The governance crisis of ENS

Author: Chao Source: @chaowxyz

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

“The political struggles within the working groups have already taken a toll on the ENS DAO, driving away many dedicated contributors—and even more will leave by the end of this term. At the current rate, we’re heading toward a situation where all serious, focused, and capable people are either pushed out or prevented from participating, resulting in DAO leadership falling into the hands of those who are either inexperienced, too stubborn to leave, or have external incentives misaligned with the protocol.”

He then added a sentence:

“If you’re worried I’m talking about you, no, of course not—you’re one of the good ones.”

This statement appears to be a reassurance, but in reality, it’s the sharpest sarcasm. In an organization that claims to be “decentralized,” even the founder’s critique of the status quo needs a layer of protection first. This sentence itself is a symptom.

1. The Secretary’s Rebellion

The story begins a week earlier.

On November 14, 2025, the ENS DAO secretary Limes posted a temperature check proposal with a simple core idea: at the end of the sixth term (December 31, 2025), terminate the operations of the three working groups—Meta-Governance, Ecosystem, and Public Goods.

In ENS’s structure, the secretary is not a backstage role. If the managers are departmental heads, then the secretary is the administrative hub of the entire DAO.

Limes has been a long-term participant in ENS DAO, serving as a manager for four years and secretary for two. He is a core operational figure of this system. When such a person proposes dismantling the very structure they belong to, it says something.

His reasons are straightforward:

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

“When future funding depends on personal relationships, your incentive becomes to avoid hurting others’ feelings. ‘I support your proposal, you support mine’ becomes the norm. This model prioritizes psychological safety over truth-seeking, and without pursuing truth, only poor results can be achieved.”

Second, it’s impossible to remove unqualified people.

“Work groups cannot filter who can participate. Traditional organizations select team members and dismiss them when necessary, but work groups are assumed to be open, accumulating contributors based on availability rather than capability. The reality is, bad contributors cause good contributors to leave.”

His conclusion is: these problems cannot be solved by improving processes—they are inherent to the structure of the work groups. Shutting down the work groups is the only way out.

2. Talent Drain List

After Limes’s post, a contributor named ENSPunks.eth—an attorney with over ten years of corporate law experience—wrote a sharper critique:

“The culture is toxic, full of gatekeeping, conflicts of interest, and self-serving behaviors. When I speak out about these issues, I am ignored. But those who have already left demonstrate the problem better: programmers, PhDs in mathematics, several lawyers (including myself), and even an astrophysicist. Few realize how difficult it is to attract talent at this level, let alone why they are driven away.”

He gave two specific examples:

One concerns the bylaws. The DAO pays non-lawyers to draft what is essentially legal work, rejecting a senior corporate lawyer who offered a lower quote. The result: three years have passed, there are still no bylaws, funds are wasted, and talent has drained away.

Another involves conflict-of-interest policies. “Parties with conflicts of interest control the adoption process, so nothing happens. This is a classic negative feedback loop—there’s little room for new contributors to join.”

Then he said a thought-provoking sentence: “Greater centralization is not a solution to a decentralized treasury. Changing toxic culture is difficult; it starts with asking questions—and unfortunately, asking questions is exactly what contributors are told not to do, even during work group meetings discussing personal responsibility, which is an important issue.”

Asking questions is prohibited. These six words more than any lengthy discourse explain the core issue.

3. Mediocrity in Institutionalization

A month later, another deeply involved participant, clowes.eth, published a more systematic analysis titled “From Stagnation to Structure: Repairing ENS Governance.” His observations are more measured, but the conclusion is equally grim:

“Most of 2025, I attended every weekly call for three work groups. Eventually, I stopped because I felt it was not the best use of my time.”

His evaluation of the three work groups is: Public Goods did its job—funded some excellent initiatives; Meta-Governance handled administrative tasks well, but few new governance initiatives were fully pushed forward; Ecosystem provided a platform for display, but there was no significant growth.

But what truly worries him is another matter:

“My biggest concern is that there have been almost no new participants over the year. Fewer are genuine newcomers involved in discussions. Unfortunately, these metrics have never been quantified because they have never been measured.”

An open organization, with almost no new active participants after a year—that data alone is a verdict.

clowes.eth’s explanation is:

“Decentralized governance fundamentally cannot empower or incentivize those with the skills to lead large protocol development. Capable people have many options; they are expected to operate in a political process without job security, long-term continuity, or true ownership.”

In other words, the system is choosing the wrong people. It’s selecting those willing to play political games, rather than those truly capable of advancing the protocol. It values continuity, but not necessarily ability.

And he distilled the most precise sentence of this article:

“Participants avoid sharing their opinions because of political consequences. The ultimate result is stalemate, inaction, and mediocrity becoming the norm.”

4. Twisted Incentives

Why is this happening?

Let’s revisit Limes’s original diagnosis: when future funding depends on relationships, your incentive is to avoid hurting feelings.

This is a classic institutional economics problem, called “log-rolling” (mutual voting). In an environment requiring repeated cooperation, if you criticize my proposal today, I might oppose yours tomorrow. Over time, everyone learns to stay silent, to “support you, you support me,” and to hide the truth in their hearts.

This incentive structure leads to three consequences:

First, adverse selection.

Capable people have choices—they can leave; those with no other options will stay and tolerate. This results in the more capable and truth-telling leaving, as evidenced by the talent drain list ENSPunks.eth provided.

Second, the “bad money drives out good.”

Limes said it clearly: “Bad contributors will make good contributors leave.” When an organization cannot weed out unqualified members, talented people tend to vote with their feet.

Third, decision quality declines.

Eugene Leventhal from Metagov mentioned a shocking industry consensus in discussions: “You can raise the cost of DAO services or products to 2-3 times that of traditional organizations, and that’s the accepted reality.”

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

5. The Cursed Openness

There is a paradox to face here.

A participant named jkm.eth said that when he first encountered ENS DAO, he was “shocked by its more open features than almost any other DAO.” This openness allowed him to enter the ecosystem.

But the problem Limes pointed out also lies here: work groups “cannot filter who can participate” and “accumulate contributors based on availability rather than ability.”

Openness is both an advantage and a weakness of DAOs.

In other DAOs, jkm.eth has seen the opposite problem—top talent cannot even get in, and insiders who were there from the start occupy all the space. But in ENS, the problem has gone to another extreme: the barrier is so low that it lacks quality filtering.

It’s a dilemma: setting high thresholds contradicts decentralization; lowering thresholds makes it impossible to guarantee participant quality. And when quality cannot be assured, talented people will leave.

6. The Founder’s Dilemma

Nick Johnson is the creator of the ENS protocol and a director of the ENS Foundation. When he spoke those words—about political struggles driving away contributors, about the DAO heading towards being controlled by incompetents—he was taking a risk.

As a founder, his words carry weight, but also greater responsibility. He must balance “telling the truth” with “maintaining organizational stability.” He chose to speak truthfully, but added a protective phrase: “If you’re worried I’m talking about you, no, of course not—you’re one of the good ones.”

This phrase is so sardonic because it exposes a fact: even a founder, in their own organization, needs to apologize first to speak honestly.

Nick supports a compromise—“pausing” the work groups, rather than “abolishing” them. He says a “sustainable long-term solution” is needed, such as hiring a management company to handle daily operations. But he also admits that, as a board member, he worries whether the DAO can fulfill its legal obligations without professional contributors.

It’s a pragmatic concern: when those who tell the truth leave, who will speak the truth?

7. Two Camps

The discussion quickly split into two camps.

One side advocates: review first, decide later.

James proposed a “review” plan, recommending a comprehensive audit of ENS DAO’s expenses over the past two years, including grants, service providers, work groups, and all expenditures from DAO funds. He believes that before making any major structural decisions, understanding the current situation is essential.

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

This proposal was questioned by Nick: “Spending over $100,000 to find inefficiencies and unnecessary expenses sounds like a setup for a joke. I hope any reader can see the sarcasm in that.”

James responded that, given DAO’s annual expenditure exceeds $100 million, $100,000 is only 0.1%. Compared to impact assessments for organizations of similar size, it’s reasonable.

The other side advocates: act immediately, learn as you go.

Limes and his supporters believe the problem is already clear; no need to spend money or time on “review.” Direct action is the way forward.

A person named 184.eth, an ENS Labs employee, was more direct: “If the ‘review’ passes, I still strongly support disbanding the work groups immediately—today, regardless. It’s necessary to move forward, and we can’t tolerate structures that are already recognized as broken and ineffective.”

Another manager, slobo.eth, announced he would resign on January 1, 2026, regardless of the outcome, and would not continue any extended term.

8. Who Spoke the Truth?

In this discussion, one person’s words deserve special attention.

clowes.eth wrote in his long article:

“ENS Labs is currently the core developer of the protocol. They receive $9.7 million annually from the DAO and are authorized to build ENSv2—Namechain. Before the DAO existed, the protocol was built by True Names Ltd., and many original founders and early contributors still work at Labs.”

He then pointed out a rarely spoken truth:

“I personally do not doubt the sincerity of the initial intentions for decentralization. But intentions can only go so far. In practice, Labs’ recent actions have not truly advanced governance toward decentralization.”

He gave examples: the work on Namechain remains highly opaque; their strategies regarding DNS and ICANN are opaque; external contributors lack clear visibility into plans or strategies.

And he said a sharper phrase:

“If there are legal reasons for Labs to keep things confidential, that’s fine—but these matters should not be secret from the DAO. They should be secret on behalf of the DAO. Right now, Labs is the opaque layer. It should be the DAO.”

This touches on the core contradiction in ENS governance: a DAO controlling funds but unable to truly supervise the entities using those funds.

9. The Cost of Telling the Truth

Let’s step back and look at the broader issue.

The dilemma ENS DAO faces is common to all organizations relying on consensus. In a company, the boss can make decisions and bear consequences; in a DAO, decisions must go through consensus, but who bears the cost of speaking truth?

There are three costs to telling the truth:

First, relationship costs. Criticizing someone’s proposal might offend them. In an environment requiring repeated cooperation, this is a tangible cost.

Second, political costs. Raising issues publicly might be seen as “disruptive” or “undermining unity.” ENSPunks.eth mentioned he was told not to ask questions during meetings—that’s a political cost.

Third, opportunity costs. Spending time speaking truthfully or pushing reforms could be better spent building relationships or securing resources. In a system with distorted incentives, speaking truth is “costly and unrewarded.”

When all three costs are high, rational actors choose silence. As more remain silent, those who speak truth become “misfits.” The “misfits” either leave or learn to keep quiet.

This is the mechanism behind institutional aphasia.

10. A Deeper Issue

During the discussion, vegayp proposed an interesting idea: “Managers and service providers should not be able to vote during their terms.”

The logic is: by depriving certain people of voting rights, political bargaining is reduced. If you are a manager, you cannot vote on proposals that fund you; if you are a service provider, you cannot vote on renewing your contract.

This sounds radical, but it points to a fundamental question: we assume “more participation = better decisions,” but if participants’ incentives are distorted, more participation might mean more politics.

Traditional companies solve this with hierarchy—bosses decide and bear consequences. DAOs try to solve it via consensus—everyone decides together and shares consequences. But the problem is, when “sharing consequences” becomes “no one bears consequences,” decision quality drops.

clowes.eth’s “OpCo” (Operating Company) proposal essentially suggests rebuilding a hierarchical, accountable structure within the DAO. He proposes a leadership team of three—technical, leadership, and finance—each empowered to hire, coordinate, and execute.

This is a pragmatic plan, a compromise: using some centralization to improve execution and accountability.

Epilogue:

The governance crisis of ENS DAO is far from over. Review and disband proposals are still under discussion; the original proposal was rejected by the community. It may be until February next year before new proposals emerge. Elections are postponed; managers are deciding whether to stay or leave. Whether this crisis will trigger real reform remains to be seen.

But regardless of the outcome, the fact that an organization can self-reflect and be brave enough to dismantle its existing structure is itself an achievement.