The Messy State of Crypto Governance with Jito Foundation's Nick Almond | The Breakdown

Nick Almond of Jito Foundation describes crypto governance as broadly dysfunctional, the product of years of neglect in one of the industry's least glamorous areas. He frames governance and decentralization as muscles that must be trained incrementally, and argues that handing full ecosystem control to a DAO before that capacity is built leads to failure, including DAOs being plundered.

Most DAO infrastructure has been forked from Compound governor contracts dating to around 2019 or 2020 with little meaningful upgrade since. In practice, multi-sigs operating on M-of-N quorum logic function as the de facto governance core in many protocols rather than token-weighted voting. Power structures in governance tokens were largely set on airdrop day, and Almond says he became a reasonably large delegate in several DAOs simply by posting a delegate profile at that moment. He argues it is now practically impossible to gain meaningful delegate standing in Arbitrum if not established at the time of the airdrop.

Early governance tokens were primarily regulatory artifacts used to launch an investable asset under a utility token framing derived from Swiss association structures, with actual governance utility being secondary. Fear of securities classification caused projects to avoid material governance power and dividend-like distributions, which constrained exploration of what digital assets could genuinely be. Almond argues that tokens without utility beyond governance will generate sham proposals to manufacture value, and that governance tokens should carry direct value accrual tied to protocol revenue.

The Arbitrum Security Council's intervention in the KelpDAO attack demonstrated that the council holds near-godlike powers over the ledger, including over legacy transactions. Almond says this means Arbitrum can no longer be called immutable, and that its permissionlessness now depends on Security Council decision-making. The council was originally a latent structure designed for security emergencies, and reframing it as an active intermediary in hacks means anyone can now approach it requesting transaction reversals, destabilizing the governance equilibrium around permissionlessness. The Arbitrum DAO is currently voting on whether to transfer the clawed-back funds to Aave LLC to act as a legal counterparty, which would place the funds under a restraining order requiring court approval for any movement. Almond extends this to permissioned blockchains generally, arguing that those with intermediation ability implicitly sanction all transactions they choose not to reverse, because having the power to intervene but choosing not to is almost equivalent to intervening.

Jito Foundation is developing a framework called pragmatic decentralization, which would delegate many protocol authorities to developers for active management and iteration while preserving token holder ability to claw back those authorities. Delegated authority would explicitly exclude custody of user funds. Almond argues that making protocol decisions publicly and having delegates review them produces higher quality decisions, and that decentralizing authority over serious keys across many people improves security regardless of governance philosophy.

Almond points to the failure of the Solana inflation reduction proposal SIMD 228, despite support from the foundation, Tali, and Mert, as genuine evidence that the Solana network is decentralized across its validator set. He contrasts this with Bitcoin, whose resistance to change is itself part of its value proposition, even though significant behind-the-scenes politics exist including questions about Blockstream's funding and influence. He argues the CLARITY Act will put greater pressure on DAOs by including stipulations about how concentrated token control is, and predicts that running everything from a multi-sig under one party's control is on borrowed time as regulatory requirements will eventually force decentralization.

Almond views regulatory clarity as a net positive because removing the threat of securities classification would give token holders more power than they currently have relative to TradFi structures, though years of waiting have still not produced a definitive picture of what the rules will look like. He expresses frustration that crypto outcomes are so often constrained by regulation rather than governance innovation, and says the full range of blockchain governance possibilities has not been adequately explored because the industry has not invested enough effort in building next-generation structures. He contends that the open autonomous capacity enabled by blockchain technology will persist regardless of regulatory outcomes, and argues the stakes make continued engagement with regulatory discussions important despite how drawn out they are.