Crypto enthusiasts who tried to buy US Constitution likely to lose most of their money

The rare copy of the US Constitution auctioned by Sotheby's
The problem is because donations and refunds all attract very high 'gas fees'. Photo credit: Getty Images

Half of the cryptocurrency enthusiasts who raised over US$47 million to try and buy a copy of the US Constitution will end up losing most of their money due to fees.

A group called 'ConstitutionDAO' crowd-funded the astonishing amount in just seven days in an attempt to buy the rare first-edition of the document.

They fell short at the Sotheby's auction by losing out to hedge fund CEO Ken Griffin, who paid more than US$43.2 million after overheads.

ConstitutionDAO has now said it plans to issue refunds through the same mechanism by which the donations were originally collected.

Donations were made using ether, the cryptocurrency of the Ethereum blockchain, but doing so means users paid a 'gas fee' to do so. All refunds will also necessitate the fee.

A gas fee is a payment that is used to cover the cost of the computing energy needed to process and validate transactions on the blockchain - and it's currently very expensive to do so.

ConstitutionDAO, in its 'how to donate' video, recommended donors add between US$150 and US$200 more than they'd like to contribute to compensate for the fees. In total it cost more than US$1 million in fees to raise the US$47 million.

After the auction, admins on the group's Discord server revealed they had "17,437 donors, with a median donation size of $206.26. A significant percentage of these donations came from wallets that were initialised for the first time."

Vice's Motherboard reported, using its own donation as proof, that would leave many struggling to see anything returned to them.

The site bought US$200 of ether which attracted a US$3 transaction fee. That had to be transferred to a crypto wallet, which cost another US$12. From there it went to Juicebox, the crowdfunding platform used by ConstitutionDAO. That's where the high gas fee kicked in.

"In our case, we paid a $75 gas fee to contribute roughly $75 to the project. Of the initial $200 we bought in ether, $90 was eaten up in fees simply to donate to ConstitutionDAO," the website reported.

"In order to get a refund, we have to do this in reverse, basically. And so to get our ether back from Juicebox, we would have to pay gas fees again, meaning essentially the entirety of the amount invested would be wiped out."

The website pointed out that the process has left some even more out of pocket after the cost of refunding proved more than what they could get back.

One user had to pay 0.015 ether in fees to get their refund of 0.011 ether, meaning they ended up paying US$18 for nothing.

Another got US$2 after their 0.018 ether refund cost 0.0175 in fees.

Despite the failure to purchase the constitution, ConstitutionDAO is still holding up the experience as a success.

"We onboarded thousands into crypto, and educated millions about DAOs," it wrote on Twitter.

"We showed the entire world the amazing things crypto can enable, and built an incredible community. You all made this happen."

It also says they're not finished despite the failed attempt but hasn't provided any details around what that means.

"The future is bright, and we're not done here and we're committed to moving forward carefully, thoughtfully, and correctly. We appreciate all of you and are so excited for what's to come."