SwiftDao: Fraud Resistant Blockchain Governance

SANTA CLARITA, Calif. - Oct. 16, 2019 - PRLog -- Blockchain project failure rates hover around 92% with an average lifetime of 1.22 years. In many cases, managers take investor's money and leave a trail of abandonware behind. Crowdfunded projects stealing money from small investors are the most tragic, but the high rate of failure has scared away institutional investment which reached new lows in 2019. A new solution is needed. Enter SwiftDao, a new standard for building fraud resistant blockchain governance.

Unlike other decentralized autonomous organizations (Daos), SwiftDaos are structured as investment clubs. In an investment club, each member is required to be actively involved in the decision making for the allocation of capital. Shares in an investment club are not considered securities by the SEC. Since each investor is also a manager, there is no expectation of profit from the effort of others. The Howey test does not apply.

SwiftDaos also solve the lemon problem in the blockchain space. Investors have difficulty telling the difference between honest managers and fraudulent ones. Many investors accordingly have exited the space, leaving behind only fraudulent projects recruiting the vulnerable.

"There's shortcoming with a lot of existing [governance] constructions," observed Vitalk Buterin, founder of Ethereum at the Ethereal Summit in 2019. "Projects [are] having ICOs where people just send them the money and then […] the CEO disappears and goes off to Indonesia or wherever. […] There's a lot of concerns with fraud in the ICO space."

ICO space fraud has attracted the attention of the SEC which has begun prosecuting ICO creators. Unfortunately, many good projects, such as Telegram, have been caught in the action. Unlike other blockchain projects, SwiftDaos are structured as investment clubs. In an investment club, each member is required to be actively involved in the decision making for the allocation of capital. Shares in an investment club are not considered securities by the SEC. Since each investor is also a manager, there is no expectation of profit from the effort of others. The Howey test does not apply.

Blockchain technology has already revolutionized the financial world, but it has had its fair share of growing pains. Without better governance structures, the original vision of the 1980's cypherpunks for a decentralized future seems doomed to failure. Today a battle is being fought between the decentralized technologies of the future and those who think centralized command and control is ideal. While the lessons of the 20^th century indicate decentralization has the force of history behind it, without effort by technologists and capitalists a freer future may not be possible.

While SwiftDaos are still in development, visitors to SwiftDao.com can register for the early access Beta.