The bear market of 2023 brought an unforgiving winter to the doorstep of much of DeFi, and DAOs (Decentralized Autonomous Organizations, for any new faces) were certainly not spared. The intensity and fervor of 2021 and 2022, which had borne witness to obscene influxes of capital to blockchain, had all but dissipated, and like the rest of the industry, it seemed that DAOs had fallen quiet. The Discord invites began to arrive fewer and farther between, the prices of NFTs plummeted back to earth, and the “DAOs will save the world” chatter which used to permeate seemingly-every corner of X (the artist formerly known as Twitter) had sunken to a low hum.
In place of the chatter, one could now hear whispers: “Are DAOs dead?”. The capitulation in the social perception of DAOs from good to bad happened as all things do, “Gradually - then suddenly”, with first a handful and then an avalanche of bloggers and “thought leaders” moving in to capitalize on what they believed to be a dying industry (as you can see from the image below). Social perceptions of DAOs as a potential solution to the nightmare of corporate culture soured and “If you’re in crypto, pivot to AI” became the rallying cry of many “DAO Experts” and “Researchers”, who ultimately revealed themselves to be little more than paid-blog-merchants turned heel in search of greener pastures.
But in the face of all the skepticism, FUD, and premature obituaries: DAOs have quietly and patiently endured – and they aren't just surviving; they're thriving. Contrary to recent signals doubting their efficacy (generated from 2023’s culling-of-the-herd), true onchain DAOs, particularly those built on the Governor framework, have continued to show remarkable growth and staying power in the face of adversity.
While sources like Jing Daily Culture (my favorite over breakfast tea), and Reddit's DAO community have cast shadows of doubt and dispersion, they largely miss the mark, citing anecdotal evidence and building arguments based largely upon the vaporous foundations of their own social media posts. While DAOs have certainly not been perfect (we still struggle to define the term itself, in fact, and we have a LONG way to go in regards to contributor compensation…but I digress), the narrative of DAOs' collective demise lacks empirical evidence. In reality, onchain DAOs are financially flourishing.
True DAOs are built using onchain governance – anything less falls short of table stakes. The distinction is important because many of the so called “DAOs” which formed and then succumbed to the winter of the bear market were actually little more than “groupchats with a bank account”, utilizing Snapshot Polls and multi-sigs in an attempt to recreate the efficacy of real onchain governance (see Unmasking DAOs — How to comprehensively analyze the decentralization of “DAOs”, by Perscheid et. al, 2022, for more information on “pseudo-DAOs”).
Though many of these endeavors were borne with good intentions, their failure to adhere to and properly pursue true decentralization of power is, in retrospect, reflective of their shortcomings as protocols and projects. Onchain governance isn’t something that can be done halfway. Commitment to true onchain governance is a signal of dedication to truth, visibility, and accountability. Lack of such commitment is a signal of the opposite.
Contrary to the gloomy predictions, the financial strength of DAOs is not only intact but booming: Data from Dune Analytics and other trusted sources such as DeepDAO and KarmaHQ paint a picture of surprising resilience and growth:
Overall Growth: The total value locked in these DAOs amounts to a staggering $32.1 billion USD (12.9 million ETH). This represents 10.75% of the total supply of Ethereum, indicating significant control and influence in the DeFi space.
Lido's Dominance: Lido shows an impressive $23.1 billion USD (9.2 million ETH), growing by 19.05% in the last 180 days and a remarkable 97.50% over the past year.
New Kid on the Block: BASE, Coinbase’s new layer-2, though smaller in total value, shows a phenomenal increase of 34064.85% over 180 days.
Steady Growth Across DAOs: Other DAOs like Arbitrum, Uniswap, and Optimism also exhibit substantial growth over both 180 and 365 days, indicating a resurgence in the industry despite the recent market downturns.
Further support demonstrated in image below via DeepDAO:
The governance structures of onchain DAOs (often criticized by those who have been wronged by the pseudo-DAOs described above) may in fact be their strongest suit. Studies of leading onchain DAOs such as Uniswap DAO, Arbitrum DAO, Lido, & more reveal robust, democratic, and effective governance models. Furthermore, as demonstrated above, real onchain governance appears to correlate with the financial success of DAOs and protocols, and because of that it’s important to understand both what kind of governance contracts to use and how to administer them. Enter Tally and Governor Bravo.
The integration of the Governor contract kit with Tally's frontend interface has continued to raise the standard of innovation and efficiency in onchain governance since its inception. This powerful combination has meaningfully improved the administration of DAOs, offering industry-leading levels of reliability, usability, and control (not to mention a splash of everyone’s favorite shade of purple!). So what are they and how do they work together?
Governor is an open-source smart contract which gives token holders full onchain voting capabilities through its Token, Governor, and Timelock Contracts, forming the backbone of over 90% of onchain DAO governance. It facilitates a wide range of actions, from treasury management to protocol adjustments, and because of its ubiquity has proven integral to maintaining a democratic and decentralized governance structure. Oh, and it’s constantly being upgraded with new features as the DAO ecosystem blossoms.
Tally serves as the most popular and user-friendly frontend for DAOs. It’s a match made in heaven, possibly bigger than Taylor and Travis (jk). It extends the power of Governor by providing an accessible platform where users can delegate their voting power, create or pass proposals, manage protocols, and upgrade smart contracts – once again all onchain. Tally is not just a tool; it's an ecosystem enhancer for DAOs and supports various blockchains, including Ethereum, Polygon, Arbitrum, and others (talk about versatility, damn). For operators, Tally simplifies the complexities of running a DAO, from building a homepage to managing proposals. For voters, it offers a unified platform to understand governance, vote on proposals, and delegate voting power. And for delegates, Tally provides a stage to amplify their influence and actively participate in the DAO’s decision-making process by creating detailed delegate profiles.
The combination of Governor and Tally has proven to be the most effective and reliable method for administering onchain governance. It ensures that the governance process is fully decentralized, with every action and decision recorded on the blockchain, maintaining transparency and accountability – which as we established earlier is a core tenet of those DAOs which continued to see success throughout the bear market.
In the grand theater of DeFi, DAOs have emerged not as a fleeting specter, but as a formidable, enduring force. The skepticism and premature eulogies that echoed around social media the past year fold and collapse in the face of the evidence of their financial resilience. By holding the reins of a staggering $32.1 billion USD (roughly 12.9 million ETH) onchain DAOs don't just occupy a niche in the DeFi space; they command a substantial portion of it, accounting for 10.75% of Ethereum's total supply.
As we stand at the precipice of what is sure to be another exciting year in DeFi, it's clear that DAOs, particularly those practicing real onchain governance, are more than just common participants on the stage of world finance—they are trailblazers hellbent on shaping its future – and they’re here to stay.
So the next time you hear someone tell you that “DAOs are dead”, feel free to politely correct them; or stay silent and carry on about your business, as you wish. But whatever you choose, remember this; we’re not afraid of doubters and we’re not afraid of silence. We built through silence and doubt all of last year, and we know a secret; DAOs have more power than you think.