SwiftDao – A New Initiative Towards Fraud Resistant Blockchain Governance

Blockchain project failure rates hover around 92% with an average life of 1.22 years. The SwiftDao standards are therefore under development to take you a step forward by implementing the latest fraud-resistant blockchain governance. It’s often found that project founders, developers, and managers are asking the investors for money and afterwards leaving a trail of abandonware behind. Crowdfunded projects tragically are now in the limelight as the public notices how these projects are stealing money from small investors. The high failure rate has reached an unexpected level that even institutional investment are scared of investing money. And they all have demanded for the exclusive solutions that are now offered by the SwiftDao standards.

SwiftDaos are not like other decentralized autonomous organizations (Daos). There are some fixed rules for the members of every investment club where it is clarified that each member must actively participate in the decision making in case of the allocation of the capital. This further helps those investment clubs in solving the principal-agent problem plaguing the blockchain space. In the principal-agent problem, the incentives for an organization’s managers are not aligned with the managers. The result therefore comes to a state where the managers freely waste the investor’s capital. In order to investigate the matter, it was found that the Blockchain project managers buying sports cars, jetting around the world, and investing in personal branding by speaking at high-cost conferences. Meanwhile, the projects are ignored and the technology languishes. SwiftDaos are designed to directly combat such troubles and they completely eliminate this problem by collapsing the roles of investors and managers.

Also, there is the lemon problem in the blockchain space which is finely solved by SwiftDaos. Sometimes, the investors are unable to point out the differences between honest managers and fraudulent ones. Many investors have left the space as they have faced fraudulent projects recruiting the vulnerable through information assymetry. In many cases, the good projects fail to find funding as the honest investors leave for they don’t want to face the scammed projects again. Thankfully, economists have been conducting research on the lemon problem for over 50 years. This research formed the basis for the SwiftDao standard, which implements their recommendations by increasing transparency, combining investors with managers, and building accountability mechanisms.

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“There’s shortcoming with a lot of existing [governance] constructions,” observed Vitalk Buterin, founder of Ethereum speaking 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.”

Recently, the ICO space fraud has drawn the attention of the SEC which in turn has begun to prosecute ICO creators. Unfortunately, good projects like Telegram have been caught in the action. As SwiftDaos are considered to be the investment clubs, investing shares in the club is not accepted as 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 20th 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.

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