Why DAOs Still Haven’t Gone Mainstream

The term “DAO” (decentralized autonomous organization) sounds like a manifesto from the future: no hierarchy, transparent voting, fairness, equality, and inclusivity. In short, an open-source utopia.

So why have DAOs, in practice, failed to become a mainstream tool or a sustainable model of governance?

The answer lies not so much in technical hurdles, but in human nature itself.

For a closer look at how these governance structures work, read our article “What Is DAO in Crypto?”

Old Habits and Human Nature

Financial psychology is a stubborn force. When given a choice, people instinctively lean toward what they know: a more familiar interface, a clearer structure, someone to take responsibility (or someone to whom responsibility can be easily delegated).

However, DAOs demand more. They ask users to think, learn, and actively participate. Most people, though, do not want to govern—they simply want things to “work on their own.”

In traditional business models, decision-making is easily delegated to managers. In a DAO, you are both participant and decision-maker, even if you hold just a single governance token.

For many, that feels less like freedom and more like an added burden. And that’s natural—this is how we are wired. Factor in cognitive laziness, quick information overload, and the lack of free time, and the reality becomes clear: people find it easier to delegate important decisions to a centralized system with a clear hierarchy than to engage in the complexities of decentralized governance models like DAOs.

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And it’s not just about convenience.

We are creatures shaped by millennia of hierarchy. Feudal lords, kings, presidents, CEOs. Throughout history, we’ve been taught that authority flows from the top down. Horizontal structures are not just rare, they are an anomaly. Most of humanity’s historical experience centers on submission to vertical power, not its fair distribution.

Some early examples of DAO-like structures include: 

• Pirate ships, where captains were elected through open assemblies, a form of collective decision-making. 
• Hippie communes, where no single individual controlled daily life, yet organization and customs kept the communities running.
• Some forms of popular self-governance, such as the Ukrainian Cossacks, who made decisions and elected leaders publicly on the central maidan (square).

History shows that while these decentralized models left behind a powerful legacy, they rarely endured for long. Still, their traditions and spirit continue to inspire modern experiments with decentralization.

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The real challenge for DAOs is that they promise equality, but human nature craves authority. People seek guidance, leadership, charisma, influence. It is built deep into our neurobiology. In times of uncertainty, we instinctively gravitate toward those who project confidence. A pack will always follow the leader willing to take responsibility.

Because of this instinct, many DAOs end up with informal leaders. Often, it is the strongest developers, founders, or prominent figures who start to influence decisions, even without holding formal power.

This creates another phenomenon: pseudo-decentralization. The surface may look democratic, but the underlying mechanisms remain the same old hierarchies.

DAOs often miss that true horizontal governance does not require less involvement. It demands far greater maturity.

Related: Machiavelli in DAO Governance

Beautiful, Transparent, but Still Not Mainstream

Yes, DAOs offer transparency. Every action is recorded on the blockchain.

But the real challenge lies elsewhere: 

• Can we truly rely on “mass competence”? 
• Who actually votes with the collective good in mind?

In large communities without clear structures, it becomes difficult to set meaningful standards for decision-making. It is like choosing a surgeon based on Instagram likes rather than professional experience.

DAOs will likely face an urgent need for scalable, verified reputation systems. Without them, blockchain voting risks slipping into hype or fiction.

Related: Cryptodemocracy Unleashed: Initiating Change and Voting in DAOs

Who Really Runs a DAO?

The main contradiction is hard to ignore: those with more tokens have more votes. In practice, decentralization often comes down to a concentration of capital. It is not the smartest or the most altruistic voices that carry the most weight. It is the wealthiest.

In decentralized organizations, whales (large token holders) have become the new aristocracy of Web3. De jure, they are not elected. De facto, they already concentrate real power in their hands.

For example, the study Analyzing Decentralized Voting to Amend DeFi Smart Contracts offers a detailed analysis of how voting power is distributed within Compound DAO.

Analysts found that just 10 participants controlled 57.86% of the total voting power within the organization. In effect, fewer than nine voters were enough to push proposals past the 50% threshold needed for approval.

This points to a high concentration of power and exposes the vulnerability of a project that markets itself as a fully decentralized organization.

A separate study by ETH Zürich found a similar pattern in Uniswap DAO, where nearly half of all voting power is concentrated in the hands of just ten major token holders. In reality, this means a few individuals can make decisions that affect the entire community. And this setup looks less like decentralization and more like a VIP club.

Another study by researchers at the University of Glasgow found that MakerDAO is not immune to the same problems. They discovered that a small group of participants controls a significant portion of the voting power, casting doubt on the true decentralization of its governance process.

The list of questionable DAOs does not end there. Dig a little deeper, and almost every organization claiming to be decentralized reveals a few centralized skeletons in the closet.

The Technical Gap Between Idea and Reality

DAO sounds great on paper.

But try explaining to your friends:

• How to create and activate a wallet 
• How to connect to a dashboard 
• How to vote 
• What exactly they are supposed to vote on

It quickly turns into a challenge with an asterisk. And in a DAO, you might not have any friends to help you. That means, at any given moment, plenty of participants may not even fully understand what they are doing. 

For now, DAO interfaces still look and feel like tools built for developers. Everything is complicated, confusing, and demands a level of technical skill. This is not UX; it’s a quest, complete with crypto crosswords.

Most DAOs suffer from the same problems: 

• Low engagement 
• Uneven participation 
• Inexperienced newcomers 

For DAOs to truly become mainstream, they need to be wrapped in a user-friendly, human-centered interface. Just as browsers once turned the internet from a playground for tech enthusiasts into an intuitive space where even your grandmother could find a new cake recipe.

If you think DAOs have failed to catch on simply because they have not been given a real chance, take a closer look at history:

• The DAO (2016) 

The first and most ambitious “decentralized” crowdfunding project ended in a $50 million hack and a hard fork of Ethereum. The lesson? A good idea is no substitute for strong security and mature code.

• SquadDAO 

An organization that managed funds through internal voting. Everything worked fine until the treasurer exploited a vulnerability in the smart contract and disappeared with a portion of the funds. DAO governance failed to protect against a very human flaw—greed.

• Build Finance DAO 

The organization was taken over from within when an attacker gained full control of its contracts by proposing a protocol change that the community carelessly voted to approve. Many simply did not realize what they were voting on.

However, none of these examples mark the failure of the DAO idea itself. They highlight a simple truth: code cannot replace management experience, ethics, or well-designed processes.

Read more: ArbitrumDAO Turns 2 With a New Vision for the Future

DAO Adoption: Not Yet for Everyone, but Not a Failure Either

DAO is not a mainstream product—at least, not yet. But if DAOs are ever going to break out of the tech niche and become a widely used tool, they will need to evolve.

What could make the difference?

1. A Human-Centered UX

Platforms must become as intuitive as Instagram or Spotify. No complicated gas mechanics, fully automated wallets, and clear, simple interfaces. People do not want to interact with smart contracts. They want to click a button and feel confident that they did not make a mistake. For now, that is simply where things stand.

2. Education and Storytelling

No one will dive into the mechanics of a DAO without a compelling story behind it. If you want people to vote, you have to explain why it matters. Build a narrative around it. Show, in simple terms, what the consequences of each decision could be. Without emotional engagement, no form of decentralization will stick.

3. Reputation Metrics

Voting systems should consider more than just token holdings. They should factor in activity, engagement, and experience. Tokens are important. But the voice of someone who has spent two years growing the community should matter more than that of a random whale.

4. Hybrid Models

DAOs do not have to be fully decentralized. Hybrid structures can work too. A core team could propose decisions, with the community approving them, or the other way around. The point is not a perfect democracy, but real trust.

5. Thematic DAOs

It may make sense for some DAOs to become more niche. For example, DAOs for artists, local communities, or fans of specific projects. Where the motivation is shared passion rather than profit, the decentralized model tends to work much better.

It is unlikely that DAOs will ever replace traditional governance structures. But they could become an important addition. Maybe they will find a natural home among creative collectives, local initiatives, and communities of people who genuinely want to build something new, not just chase profits.

And that would already be a lot. Because in every DAO, even the roughest one, there is the seed of a world where we take responsibility into our own hands. For now, DAOs have not gone mainstream. But maybe it is not that DAOs are not ready for the mainstream; maybe the mainstream is not yet ready for DAOs.

And that is perfectly fine.

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