This Fintech Experiment Could Be Huge… Here's What You Need to Know

Shah Gilani

Would you invest in a company with no managers and no legal documents?

Believe it or not, that's a question thousands of "investors" just answered with a resounding "Yes!"

Last week, I told you that the future had already arrived, that hundreds of tiny startups are already changing the way we live, work, and conduct business through innovations in financial technology, or fintech.

I teased a breaking story about a "company" whose extraordinary name is itself indicative of the future of fintech.

The company, if you can even call it that, goes by the name of the DAO, which stands for Decentralized Autonomous Organization.

Since April 30, 2016, DAO has raised over $152 million via crowdfunding, which is by far the largest amount of "money" ever raised that way.

It closed its "creation phase" on May 28, 2016.

But what is DAO? And how do you invest? And should you even consider it?

Generally speaking, decentralized autonomous organizations are part of the fintech future that's already here. Going forward, they'll change how you invest, what you invest in, and every possible way for you to make money.

There are a few moving pieces to this particular "deal" and this decentralized autonomous organization in particular. That's why I've put words like "investors," "money," and "deal" in quotes – because what we're talking about is so radical that it may redefine what these things mean in the very near future.

Here's what you need to know.

The First DAO Open to the Public

This company, or investment, or organization, depending on what it ultimately is legally defined as, calling itself the DAO, is the first of its kind of organization making itself available to the public.

The DAO was created by 32-year-old German programmer Cristoph Jentzsch, who will have nothing to do with running it, or controlling what it invests in, or even, he says, what happens to it, though he may be in for more than he bargained for on that front.

What the DAO will do is invest the "money" it gathers in its creation phase (from April 30, 2016, to May 28, 2016) in mostly startups fueling digital blockchain technology and something called Ethereum, which I'll explain in a minute.

The organization is essentially a program, that's why there are no managers and no legal documents. I'll get to the lack of legal documents in a bit.

The "money" crowdsourced investors put up is actually Ether, or ETH.

Ether is a cryptocurrency, like Bitcoin. Ether comes out of Ethereum, which is a type of decentralized blockchain platform (hence the cryptocurrency offshoot Ether) with programmable transaction functionality.

Investors have to get their hands on Ether, which at its current unit price is worth about $13 a piece (as opposed to Bitcoin's approximate value of $450) and contribute ETH as their investment. For their ETH they get DAO "tokens" on a pro-rata basis calculated against the total amount raised.

Shareholders vote their tokens on "any expenditures," including which startups or companies to fund, which are themselves chosen for consideration by online polling of shareholders.

In other words, the DAO is a technology-enabled leaderless collective that invests in shareholder-approved deals.

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Shah Gilani

About the Author

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Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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