FloorDAO, a crypto group specializing in NFT finance, recently underwent a split due to disagreements among its investors. The project, which focuses on developing products for NFT-Fi, transferred more than $2.5 million from its treasury, consisting of crypto tokens and NFTs, to a splinter group called FloorkDAO. This division was spearheaded by activist investors who were dissatisfied with the direction of FloorDAO.
The split initiated a redemption process for the FLOOR token, with investors receiving nearly $5 per token, close to its highest value this year. This is notable considering that the current trading price of the token is $3.88. The internal conflicts within FloorDAO have been ongoing for months, revolving around the project’s commitment to its obligations towards FLOOR token investors.
FloorDAO was originally created as a spinoff of Olympus DAO, a significant protocol known for revolutionizing fundraising, token issuance, and treasury management. Given its lineage, it was expected that FloorDAO’s native token would maintain a value equal to or higher than its treasury’s “book value.” The initial documentation for the project outlined a mechanism to address any discrepancy, offering asset distribution in the event of a fall below book value. However, when the price of FLOOR dropped below book value, the theoretical arbitrage mechanism did not come into effect.
According to Discord records and conversations with long-term investors, project insiders promised to introduce a redemption mechanism to rectify this issue. However, they later abandoned this promise and instead planned a protocol upgrade that removed voting power and treasury rights from token holders.
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Opposition within the FLOOR community began before the implementation of the “v2” upgrade. A subset of the community demanded the opportunity to exit the DAO and claim their share of the treasury prior to the upgrade, viewing it as a betrayal of the project’s original principles and future promises. These token holders consistently voted for buybacks of their tokens instead of acquiring more NFTs for the treasury.
Recognizing the influence of the dissatisfied faction, the insiders of FloorDAO decided to split the project. A vote earlier this year allowed the division into two groups: one retaining the original name and focus on NFTs, and the other called FloorkDAO, serving as an escape hatch for disillusioned investors. This division highlights the increasing power of activist investors within decentralized autonomous organizations (DAOs).
DAOs that struggle to find product-market fit or maintain the book value of their tokens have faced pressure from investors to initiate buyouts rather than continuing to spend from the treasury. Many DAOs view their issued tokens as governance chips, with more tokens translating to greater decision-making power. Arbitrage investors often acquire tokens trading below book value and then advocate for mechanisms that allow them to cash out, leading to an activist approach.
While project insiders may perceive the actions of activist investors as an attack on the DAO, the activists consider themselves as safeguarding their positions and the interests of all token holders who share their discontent. In a recent blog post, FloorDAO acknowledged the successful fork that allows members not aligned with the long-term vision of the DAO to exit.
The split within FloorDAO and the emergence of FloorkDAO serve as reminders of the challenges faced by DAOs operating in the crypto space. It highlights the importance of addressing investor concerns and finding a balance between long-term vision and investor satisfaction. Moving forward, DAOs will likely need to navigate these tensions and ensure transparency and accountability to maintain trust and support from their token holders.
