DAOs may need to decentralize governance to court institutions.
Decentralized Autonomous Organizations (DAOs) are built on an ideology that conflicts with the realities of doing business today, where decentralization conflicts with the need for legal ownership and control.
On March 11, DAO Across Protocol made a controversial proposal to transition to a private company through a token-to-equity exchange purchase. Risk Labs, the group behind Acros (ACX), said the token and DAO structure “materially” affected the ability to close deals with enterprises and institutions.
The industry response was divided. Decentralized finance (DeFi) researcher Ignas called it “crypto's biggest failure.”
“This seems to be a betrayal of the spirit of crypto: access to investment for everyone, anywhere, globally,” Ignas said at X.
The DAO structure is holding back all Stablecoin business.
The Crosschain Bridge Acros protocol currently operates on a token and DAO framework, with risk labs overseeing the development of a foundational model.
Risk Lab's proposal outlines a transition to a newly formed US C-corporation that will take over development and commercialization of the protocol. ACX holders can exchange their tokens for equity in the new entity or opt-in to buy.
“[DAOs] They had to replace an antiquated organizational infrastructure characterized by greed and lack of trust,” Matthew Pinnock, founder of Defy Project Altura, told Cointelegraph.
“However, as the industry grows into tangible assets and institutional capital, protocols are entering into structural constraints. Institutions typically need a clear legal counterpart who can sign contracts and conduct due diligence, which a decentralized collective cannot easily provide,” Pinnock added.
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According to Mela co-founder Hart Lambur, in the case of Acros, having a token “generally hurts more than it helps.”
“We released the Acros token very early, with a very low valuation and a very wide airdrop. We chose this strategy to be able to build value publicly with our community,” Lambur said on X.
Mado sits around Stablecoin infrastructure, which partly explains the transition. The goal is to equally enable financial transactions on Stablecoins, with payments taken by issuers or partners rather than end users. Lambur said it would require contracts and off-chain payment arrangements that are not compatible with DAO structures to maintain related agreements.
ShapeShift lost its corporate legitimacy and became a DAO.
As protocols rethink DAO structures, ShapeShift offers a counterpoint. The crypto trading platform was transformed into a DAO in 2021, supporting its corporate entity with tokenholder management.
Tim Black, product lead at ShapeShift DAO, says many teams have adopted DAO structures as part of a broader narrative late in the cycle, without fully considering the operational complexity involved.
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Black told Cointelegraph that “all in all, what he's proposing is essentially acknowledging that. They're saying that the DAO experiment helped expand the network, but the company's structure is better for the next phase.”
“Many groups operate quietly as companies,” he added. “Shapeshift has been innovative in using workflows, mirroring components, but they still create more conflict than collaboration over time.”
Social media debates are a way to move toward tokenized equity in the traditional corporate structure, which Ignas says will be a boon for the industry. But Black thinks it says more about token designs than the concept itself, as many governance tokens already function as pseudo-equity.
“The original idea behind governance tokens was coordination, not ownership… If they were a fair substitute, the experiment fell into a corporate model that should have been fundamentally challenged,” he said.
The entire organizational structure is not complete.
If transitions like Acros' become more common, the result may not be one direction for DeFi, but a divergence in how protocols are structured and implemented.
“One side will be corporate crypto, protocols will work like fintech companies, tokens will work like stocks. The other side will be fully decentralized and accept the operational friction that comes with that,” he said.
That change is being shaped by the flow of institutional capital and RWAs, which impose requirements that DAO structures often struggle to meet.
“That's why we're seeing DAOs take the regulatory black pill and ditch the D that decentralized autonomous organizations did,” Pinnock said.
As protocols evolve, some are moving toward clear legal frameworks and central performance standards, while others continue to prioritize open participation and community governance.
Although it is looking at the entire corporate structure, it still functions as a DAO today. He presented the proposal as a “thermometer” to indicate that no final decision had been made. It still needs to vote on governance and get the token buyers' blessing.
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