Separation of Powers
One notable example is the governance structure of the Token House, which operates on Optimism’s OP token distributed through an airdrop. Through voting, members actively participate in determining protocol upgrades and inflation adjustments. In contrast, the Citizen House adopts an identity-based governance approach to fund Optimism’s retroactive public goods initiative. Individuals contributing to the Optimism ecosystem receive voting “badges” that enable them to have a say in the distribution of the substantial funds designated for public goods providers. A16z’s Miles Jennings views this non-token-based system favorably as a potential solution to the pitfalls of token-exclusive schemes, which often result in superficial decentralization.
Rage Quits
To safeguard minority interests, certain DAOs now offer disgruntled members the opportunity to exit, including a pro-rata share of the treasury. Nouns DAO, for instance, experienced significant treasury losses when some members performed a new forking process. Critics accused the activist forkers of cashing out on their treasury share, thus undermining the DAO’s vision. Similarly, FloorDAO encountered departures through “rage quits,” leading the organization to announce a laser-focused agenda for the upcoming year, declining certain topic discussions.
Treasury Disputes
The resurgence of a potential bull market has driven up the value of native tokens held in DAO treasuries. Simultaneously, competition intensifies among potential recipients of these funds. Within the Optimism ecosystem, concerns were voiced about venture capital-backed projects receiving public goods funding. Arbitrum, the second-largest layer-2 network after Optimism in terms of total value locked (TVL), faced its share of funding controversies. The community voted against allocating over $2 million worth of Arbitrum (ARB) tokens to Blockworks Research, Gauntlet, and Trail of Bits for governance management. Furthermore, the co-founders of Bankless burned their BANK tokens following criticism from the Arbitrum community over a BanklessDAO proposal’s high cost for educational and onboarding services.
By assessing these trends, we gain valuable insights into the evolving landscape of DAOs and their governance practices as they navigate the challenges and opportunities that lie ahead in 2024.