The first DAO launched in 2016 as a bold experiment in decentralized investment fund management. Despite a disastrous hack that derailed its initial implementation, the concept proved resilient enough that by 2021, DAOs had proliferated across the blockchain landscape, managing protocols, communities, investments, and even some ambitious real-world assets.
 

Yet as DAOs scaled, fundamental problems became apparent:
 

First, participation remained stubbornly low despite theoretical inclusivity. Even in high-stakes votes affecting billions in value, voter turnout frequently falls below 10% of eligible token holders. This creates legitimacy problems—can a decision truly be called "decentralized" when 90% of stakeholders remain silent?
 

Second, decision-making processes proved agonizingly slow. Simple proposals often take weeks to implement, with complex ones stretching into months of discussion, voting, and execution. In fast-moving markets, this glacial pace became a competitive disadvantage.
 

Third, the "one-token-one-vote" mechanism created vulnerability to manipulation. Wealthy entities could simply buy voting power, undermining the democratic ethos. Vote buying, last-minute whale interventions, and governance attacks became common enough to undermine trust in the model itself.
 

Finally, expertise gaps emerged in technical decisions. Token ownership doesn't correlate with specialized knowledge, yet complex technical proposals were subjected to majority rule, sometimes leading to suboptimal or even dangerous outcomes.
 

These problems revealed a fundamental governance paradox: pure decentralization often comes at the cost of effectiveness. As one protocol founder lamented, "We've created organizations that are theoretically owned by everyone but practically governed by no one."