Caution: The DAO Can Turn into a Naturally-Arising Ponzi

Charles Ponzi was a charismatic, well-liked man.

The DAO is under pressure to engage in practices that are (1) ill-informed, (2) incredibly risky, and (3) tantamount to a “naturally-arising Ponzi.”
Case in point is the latest call for The DAO to Perform Arbitrage by Buying Its Own Tokens, and follow on posts that charactize this as a “riskless” investment. This is a uniquely misguided idea, part speculation, part Ponzi, and altogether reckless. Let me describe why.

The DAO Background
If you don’t know how The DAO works: it’s a crowd-funded investment fund.
You buy into The DAO with ether (a cryptocurrency), and get “DAO tokens” in return. DAO tokens are essentially shares in a computer-controlled fund.
The DAO then invests your ether into worthy projects, selected by crowd voting. As these projects
pay off dividends, you are supposed to make money as the crowd picks winners with its infinite wisdom, or lose money if the crowd ended

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