DAO governance debate returns as crypto investors revisit token voting
Investors and founders are reassessing DAOs after years of disputes over whether blockchain voting can deliver real decentralization.
By Sofia Marchetti · World Affairs Correspondent
3 min read
Crypto investors are again debating decentralized autonomous organizations, the blockchain-based governance model once promoted as a way to run online projects without a central authority. The debate cuts to a core promise of crypto: whether token voting can produce accountable decision-making or mostly recreate the power of large holders.
In a discussion on X last week, Ali Yahya, a general partner at Andreessen Horowitz’s crypto arm, said earlier versions of DAOs had fallen short. “We spent the last 10 years rediscovering the hard way that direct democracy is a bad idea,” Yahya wrote, according to Fortune.
DAOs are used by some crypto projects to coordinate decisions among tokenholders. Fortune described most DAOs as similar in structure to public companies: members can vote on proposals, and their influence often depends on how much of a project’s cryptocurrency they hold.
The difference is that DAOs use blockchains to record and coordinate votes rather than relying on a single administrator to count them. In theory, a proposal is submitted, votes are logged, the result is calculated and software carries out the decision.
In practice, critics say the model can concentrate power in a few hands. If one person or a small group controls a large share of tokens, the system may appear democratic while letting the largest holders drive outcomes, a criticism often described in crypto as “decentralization theater.”
Polymarket disputes put the problem in view
Fortune pointed to Polymarket, the prediction market that describes itself as decentralized, as one example of the controversy. The platform sends disputes over whether an event occurred to UMA protocol, where tokenholders vote on the outcome.
One cited dispute involved whether Strategy, the company known for holding Bitcoin, sold Bitcoin in May, according to Fortune. Although UMA voting is open to anyone, the Wall Street Journal recently reported that a small number of large tokenholders often determine the results.
That dynamic has helped sour some investors and founders on DAOs. Jake Brukhman, founder and CEO of crypto venture firm CoinFund, replied to Yahya that years of experimentation showed governance often happened away from the blockchain rather than on it, according to Fortune.
Yahya still argued that the model should not be judged only by past failures. “The future does not always look like the past,” he wrote on X, according to Fortune.
Founders test newer versions
Some builders remain committed to the structure. Simon Hudson, whose project Botto uses a DAO to oversee an autonomous AI artist, told Fortune that DAOs are not finished, while acknowledging that many participants have had bad experiences with them.
Botto has generated millions of dollars from selling its art as NFTs, Fortune reported. Hudson’s view is that the format still has uses, even after the first wave of experiments exposed weaknesses in coordination, voter power and community management.
The renewed discussion shows DAOs remain unresolved in crypto. Supporters see a chance to redesign online governance with better incentives and tools; skeptics say technology cannot remove the human conflicts that shape any organization.
This story draws on original reporting from Fortune.