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The crypto investors who raised $47 million to buy a copy of the Constitution lost their bid — here’s where the money goes now.

• In a week, a consortium of cryptocurrency investors pulled together $47 million worth of ether to try to buy a rare, first-edition copy of the United States Constitution at a Sotheby's auction — and lost.
• In its 'frequently asked questions,' the group, known as ConstitutionDAO, stated that the funds would be redeemable, plus a transaction fee.
• If no one wants to redeem their funds, the DAO will determine what to do with the remaining funds.

In a week, a consortium of cryptocurrency investors pulled together $47 million worth of ether to try to buy a rare, first-edition copy of the United States Constitution at a Sotheby's auction — and lost. It is up to the people to decide what to do with all of that money.

In its 'frequently asked questions,' the group, known as ConstitutionDAO, stated that the funds would be redeemed, minus a transaction fee.

ConstitutionDAO contributor Alice Ma told CNBC that they will "absolutely provide everyone with a refund option." "Many customers have already stated that they prefer to leave their monies in the wallet," Ma continued, "and we are considering between numerous possibilities internally for that scenario!"

Following the lost bid, it was unclear where the money would go next on Twitter Spaces. Some DAO members discussed how the cash might be put to use in future auctions.

Member Liz Yang, speaking aboard an American Airlines flight, expressed her desire to put the money to good use. "I think we set the bar too high," Yang stated. "We need to do something just as epic, whether it's a future auction or something else entirely, but that's up to the people."

The "decentralised autonomous organisation" that facilitated the fundraise will, in principle, select the following moves. A DAO can be compared as a group of people working together without a single leader. Unlike a traditional pool of investors, DAOs use bitcoin technology to track and confirm group participation as well as to simplify the inner workings of how to generate and distribute large amounts of cash.

"WAGBI," or "we're all going to buy it," was DAO's rallying cry. The hundreds of investors that make up this DAO, on the other hand, would not have earned fractional ownership of the document.

Instead, they would have become owners of the "People" crypto currency, which would have given them some voting rights over the document's future.

"Everyone who buys in gets a piece of the DAO's governance token, which they can then use to vote on where the Constitution should actually be kept," Ma told CNBC ahead of the auction. The crypto group has been considering the Smithsonian and the New York Public Library, among other museums and libraries around the country.

Many people were perplexed as to why the organisers did not make the winning bid in a heated bidding war that ended at $41 million.

One organizer in the group’s Discord server said that they stopped bidding where they did because there wouldn't have been enough money left over to provide for the "necessary care and maintenance" required for the Constitution's preservation.

How it all began

An exchange of semi-joking Twitter messages about making a bid on the 1787 first-edition printing sparked the notion a week ago. One of the thirteen surviving copies of the historic document has been put up for auction for the first time in 33 years. Dorothy Tapper Goldman, a New York philanthropist, formerly had a copy.

The concept of pooling ether from thousands of crypto investors to make a group bid for a historic artefact was a success right away.

The DAO has collected more than $4 million in just five days. After a week, the crypto-clan had amassed almost $47 million in ether in preparation for the auction.

Organizers were doing logistical acrobatics to discover a legal avenue to launch a legitimate bid while the ConstitutionDAO coffers filled with ether.

DAOs do not use banks to store their funds, instead relying on smart contracts. These contracts are self-executing agreements that are stored on the blockchain, the digital ledger that supports cryptocurrencies. DAOs likewise lack a central governing body, instead relying on votes from their collective membership to make decisions. Many of Sotheby's eligible bidder stipulations are inconsistent with the organisational structure.

Sotheby's does not enable DAOs to bid directly, according to the group's FAQ, and the auction house did not accept anything other than government-issued currencies for this lot, although accepting ether for the first time for two pieces by famed street artist Banksy earlier in the evening. Compliance with Know-Your-Customer regulations is also necessary, which is difficult for a group of thousands of investors.

ConstitutionDAO worked with a crypto exchange to convert its ether to dollars and a non-profit to make bids on the DAO's behalf to meet the requirements. In order to make the transfer easier, the group incorporated a corporation.

This resulted in a complicated and not entirely clear chain of ownership.

Regardless, according to Auston Bunsen, co-founder of QuikNode, which provides blockchain infrastructure to developers and businesses, the idea of DAOs is gaining appeal due of its speed and decentralised nature. Bunsen told CNBC that he envisions a group of strangers banding together to acquire a basketball franchise.

"They symbolise a new type of organisation that is moving at breakneck speed," Bunsen added.

ConstitutionDAO is the latest in a long line of DAOs that pool funds to purchase real-world assets. PleasrDAO purchased a copy of the Wu-Tang Clan CD that had previously belonged to Martin Shkreli in July.