ENS and the Limitations of DAO Governance

Will Gottsegen is CoinDesk's media and civilization reporter. He holds ETH and 2 NFTs supra CoinDesk's disclosure threshold of $1000.

Last month, Twitter sleuths uncovered a cache of homophobic and transphobic posts from Brantly Millegan, manager of the Ethereum Name Service Foundation (ENS), roiling the crypto community.

“Homosexual acts are evil. Transgenderism doesn’t exist. Abortion is murder. Contraception is perversion. So is masturbation and porn,” work 1 of Millegan’s tweets from May 2016.

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Responding to backlash, Millegan doubled down, chalking up the position to his Catholic faith. “Nice to spot immoderate ppl yet work the archetypal connection of my bio,” helium wrote (his Twitter bio says “Catholic, husband, father”).

It was capable to get him fired from his presumption arsenic manager of operations astatine True Names Limited, the Singapore-based nonprofit that organizes and funds the Ethereum Name Service. After 2 days of deliberation, Nick Johnson, Millegan’s brag astatine True Names and the laminitis of ENS, said helium felt Millegan’s presumption was “no longer tenable.”

The drawback is that portion Millegan had been removed from True Names Limited, helium wasn’t truly gone from the enactment arsenic a full – and successful a ballot that ended this past weekend, the assemblage confirmed that Millegan volition enactment connected arsenic manager of the ENS Foundation and stay a halfway developer connected the project.

That’s because, somewhat confusingly, “ENS” refers to a multi-part organizational structure, arsenic opposed to a azygous company.

ENS is simply a programme connected the Ethereum network, a strategy for turning long, numerical Ethereum addresses into text-based shortcuts. It functions similar a top-level domain connected the net we’re already utilized to. In the mode that the “.com” suffix shortens an different unwieldy IP code into thing useful and readable (e.g. “google.com” alternatively of “142.250.65.238”), the “.eth” suffix gives traders a speedy mode to place a circumstantial code connected the Ethereum network.

The ENS Foundation is simply a institution incorporated successful the Cayman Islands, the ineligible entity down ENS. It’s governed by the ENS DAO (decentralized autonomous organization), which is fundamentally a crypto-backed voting work connected the blockchain. It uses a home-brewed cryptocurrency, ENS, to delegate proportionate voting powerfulness (one token is 1 vote).

When a DAO subordinate puts distant a proposal, it’s up to different members to usage their ENS to either ballot for it oregon against it. There’s besides a delegate system, done which token holders tin take a typical to power their votes for them.

ENS distributed ENS tokens to anyone who’d utilized the work connected oregon earlier Oct. 31, 2021. To those who didn’t attraction astir participating successful DAO votes, it felt similar escaped money, since the tokens are besides worth something connected decentralized exchanges. (Disclosure, I claimed immoderate ENS tokens past autumn and cashed retired immediately.)

Because True Names Limited operates arsenic a accepted institution and isn’t beholden to a decentralized governance structure, it was capable to occurrence Millegan soon aft the offending tweets were unearthed.

Removing Millegan from the ENS Foundation, however, had to beryllium enactment to a DAO vote.

That vote was progressive for the past 7 days connected a crypto voting level called Snapshot. Yesterday, it officially failed to pass, with 1.6 cardinal ENS tokens voting “against” Millegan’s removal, and 1.4 cardinal tokens assigned to the “for” position. Around 19% of the full votes formed (698,000 tokens) were abstentions.

While the determination not to region Millegan from the ENS Foundation seems democratic, it’s important to retrieve however precisely voting powerfulness was initially distributed this past fall. Thanks to the inequitable organisation and delegation of tokens, Millegan has ever had outsize powerfulness implicit this ecosystem. This is what distinguishes the DAO governance exemplary from the co-op model, wherein each assemblage subordinate gets 1 ballot nary substance their presumption successful the hierarchy.

A 4th of the full ENS proviso went to aboriginal adopters (everyday users similar me, who procured an ENS domain sanction earlier November), and 50% went to the DAO treasury, for assemblage members to power via votes. As a mode to reward information successful the task (a la equity successful a accepted startup), the last 25% went to ENS contributors and developers.

Not coincidentally, Millegan himself holds a monolithic magnitude of ENS tokens, and utilized them to ballot against the proposal. He’s besides been delegated votes by different ENS holders: He holds astir 1,600 tokens successful his nationalist wallet, but he’s besides controlling the combined voting powerfulness of everyone who delegated their votes to him erstwhile they claimed their ENS tokens. With immoderate 363,000 votes nether his charge, helium was capable to sway the results successful his favor.

Without those votes, the connection would person passed.

Nick Johnson, who fired Millegan from True Names, chose to abstain, arsenic did ENS co-founder Alex Van de Sande. Major delegates similar Coinbase and Mike Demarais, of the crypto wallet app Rainbow, didn’t ballot astatine all. Why fuss campaigning to beryllium a delegate if you’re not going to vote?

It reminded maine of a country successful the archetypal play of “Succession,” wherever committee members are voting connected whether to region Logan Roy, CEO of the media conglomerate Waystar Royco, from the institution helium founded truthful galore years ago. Logan is forced to recuse himself, since he’s the taxable of the vote, but helium refuses to permission the room, staring down idiosyncratic committee members arsenic they marque their choices. Spoiler alert: The ballot fails, and Logan fires everyone who voted for his removal.

That is to say, it’s lone quality to deliberation astir changing your ballot erstwhile you’re nether pressure, successful the vigor of things, oregon erstwhile you cognize you’re being watched. Even worse, you mightiness determine not to ballot astatine all. Social unit doesn’t conscionable vanish successful the discourse of a transparent DAO vote.

You tin ideate ENS holders and delegates feeling reluctant to ballot for fearfulness of being branded a proponent of “cancel culture” connected the blockchain, (the contented of accountability has only recently go a large contented successful the historically libertarian, do-what-you-want situation of crypto).

And you tin ideate it going the different way, too, with imaginable voters acrophobic to explicit their enactment of Millegan successful an situation they spot arsenic excessively oppressively “woke.” More than a fewer influencers person framed Millegan’s firing from True Names arsenic a usurpation of the close to state of religion. (Though, is favoritism a constitutionally protected right?)

In-person voting processes for governmental races are designed to beryllium backstage to support against this benignant of thing. The counterargument is that transparent voting is important for a delegate system, ensuring that voters enactment responsibly.

In the lawsuit of ENS, the strategy worked arsenic it was meant to – nary 1 is alleging elector fraud oregon foul play – and yet the effect has enshrined a benignant of exclusivity on-chain. The ENS Foundation volition proceed to beryllium led by a self-professed bigot, according to a elemental bulk of votes.

What does it mean that 1 of the astir “decentralized” organizations retired there, a assemblage with a existent strategy successful spot for determining its corporate future, has chosen this outcome?

Equating DAO votes with monetary worth (one ballot = 1 ENS token = astir $14) gives the richest assemblage members the biggest say, and the powerfulness to extremity important decisions successful their favor. But the deficiency of standards astir recusal whitethorn beryllium the bigger culprit here. Because Millegan voted against removing himself from DAO enactment portion different ENS leaders chose to abstain, helium efficaciously gave himself the past word.

“If this were web2, a committee would region Brantly instantly simply due to the fact that ENS itself is astatine risk,” tweeted the capitalist David Phelps. “Who would enactment determination now?”

Now that he’s mostly avoided accountability, the question is whether Millegan volition beryllium capable to rebuild a fractured ENS – a assemblage that undoubtedly includes cheery and trans people, arsenic good arsenic radical who simply don’t privation to enactment an enactment whose manager holds these prejudices.