The cracks in DAO control begin to show. Over the course of a few weeks, two high-profile players (Surana-based Jupiter and NFT conglomerate Yuga Labs) abandoned their DAO structure and sent out blunt statements about dysfunction and disillusionment.
Jupiter quotes “a subdivision of trust”, Yuga CEO Greg Solano Called Apecoin Dao “Lazy, noisy, usually unconfident governance theater.”
While hundreds of Daos still operate on cryptocurrencies with thousands of participants, during this cycle, whether Daos was once Crypto’s decentralized dream’s beating heart would raise questions.
Daos is a decentralized autonomous organization, a blockchain local governance system that allows token holders to vote on fiscal components, protocol upgrades, etc. In the last decade of crypto experiments, they were considered the future of community capitalism. Now, their limitations seem to be catching up with them.
“I absolutely understand frustration,” said Kollan House, founder of Metadao. “It’s a question of token voting.”
From political idealism to symbolic theater
Daos was initially celebrated as a way of “voicing to silent voices” and was often criticized for being a legal and financial gray area. By issuing “governance tokens,” many projects have found a way to circumvent securities laws without the responsibility or practicality of the promise of token commitments.
Today, CoinMarketCap lists 273 DAO tokens with a total market cap of more than $21 billion. But these numbers are misleading. Nearly 50% of this value is concentrated on only three tokens – uniswap
Aave and Bittensor. On the other side, there are 63 DAO tokens worth less than $1 million, which is actually death on the chain.
Take the mango market as an example. It was once a bustling decentralized exchange with more than 1,000 governance proposals. After the platform closed in February, its activity is now zero, but the $19 million MNGO token still exists – totally useless.
Broken model?
Daws is often criticized for “governance theater,” in other words, seems to be dispersed and dominated by the crowd, but is actually controlled or directed by a few.
Daos requires a large number of people to participate in order to be effective. But numbers are often lacking, leading to disillusionment. “To vote on anything, you need a quorum. But to get to the quorum, you need incentives. When you start incentivizing voting, you get involved with mercenaries. From the beginning, everything will be against yourself,” House said.
Joshua Tan is the executive director of Metagov, a research group focused on autonomy.
“There are reasonable questions about the value Daos actually offers,” Tan, co-author of the latest report on DAO M&A, told Coindesk. “Grant systems are often inefficient. Governance can be a mess. But that doesn’t mean Daos are done. It just means they are changing.”
Tan believes that the struggle between Jupiter and Yuga’s lab is a sign of deeper system problems. However, governance failures in a particular project should not be confused with failures in the DAO concept itself.
Read more: Joshua Tan, Jillian Grennan and Bernard Schmid- DAO M&A Status
“If you compare a billion-dollar Daos to a billion-dollar publicly traded company, then Daos looks inefficient,” he said. “But so do most corporate boards. Governance is a cost center, not a profit center. That doesn’t mean it is distributable.”
No death – but mutation
Instead of writing the concept, the tan and the House saw Daws’ bright future, albeit completely different. The House pointed out Futarchy, a governance model that makes decisions based on predicted markets, which is a promising evolution. Metadao is actively building a fundraising platform based on this vision.
“We are addressing liquidity, decision-making and ownership,” House said. “The goal is to build future organizations from the beginning.”
TAN focuses on infrastructure – DAO mergers and acquisitions set standards (Mergers and Acquisitions)Governance tools and valuation indicators through Metagov and Daostar through Metagov and Daostar.
“We need to build the muscle that Tradfi has been having for decades,” Tan said. “That includes M&A workflow, legal frameworks and strong metrics, not just relying on TVL.”
Regulating the gray area is another persistent headwind. Some jurisdictions such as Wyoming, Utah and Cayman Islands have established legal packages for Daws, while others are behind. Even if structures exist, they are often expensive and impractical for small teams.
“We’re still seeing two or three DAO registrations a week in Caymanians,” Tan noted. “It’s a $50,000 setup. The fact that people are paying tells you that Daws still offers a unique advantage.”
DAO merger is coming soon
Both experts agree: it will inevitably shake.
“We might end up with 50 to 100 vibrant Daws,” Tan said. “Just after the ICO boom, most people will disappear. It’s good.”
The rest will be slimmer, better managed, and hopefully ineffective.
Tan saw a future where Daos would not disappear, but merged into a broader organizational strategy, especially in the merger of tradfi and defi. Daos may become a tool in the company stack – used when necessary, and ignored when not.
“Basic technology, smart contracts will stay here,” he said. “Not everyone wants the ‘sport’ version of Daos. But the infrastructure layer is decentralized. It is modular. The company will choose the right thing.”
What will happen now?
A good governance system is invisible when it works, and painful when it doesn’t work. Now, this authenticity plagues the DAO ecosystem.
“The dream of a community-led protocol has not yet disappeared,” House said. “But we are still finding the right way to build it. Failure is part of it.”
“Governance cannot be optional. Without it, you’ll have a mess. But that doesn’t mean the system we’ve built so far is the right one.”
It remains to be seen if more Daos follow Yuga and Jupiter to shut down community governance, but it is obvious. Daws may be struggling, but he is not dead yet.
Read more: What is dao?
