# Governance failure

`kaal:entity:governance-failure`

**Status.** derived

This node is assembled mechanically from the 16 claims that carry the concept tag `governance-failure`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

16 claims across 11 works, 2017 to 2024.

**2017**

- [3071378-012](https://wulfkaal.github.io/claims/3071378-012) [failure/evidenced] *(failure mode)* -- The DAO failed because its code had not yet been perfected: hackers took a third of the DAO tokens and transferred them to another account, and that hack together with other technological limitations led to the demise of the DAO.
  > Unfortunately, the code had not yet been perfected and hackers were able to take a third of the DAO tokens and transfer them into another account. This hack and other technological limitations, led to the demise of the DAO.58
  Wulf A. Kaal, Blockchain Technology and Race in Corporate America (2017). SSRN: https://ssrn.com/abstract=3071378

**2018**

- [3227933-035](https://wulfkaal.github.io/claims/3227933-035) [failure/evidenced] *(failure mode)* -- Fundamental flaws in the DAO's code allowed hackers to transfer one third of the total contributed funds to a subsidiary account, and this together with other technological limitations ended the initiative, but the authors argue it did not end the underlying vision of decentralized autonomous organization.
  > To be sure, fundamental flaws in the DAO code made it possible for hackers to transfer one-third of the total contributed funds to a subsidiary account. This, and other technological limitations meant the end of the initiative
  Mark Fenwick, Wulf A. Kaal, Erik P.M. Vermeulen, Why 'Blockchain' Will Disrupt Corporate Organizations (2018). SSRN: https://ssrn.com/abstract=3227933

**2019**

- [3373393-030](https://wulfkaal.github.io/claims/3373393-030) [failure/evidenced] *(failure mode)* -- Fundamental flaws in the DAO code enabled hackers to transfer one third of total funds to a subsidiary account, and that hack combined with additional technological limitations brought down the first DAO initiative.
  > This hack in combination with additional technological limitations brought down the first DAO initiative.
  Wulf A. Kaal, Blockchain Solutions for Agency Problems in Corporate Governance (2019). SSRN: https://ssrn.com/abstract=3373393

**2021**

- [3782201-023](https://wulfkaal.github.io/claims/3782201-023) [failure/argued] *(failure mode)* -- The re entrancy programming bug was not the 2016 DAO's most serious problem; the system would eventually have failed more spectacularly because it was designed poorly on other levels.
  > But that technical design flaw was not its most serious problem. The system would have eventually failed more spectacularly, because it was designed poorly on other levels.
  Craig Calcaterra, Wulf A. Kaal, Future of Decentralization (2021). SSRN: https://ssrn.com/abstract=3782201
- [3782203-012](https://wulfkaal.github.io/claims/3782203-012) [failure/evidenced] *(failure mode)* -- Given a process with static rules and finite, discrete execution, a sufficiently patient and clever minority can always corrupt the process and profit at the majority's expense while following the rules, so no perfect voting system exists.
  > A sufficiently patient and clever minority power can always corrupt the process and profit at the expense of the majority, assuming your process has static rules and finite, discrete execution. There is no perfect voting system.
  Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203
- [3782214-009](https://wulfkaal.github.io/claims/3782214-009) [predictive/argued] *(failure mode)* -- Because no major peer to peer organization has anything resembling effective decentralized governance, none of them are viable in the long term and all will eventually be displaced by superior clones, though the timing of that displacement cannot be predicted.
  > Since no major PCP organization has anything resembling effective decentralized governance, none of them are viable in the long term. They will all eventually be dis- rupted with superior clones.
  Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214
- [3782214-022](https://wulfkaal.github.io/claims/3782214-022) [failure/argued] *(failure mode)* -- The main problem with all current peer to peer governance structures is the lack of proper incentivization: participants are not motivated to improve the whole organization over the long term, so they game the system for short term personal profit.
  > The main problem with all current PCP governance structures (such as they are) is the lack of proper incentivization. In business or in government, all participants need to be motivated to improve the whole organization over the long term.
  Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214
- [3799320-005](https://wulfkaal.github.io/claims/3799320-005) [failure/argued] *(failure mode)* -- The focus on value enhancement of fungible tokens can drive short termism in DAOs and cause ethical and governance issues to be ignored.
  > Yet, the focus on the value enhancement of fungible tokens can lead to short- termism and may ignore ethical and governance issues.
  Wulf A. Kaal, A Decentralized Autonomous Organization (DAO) of DAOs (2021). SSRN: https://ssrn.com/abstract=3799320
- [3808852-016](https://wulfkaal.github.io/claims/3808852-016) [failure/argued] *(failure mode)* -- The DAO focus on enhancing the value of fungible tokens can produce short termism and can cause ethical and governance issues to be ignored, even as it frees non-performance reputational penalties from racial and cultural bias.
  > Yet, the focus on the value enhancement of fungible tokens can lead to short termism and may ignore ethical and governance issues.
  Wulf A. Kaal, Decentralization and Feedback Effects (2021). SSRN: https://ssrn.com/abstract=3808852

**2022**

- [4067783-002](https://wulfkaal.github.io/claims/4067783-002) [failure/asserted] *(failure mode)* -- Poorly executed DAOs exhibit a recognizable cluster of pathologies, including siphoned coins, distracted and robo voters, centralization, DAO washing by founders, and absent decentralized governance, and these pathologies drive mid-term and long-term DAO failure.
  > Several of the identifiable downsides include: siphoned coins, distracted and robo voters, centralization, DAO washing by founders, lack of decentralized governance, and other pitfalls that could end up in mid-term and long-term DAO failure.
  Wulf A. Kaal, DAO Fallacies (2022). SSRN: https://ssrn.com/abstract=4067783

**2023**

- [4529715-003](https://wulfkaal.github.io/claims/4529715-003) [empirical/evidenced] *(failure mode)* -- DAOs in the dataset score well below average on implementing true decentralization, averaging 3.78 out of 10, with the highest score being CRDAO at 8 out of 10 and several DAOs scoring 1 out of 10.
  > Based on our observations of the data, the maximum score was CRDAO at 8/10 while there were a few DAOs that scored 1/10. Across the board, DAOs are well below average at implementing true decentralization practices in their organizations with a 3.78 out of 10.
  Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715
- [4529715-004](https://wulfkaal.github.io/claims/4529715-004) [failure/evidenced] *(failure mode)* -- The decentralized power structure is supposed to encourage cooperation, free information flow, and decision-making that escapes top-down hierarchy, but with few exceptions the current state of DAOs does not deliver this.
  > efficiency to organizations. The current state of DAOs, with a few exceptions, doesn't seem to do this.
  Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715
- [4529715-015](https://wulfkaal.github.io/claims/4529715-015) [failure/argued] *(failure mode)* -- The most significant risk of bad DAO governance is centralization, in which a small group holds a disproportionate share of power or influence and thereby undermines the decentralized nature of the organization.
  > centralization, where a small group of individuals or entities hold a disproportionate amount of power or influence within the DAO, which can undermine the decentralized nature of the organization.
  Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715
- [4529715-016](https://wulfkaal.github.io/claims/4529715-016) [failure/argued] *(failure mode)* -- Without clear and effective governance mechanisms, DAO decision-making becomes slow and inefficient, delaying important changes and the resolution of internal issues.
  > Without clear and effective governance mechanisms, decision-making processes can become slow and inefficient, leading to delays in implementing important changes or addressing issues within the DAO.
  Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715
- [4529715-017](https://wulfkaal.github.io/claims/4529715-017) [failure/argued] *(failure mode)* -- DAOs without effective governance structures and policies risk violating local laws and regulations, exposing themselves to legal and regulatory consequences.
  > Furthermore, DAOs that do not have effective governance structures and policies may be at risk of violating local laws and regulations, which can lead to legal and regulatory consequences.
  Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715

**2024**

- [5254152-005](https://wulfkaal.github.io/claims/5254152-005) [failure/argued] *(failure mode)* -- Poorly governed DAOs face significant risks of centralization, lack of transparency, and inefficiency, so effective governance structures are a precondition for DAO sustainability.
  > However, poorly governed DAOs face significant risks, including centralization, lack of transparency, and inefficiency.
  Wulf A. Kaal, DAO Market Meta Analysis 2024 (2024). SSRN: https://ssrn.com/abstract=5254152

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/governance-failure.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.