Behind the PandaDAO Dissolution Proposal: Is Efficiency and Democracy an Either-Or Choice?

Author: Jessy, Chain Catcher

On September 19, PandaDAO released the "Community Refund and Dissolution Proposal" on Snapshot. The voting for the proposal started at midnight on September 20 and will end at midnight on September 24. As of now, over 80% of community members support the proposal, and although the voting deadline has not yet arrived, it can be predicted that this organization, incubated by People DAO, which raised 1900 ETH and was once the largest DAO on Dework, will ultimately dissolve in less than a year.

According to core member "Panda" on Twitter, the proposal for dissolution arose because the conflicts between the core development team and community members could not be resolved, and management issues could not be addressed. A significant amount of time was spent on community governance and communication, leaving too little time for project development. To better focus on project work, the decision was made to dissolve the DAO.

PandaDAO is actually a decentralized data development organization. In less than a year since its launch, it developed a programmable data referencing platform called Pansight, created an AMM DEX protocol for NFTs, and completed a mutual fragmentation protocol for NFT collections and ERC20 tokens.

Compared to most interest group DAOs currently on the market, as well as those that have yet to establish a functioning economic model, PandaDAO can be considered a relatively mature and successful DAO organization. The fact that such a DAO ultimately chooses to dissolve due to governance issues reflects the common problems faced by DAO organizations today.

First, there is the inefficiency of decision-making. Core member Panda recalls, "In the past, every penny had to go through a voting process, which was very inefficient. The entire community was either voting or on their way to vote, leaving no time to work." It was only after realizing the inefficiency of voting on trivial matters that PandaDAO changed its approach, opting to hold public votes only on significant decisions.

However, the lack of consensus among members and the divergence of opinions between core members and the general public exacerbated the conflicts. There was once a proposal within the community to issue its own NFT, but this proposal was ultimately rejected by the core members. Panda explained the core team's considerations on Twitter: "If the NFT is issued and you cannot guarantee it to investors, the community might profit, but the community's credibility would be questioned. I always believed that the community's reputation and credibility are more important than short-term profits."

Perhaps it was from that moment that a gap began to exist between the core team and the community. The community could not understand why the core team could unilaterally reject certain proposals, leading to disagreements.

Similar situations are not uncommon. PandaDAO once had a proposal to exchange ETH in the treasury for stablecoins to mine UST in the Terra ecosystem. This proposal had already passed community voting but was vetoed by members of People DAO who held multi-signature voting rights. The reason for the veto was that the core team had not disclosed the risks of UST and other stablecoins to the community and had no corresponding risk management proposal.

Looking back, this was a very correct decision. If the community's voice had been followed at that time, PandaDAO's treasury funds could have been lost in the crash of Luna. However, at that time, the core members' failure to heed the public's opinion led to significant complaints within the community.

This is actually a common problem in DAOs: whether decisions should be made by "smart brains" or by listening to the "majority." In today's corporate organizational structures, decisions are made by "elites." The emergence of DAOs aims to decentralize power and give it to everyone who holds a "Token."

Although this decentralized organizational form was used, conflicts remained unchanged. Panda is very aware of the pros and cons of both autocratic decision-making and completely following the community's voice. He once cited that Alibaba Cloud was not initially well-received internally, but it was the autocracy of Jack Ma and Wang Jian that prevented the project from failing. However, if a similar major turning point occurs within the DAO structure, community voting is certainly needed to decide, in a sense, the majority decides for the minority. "If members cannot understand what we are doing, or if they really veto it, we can only execute according to the community's decision." Panda has a premonition and awareness of all the conflicts, and he has said that he is prepared to bear all the consequences.

Dissolution is precisely the final outcome he needs to bear. "Governance takes too long, development time is too short, and there are too many voices about price. It's too exhausting; let's refund everything." Such a dissolution declaration reveals many grievances and helplessness from the team members.

A practitioner who has participated in multiple DAO projects in China, Ding Hui, told reporters that seeing PandaDAO's dissolution declaration made him feel very distressed. He believes that the problems faced by PandaDAO are also common issues in many DAOs today, where core members and community members still maintain a relationship of operators and consumers. A healthy DAO should have everyone as operators, where community members not only propose and vote but also participate in project execution.

In reality, it can be seen that the developers of PandaDAO spent a lot of time listening to and coordinating the opinions of community members to meet their needs. Core member "Panda" is known externally as "Panda," which shows that he is the core of PandaDAO and bears the pressure derived from many people's expectations of PandaDAO.

This situation seems to be a stage that DAOs must go through in their development. Perhaps as DAO organizations evolve over generations, we will see the emergence of a relatively "perfect" DAO that can solve this series of problems.

"What People Want, What Pandas Build," people need what Panda creates. This was once the belief and mission ingrained in PandaDAO.

But in the end, it seems that "people" destroyed PandaDAO. In the bear market, the voices demanding refunds within the community grew louder, and PandaDAO ultimately decided to listen to the "people."