Shift to Community-Led: Practical Challenges in DAO Transition

Disclaimer: This article is for educational purposes only and does not constitute investment advice.

The Contradiction of Decentralization: The Gap Between Ideals and Reality

Cryptocurrency projects aim to establish a fully decentralized autonomous organization(DAO) as their core principle. However, during the initial stages of founding, they inevitably start from a centralized structure. When founders make all decisions regarding protocol architecture, tokenomics, and technical specifications alone, rapid decision-making is essential. Yet, there exists a fundamental contradiction between this “benevolent dictatorship” system and the long-term vision promoted by Web3 and decentralized finance.

While transitioning to decentralization is undoubtedly a crucial goal, it must be done gradually and cautiously to avoid threatening the project’s survival. The greatest risk is that, at an early stage when the community is still immature, there may be a lack of the specialized knowledge and institutional infrastructure necessary for managing complex protocols.

Gradual Delegation of Power: 3 Milestones

The first step in DAO transition is designing the governance mechanism by the founders. This typically involves issuing governance tokens and distributing voting rights among community members. Decentraland has become a model case in this process. First, the Decentraland Foundation was established, a community forum for proposals and discussions was built, and then the MANA governance token was introduced. Holders of MANA or LAND tokens can propose and vote on platform changes and community treasury policies.

In the next phase, to avoid disrupting actual protocol operations, “non-binding advisory votes” are conducted to test governance mechanisms. Subsequently, only limited parameter adjustments such as fee structures and interest rates are decided through on-chain voting. This phased approach helps mitigate the risks associated with full delegation of voting rights.

The final stage is achieving full DAO autonomy. This occurs when the core team relinquishes all control over protocol modifications and community treasury expenditures. At this point, the code becomes law, and all changes are executed solely based on community consensus.

Technical Requirements for Achieving True Decentralization

To fully realize decentralization, it is necessary to guarantee complete immutability of the codebase, preventing arbitrary changes by founders. Software updates, bug fixes, and feature additions can only be implemented with community approval.

Simultaneously, DAOs must build self-sustaining revenue models. Revenue generated through transaction fees, lending interest, and other mechanisms is directly deposited into the community treasury, with its allocation decided by community voting. This system enables the project to continue protocol development and operation without external support from the founding team, thereby ensuring long-term longevity.

No NPC Society: Aiming for Rapid Transition

No NPC Society, a memecoin embracing the “Simulation Hypothesis” and an identity project promoting decentralization, has its main goal set on full DAO autonomy. Its roadmap includes a swift transition schedule, delegating treasury and management rights to the community within six months after token sale.

To achieve this, the project leverages Solana’s Realms platform to streamline DAO structure and grants governance voting rights to native NONPC token holders. To maximize transparency, it employs multi-signature wallets for distributed management, ensuring complete visibility into democratic processes. This design allows the project to evolve beyond the founding team, with team members stepping back to an equal footing with regular community members.

Challenges and Countermeasures in DAO Governance

In reality, many projects face issues such as decision-making stagnation, low voter turnout, and excessive influence by large token holders (whales).

To address low voter turnout, projects introduce various incentive schemes to encourage DAO participation. Mechanisms like participation rewards and early voting bonuses can reduce voter apathy.

To prevent whale dominance, adopting more sophisticated voting models is essential. Reputation-based governance determines voting power based on actual contributions to the project rather than token holdings. Another approach is Quadratic Voting(, which reduces the voting weight of large holders and narrows the gap between small and large token holders.

Improving proposal processes is fundamental for successful DAO governance. Creating an environment where community members can systematically submit proposals, clearly explain their content and potential impact, and present simple options like “Approve” or “Reject” is crucial.

DAO Transition as an Indicator of Project Maturity

Transitioning to DAO governance involves overcoming numerous hurdles, including technical challenges, institutional design, and community maturity. It can only be implemented at the appropriate time once a well-established community has formed.

When management and ownership are dispersed across a vast global community, the project’s reliability and long-term lifespan are significantly strengthened. Completing this power delegation is not merely a structural change but a decisive achievement that embodies the project’s maturity and commitment to decentralization.

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