Several years ago, decentralized autonomous organizations (DAOs) seemed to embody the ideals of crypto-anarchism. A future without hierarchies and bureaucracy, where decisions are made by the community through smart contracts, code replaces the need for trust in individuals, tokens distribute influence, and voting replaces politics. However, something has gone awry.

The number of cases involving the suspension or freezing of DAOs is increasing. Voting barely reaches quorum, forums are empty, treasuries remain frozen, and projects are shutting down. Instead of discussing death, people use careful phrases: "temporarily suspending governance," "reviewing the model," "optimizing processes for speed."

What happened? Did the idea collide with the laws of human psychology, power, and economics, or are we witnessing a crisis that will lead to a significant evolutionary transformation of the system? Let's explore this with experts.

Understanding DAOs and Their Challenges

Today, over 12,000 decentralized autonomous organizations manage assets totaling around $28 billion. The average voter turnout is about 20%, with in many cases only one in ten actually exercising their voting rights. What initially promised radical decentralization (one token, one vote; decisions made by the community rather than a board) looks quite different in 2026.

In January, after the exit of Scroll DAO's leader, the organization completely suspended its activities due to uncertainty about which proposals were under consideration. How this aligns with the principle of transparency is unclear. Previously, Jupiter froze all governance votes and blocked access to its funds, first until 2026, then until 2027. Yuga Labs abandoned its DAO, citing inefficiency.

More often, decentralized organizations have experienced less dramatic scenarios. For instance, a rollback to a centralized model, where real power shifts to the development team, leaving the DAO as a mere formal structure. Thus, Compound has gradually transformed from an open system into a club of delegates.

Uniswap is trying to maintain decentralization (voting with tokens and on-chain execution), but in practice, it leans towards centralized decision-making through thresholds, filters, and a delegation model—this is intended to reduce governance overload and increase efficiency, but it simultaneously narrows the circle of actual decision-makers.

A group of researchers from Cornell University in 2025 published findings on the governance protocols of Compound and Uniswap.

"By analyzing over 370 governance proposals and millions of blockchain events from their inception until August 2024, we found significant centralization of voting power: just three to five voters were enough to influence the majority of proposals. We also discovered that the cost of voting disproportionately falls on the shoulders of small token holders, and strategic voting behaviors, such as delayed participation and coalition formation, further distort governance outcomes. Our findings show that despite their decentralized ideals, existing DAO governance mechanisms do not meet expectations in practice," the authors stated.

Why is this happening? The idea was simple and appealing—give people tools for governance, wallets, interfaces like Snapshot or Tally, and they would jump into action. In a DAO, every token holder could directly influence the project's fate. But participation requires effort: hours spent reading proposals on forums, understanding complex tokenomics where yield farming, impermanent loss, and gas fees intertwine into a puzzle. Then there's the need to vote on questions without clear answers, such as: "Should we increase token issuance to stimulate liquidity?"

In reality, the picture is different: one percent of token holders controls ninety percent of voting rights. This is not a system failure but a reflection of human nature: enthusiasm for governance gives way to apathy and the delegation of responsibilities to either an oligarch or artificial intelligence.

DAOs have hit the limits of their architecture, facing a lack of motivation and the peculiarities of tokenomics. Simply put, if the principle of capital is embedded somewhere, you cannot escape the costs of capitalism. Experts we consulted are divided into two camps: some argue that the idea of DAOs has failed, while others assert that the model is simply seeking more sustainable forms of existence.

Believers in DAOs

Decentralized autonomous organizations tend to appear "effective" simply because they have many votes or high total value locked (TVL). However, this does not necessarily mean they are well-managed. Besides voting, execution, transparency, and the ability to allocate resources without constant manual intervention are crucial.

The effectiveness of DAOs cannot be measured by universal criteria, as these structures can be very diverse—from grant-based to protocol-based, from small communities to billion-dollar treasuries. A one-size-fits-all approach won't work. However, we can outline some general parameters.

When assessing the performance of DAOs, four blocks are typically considered:

  • Participation: how many people actually vote, how many delegates are active, what is the quorum and concentration of votes;
  • Speed and execution: how quickly a proposal moves from discussion to execution, and how many decisions do not get stuck;
  • Economic outcome: is the treasury growing, is there income, is value accumulation maintained for participants;
  • Quality of governance: is there any power capture, burnout, disputes, and constant rollbacks of decisions.

One could argue that the effectiveness of a DAO should be judged by how quickly and efficiently it transforms collective decisions into measurable results while maintaining transparency, sustainable decentralized participation, and economic benefits for the protocol.

By 2026, have DAOs proven their inefficiency as a form of governance? Web3 researcher Vladimir Menaskop answered this question unequivocally, but with the caveat that by effectiveness we should understand what he means—namely, the components that make up a DAO: decentralization, autonomy, and organization.

"As of 2026, DAOs are ineffective where they were created as a mere imitation of the process, as an attempt to evade responsibility (the peak of this being the case of bZx), rather than as an organically derived consequence of decentralization as a principle. If we take the largest lending protocol AAVE, here the DAO protects token holders from ineffective projects on one hand, while on the other, it safeguards against hacks, as many decisions are made at the DAO level. Therefore, AAVE is effective. However, the V4 has moved towards centralization, and immediately questions arose within the community about the threat of centralization of the DeFi project. A compromise has been found so far in the financial aspect—through revenue sharing, but this is only a temporary solution," Menaskop asserts.

According to the expert, a similar situation is observed in Uniswap, where complex disputes often arise, for example, regarding the implementation of BNB Chain or fees and payments for token holders, but ultimately everything develops in its own way. He considers Bitcoin and Ethereum to be effectively functioning networks, clarifying that these are "not classic firms, but rather global teal corporations, for which DAOs are not just a form, but the essence."

Moreover, Menaskop noted that effective DAOs are those that, in addition to standard voting, offer the community something more:

"For example, AAVE made an impressive revision of its tokenomics towards not just staking, but simultaneous buybacks; UNI replaced zero fees with positive ones; and SAFE implemented a proper claim for early users."

DAOs have not proven their inefficiency—they have rather demonstrated the limits of applicability. This is the view of Denis Smirnov from DAO Builders.

"I would describe what is happening not as a failure of DAOs, but as the end of their first, overly utopian version," he shared.

In his view, the mistake of the first wave was trying to reduce complex political coordination to voting: whoever has more tokens.

"DAOs work where there is a common resource, formalizable rules, and transparent execution: treasury management, grants, protocol parameter management, and so on," Smirnov clarified.


Web3 and artificial intelligence industry researcher, content strategist, and founder of Web3FuturePro Abubakar Yusuf Radda called in February this year not to lose faith in DAOs:

"In 2026, decentralized autonomous organizations will not replace governments or corporations—they will offer a superior alternative for solving specific coordination tasks: transparent funding, protocol management, community participation. As legal recognition grows and tools improve, we should expect the emergence of DAOs in impact financing, open-source funding, and even in pilot projects at the municipal level. The revolution is not top-down; it is distributed, occurring on the blockchain, and is just beginning."

We are entering the second generation of DAO governance, Radda believes, and while the next wave will not eliminate leadership, it will force us to rethink it—and that is already significant. He suggests paying attention to the following trends in the development of decentralized autonomous organizations:

However, he does not see DAOs as a panacea that eliminates politics, conflicts, and various injustices. They provide a means of programmable trust, which is rare in itself.

"Real change is not technological. It is a philosophical question. From centralized power to shared ownership. And this may be the largest experiment in governance of our time," Radda asserts.

The Death Squad of DAOs

However, some experts are convinced of the failure of this experiment.

Cyber~Congress co-founder Dmitry Starodubtsev bluntly states that DAOs do not work. In his opinion, avoiding the concentration of power in governance is unnecessary.

"Rather, we lack good leaders," he summarized.

Allbridge.io co-founder Andrey Velikiy also speaks of the collapse of the idea.

"The thing is, DAOs emerged as a way to transfer governance to the entire community. It turned out that a crowd of monkeys won't write 'War and Peace.' They cannot and will not govern anything. This community needs to be either highly motivated or this DAO will just drift along in the same way as a centralized system," the expert stated.


He reminded of a recent conflict between the community and developers in the AAVE ecosystem, triggered by the latter's attempt to seize control over the brand and revenues. Such scandals negatively impact projects and can destroy them.

"In my project, although I generally support the ideas of decentralization, I would hardly transfer governance of anything to the community. I believe in motivated voting. For example, if the protocol is already prepared to give some rewards to the community, to share revenue, profits, one can go for a DAO scheme, showing that the most active will receive more simply for pressing buttons and signing contracts," Velikiy explained his position.

At the same time, the expert noted another motivation: in several projects, DAOs were primarily used as a legal shield rather than a real mechanism for decentralization. According to him, in recent years there has been a shift towards more traditional forms—ordinary incorporation, especially in jurisdictions where it is easier for a project to build a clear legal and operational model. This seems logical against the backdrop of tightening regulation and rising costs for complex blockchain structures.

Concentration of Power—Normal or Desirable?

The situation where organizations intended to eliminate centralized control recreate it through tokenomics, despite its paradoxical nature, often appears to be a natural result of development.

Denis Smirnov believes that it is impossible to completely avoid the concentration of power in token-based governance, as such a structure almost inevitably concentrates capital. However, this can be mitigated by separating economic and governance rights, enhancing delegation based on expertise, introducing liquidity pools, reputation systems, and moving away from the model of "1 token = all power."

Andrey Velikiy shares a similar view. He states that avoiding the concentration of power is practically impossible because 90% of people simply will not vote for various reasons, including apathy and security considerations.

Despite his confidence that DAOs are "alive and well," Vladimir Menaskop also sees no possibility of avoiding centralization of power in them as long as voting is tied to the number of tokens. However, in his worldview, this does not contradict a commitment to the ideas of decentralization.

"Voting is about democracy, which is about the past; whereas DAOs are about anarchy, which is about the present and future," says the crypto enthusiast.

Menaskop reminded of a structural effect described in the late 19th to early 20th century by sociologists Robert Michels and Gaetano Mosca: any large organization tends to gravitate towards the power of a few over time, and an organized minority almost always proves stronger than a disorganized majority. This, according to the expert, does not mean that the successful functioning of decentralized autonomous organizations is impossible. It simply means that large communities need to be broken down into smaller working groups where decisions can be made more quickly and meaningfully, Menaskop believes.

It is precisely on this basis that DAOs are built—where one part of the questions is only of interest to a narrow circle of participants, while another, primarily financial, requires the involvement of a broader audience. Therefore, for decentralized autonomous organizations, small teams are particularly important, and the sustainability of governance depends on how genuine the grassroots decision-making level remains.

Often, as Menaskop believes, many topics turn out to be of interest to a limited number of listeners, viewers, and participants, while other issues—typically financial—are of concern to the overwhelming majority. Therefore, in DAOs, small groups of five to ten people are very important.

"For Web3 projects, this is native, and therefore 1inch provides payouts to token holders from a number of transactions, while UMA grants voting rights literally through email notifications. Thus, the grassroots decision-making level should not be merely formal but substantive. Then, if concentration of power is not impossible, it is unlikely," Menaskop clarified.

Concentration of power in token-based governance is almost an inevitable effect of the very structure, and it often has negative implications and hinders transparency. When voting is tied to tokens, power gravitates towards capital: most decisions are made by those who have accumulated tokens, while others either do not vote or delegate their votes to the same active participants. Therefore, the question today is no longer whether DAOs can completely avoid centralization, but whether it is possible to mitigate it through delegation, reputation mechanisms, and the separation of economic and governance rights.

Can and Should We “Revive” DAOs?

The mechanism of income distribution does not magically revive DAOs, but it can give tokens an economic reason to exist, thus providing frozen communities with an incentive to re-engage in governance. Andrey Velikiy agrees that this is a living format but notes:

"Tokens are generally dead right now—so what DAO are we talking about if 99% of projects on the market are stagnating with tokens, wanting to get rid of them? A token that has an additional function that needs to be proactively applied, rather than just working by itself, seems to me to be an illusion."

Menaskop takes a more optimistic view of the idea of bringing life back to frozen structures of decentralized organizations:

"I am currently in a DAO where three full compositions of participants have already changed: the first worked in 2016-2017, then came the team of 2018-2019, followed by a break when the organization functioned—strongly, but with several leaders, and a new period began around 2023 and continues now. How it will end remains to be seen. But the fact is that it is always possible to breathe new life into both small and large DAOs."

Reviving DAOs with diminished participation is only possible if there remains a real object of governance, believes Denis Smirnov. By this object, he means treasuries, products, protocols, or networks of participants.

"The essence of a new cycle lies in the combination of DAO plus AI agents: they will take care of the routine, proposal preparation, simulation, and tracking consequences, as well as part of operational management. Therefore, I expect the revival of DAOs on the horizon of the next year," Smirnov predicts.

Menaskop pointed out already existing transformations and listed the most successful cases:

  • BitDAO—the transition to Mantle (L2) gave a new impetus to development and evolution;
  • ENS—after a long search for its path, found it in a conditional agreement with Vitalik Buterin (not transitioning to L2);
  • SKY—its rebranding and relaunch can be considered successful, as there is economic growth;
  • Balancer—after a hack, it continued to function at a decentralized level.

In his opinion, the meanings for the revival of DAOs need to be sought in the economy, idea, and community. Firstly, new monetization models can rekindle interest. Secondly, without an idea and development, a product quickly stagnates. Thirdly, without a strong community, a DAO loses sustainability.

"DAOs are going through tough times: support for networks is being cut as infrastructure is expensive or very expensive; several projects are trying to revert to classic structures. But at the same time, the DAO market is currently experiencing a period where innovations help businesses grow in very challenging conditions, making it clear to many that classic, old management methods should simply be abandoned. And I advocate for these changes," the expert concluded.

A promising response to the governance crisis has been a fundamental rethinking of tokenomics. On another level—rethinking the philosophical foundations of governance. Those who view governance not as a formal option but as a product requiring as much careful attention as technology, or even more, will survive.

Today, most experts lean towards the belief that the sustainability of DAOs will be ensured by: hybrid governance structures, voting considering reputation and expertise, AI assistance in processing large data sets, and diversification of treasury assets. In any case, it is worth agreeing that the experiment continues. Whether to be a participant or an observer is a choice each must make.