and Indiegogo.

That said, crypto investing fads can sometimes be a little silly — which doesn’t mean they will fail, as Elon Musk tweet-powered joke memecoin Dogecoin’s $22.5 billion market cap makes clear.

This one is built on DAOs, or decentralized autonomous organizations. It is the vote-based, smart contract-powered governance mechanism at the heart of decentralized finance, or DeFi, projects.

See also: PYMNTS DeFi Series: Unpacking DeFi and DAO

It’s not the first time DAO-based crypto industry crowdfunding has been tried.

The DAO structure came to prominence in crypto back in April 2016 with the launch of The DAO, a crowd-funded, decentralized venture capital fund that was going to back projects selected by investors. It was hugely successful at launch, raising $150 million from more than 11,000 governance token buyers in less than a month.

A ‘Grand Experiment’

On New Year’s Day and Jan. 2, LinksDAO sold 9,090 NFT tokens on the OpenSea marketplace that act as membership cards in the golf course project.

To be clear, these NFTs do not bring any ownership rights to the course, or even a club membership. What they bring is the right to vote on the course purchase and design — the goal is to remake it into a top tier course — as well as things like prices and rules, as well as the right to buy a membership and various club perks like preferred tee times and discounts.

There is also a members-only Discord channel.

Those voting rights will come when the project’s $LINKS governance tokens are airdropped to NFT buyers, with Global Members who paid 0.72 ether ($2,700) getting four times as many as Leisure Members, who paid 0.18 ether (about $675).

In an industry in which fraud is till rampant and “rug-pulls” — starting a project and running off with investors funds — is a growing problem, LinksDAO has one big thing going for it: The project is headed by someone well-known and respected in the crypto community, Mike Dudas, who founded The Block, a well-regarded cryptocurrency news and research site, as well as several other successful startups.

Read more: Crypto Scams Fueled by DeFi-Friendly ‘Rug Pulls’

The timeline calls for a mid-2022 club purchase, early 2023 opening, and future club purchases after that.

While the LinksDAO’s project’s business plan is a lot more detailed than ConstitutionDAO’s (which is to say, it has a business plan), it is still very light compared to a traditional start-up seeking venture capital money.

That’s something Dudas acknowledges, telling Golf magazine that it is “a grand experiment” that may never see an actual golf course opened.

He added that the $11 million won’t even go to buying a course, but to managing, planning, and developing the project.

That process is not very far along — certainly not far enough for angel or venture investors to plunk down $11 million.

How far along is it? Dudas said he’d only started thinking about LinksDAO in early December — just weeks after ConstitutionDAO caught a wave of success by capturing the crypto public’s eye.

Back to The DAO

DAOs are ubiquitous in DeFi — it’s the only truly decentralized, human-management-free governing method crypto has come up with — with virtually all projects run by DAOs or by founders who intend to turn them into a DAO.

However, in the case of a decentralized lending platform or exchange the basic business plan is well-tested.

Which points to another hole in DAO-based crypto crowdfunding: Decentralized investing projects don’t necessarily have any professionals scrutinizing the business plan, or even the code of the DAO itself.

The DAO model relies on knowledgeable community members to scrutinize things like coding and smart contract language — sometimes to ruinous results.

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Most notably The DAO. Launched in April, by May and June community members were warning of holes in the code. Then, on June 17, it was hacked. About one third of its ETH was stolen with the thief making off with about $50 million.

It was such a big disaster for the credibility of both The DAO and even the Ethereum blockchain project — just a year old at the time — that the node runners voted to create a hard fork, going back to a pre-theft block, which effectively returned investors funds. It was so controversial that it caused a schism, with opponents carrying on the original blockchain under the name Ethereum Classic.

As for The DAO, its token was soon delisted by various exchanges and the project died along with its tokens. Which in one way was a good thing: A year later, on July 25, 2017, the U.S. Securities and Exchange Commission (SEC) issued The DAO Report — a posthumous investigation that was the first time it asserted that initial coin offering (ICO) token sales were actually securities offerings — an issue that has dogged and hampered crypto investing to this day.

Read more: SEC Chair Wants More Crypto Oversight Authority

A Slice of Reality

So, what does this bode for the future of LinksDAO?

It’s actually hard to say. In crypto, failure can succeed on exuberance alone. Again, see Dogecoin, a smart contract platform like Ethereum, but with no virtually no projects built on it.

Look at what happened to ConstitutionDAO’s PEOPLE tokens after the auction was lost.

After a botched refund process, many original investors either hung onto their governance tokens or sold them. The result? PEOPLE now has a market capitalization of more than $800 million.

Why? Well, there are really only two possible explanations: It is seen as a meme token like Dogecoin, valuable as long as the joke lasts, or there is the core of an investment DAO somewhere in there — if the community of governance token holders get behind some proposal.