ENS's governance crisis: Decentralization = low quality and inefficiency

On November 18, 2025, ENS founder Nick Johnson wrote the following on the forum:

Then he added:

This statement, seemingly comforting, is actually the most biting irony. In an organization that claims to be "decentralized," even the founder has to add a protective layer before criticizing the status quo. This statement itself is a symptom.

I. The Secretary's Rebellion

The story begins a week ago.

On November 14, 2025, Limes, the secretary of ENS DAO, released a temperature check proposal with a simple core argument: to terminate the operation of the three working groups on meta-governance, ecosystems and public goods at the end of the sixth term (December 31, 2025).

In the ENS structure, the secretary is not a menial task. If the stewards are the heads of their respective departments, then the secretary is the administrative hub of the entire DAO.

Limes was a long-time participant in the ENS DAO, serving as its director for four years and secretary for two. He was a core operator of the system. The fact that someone like him proposed dismantling the very structure he belonged to speaks volumes.

His reasoning was very straightforward:

First, there is no incentive to tell the truth here.

"When future funding depends on personal relationships, your incentive becomes not to hurt others' feelings. 'I support your proposal, you support mine' becomes the norm. This model prioritizes psychological safety over the pursuit of truth, and without the pursuit of truth, only bad results can be achieved."

Secondly, it's impossible to weed out unqualified people here.

"Workgroups cannot screen who can participate. Traditional organizations select team members and fire them when necessary, while workgroups are open by default, accumulating contributors based on availability rather than ability. The reality is that bad contributors drive away good ones."

His conclusion was that these problems could not be solved by improving processes; they were inherent to the working group structure. Closing the working group was the only solution.

II. List of Talent Losses

After Limes posted his message, a contributor named ENSPunks.eth—a lawyer with over ten years of experience in corporate law—wrote something even more pointed:

He gave two specific examples:

One issue is the articles of association. The DAO paid non-lawyers to draft what is essentially legal work, rejecting a senior in-house lawyer who offered a lower price. The result: three years later, there are still no articles of association; money was wasted, and talent was lost.

Another issue is conflict-of-interest policies. "The parties with conflicting interests control the policy adoption process, so nothing happens. This is a classic negative feedback loop—new contributors have virtually no room to enter."

He then made a significant statement: "Greater centralization is not the solution for decentralized treasuries. Changing a toxic culture is difficult; it starts with asking questions—unfortunately, questions are precisely what contributors are told not to do, even when discussing important issues like individual responsibility in working group meetings."

Questions are disabled. These six words say more than any lengthy explanation.

III. The Institutionalization of Mediocrity

A month later, another deep participant, clowes.eth, published a more systematic analysis titled "From Stagnation to Structure: Fixing ENS Governance." His observations were more sober, but his conclusions were equally stark:

His assessment of the three working groups was: public goods did indeed do what they were supposed to do—funding some excellent public goods; meta-governance did a good job in handling administrative tasks, but few new governance initiatives were fully implemented; and ecosystems provided a platform for demonstration, but ecosystems did not show significant growth.

But what truly worried him was something else:

An open organization, yet almost no new people actually join after a year. This data speaks for itself.

clowes.eth's explanation for this is:

In other words, this system chose the wrong people . It chose those willing to play the political game, not those truly capable of driving the agreement forward. It chose continuity, but not necessarily ability.

Then he wrote the most precise sentence in the article:

IV. Distortion of Incentives

Why is this happening?

Let's go back to Limes' initial diagnosis: when future funds depend on the relationship, your motivation is not to hurt feelings.

This is a classic problem in institutional economics, academically known as "log-rolling." In an environment that requires repeated cooperation, if you criticize my proposal today, I might not support yours tomorrow. Over time, people learn to remain silent, to agree to a "you support me, I support you" dynamic, and to keep the truth to themselves.

This incentive structure will have three consequences:

First, adverse selection.

Capable people have a choice; they can leave. Those with no other choice stay and endure. This leads to a situation where those who have the most to say the truth and the ability to do so are more likely to leave. The talent drain list compiled by ENSPunks.eth is evidence of this.

Second, bad money drives out good money.

Limes made it very clear: "Bad contributors will drive away good contributors." When an organization cannot weed out unqualified people, good people will choose to vote with their feet.

Third, the quality of decision-making has declined.

Eugene Leventhal of Metagov mentioned a startling industry consensus during the discussion: "You can raise the cost of a DAO's services or goods to 2-3 times that of a traditional organization, and that's the accepted reality."

This is the so-called "DAO premium"—the cost of decentralization. But the question is, is this cost structural or can it be changed?

V. The Curse of Openness

There is a real paradox to confront here.

One participant, jkm.eth, said that when he first came into contact with ENS DAO, he was "amazed by its more open nature than almost any other DAO." It was this openness that allowed him to enter the ecosystem.

But this is precisely the problem Limes points out: the working group "cannot screen who can participate" and "accumulates contributors based on availability rather than ability."

Openness is both a strength and a weakness of DAO.

In other DAOs, jkm.eth has seen the exact opposite problem—talented newcomers simply can't get in, while insiders who've been there from the start occupy all the spots. But in ENS, the problem goes to the other extreme: the threshold is so low that there's no quality screening.

This presents a dilemma: setting entry barriers violates the spirit of decentralization; not setting barriers, however, makes it impossible to guarantee the quality of participants. And when quality cannot be guaranteed, excellent individuals will leave.

VI. The Founder's Dilemma

Nick Johnson is the founder of the ENS Protocol and a director of the ENS Foundation. When he made those remarks—about political infighting driving out contributors and about the DAO falling into the hands of the incompetent—he was taking a risk.

As the founder, his words carried weight, but also meant greater responsibility. He had to find a balance between "telling the truth" and "maintaining organizational stability." He chose to tell the truth, but added a protective remark: "If you're worried I'm talking about you, no, of course not—you're one of the good guys."

This statement is ironic because it exposes a fact: even founders need to apologize before speaking the truth in the organization they created.

Nick advocated for a compromise—"suspending" the working group, rather than "abolishing" it. He said a "sustainable long-term solution" was needed, such as having a management company handle the DAO's day-to-day operations. However, he also acknowledged, as a board member, his concerns about whether the DAO could fulfill its legal obligations in the absence of professional contributors.

This is a pragmatic consideration: when all those who speak the truth leave, who will speak the truth?

VII. Two Camps

The discussion quickly split into two camps.

One side argues: review the situation first, then make a decision.

James proposed a "review" motion suggesting a comprehensive audit of ENS DAO's spending over the past two years, including all expenditures from the DAO's treasury, such as grants, service providers, and working groups. He argued that the current situation should be understood before making any major structural decisions.

He invited an independent organization called Metagov to host the review, with a budget between $100,000 and $150,000.

Nick questioned the proposal, saying, "Spending over $100,000 to find inefficient and unnecessary expenses sounds like a joke, and I hope any reader can see the irony."

James responded that, given that the DAO spends over $10 million annually, $100,000 represents only 1%. This is reasonable compared to impact assessments of traditional organizations of similar size.

The other side advocates: take immediate action and learn as you go.

Limes and his supporters believe the problem is already clear and there's no need to spend money and time "revisiting" it. Direct action is the right way forward.

An ENS Labs employee named 184.eth was even more direct: "If the 'review' passes, I still strongly support the immediate dissolution of the working group—today, no matter what. This is necessary to move forward; we can no longer tolerate structures that are already widely recognized as broken and ineffective."

Another administrator, slobo.eth, announced that regardless of the outcome, he will resign on January 1, 2026, and will not continue to participate in any extended term.

8. Who told the truth?

In this discussion, one person's remarks deserve special attention.

clowes.eth wrote in his long article:

He then pointed out a fact that few people dare to say publicly:

He gave examples: Namechain's work remains highly opaque; their policies toward DNS and ICANN are opaque; and external contributors lack clear visibility into their plans or strategies.

Then he said something even more pointed:

This passage touches upon the core contradiction in ENS governance: a DAO that controls the funds is unable to truly oversee the entities that use those funds.

IX. The Institutional Costs of Speaking the Truth

Let's take a step back and look at the universality of this problem.

The dilemma faced by ENS DAO is actually a problem faced by all organizations that rely on consensus. In a company, the boss can make decisions and bear the consequences; in a DAO, decisions must be made through consensus, but who will bear the cost of telling the truth?

There are three costs to telling the truth:

First, there's the cost of relationships. Criticizing someone's proposal means offending that person. In an environment where repeated collaboration is necessary, this is a real price to pay.

Second, the political cost. Publicly pointing out problems can be seen as "disunity" or "stirring up trouble." ENSPunks.eth said he was told not to ask questions at meetings, which is a manifestation of the political cost.

Third, opportunity cost. It's better to spend time building relationships and securing resources than telling the truth and pushing for reforms. In a system with distorted incentives, telling the truth is a thankless task.

When all three costs are high, rational people will choose to remain silent. With more people remaining silent, those who speak the truth appear "out of place." Those who are "out of place" will either leave or learn to shut up.

This is the mechanism by which institutional aphasia is formed.

10. A Deeper Question

During the discussion, vegayp made an interesting suggestion: "Managers and service providers should not be able to vote during their term of office."

The logic behind this suggestion is to reduce the space for political deals by disenfranchising certain individuals. If you are in charge, you cannot vote for proposals that fund you; if you are a service provider, you cannot vote to renew your contract.

This sounds radical, but it points to a fundamental problem: we assume "more participation = better decision-making," but if participants' incentives are distorted, more participation may mean more politics.

Traditional companies address this issue through hierarchical structures—the boss makes decisions and bears the consequences. DAOs attempt to solve this problem through consensus—everyone makes decisions together and shares the consequences. However, the problem is that when "sharing the consequences" becomes "no one takes responsibility for the consequences," the quality of decision-making declines.

clowes.eth's "OpCo" proposal essentially involves rebuilding a hierarchical and accountable structure within the DAO. He suggests a leadership team of three people—one each in technology, leadership, and finance—empowered to hire, coordinate, and execute.

This is a pragmatic solution, but also a compromise: exchanging a certain degree of centralization for execution and accountability.

end:

The governance crisis at ENS DAO is far from over. The review and dissolution proposals are still under discussion, and the original proposal has already been rejected by the community. A new proposal may not be available until February next year. Elections have been postponed, and administrators are deciding their future. Whether this crisis will lead to genuine reform remains to be seen.

But regardless of the outcome, an organization's ability to reflect on itself and its courage to dismantle its existing structure is itself an achievement.

(This article is based on public discussions held at the ENS DAO Governance Forum from November to December 2025. The views expressed in this article do not represent the author's position.)