ENS and the Limitations of DAO Governance

Last month, Twitter sleuths uncovered a cache of homophobic and transphobic posts from Brantly Millegan, one of three directors of the Ethereum Name Service Foundation (ENS), roiling the crypto community.

“Homosexual acts are evil. Transgenderism doesn’t exist. Abortion is murder. Contraception is perversion. So is masturbation and porn,” read one of Millegan’s tweets from May 2016.

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Responding to backlash, Millegan doubled down, chalking up the perspective to his Catholic faith. “Nice to see some ppl finally read the first word of my bio,” he wrote (his Twitter bio says “Catholic, husband, father”).

It was enough to get him fired from his position as director of operations at True Names Limited, the Singapore-based nonprofit that organizes and funds the Ethereum Name Service. After two days of deliberation, Nick Johnson, Millegan’s boss at True Names and the founder of ENS, said he felt Millegan’s position was “no longer tenable.”

The catch is that while Millegan had been removed from True Names Limited, he wasn’t really gone from the organization as a whole – and in a vote that ended this past weekend, the community confirmed that Millegan will stay on as director of the ENS Foundation and remain a core developer on the project.

That’s because, somewhat confusingly, “ENS” refers to a multi-part organizational structure, as opposed to a single company.

ENS is a program on the Ethereum network, a system for turning long, numerical Ethereum addresses into text-based shortcuts. It functions like a top-level domain on the internet we’re already used to. In the way that the “.com” suffix shortens an otherwise unwieldy IP address into something handy and readable (e.g. “google.com” instead of “142.250.65.238”), the “.eth” suffix gives traders a quick way to identify a specific address on the Ethereum network.

The ENS Foundation is a company incorporated in the Cayman Islands, the legal entity behind ENS. It’s governed by the ENS DAO (decentralized autonomous organization), which is essentially a crypto-backed voting service on the blockchain. It uses a home-brewed cryptocurrency, ENS, to assign proportionate voting power (one token is one vote).

When a DAO member puts forth a proposal, it’s up to other members to use their ENS to either vote for it or against it. There’s also a delegate system, through which token holders can choose a representative to control their votes for them.

ENS distributed ENS tokens to anyone who’d used the service on or before Oct. 31, 2021. To those who didn’t care about participating in DAO votes, it felt like free money, since the tokens are also worth something on decentralized exchanges. (Disclosure, I claimed some ENS tokens last fall and cashed out immediately.)

Because True Names Limited operates as a conventional company and isn’t beholden to a decentralized governance structure, it was able to fire Millegan shortly after the offending tweets were unearthed.

Removing Millegan from the ENS Foundation, however, had to be put to a DAO vote.

That vote was active for the past week days on a crypto voting platform called Snapshot. On Saturday afternoon, it officially failed to pass, with 1.6 million ENS tokens voting “against” Millegan’s removal, and 1.4 million tokens assigned to the “for” position. Around 19% of the total votes cast (698,000 tokens) were abstentions.

While the decision not to remove Millegan from the ENS Foundation seems democratic, it’s important to remember how exactly voting power was initially distributed this past fall. Thanks to the lopsided distribution and delegation of tokens, Millegan has always had outsize power over this ecosystem. This is what distinguishes the DAO governance model from the co-op model, wherein each community member gets one vote no matter their position in the hierarchy.

A quarter of the total ENS supply went to early adopters (everyday users like me, who procured an ENS domain name before November), and 50% went to the DAO treasury, for community members to control via votes. As a way to reward participation in the project (a la equity in a conventional startup), the final 25% went to ENS contributors and developers.

Not coincidentally, Millegan himself holds a massive amount of ENS tokens, and used them to vote against the proposal. He’s also been delegated votes by other ENS holders: He holds around 1,600 tokens in his public wallet, but he’s also controlling the combined voting power of everyone who delegated their votes to him when they claimed their ENS tokens. With some 363,000 votes in his charge, he was able to sway the results in his favor.

Without those votes, the proposal would have passed.

Nick Johnson, part of the team that fired Millegan from True Names, chose to abstain, as did ENS co-founder Alex Van de Sande. Major delegates like Coinbase and Mike Demarais, of the crypto wallet app Rainbow, didn’t vote at all. Why bother campaigning to be a delegate if you’re not going to vote?

It reminded me of a scene in the first season of “Succession,” where board members are voting on whether to remove Logan Roy, CEO of the media conglomerate Waystar Royco, from the company he founded so many years ago. Logan is forced to recuse himself, since he’s the subject of the vote, but he refuses to leave the room, staring down individual board members as they make their choices. Spoiler alert: The vote fails, and Logan fires everyone who voted for his removal.

That is to say, it’s only human to think about changing your vote when you’re under pressure, in the heat of things, or when you know you’re being watched. Even worse, you might decide not to vote at all. Social pressure doesn’t just disappear in the context of a transparent DAO vote.

You can imagine ENS holders and delegates feeling reluctant to vote for fear of being branded a proponent of “cancel culture” on the blockchain (the issue of accountability has only recently become a major issue in the historically libertarian, do-what-you-want environment of crypto).

And you can imagine it going the other way, too, with potential voters afraid to express their support of Millegan in an environment they see as too oppressively “woke.” More than a few influencers have framed Millegan’s firing from True Names as a violation of the right to freedom of religion. (Though, is discrimination a constitutionally protected right?)

In-person voting processes for political races are designed to be private to protect against this sort of thing. The counterargument is that transparent voting is crucial for a delegate system, ensuring that voters act responsibly.

In the case of ENS, the system worked as it was meant to – no one is alleging voter fraud or foul play – and yet the result has enshrined a kind of exclusivity on-chain. The ENS Foundation will continue to be led by a self-professed bigot, according to a simple majority of votes.

What does it mean that one of the most “decentralized” organizations out there, a community with a real system in place for determining its collective future, has chosen this outcome?

Equating DAO votes with monetary value (one vote = one ENS token = around $14) gives the richest community members the biggest say, and the power to tip crucial decisions in their favor. But the lack of standards around recusal may be the bigger culprit here. Because Millegan voted against removing himself from DAO leadership while other ENS leaders chose to abstain, he effectively gave himself the last word.

“If this were web2, a board would remove Brantly immediately simply because ENS itself is at risk,” tweeted the investor David Phelps. “Who would work there now?”

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Now that he’s mostly avoided consequences, the question is whether Millegan will be able to rebuild a fractured ENS – a community that undoubtedly includes gay and trans people, as well as people who simply don’t want to support an organization whose director holds these prejudices.

The crypto industry has a long history of disavowing politics and avoiding conversations related to social justice, but ignoring the potential for discrimination doesn’t make it go away.

UPDATE (MAR. 8, 2022 – 15:10 UTC): Clarified that Millegan is one of three ENS directors.