Aave Founder Says DAOs Must Evolve

Stani Kulechov, the founder of decentralized lending platform Aave, says decentralized autonomous organizations (DAOs) need a rethink, namely, how much tokenholders vote on as opposed to input from leaders.

His comments came in the wake of governance disputes about the future of the protocol.

Kulechov said in an X post on Tuesday that DAOs, in their current form, are “extraordinarily difficult” to operate because of internal conflicts and proposals that can take weeks of forum posts, temperature checks and multiple votes to pass.

DAOs are intended to operate without core leadership, with all decisions made through community consensus; however, average participation rates in DAOs are estimated at 15% to 25%, which can lead to issues such as power centralization and ineffective decision-making.

“DAOs also become politicized very quickly and it’s easy for voting to become about attention. Participants take sides, lean toward the loudest voices, and form political alliances to get their own proposals passed later,” Kulechov said.

“It can often feel like we took the worst parts of corporate bureaucracy and removed the parts that create accountability in the name of decentralization. But that doesn’t mean DAOs are doomed. They are far from that,” he added.

DAOs should keep what works, leave the rest

Kulechov said the path forward needs to involve DAOs keeping what they “got right” and fixing “what they got wrong.”

He proposes that rules should stay in the code, DAOs typically resolve decisions through smart contracts on a blockchain, the treasury should stay visible to everyone, and token holders should still have input on major decisions.

Related: Vitalik Buterin proposes using AI to strengthen DAO governance

However, Kulechov argues that going forward, token holders shouldn’t vote on everything, because running the protocol day-to-day requires teams and leaders, not thousands of voters.

“Someone needs to wake up every morning with the full context in their head and make hard calls,” he said.

“The difference is that their decisions and performance are all on-chain and transparent, and token holders can fire the team when objectives are not met. Accountability is verifiable, and that is what separates this from a traditional company. There is no vendor lock-in.”

Aave governance proposals spark exit

Kulechov’s comments come amid a proposal, the “Aave Will Win Framework,” which passed a temperature check on March 1.

Soon after, a major governance delegate, the Aave Chan Initiative, announced it would wind down its involvement with the Aave DAO over concerns with the governance standards and voting dynamics during the proposal process.

In January, another proposal to transfer control of Aave’s brand assets and intellectual property to its DAO failed, prompting renewed debate within the Aave community over the protocol’s long-term direction and governance structure.

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