FloorDAO, a finance-focused crypto group in the NFT (Non-Fungible Token) space, recently experienced a significant split into two separate entities. This decision was driven by disagreements between FLOOR token investors and the project’s direction, particularly its shift away from its original arbitrage-friendly focus. FloorDAO, which aims to create products for the emerging field of “NFT-Fi,” made a bold move by transferring over $2.5 million worth of its treasury, consisting of crypto tokens and NFTs, to a breakaway faction known as FloorkDAO.
FloorDAO’s dramatic split causes dilemma
This splinter group was led by activist investors and comprised numerous disgruntled token holders who chose to join this exodus. The new group promptly initiated a redemption process that paid out nearly $5 per FLOOR token, a value close to the year’s highest point for the struggling asset, which currently trades at $3.88. This dramatic split is the culmination of several months of internal disputes within FloorDAO regarding its commitment to FLOOR token investors.
The project is a spinoff of Olympus DAO, a protocol that once held significant prominence in the crypto space, known for pioneering innovative fundraising methods, token issuance, and treasury management. Given this lineage, FloorDAO’s native token was expected to maintain a value at or above the worth of its treasury, often referred to as its “book value.” The project’s initial documentation supported this expectation, stating that if the token’s value ever fell below this threshold, the DAO could address the situation through “theoretical arbitrage” and asset distribution.
However, when FLOOR’s price did indeed drop below its book value, this theory failed to materialize in practice. Records from Discord discussions and accounts from long-term investors revealed that project insiders had committed last year to introducing a redemption mechanism to rectify the situation. However, somewhere along the way, they abandoned this promise and opted for a protocol upgrade that revoked token holders’ voting power and treasury rights. Before the “v2” upgrade could be implemented, a subset of the FLOOR community vehemently opposed it.
The rise of activist investors in the DAO community
The holders demanded the project allow them to exit the DAO and receive their share of the treasury before the upgrade took effect. They viewed this upgrade as a departure from the project’s original principles and future commitments. These token holders repeatedly voted to urge the project to conduct buybacks of their tokens instead of acquiring more NFTs for the treasury. Ultimately, FloorDAO’s insiders acknowledged that the disaffected group had gained enough influence to force a split. A vote earlier in the year paved the way for FloorDAO to divide into two factions.
One faction retained the name and its NFT focus, and the other named FloorkDAO, providing an exit option for investors. The emergence of FloorkDAO underscores the increasing influence of activist investors within decentralized autonomous organizations (DAOs). Projects struggling to find product-market fit or maintain their token’s book value have faced mounting pressure from investors to facilitate buyouts rather than continuing to allocate funds from their treasuries. This dynamic is possible because many DAOs treat their issued tokens as governance tokens.
The more tokens one holds, the greater their influence on the DAO’s decision-making processes. Arbitrage-focused investors have been known to purchase tokens trading below book value and then lobby for mechanisms that enable them to cash out, leading to an activist-oriented approach. From the perspective of project insiders, this coordination is often perceived as an attack on the DAO. In a recent blog post, FloorDAO stated, “FloorDAO has now successfully forked to allow members who are not aligned with the long-term vision of the DAO to exit.”
However, from the viewpoint of activist investors, their actions are aimed at protecting their positions and safeguarding the interests of all token holders who choose to join them in leaving the DAO. These investors argue that FloorDAO’s failure to fulfill its promise of implementing redemptions set the stage for the mass exodus. This move underscores the importance of transparency and accountability in the crypto space, where trust and commitment to initial promises are paramount. The cryptocurrency world continues to evolve, and the actions of projects like FloorDAO serve as valuable case studies for the broader crypto community.
