DAOs Face Challenges With Treasury Management, Regulatory Scrutiny, And Security

Coin WorldSunday, Jun 15, 2025 11:06 pm ET
2min read

Top decentralized autonomous organizations (DAOs) in the decentralized finance (DeFi) space are amassing substantial treasuries, yet they appear to be overlooking critical aspects that could impact their long-term sustainability and growth. One of the primary concerns is the lack of transparency and accountability in how these treasuries are managed. While DAOs are designed to be decentralized and community-driven, the absence of clear governance structures and auditing mechanisms can lead to mismanagement and potential misuse of funds. This lack of oversight can erode trust among community members and investors, who rely on the DAOs to manage their assets responsibly.

Another area of concern is the regulatory environment. As DeFi continues to gain traction, regulatory bodies are increasingly scrutinizing the sector. DAOs with large treasuries are particularly vulnerable to regulatory actions, as they are more likely to attract the attention of authorities. The lack of regulatory compliance can result in legal challenges and financial penalties, which can severely impact the DAOs' operations and reputation.

Moreover, the security of these treasuries is a pressing issue. Despite the advancements in blockchain technology, the risk of hacks and cyber-attacks remains a constant threat. DAOs must prioritize robust security measures to protect their treasuries from malicious actors. This includes implementing multi-signature wallets, conducting regular security audits, and educating community members about best practices for securing their assets.

The management of liquidity is another critical aspect that DAOs need to address. Effective liquidity management ensures that the DAO can meet its financial obligations and continue to operate smoothly. However, many DAOs struggle with liquidity issues, which can lead to financial instability and reduced community trust. DAOs must develop strategies to manage their liquidity effectively, such as diversifying their asset holdings and implementing liquidity provision mechanisms.

While DAOs like Sky and Aave are burning through hundreds of millions annually, Uniswap has seen its trading volume stagnate since 2021. The contrast is striking: even as DAO budgets surge and spending ramps up across the board, growth remains elusive for some of the space’s biggest names. Sky leads the pack with a staggering $238.3 million in annual expenses, even excluding token incentives – more than triple Aave’s $63.6 million budget. But what Aave lacks in size, it arguably makes up in structure: over half of its budget goes toward tangible growth efforts—risk frameworks, technical upgrades, and marketing. According to its TokenLogic dashboard, growth alone accounts for nearly $38 million annually.

Uniswap may have defined the early DeFi era, but its trading volume has barely budged over the past four years. Despite its dominance in name recognition, the protocol’s growth has stalled; a contrast to the innovation happening on newer, faster chains. What if Uniswap had launched on Solana instead of Ethereum? That hypothetical now carries real weight. By staying tethered to Ethereum, Uniswap may be paying an unseen cost: missing out on lower fees, faster execution, and an increasingly active Solana user base.

Is Sky’s $238 million annual spend – roughly $20 million a month – translating into defensible TVL, active users, or long-term protocol dominance? Aave, while far leaner, still allocates tens of millions to marketing, security, and operations despite already securing $40 billion in deposits. The bulk of its budget is aimed at growth, but the ROI remains unclear. It’s no longer about spending to grow, but spending to prove ROI. Efficiency, not treasury size, is perhaps emerging as the defining metric of sustainable DAO success.