Decentralization is a central idea in cryptocurrency, yet most projects begin their lives under tight founder control. Code design, product direction, and treasury management are typically handled by a small team during the early stages. This structure allows rapid decision making but conflicts with the long term aim of distributing authority to a broader community.
For this reason, many projects plan a gradual transition toward governance through a decentralized autonomous organization. The challenge is timing. If authority is transferred too early, a community may lack the knowledge and organization needed to manage a complex protocol. As a result, decentralization is often introduced in stages.
The first step usually involves creating a formal governance framework. This often includes a governance token that represents voting power and defines who can submit proposals. Early community forums allow participants to debate changes, suggest new features, and discuss treasury use before any binding authority is granted.
A well known example is Decentraland. It began by establishing a foundation and online forum where members could share ideas. It then introduced governance tokens that allow holders to propose changes and vote on how funds should be spent. Initial voting rounds were advisory only, providing a way to test governance processes without putting the protocol at risk. Over time, binding on chain votes were introduced for limited technical updates, followed later by broader authority over protocol changes and treasury management.
Full autonomy is reached only when the founding team relinquishes administrative control. This includes giving up direct access to treasury funds and removing special permissions that allow unilateral code changes. At this point, the community becomes responsible for approving upgrades, fixing bugs, and directing long term development. A sustainable treasury is also required so that the protocol can fund operations through fees, lending activity, or other revenue streams.
Some newer projects aim to shorten this transition period. No NPC Society, a project that combines digital identity concepts with community governance, has outlined plans to transfer treasury and voting authority to its community within months of its token distribution. It is using governance tooling on Solana to manage proposals and votes, and plans to rely on multisignature vaults to provide transparency over treasury activity.
DAO governance also presents challenges. Many communities struggle with low participation, slow decision making, and the risk that large token holders gain outsized influence. To address these issues, projects often use structured proposal formats, simple voting options, and participation incentives. More advanced voting models, such as quadratic or reputation based systems, can also be used to distribute influence more evenly.
Moving to a DAO model is widely viewed as a milestone that reflects a project’s maturity. By placing authority in the hands of a distributed global community, projects can strengthen accountability and reduce dependence on founding teams.
