Refunding ETH is a Gas!

ConstitutionDAO (a decentralized autonomous organization created to purchase a rare copy of the U.S. Constitution) raised $49.8 million in ETH. Its auction bid was not successful, so it began refunding the unused ETH to members of the DAO. Since the funds were collected in ETH, each refund is a new transaction that incurs gas fees (the fees ETH miners charge to write transactions to the Ethereum blockchain). As of this writing, gas fees are bubbling around 100 Gwei (roughly $25 at current ETH prices), but gas fees vary greatly during the day (as does the price of ETH), so the refund process can be surprisingly expensive. One ConstitutionDAO contributor complained of a $62 gas fee to receive his $200 investment back; for reference, it cost him $38 to make the original $200 investment.

There are several lessons here: 1) Read your DAO docs to ensure that your investment will be used the way you intend it to be used. 2) Think through the tactics (costs, complexity) of both your investment and your exit from the DAO. 3) Invest enough funds where the gas fees become immaterial to the investment, or choose a DAO that’s built on a blockchain solution that doesn’t have material gas fees.

Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and the CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and CNBC and writes a popular daily business blog. He’s the Co-Host of the award-winning podcast Techstream with Shelly Palmer & Seth Everett and his latest book, Blockchain - Cryptocurrency, NFTs & Smart Contracts: An executive guide to the world of decentralized finance, is an Amazon #1 Bestseller. Follow @shellypalmer or visit shellypalmer.com.

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