As DAOs evolve, they must anticipate future challenges and opportunities. Prospective governance is a design and management approach that tackles these issues proactively, instead of reacting as they appear. By acknowledging DAOs’ temporal complexities, we can enhance governance outcomes from the start and through their lifecycle.
We’ll share a brief guide to prospective governance—from design philosophy to structural reinvention. This topic goes far beyond the scope of this article, but we hope at least to persuade DAO enthusiasts of its importance.
Prospective Design
As the saying goes, the best time to plant a tree was 20 years ago. So, our governance gardening is at its peak before launch—on the design phase. This can be challenging because DAOs’ development carries an abundant list of choices and restrictions. Planning ahead for the rain when the present is nothing but a desert may be even considered a deficient framework. But if the blockchain weather teaches us anything is that a storm is brewing just around the corner—always.
Prospective design may include:
- Defining emergency measures in case of security breaches.
- Making a rotation system for admin roles to lower takeover exposure.
- Storing emergency funds to handle unplanned expenses.
- Crafting smart contracts with fail-switches for hacking safeguards.
- Anticipating community growth and monitoring decentralization objectives.
Therefore, if possible, design your DAO with a prospective mindset. Taking action now is just second best, and sometimes is too late.
Short-Term Blindness
After deployment, any DAO faces governance challenges at each step of its lifecycle. Sometimes, these setbacks are the result of inaction—other times, they come about from misplaced action focused on the unimportant. While active engagement is a worthy goal for a DAO, we need to be purposeful with our governance participation—arbitrary sounds do not produce good music.
Short-term governance blindness is a far too common occurrence, from wasting limited resources (“who needs a dev-ops manager when we can buy this NFT collection…”), to passing useless submissions (“Proposal #47: Change the Discord font…”). Reacting to emergency situations may also lead to short-term blindness, if our response plan wasn’t properly thought out. Activate admin veto powers can prevent a live draining of funds, but it may result in trust deterioration if we didn’t communicate with DAO’s members regarding veto motivations and scope.
Middle-Term Avoidance
Even if we took into account short-term challenges in our prospective framework, we are far from immune to governance staleness. Handling the immediate may open a new can of worms—this time in the form of transformation avoidance. Some of the most frequent issues in this regard are the following:
- Not wanting to adapt to a better framework, preferring conformity to optimization.
- Losing focus in an upgrade process, jeopardizing the transition.
- Delaying decentralization due to fear of losing core team control.
- Governance gridlocks by avoiding priorities debate.
Losing governance momentum may not necessarily be the result of avoidance, but it should be considered a potential symptom. If our prospective design did set a specific goal, and when the conditions for change are appropriate we are not moving forward, is important that we recalibrate. Promote conversation—reaffirm governance priorities. Remember: the DAOs’ graveyard is filled with cases of death by staleness.
Long-Term Hopefulness
“Hope for the best, plan for the worst”—a lesson often forgotten in the blockchain world. DAOs can fall prey to focusing too far ahead and not integrating long term vision with their current actions:
- DAO founders with “Visionary Syndrome”, viewing themselves as trailblazers.
- Relying on hope that things work out in the distant future.
- Planning an outcome without a viable technological and organizational implementation.
- Making empty promises to members.
- Banking on community growth to fix unsustainable practices.
Goals need strategy—otherwise they become perverted by dysfunctional expectations. And strategy can’t rely on hope—it must adapt to an ever-changing environment. If a DAO is built only on vision, it won’t survive the present.
Before we explore how a DAO may navigate its past and future, here’s a summary of prospective governance challenges—and the adjustments that can guide better decisions.
| PROSPECTIVE GOVERNANCE | Typical Pitfall | Corrective Strategy |
|---|---|---|
| Short-term | Proposal spam; trivial spending | Define impact metrics before proposals |
| Middle-term | Avoiding upgrades; leadership stagnation | Roadmap audits; temporary roles |
| Long-term | Unrealistic promises; vision drift | Milestone-linked strategy reviews |
History vs Destiny. Case Study: Beanstalk DAO
Every person has their past—every DAO has its history. While a properly planned prospective governance is the ideal, it’s not always our reality. If we became aware of these issues late in the game or after a defeat, that doesn’t mean that we abandon this awareness. We do our best and we try again. A DAO can recover from severe hardship and reinvented itself—such was the case of the Beanstalk DAO.
Beanstalk DAO, a decentralized credit-based stablecoin protocol, suffered a significant hack on April 17, 2022, where an attacker exploited the system to steal approximately $181 million worth of assets. The hack involved a flash loan, which allowed the attacker to borrow a large sum of money to gain enough voting rights to execute a malicious governance proposal.
This exploit highlighted the vulnerabilities of on-chain governance mechanisms, especially when voting and execution can occur in the same transaction. The hacker managed to steal around $77 million worth of non-Bean assets, while the rest was successfully burned by the protocol’s team. Shortly after the incident, Beanstalk removed the Governance Facet implementation and replaced it with a community-run multisig wallet to enhance security.
Despite the setback, Beanstalk DAO resumed operations and continues evolving under a more cautious governance structure.
Destiny is built by choices, not providence. Your story is not over yet, unless you fail to act.
We’ve covered some key aspects of prospective governance:
- Implementing prospective design gives DAOs a resilient foundation.
- Prospectiveness remains relevant over the entire lifecycle of a DAO, from short to long-term choices and each step along the way.
- The ideal scenario is not always available, but we can improve regardless of hardships.
Prospective governance is not about predicting the future, but about preparing for it with intention and clarity. As you could see, this topic is far from exhausted—too many avenues for exploration remain active. We hope that this framework was of use, and we encourage you to apply this framework when analyzing DAOs. Stay in touch with DAO Horizons for future articles that will expand on these ideas.
Do you have any questions or suggestions? Please contact Lokapal Research and let’s continue building a better horizon for DAOs. Thank you!
*Cover Image by King of Hearts from Wikimedia Commons. Licensed under CC BY-SA 4.0
