A look at the rise of DAOs as they wrestle with infighting and other challenges; DeepDAO: the value of cryptocurrencies held in DAOs rose 3,200% in 2021 to $13B
The cryptocurrency boom has spawned enterprises democratically governed by a community of users. Or that's the theory. Tweets: @blockanalia , @annmlipton , @ericliptonnyt , and @ericliptonnyt Tweets: Andrew T / @blockanalia : Cool to see my work cited in the NYT, but a classic example of “Of what use is such an invention?” — which was the NYT's take on telephones in 1876. https://www.nytimes.com/... Ann Lipton / @annmlipton : leaving aside all the fraud-y stuff, aren't the daos just, you know, reinventing cooperatives? but on the blockchain? https://twitter.com/... Eric Lipton / @ericliptonnyt : NEW: Crypto industry-backed by billions in VC capital-is pushing a radical new business structure called DAOs. It distributes decision making. A virtual commune vs corporation. Guess what? Lots of problems have cropped up.We examine them. With @el72champs https://www.nytimes.com/... Eric Lipton / @ericliptonnyt : THREAD: The crypto industry has spawned a new kind of corporate entity-an anti-company company. Decentralized autonomous organizations-DAOs. They rely on crypto owners to vote on decisions, instead of C-suite/highly paid corporate board. Here's our piece https://www.nytimes.com/...
Context & Ripple Effects
The NYT piece lands at the end of a long arc: researchers flagged code vulnerabilities in The DAO back in 2016, and by late 2021 community DAOs like Flamingo and Fingerprints were raising funds through blue-chip NFT drops while critics warned that [[a:973377|crypto tokens let venture capitalists offload investments to an enthusiastic public with no regulation]].
What has changed is scale and scrutiny. DeepDAO pegs crypto held in DAOs at $13B after a 3,200% jump in 2021, and the same boom that drew $28B+ in startup funding is now forcing the governance model itself into mainstream view — with law professor Ann Lipton asking whether DAOs are simply reinventing cooperatives on a blockchain.
First-order effects
- DAO members and treasury holders now govern billions in assets through voting processes already showing infighting, so disputes over direction directly put large pools of member capital at stake.
- The pseudonymous operators profiled in recent crypto coverage — founders whose names some VCs never learn — are the same people increasingly controlling these multi-billion-dollar treasuries.
Second-order effects
- If DAO governance keeps producing gridlock and fraud-adjacent episodes, the unregulated token-distribution channel VCs used in 2021 faces pressure for disclosure rules that treat DAO treasuries more like managed funds.
- The cooperative comparison Lipton raises gives traditional co-ops and mutual organizations an opening to argue their century-old governance playbooks as the fix, pulling DAO tooling toward established legal forms.
Third-order effects
- If the pattern holds, DAOs split into two camps: those adopting formal legal wrappers and delegated decision-making that resemble cooperatives, and those staying fully on-chain where governance failures remain unresolved — widening the broader crypto legitimacy gap between institutional-grade structures and speculative ones.
The trend: Decentralized governance is scaling its balance sheets far faster than its decision-making mechanisms, pushing DAOs toward either cooperative-style structure or renewed regulatory attention.