FloorDAO, a cryptocurrency group specializing in NFT finance, has undergone a split into two distinct entities as a result of disagreements among investors. The project, which focuses on developing products for “NFT-Fi,” has transferred more than $2.5 million from its treasury—comprising cryptocurrency tokens and NFTs—to a newly formed group named FloorkDAO.
This splinter group is now under the control of activist investors who were dissatisfied with the direction of the original project. The split initiated a redemption process, and FLOOR token holders were paid nearly $5 per token, an amount close to its highest value for the year. This redemption occurred despite the current trading price of the FLOOR token being $3.88.
The split within FloorDAO follows months of internal conflicts centered around the project’s commitment to fulfilling its obligations to FLOOR token investors. FloorDAO itself originated as a spinoff of Olympus DAO, a notable protocol that brought about innovations in fundraising, token issuance, and treasury management.
Due to its lineage and association with Olympus DAO, there were expectations for FloorDAO’s native token to maintain a value equal to or higher than its treasury’s “book value.” However, internal disagreements and concerns over the project’s direction led to a division, with activist investors forming FloorkDAO and taking control of assets from the original treasury. The conflict underscores the challenges and complexities that can arise in decentralized governance models within the crypto space.
The project’s initial documentation included a mechanism designed to address any discrepancy, allowing for asset distribution in the event of a fall below book value. However, when the price of FLOOR eventually dropped below book value, the anticipated arbitrage mechanism did not activate as expected.
Last year, project insiders committed to introducing a redemption mechanism to rectify this issue, as evidenced by Discord records and conversations with long-term investors. However, they later reneged on this promise and opted for a protocol upgrade that stripped voting power and treasury rights from token holders, sparking dissatisfaction and internal conflicts among the community. The deviation from the original commitment has contributed to the discord within FloorDAO.
FLOOR Community Started Opposing Before V2 Upgrade
Prior to the implementation of the “v2” upgrade, a faction within the FLOOR community began expressing opposition to it. They demanded the opportunity to exit the DAO and claim their share of the treasury before the upgrade, considering it a betrayal of the project’s original principles and future promises.
This subset of token holders consistently voted in favor of buybacks of their tokens rather than acquiring more NFTs for the treasury. As a result, the dissatisfied bloc gained growing influence within FloorDAO. In response to this internal strife, the project’s insiders ultimately acknowledged the significant impact of the dissenting group and made the decision to split the project, leading to the formation of the new entity, FloorkDAO. This move aimed to address the concerns and disagreements within the community.
A vote conducted earlier this year resulted in FloorDAO splitting into two distinct groups: one retaining the original name and continuing its focus on NFTs, and the other named FloorkDAO, functioning as an exit option for disillusioned investors.
The emergence of FloorkDAO highlights the growing influence of activist investors within decentralized autonomous organizations (DAOs). In instances where projects face challenges in achieving product-market fit or maintaining their token’s book value, investors have increasingly pressured these projects to consider buyouts rather than continuing to spend from the treasury. This reflects the evolving dynamics and challenges associated with decentralized governance models in the crypto space.
In many DAOs, the issued tokens are often regarded as governance tokens, where more tokens translate to increased decision-making power. Arbitrage investors frequently acquire tokens trading below book value and advocate for mechanisms that enable them to cash out, adopting an activist approach.
From the perspective of project insiders, these actions by activist investors may be seen as an attack on the DAO. However, the activists themselves often view their actions as a means of safeguarding their positions and representing the interests of all token holders who share their discontent.
A recent blog post mentioned, “FloorDAO has now successfully forked to allow members who are not aligned with the long-term vision of the DAO to exit.” This reflects the DAO’s attempt to address internal conflicts and provide an exit option for those who are not in agreement with the project’s direction.
