DAOs struggle to overcome old-fashioned governance fights

Context: The issue at the heart of the Aragon drama is an intriguing one from a business and philosophical perspective: What if the market values the assets owned by a project more than it values the project itself?

Between the lines: In the blockchain space, this happens when the market cap of a token is worth less than the value of the assets in the treasury that token theoretically controls.

• A token is sort of like stock. It is meant to have control a crypto project, and is, therefore, a way of establishing a value for that project in the market. Aragon has the Aragon Network Token (ANT).
• Aragon was funded initially with a $25 million initial coin offering in 2017, where it sold ANT to the public.

There are three groups in this story: the Aragon Association, which launched the Aragon project and created the governance tools it's known for. The association has a bunch of crypto assets (over $170 million worth) it earned selling its ANT token.

• There is the Aragon DAO, of which everyone who holds ANT is a member. Someday, the Aragon assets are meant to be controlled by this group — the DAO had voted last year to take control of the treasury — but the association hasn't turned them over yet.
• And third, there is the group of investors who have pushed moribund projects to return their assets to investors, or at least to get their token market caps back in line with their treasury values.

The intrigue: The basic structure of most DAOs, including Aragon, is that anyone with a token can participate in governance, from voting to discussion.

• But the Aragon core team recently shut out several new arrivals to its governance forums, despite the fact that they were token holders, accusing them of attempting what looked like a hostile takeover.

The latest: Aragon's treasury had been worth more than the ANT market cap, but the gap shrank when one of its cofounders proposed token buybacks to get the values back in line.

• As of this writing, its token's market cap is $129 million. Its treasury is worth $172 million.
• Be smart: In a mass sale of either, neither would get anywhere close to that full dollar value.

Flashback: We previously covered the unwinding of another DAO, Fei, which found itself in a comparable position.

• Separately, the ROOK DAO recently dissolved, returning its assets to token holders.
• Of note: Aragon Association accused the new ANT holders of being the same parties who had dissolved ROOK.

Quick take: The decision to do more buybacks can only be read as a concession to the investors the Association has tried to shut out, and the market is responding now to an anticipated supply contraction.

What they're saying: "Progressive decentralization is an ongoing process and we are committed to moving the treasury into the hands of ANT holders when it’s safe, and for the purpose of advancing the project’s mission," the Aragon core team wrote in a blog post.

Yes, but: “There is no doubt that community management and governance are hard, but selectively removing the voices of the few tokenholders who want to engage strikes me as a massive step in the wrong direction,” Alex Woodard of Arca, an investment firm that has advocated for getting tokens and treasury back in line, wrote in a now unpublished open letter to Aragon.

💭 Our thought bubble: There's a certain irony in a project designed to facilitate governance facing this governance breakdown.

• Zoom out: Joseph Delong was the CTO at SushiSwap, a crucial early DAO. He's now a DAO doubter (a DAOter?), and wrote a bit of a fable about the structure on Twitter last year.

The bottom line: "We believe humankind should use technology as a liberating tool to unleash all the goodwill and creativity of our species," Aragon's manifesto says.