The governance crisis of ENS: Decentralization = Low quality and inefficiency

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

“Political struggles within the working groups have already cost the ENS DAO, driving away many dedicated contributors—and even more will leave by the end of this term. As things stand now, we are heading toward a situation where all serious, focused, and capable individuals are either pushed out or prevented from participating, resulting in the DAO’s 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:

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

This phrase seems reassuring but is actually the sharpest satire. In a so-called “decentralized” organization, even the founder’s criticism of the status quo is cloaked in a layer of protection. The sentence itself is symptomatic.

1. The Rebellion of the Secretary

The story begins a week earlier.

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

In ENS’s structure, the secretary isn’t a mere assistant. If the managers are department heads, the secretary is the administrative hub of the entire DAO.

Limes has been a long-time participant in ENS DAO, serving four years as a manager and two as secretary. He is a core operator of this system. When such a person proposes dismantling their own structure, it says something.

His reasons are direct:

First, there’s 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 truth-seeking, and without truth, only poor results can follow.”

Second, it’s impossible to eliminate unqualified people.

“Work groups cannot filter who can participate. Traditional organizations select team members and can dismiss them when necessary, but work groups are presumed open, recruiting contributors based on availability rather than ability. The reality is, bad contributors drive good ones away.”

His conclusion: these problems cannot be fixed by improving procedures; they are inherent to the structure of the work groups. Closing the work groups is the only solution.

2. Talent Drain List

After Limes’ 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-enrichment. When I mention this, I’m ignored. But those who have already left tell the story best: programmers, PhDs in mathematics, multiple lawyers (including myself), and even an astrophysicist. Few realize how difficult it is to attract such talent, let alone why they are driven away.”

He gave two specific examples:

One concerns the bylaws. The DAO paid non-lawyers to draft what is essentially legal work, rejecting a senior corporate lawyer who quoted a lower fee. The result: three years on, there are still no bylaws, funds have been wasted, and talent has flowed out.

Another involves the conflict-of-interest policy. “Parties with conflicts of interest control the adoption process, so nothing happens. It’s a classic negative feedback loop—there’s almost no room for new contributors to join.”

He then said something profound: “Greater centralization is not the solution to a decentralized treasury. Changing toxic culture is difficult; it starts with asking questions—unfortunately, asking questions is exactly what contributors are told not to do, even when discussing critical issues like personal accountability in working group meetings.”

Questions are forbidden. These six words explain the core problem better than any lengthy treatise.

3. Mediocrity and Institutionalization

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

“Most of 2025, I attended all calls for three working groups weekly. Eventually, I stopped because I felt it wasn’t the best use of my time.”

He assesses the three groups: Public Goods did its job—funded some excellent initiatives; Meta governance handled administrative tasks well, but few new governance initiatives were fully pushed forward; the Ecosystem provided a platform for display, but there was no clear growth.

What truly worries him is another matter:

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

An open organization, over a year, with almost no genuine new participation. This data alone is a verdict.

Clowes.eth’s explanation:

“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 within a political process with no job security, no long-term continuity, and no real ownership.”

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

He then wrote the most precise sentence in the article:

“Participants avoid sharing their opinions because it would have political consequences. Ultimately, issues remain unresolved, nothing gets done, and mediocrity becomes the norm.”

4. Incentive Distortion

Why is this happening?

Let’s return to Limes’ initial diagnosis: when future funding depends on relationships, the incentive is to avoid hurting feelings.

This is a classic institutional economics problem, called “log-rolling” (mutual support votes). In an environment requiring repeated cooperation, if criticizing my proposal today risks my support tomorrow, everyone learns to stay silent, support each other, and hide the truth.

This incentive structure produces three consequences:

First, adverse selection.

Capable individuals have choices—they can leave; those with no alternatives stay and endure. This leads to the more capable and truth-telling leaving. The talent drain list by ENSPunks.eth is evidence.

Second, the “bad money drives out good.”

Limes made it clear: “Bad contributors drive away excellent ones.” When an organization cannot eliminate unqualified people, the good ones vote with their feet.

Third, decision quality declines.

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

This is the so-called “DAO premium”—the cost of decentralization. But is this cost structural or changeable?

5. The Curse of Openness

There’s a real paradox here.

A participant named jkm.eth said that when he first encountered ENS DAO, he was “shocked by its even greater openness compared to almost any other DAO.” It was this openness that allowed him to enter the ecosystem.

But the problem Limes pointed out is precisely that: work groups “cannot filter who can participate,” and “recruit 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 opposite problem—high-quality newcomers cannot get in, and insiders who are already there occupy all spaces. But in ENS, the problem has gone to another extreme: the threshold is so low that there’s no quality filter.

It’s a dilemma: setting a high threshold violates decentralization; not setting one means no guarantee of participant quality. When quality cannot be assured, good people leave.

6. The Founder’s Dilemma

Nick Johnson is the creator of the ENS protocol and a board member of the ENS Foundation. When he said that—about political struggles pushing contributors out, about the DAO heading toward being controlled by the incompetent—he was risking himself.

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

The irony is that this exposes a reality: even a founder needs to apologize first when speaking the truth inside their own organization.

Nick’s support is for a compromise—“pausing” the work groups, not “abolishing” them. He says we need “sustainable long-term solutions,” such as hiring a management company to handle daily operations. But he also admits that, as a director, he worries whether the DAO can fulfill its legal obligations without professional contributors.

This is a pragmatic concern: When those who speak the truth leave, who will speak the truth?

7. Two Camps

The discussion quickly divided into two camps.

One advocates: review first, then decide.

James proposed a “review” plan, suggesting a comprehensive audit of ENS DAO’s expenses over the past two years, including grants, service providers, work groups, and all DAO fund expenditures. He believes understanding the current situation should come before any major structural decision.

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

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

James responded: considering DAO’s annual expenditure exceeds $100 million, $100K is only 1%. Compared to impact assessments for organizations of similar size in traditional settings, this is reasonable.

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

Limes and supporters believe the problems are clear enough; there’s no need to spend money or time on “review.” Direct action is the way to go.

An ENS Labs employee named 184.eth said more directly: “If the ‘review’ passes, I still strongly support disbanding the work groups immediately—today, regardless of anything. This is necessary to move forward; we can no longer tolerate structures that are already recognized as broken and ineffective.”

Another manager, slobo.eth, announced he would resign on January 1, 2026, and would not continue participating in any extended terms, no matter the outcome.

8. Who Told the Truth?

In this debate, one person’s words warrant special attention.

clowes.eth wrote in his lengthy article:

“ENS Labs is currently the core developer of the protocol. They receive $9.7 million annually from the DAO, 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 today.”

He then pointed out a rarely openly acknowledged fact:

“I personally don’t doubt that there was a sincere intention for decentralization at the start. But intentions can only go so far. In practice, Labs’ recent actions have not truly advanced governance toward decentralization.”

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

Then he said something more pointed:

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

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

9. The Cost of Telling the Truth

Let’s take a step back and consider the universality of this issue.

The dilemma faced by ENS DAO is actually common to all organizations relying 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 bears the cost of speaking the truth?

There are three costs to truth-telling:

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

Second, political costs. Pointing out issues publicly may be seen as “disunity” or “causing trouble.” ENSPunks.eth said he was told not to ask questions in meetings—that’s a political cost.

Third, opportunity costs. Spending time speaking truthfully and pushing reforms may be less attractive than building relationships and gaining resources. In a system with distorted incentives, speaking truth is “arduous and unrewarding.”

When these three costs are high, rational individuals choose silence. As more remain silent, those who speak truth become “unpopular.” The unpopular either leave or learn to shut up.

This is the mechanism behind institutionalized silence.

10. A Deeper Question

During the discussion, vegayp proposed an interesting suggestion: “Managers and service providers should not be allowed to vote during their term.”

The logic is: by depriving certain people of voting rights, you reduce political trading. If you are a manager, you cannot vote to support proposals that fund you; if you are a service provider, you cannot vote to renew your contract.

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

Traditional companies handle this through hierarchy—bosses make decisions and bear consequences. DAOs try to solve this through consensus—everyone makes decisions together and shares consequences. But when “sharing consequences” becomes “no one bears consequences,” decision quality declines.

Clowes.eth’s proposed “OpCo” (Operating Company) plan essentially rebuilds a hierarchical, accountable structure within the DAO. He suggests a leadership team of three—one for tech, one for leadership, one for finance—that is empowered to hire, coordinate, and execute.

This is a pragmatic compromise: using some centralization to gain execution power and accountability.

Epilogue:

The governance crisis of ENS DAO is far from over. The proposals for review and disbandment are still under discussion; the original proposals have been rejected by the community. New proposals may not emerge until February next year. Elections are postponed, and managers are choosing whether to stay or leave. Whether this crisis will lead to real reform remains to be seen.

But regardless of the outcome, the fact that an organization can reflect on itself and dare to dismantle existing structures is an achievement in itself.

(This article is based on publicly available discussions from the ENS DAO governance forum from November to December 2025. The views expressed do not reflect those of the author.)