DAO's "governance dilemma": constant infighting and uneven distribution of benefits
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DAO's "governance dilemma": constant infighting and uneven distribution of benefits
There are no eternal friends, no eternal enemies, only eternal interests.
Navigating Web3 tides with focused insightsAuthor: Sleeping Hard in the Rain
Recent developments at AragonDAO have once again sparked intense interest in DAOs across the crypto industry.
In short, a dispute has emerged between Aragon’s official leadership and its community over how to manage treasury funds. The community, through token voting, wishes to either repurchase $ANT tokens using treasury assets or distribute treasury bonds equally among holders. In response, Aragon's leadership has attempted to unilaterally transfer treasury funds to prevent this outcome.
Ironically, AragonDAO—a DAO designed to help build more DAOs—is acting in a manner that is profoundly undemocratic and anything but "DAO-like."
This isn’t unprecedented:
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The Arbitrum Foundation moved part of the DAO treasury and sold 10 million $ARB tokens without prior approval via a DAO proposal;
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Two founding members of BuilderDAO clashed publicly over whether to divert funds to purchase cryptocurrency;
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Internal conflict erupted within the Paraspace team, with founders and team members accusing each other, ultimately resulting in the team removing the founder from the protocol’s multi-sig signers.
Ultimately, most disputes stem from disagreements over profit distribution.
When we talk about DAOs (Decentralized Autonomous Organizations), what are we really talking about?
Blockchain technology has brought us decentralization and disintermediation. DAOs leverage trusted code and smart contracts to create a new form of organizational structure, enabling transparency and democratic decision-making.
Put simply, a DAO consists of an internet-based community of like-minded individuals who pool financial support—by purchasing DAO tokens or contributing capital—to achieve shared goals, independent of any single controlling entity. Decisions are made through community voting, and the community can further organize subgroups and tasks to refine execution and fund allocation.
The two most critical principles here are “disintermediation” and “trust in code.”
Yet today’s DAO governance struggles stem from the fact that they are still fundamentally driven by people. With differing individual interests, even communities formed around shared values are merely temporary alliances based on aligned incentives. This means internal conflicts inevitably arise when interests diverge.
The AragonDAO incident exemplifies this perfectly. Community members, as holders of the governance token $ANT, want greater returns—either through token buybacks or direct distribution of treasury bonds. Meanwhile, AragonDAO’s core leadership seeks to retain control over treasury value, leading to conflict.
As British 19th-century statesman Lord Palmerston famously said: "There are no eternal friends, nor eternal enemies, only eternal interests."
The current dilemma facing DAOs arises from members splitting into competing interest blocs based on divergent incentives. These blocs then engage in governance battles to advance their agendas.
A prime example is Uniswap’s choice of cross-chain bridge, which triggered a governance battle between major stakeholders a16z and Jump Trading—supporting LayerZero and Wormhole, respectively. Ultimately, Wormhole won the vote due to greater UNI token backing, becoming the chosen bridge for Uniswap users on BNB Chain to participate in Ethereum-based Uniswap DAO governance.
That clash resembled a fair contest—essentially a battle of voting power. But the AragonDAO controversy reflects a deeper rift: a disagreement between the protocol team and the community over the future direction of the protocol. AragonDAO increasingly resembles a traditional company wrapped in a DAO shell—where the team wants to control corporate funds, while the community believes those funds belong to all participants.
It seems that human-driven DAOs, despite their democratic facade, still depend on capable and benevolent founders—or competent teams—to drive progress. Much like citizens in a supposedly decentralized nation who cannot truly govern themselves democratically, but must instead hope their leader is a wise and effective ruler. This contradicts the very ideals of “disintermediation” and “trust in code.”
As legal frameworks around DAOs continue to evolve, these governance challenges serve as a stark reminder: What should we do when DAO members’ interests diverge?
Perhaps we need to legally define behavioral standards for every DAO member, formally recognizing member identities and rights under law. Only by reducing friction between competing interest groups can we pave the way for broader adoption of the DAO model.
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