Remember when decentralized autonomous organizations (DAOs) were all the rage in 2021? Billions were raised for DAO tooling and infrastructure and most of it has nothing much to show for. It’s 2025 — what are DAOs really good for?

Bridge flows to Sonic:

TVL may be little more than a “fluffy headline metric” but Sonic’s rapid TVL expansion is still impressive considering the -40% price decline in S over the past month. After plateauing in February, TVL has once again started to pick up over the past week, buoyed by stablecoin inflows of circa $50 million. 

This means users continued bridging and staking assets into Sonic despite the market downturn. Now, with $S rebounding, TVL in USD terms is surging again. Sonic is now closing in on the likes of Aptos, Avalanche and Sui in terms of DeFi TVL, bridged TVL and stablecoins, despite the latter’s native tokens being 5-10x richer by fully-diluted valuation.

Rhino Finance points to inflows primarily coming from Arbitrum, Base and Solana.

— Macauley Peterson

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To DAO or not to DAO

Centralized firms are like mini-dictatorships. 

They’re not perfect, but their corporate model has worked well on the basis of economic efficiency.

Firms reduce transaction costs, which is why they exist at all, argued the Nobel Laureate economist Ronald Coase in 1937.

Are DAOs centralized companies? Yes and no.

DAOs are centralized in the sense that there are typically figureheads or a set of actors who command disproportionate power to influence changes. Yet DAOs are not quite like centralized traditional companies because even founders cannot snap their fingers and push any proposal through.

Here’s a perfect example. Aave Labs announced last Thursday “Horizon,” a permissioned instance of the Aave v3 codebase for “qualified” institutions to use tokenized money market funds to tap into stablecoin liquidity.

Despite the proposal’s plans to share revenue with the DAO (at an annual declining rate of 50% in the first year, 30% in the second and 15% in the third), the mere mention of a potential Horizon token drew near-unanimous negative feedback from DAO members, including Aave-chan Initiative (ACI) founder Marc Zeller.

The complaint in a nutshell: If Aave Labs plans to use Aave tech to create new business, then please give that value to AAVE tokenholders rather than some new token that Aave Labs will hold a big bag of.

The strong backlash prompted Aave Labs leadership to gracefully accept the community’s consensus. It abandoned the possibility of a Horizon token launch, though it will move forward with the Horizon product.

Aave Labs probably anticipated such a reaction. Had a Horizon token been launched, 15% was even promised to be allocated to the DAO, but that carrot failed to stave off fears of token dilution.

There’s a striking parallel between the backlash to Aave’s Horizon announcement and Uniswap Labs’ reveal of its Unichain L2.

Recall that when Unichain was announced by the Uniswap Foundation last October, Uniswap DAO was caught off guard and felt left out of the decision-making process behind such an integral launch.

Jay Yu, president of Stanford Blockchain Club and a Uniswap delegate, argued that the announcement left “DAO delegates in the dark.”

Though Unichain proceeded with the launch (unlike Horizon), the consequences are catching up.

In response to Unichain’s poor market performance after a month of being live (Unichain has a mere ~$9 million in TVL), Uniswap Foundation proposed two weeks ago to spend $45 million worth of UNI tokens from the DAO treasury to spur activity.

But if Unichain is decidedly a “Labs” product, then dipping into the DAO’s coffers to fund that product is a big no-no.

Uniswap DAO delegate GFX Labs also points out that most Uniswap v4 hooks (such as Flaunch and Bunni) effectively disallows the DAO from monetizing v4 activity through a fee switch, due to the use of a “No-Op” hook which bypasses v4’s core contract logic.

“While this could mean Uniswap Labs and DAO lose a monetization strategy, Uniswap could always choose to turn on the protocol fee-switch on pools without hooks,” Rostyslav Bortman, co-founder of Hookrank.io, told Blockworks.

“Yet, most popular hook teams work in close collaboration with Uniswap Foundation, and we don’t see Bunni or Flaunch turning off the ‘protocol fee’ logic inside their hooks. Hopefully most hook teams will follow this example.”

In both the cases of Aave and Uniswap, you have centralized leadership teams behaving like a startup absolutely should — that is, pivoting and launching fast to survive and succeed.

Yet DAO leadership is encumbered by the decentralized norms of DAO governance, limiting the agility and nimbleness that a startup requires.

To get anything done, a DAO has to typically:

• Post a request for comment (RFC) to invite community discussion

• After a reasonable level of discussion, the DAO commences an early temperature check

• If the DAO has problems with the proposal, the discussion inevitably spills over into the anarchy of Crypto Twitter

• The DAO eventually takes a final vote to finalize the proposal

That entire process brings up transaction costs rather than down, so do we really want DAOs? Do the ethical benefits of decentralization outweigh the burden in transaction costs for DAOs to work well?

DAO governance is a strange animal.

If Ronald Coase was still alive, I wonder if he would think DAOs are such a good idea after all.

— Donovan Choy

Stablecoins as “superconductors” of finance

Luke Leasure’s latest report for Blockworks Research calls stablecoins "room-temperature superconductors for financial services," and makes a compelling case for crypto’s killer app.

Despite their lack of speculative appeal, stablecoins offer superior money transfer efficiency, reducing costs and settlement times while expanding global accessibility.

Stablecoins benefit from a key structural advantage: As long as onchain yields remain higher than the risk-free rate, net inflows will persist, driving supply growth. Tether, with its dominant market position, exemplifies this dynamic, profiting from its reserves to an extent that it is potentially attracting more competition to the issuer market.

The GENIUS Act, currently progressing in the US Senate, introduces a regulatory framework favoring centralized, US-domiciled issuers. While this provides clarity for financial institutions to enter the space, its implications for decentralized stablecoin issuers remain uncertain.

Meanwhile, traditional firms like PayPal, Stripe and Robinhood are integrating stablecoins, signaling the sort of mainstream adoption the crypto industry has been craving.

As issuers, money markets and fintech firms compete for inflows, stablecoins appear poised to become one of crypto’s first large-scale financial breakthroughs — unlocking liquidity and reducing financial friction.

— Macauley Peterson

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