The Death of DAOs: How Crypto’s Governance Experiment Got Corrupted

DAO drama and DAO Governance has personally taught me more than any college degree, job, campaign, project or company I have been a part of. Its the convergence a wide array of skill sets very few in the world have. Brand Building, Narrative, Incentive distribution, Investment, Design, Tokenomics, Security, Yield Strategies, Biz Dev, Liquidity, Smart Contract Development.

There are far more comfortable paths to earning a living than winning, failing in public. But comfort is not what brought any of us into crypto. We came for permissionless systems, radical experimentation, meritocracy over credentialism and upside.

So if you’re in the arena, you owe it to the experiment to speak honestly, critically, and openly about how to make this thing run smoother.
https://x.com/bryancolligan/status/1881348021205782757

This isn’t an attack piece. It’s a mirror.
And like most mirrors, some folks won’t like what they see.

📖 Table of Contents

1. How We Got Here: From Cypherpunk Dreams to Legal Nightmares
2. The Chainlink-Elixir Meltdown: $200K In, $500K Gone, Zero Accountability
3. The Myth of Meritocracy: Sentiment Decides the Budget
4. Shadow Governance: The Unseen Power Behind the Proposals
5. Delegates, Service Providers, and the Fear of Truth
6. When Everyone’s an Expert, No One Votes Right
7. Tragedy of the Commons: Why Some DAOs Are Ghost Protocols
8. Lessons from TradFi: Why Boards, Budgets, and KPIs Actually Work
9. The SubDAO Proposal That Got Shot Down
10. Sentiment Over Substance: When Vibes Win Votes
11. The Attention Collapse: What’s in Your Wallet?
12. Can DAOs Reform?
13. We Can’t Collude Together Forever

1. How We Got Here: From Cypherpunk Dreams to Legal Nightmares

In 2017, Bitcoin had a governance crisis. There was no upgrade path, no formal process, no EIPs, no Discord governance channels. Just forums. People like Tony from BitPay and Mike Belshe proposed increasing block size, but there was no structured way to make it happen, debate, communicate have consensus on the path forward.

That failure birthed governance. And governance birthed DAOs.

DAOs were the first real attempt at on-chain consensus. The idea? Let the token holders decide. If you had skin in the game, you had a say. But DAOs couldn’t sign contracts. They couldn’t pay vendors. So foundations emerged. The off-chain arms meant to do the legal and IRL(in real life) work. It was a hack, a compromise, a necessary evil.

And now, as Miles Jennings from a16z points out in his recent piece, that structure has outlived its usefulness.

2. The Chainlink-Elixir Meltdown: $200K In, $500K Gone, Zero Accountability

Let’s get concrete.

A lending protocol recently integrated a Chainlink oracle labeled “high risk.” A $200K buy of the Elixir token which launched on a new chain with very thin liquidity, caused a $500K liquidation event. One trade. Half a million dollars lost. The market broke, and no one was accountable.

Not the oracle. Not the lending protocol. Not the asset team.

It was like watching a slow motion car crash and everyone argued who was at fault, the road, the car manufacture, the roadsigns or the driver. This is the danger of decentralized systems is: when everyone is accountable no is accountable.

3. The Myth of Meritocracy: Sentiment Decides the Budget

I proposed a SubDAO structure: a president, KPI-driven teams, real accountability. It would’ve brought executive discipline to the mess of forum chaos and delegated responsibility dance.

The response?

Too much voting. Too much transparency. Delegates whispered that it would “hurt the brand.” Some grumbled that radical responsibility would hurt their service fees.

The lesson? Good ideas die in public when responsibility is delegated.

Without aligned incentives the status quo is to do nothing. Even if the current system is not working.

Who are you to claim the DAO is broken?

Best to keep small keep getting paid and avoid rocking the boat. The reality is most proposals are judged on sentiment, not merit. And the trolls? They don’t sleep. They post 24/7.

DAOs are complicated and delegates don’t have time to become an expert on every subject and read every proposal and post. The only thing a delegate can do is re-delegate responsibility to the sentiment of community.

4. Shadow Governance: The Unseen Power Behind the Proposals

Many DAOs already run like centralized companies, just with fewer rules and no legal accountability. Most Proposals are pre-negotiated in DMs, sidebars and backrooms. Telegram chats determine outcomes. Tokenholder forums are theatre.

This isn’t always malicious. In fact, it’s often survival. The process is too slow, too chaotic, too filled with unknowns. So people cut corners. But the result is a system that pretends to be transparent while operating in shadows. Proposers can’t afford to lose the sentiment of the community.

And when that happens, the collaborators win. Collaboration quickly turns into diplomatic corruption. You know the old saying:

Weak men create hard times.
Hard times create strong men.
Strong men create good times.
Good times create weak men.

I believe the first step of good time to weak men is diplomatic corruption.

5. Delegates, Service Providers, and the Fear of Truth

I don’t blame the delegates. Or the service providers.

Everyone is stuck in a broken incentive model. Especially If you’re a delegate working across multiple DAOs, you can’t speak hard truths without hurting your future deals, income and relationships. If you’re a service provider trying to keep contracts alive, you can’t call out inefficiency without making enemies.

We’ve created a world where honesty is punished and silence is rewarded.

Once again it’s not anyone’s fault. It’s the system. And systems can be redesigned.

6. When Everyone’s Expected to be an Expert, No One Votes Right

Here’s a confession, I don’t know how to audit smart contracts.

I probably shouldn’t be voting on risk parameters for lending protocols. Most delegates shouldn’t either. But we ask them to anyway, same goes with marketing, tokenomics, business development, liquidity, and design.

In simpler times around founding of America, everyone was a landowner, all the voters had the same job, a shared experience. Democracy makes sense. Voting citizens knew what a good vote looked like. But even the founders knew it was a burden to vote on everything and that’s why America is a republic.

But in DAOs the shared experience is missing. In a world of hyper-specialization, where one person can’t possibly master everything.

Flat democracy collapses under the weight of complexity.

Expecting universal expertise is delusional.

We must trust institutions we must trust delegates and that is the moment when diplomatic corruption starts.

7. Tragedy of the Commons: Why Some DAOs Are Ghost Protocols

In too many DAOs, the founders have moved on to the next project. The early investors cashed out. What’s left?

A treasury.
A token.
A slow, soft death of the DAO.

It’s a tragedy of the commons. Nobody owns the downside. Everyone wants their slice before the pie runs out.

Call for accountability and you’re calling the game. Try to optimize the treasury and align incentives you’re centralizing the protocol.

But the truth is, if no one’s incentivized to act like an owner, the protocol and DAO deteriorates and eventually collapses.

This is how commons collapse. Slowly, then all at once.

8. Lessons from TradFi: Boards & Budgets

You know what is tough to admit?

Corporate governance works.

It has fiduciary duty. Conflict disclosures. Compensation tied to performance. If a CFO messes up, they’re fired, not rotated onto another DAO proposal.

Miles Jennings gets this. His article isn’t some anti-crypto creed. It’s a realist’s roadmap for what comes next: structures like BORGs and DUNAs, new models that blend off-chain accountability with on-chain autonomy.

He’s not killing the dream. He’s refining it.

9. The SubDAO Proposal That Got Shot Down

Back to that subDAO proposal. It laid out nine business units, risk, marketing, dev, product, institutional sales, each with goals, KPIs, and rotating leadership.

https://x.com/bryancolligan/status/1881348021205782757

The response?

Too many things to vote on. Too much structure. “Let the vibes decide.”

But here’s the irony: the most successful protocol in DeFi, Aave, is already doing this. They’ve got subDAOs. They’ve got a “benevolent dictator” model. And it works. They’re winning.

You don’t have to like it.
But you can’t ignore it.

10. Sentiment Over Substance: When Vibes Win Votes

Here’s how most proposals get passed:

1. Write something vague but exciting.
2. Get a few big delegates to co-sign.
3. Spin up a meme, post on Twitter.
4. Wait for “looks good to me” comments.
5. Pass.

The problem?

No one reads the proposal. No one checks the math.
And the few who do?
They get ratioed by sentiment.

We reward vibes.
We punish diligence.
And we wonder why DAO treasuries keep shrinking.

11. The Attention Collapse: What’s in Your Wallet?

Here’s the harsh truth: I have hundreds of tokens in one wallet. Most are worth less than a Five Guys cheeseburger. Some I don’t even remember receiving.

And I’m all in on crypto.

If I can’t track all the tokens, How can we expect anyone else to?

It’s not apathy.
It’s overload.

We need better filtering.
We need domain-specific delegation.
We need expertise, not everyone votes on everything noise.

12. Can DAOs Reform?

Yes.

I’m bearish on DAOs in their current form. But I’m wildly bullish on their potential.

We need:

• SubDAOs with aligned incentives.
• Reputation-weighted voting.
• Incentive alignment across the stack
• Mechanism Designs that rewards honesty

And above all, we need to keep experimenting.

The foundation era is over. Let it end.

But let’s build what comes next with eyes open, incentives aligned, and truth above all.

13. We Can’t Collude Together Forever

If we don’t start telling the truth about where and why DAOs are breaking, they won’t be here in five years.

They’ll collapse under their own contradictions, just another Tower of Babel, undone by its own diplomatic corruption.

It doesn’t have to be that way.

Governance isn’t just a system. It’s a mirror. It shows us who we are, what we value, and how we lead.

We can fix this. We can rebuild. We can evolve.

But we have to do it now.

So here’s my ask: Be honest. Be experimental. Be uncomfortable.

Because the next great DAO won’t be the one with the best meme.

It’ll be the one that rewards the truth.

Special thanks to Ross Gates, who helped proofread and co-architect the subDAO structure for accountability.