"We call it ownership coin": DAO governance innovation

Introduction

Deep in the crypto Twitter sphere, a community filled with technological optimism is reconstructing on-chain ownership and governance models in an almost religious manner. This concept subverts the long-held belief that members of on-chain native organizations find it difficult to obtain substantive control and accountability mechanisms from the projects in which they invest.

Based on the theoretical foundation of the governance mechanism of prediction markets, this movement led by MetaDAO builds a new ownership and capital formation structure for fully on-chain entities. This model empowers investors with rights in terms of economic interests, profit distribution, and rights protection, directly addressing the core pain points that have long plagued token investments in decentralized autonomous organizations – those often merely nominal “decentralized” projects. The decade-long vision of a truly blockchain-native organization may finally come to fruition. We refer to this new type of asset class as “ownership tokens”.

What does a traditional on-chain organization look like?

The core issue facing DAOs today lies in their fragmented structure. Many blockchain-native organizations combine a token-based on-chain governance layer with an independent off-chain legal structure. In order to interact with the real world (such as signing contracts, hiring employees, managing intellectual property, or holding funds on-chain or off-chain), traditional legal entities, such as foundations or limited liability companies, need to be established. This “legal wrapping” often raises equity financing from venture capital investors to fund the development and operation of the protocol. It maintains a loose connection with the DAO only through governance and is economically completely separate from the DAO's tokens and their holders.

This design has resulted in structural cracks. Off-chain entities can be managed by directors and shareholders in accordance with traditional corporate law, holding shares and assets of the DAO. Their legal obligation is to act in the best interests of the entity and its shareholders (rather than the token holders). In contrast, on-chain organizations are composed of token holders who have limited power to influence certain aspects of protocol direction and fund management. However, their tokens do not equate to ownership or control over the DAO legal entity, which can act independently of the token holders.

Tokens typically do not enjoy profits, assets, or any other rights owned or controlled by legal entities in any capacity. This separation makes token holders vulnerable to market risks while being unable to obtain legal remedies or economic claims against the underlying business; these assets effectively represent risks without actual control or ownership. If an off-chain entity goes bankrupt, mismanages funds (or absconds with them), or takes actions contrary to the best interests of the community, token holders have little recourse. This is because they do not have enforceable rights against the enterprise or its assets, yet must bear the economic consequences.

On the other hand, if the team managing the project creates a successful product and generates significant economic value, it does not guarantee that this success will be reflected in the value of the tokens (but historically, equity holders tend to perform well in such cases). Over the years, we have seen these two situations occur countless times.

As a result, there is a value split between the company's equity and the tokens issued by the DAO, and they exist in parallel. Off-chain entities, like all companies, obtain economic value (for example, through intellectual property, service contracts, and revenue generated by underlying applications), while on-chain tokens primarily accumulate value through in-app utility, governance influence, or direct speculation. Consequently, the tokens of the DAO and the equity of its “legal wrappers” are assigned different values.

This dual model, where an on-chain community composed of token holders governs a core off-chain enterprise, has become the standard implementation for most DAOs. This model has significant flaws, the most obvious being that on-chain participation only provides visibility and a voice, while the ultimate power, ownership, and protection mechanisms remain anchored in traditional legal structures that are separate from the tokens and their holders.

The next generation of on-chain organizations aims to bridge this gap by integrating economic, legal, and operational rights directly into a single, locally executable system through tokens issued on-chain and governance mechanisms.

Decision-making under the traditional DAO model

Most DAOs adopt a “one token, one vote” governance mechanism, where the number of tokens held by an individual is directly related to their influence on the outcomes of governance decisions. Thus, control over proposal outcomes is proportionally distributed according to token ownership, which means that the degree of decentralization in the decision-making process can only align with the distribution of token supply. In reality, voting power in many DAOs is concentrated in the hands of large holders, early insiders, or professional representatives, leading to governance mechanisms that often resemble oligarchic politics rather than a truly distributed decision-making process.

In addition to token concentration, social influence can also exacerbate the centralization of the “one token, one vote” model. A small number of prominent individuals, including founders, contributors, or key representatives, often influence outcomes by shaping narratives, swaying sentiment, and even determining which decisions can be voted on. Some token holders may follow the opinions of these individuals or simply delegate their voting to others, allowing reputation networks and social hierarchies to drive decision-making.

In addition, due to the interchangeability of governance tokens and their easy acquisition through various channels (such as exchanges, lending, and leasing), DAOs are also susceptible to vote-buying and short-term governance attacks. Participants can accumulate voting power around key proposals and then exit immediately, undermining the legitimacy of the process. A recent example of this occurred in the Arbitrum DAO voting, where the hostile party was able to acquire votes at a low cost and substantially influence the voting outcome; such cases have been common historically [ 1 ] [ 2 ].

From a deeper perspective, these governance flaws stem from a fundamental disconnect between token power and the ownership or control of DAO resources. Governance tokens typically do not grant tangible claims to profits, assets, or trust rights within the relevant off-chain entities. As the value of the tokens is decoupled from the economic performance of the entities, governance decisions, whether excellent or destructive, have no direct correlation to the value of the tokens. Token holders who vote in support of value-creating proposals cannot guarantee that their tokens will realize that value; similarly, voting in support of destructive decisions does not necessarily adversely affect their position.

This disconnection makes governance participation economically decoupled from outcomes. When decisions have no direct impact on voters, indifference and short-termism naturally follow. Furthermore, since only token holders have voting rights, there is a lack of structural mechanisms to integrate the interests of a broader range of stakeholders or to penalize decisions that harm long-term value. Without enforceable accountability or economic feedback loops, token holders have no incentive to rigorously assess decisions or oversee management.

What is an ownership coin?

Ownership tokens represent a fundamental restructuring of on-chain organizational design, aimed at integrating economic, legal, and governance rights into an executable framework. Unlike traditional governance tokens (which confer influence but do not bear control or accountability), ownership tokens directly embed executable membership, decision-making authority, and economic risk into the on-chain structure of the organization.

Core Innovation

Ownership tokens aim to address an important issue for blockchain-native organizations: some traditional DAOs allow token holders to vote on decisions but do not grant any share of the underlying economics of the organization, do not control all types of decisions made by the organization, and do not protect the organization from rogue leaders (e.g., the ability to dissolve the DAO and proportionately distribute funds to token holders). The ownership token model embeds on-chain governance into a legal entity that holds all assets (such as funds, intellectual property, contracts, codebases, and infrastructure), where operational agreements legally require designated members to execute decisions approved by the on-chain voting mechanism, establishing an enforceable accountability between blockchain governance and real-world execution.

When the on-chain community controls the governance mechanism and this mechanism has exclusive legal authority over the entity, token holders have stricter control over everything within the entity's scope of authority, thereby providing legal protection for their collective rights and interests. Therefore, ownership is expressed through control and enforcement rather than passive holding; legally speaking, tokens do not constitute equity in the entity, but they determine its actions and value distribution through enforceable control.

working principle

The architecture consists of three parts, established through the collaboration of MetaDAO and MetaLex. First, the limited liability company (LLC) owns all assets and legally recognizes only on-chain governance as its decision-making authority. Second, the futarchic mechanism (the on-chain governance platform of MetaDAO on the Solana blockchain) makes all binding decisions on these assets as well as all strategic, operational, and capital allocation choices of the organization through market pricing. Third, members have a legal obligation to execute these on-chain decisions in the real world, bridging the gap between code and law. The entity used is a DAO LLC established through MIDAO, allowing ownership token enterprises to embed governance smart contracts into their operating agreements within a framework that recognizes algorithmic management.

The result is: community control of the futarchic mechanism → the futarchic mechanism controls the LLC → the LLC owns all assets and makes all business decisions. Therefore, token holders effectively control the organization's balance sheet and strategic direction. This is executable control over a real entity, including its economic condition, decision-making, and future, enforced by law and smart contracts (i.e., DAO resources are managed by on-chain smart accounts, with spending parameters set), rather than symbolic governance.

Examples of ownership coin operation agreements can be found here.

Separation of Law and Market Power

In this system, member rights are not equity but rather a legal role tied to on-chain governance. Each member possesses a singular, indivisible, and non-transferable member right, which cannot be sold, transferred, or inherited. Members do not own shares of the organization nor do they possess any automatically generated economic rights. Instead, they have a legal obligation to execute the outcomes of the future monarch mechanism.

Since each expenditure or allocation requires explicit approval from the futures market, and the funds held by the DAO are stored in an on-chain smart account, no one can unilaterally withdraw value or do so off-chain. All capital flows and decisions are conducted transparently through smart contracts. This framework separates legal enforcement authority (members who execute decisions) from economic and decision-making authority (the futures market controlled by token holders). As a result, the governance system is better able to resist oligarchic politics because the market determines direction and legal enforcement outcomes, while members are purely executors of the community's will. Although this legal framework provides enforceable accountability as a key support, the design of the system primarily operates through transparent smart contracts and coordinated economic incentives. This should make legal recourse a last resort rather than a routine enforcement mechanism.

Consistent Compensation

Compensation follows the same rule logic as governance. Team incentives and member compensation are determined by the futures market and are paid programmatically through smart contracts, rather than being decided by management. Tokens linked to performance will only unlock when predefined indicators (such as token price or company value) or market conditions indicate that genuine value creation has occurred, ensuring that rewards are tied to measurable outcomes rather than lifetime positions or internal privileges. Since all spending and compensation proposals must be approved through the same on-chain mechanism that governs all other decisions, compensation becomes transparent, enforceable, and economically aligned with community performance.

Economic Integration

Traditional DAOs typically attempt to simulate ownership through fee conversion (sharing fees with token holders) and token buybacks, mechanisms that mimic economic coordination and control but do not establish substantive ownership or accountability. These workarounds rely on off-chain discretion and consume financial resources, leading to a loose correlation between token value and the organization's actual economic performance, while depleting capital that could otherwise be used for more productive purposes (such as growth or acquisition). In contrast, ownership tokens establish token value based on direct, enforceable control over the organization's actual assets. The design of all company assets is entirely governed by futurist mechanisms. Thus, the community's governance decisions directly determine how value is created (or destroyed), allocated, and preserved, which in turn dictates how much of the growing or shrinking value is tied to the tokens. In this context, governance control and economics become inseparable.

In traditional DAOs, the value of tokens and the value of DAO equity fluctuate independently. Ownership tokens bridge this gap. Although the legal ownership of the assets still belongs to the limited liability company, token holders effectively own the assets because they manage the entity's actions, guide its capital, and shape its value flow through a futures mechanism. This integration realigns the value flow, linking company performance and token price into an executable system. Therefore, the value of the DAO and the value of the tokens should be combined.

Summary

Ownership tokens are expected to transform DAOs into digital companies with legal anchoring and economic coherence, where code, capital, and law will operate as a single system. Token holders do not obtain effective ownership through statutory ownership, but rather through enforced control over real entities that own tangible assets. Decisions made by token holders on-chain will have legal binding effects.