FloorDAO, a prominent cryptocurrency group specializing in NFT finance, has recently undergone a division into two separate entities as a result of disagreements among its investors.
The Birth of FloorkDAO
The project, which initially aimed to develop innovative “NFT-Fi” products, experienced a transfer of over $2.5 million from its treasury, consisting of crypto tokens and NFTs, to a breakaway group known as FloorkDAO. This separate entity is now controlled by activist investors who expressed dissatisfaction with the project’s direction.
“The split initiated a redemption process that paid nearly $5 per FLOOR token, which is close to its highest value this year, despite the current trading price being $3.88,” stated a spokesperson for FloorDAO.
Internal Conflicts and Broken Promises
The division within FloorDAO comes after months of internal conflicts surrounding the project’s commitment to its obligations towards FLOOR token investors. As a spinoff of Olympus DAO, a significant protocol that revolutionized fundraising, token issuance, and treasury management, FloorDAO was initially expected to maintain a token value equal to or higher than its treasury’s “book value.”
However, when the price of FLOOR inevitably dropped below book value, a previously outlined arbitrage mechanism failed to come into effect. Discord records and conversations with long-term investors revealed that project insiders promised to introduce a redemption mechanism to rectify this issue. Unfortunately, they later reneged on this promise and instead planned a protocol upgrade that removed voting power and treasury rights from token holders.
A subset of the FLOOR community expressed opposition towards the “v2” upgrade and demanded the opportunity to exit the DAO and claim their share of the treasury before the upgrade took place. These dissenting token holders perceived the upgrade as a betrayal of the project’s original principles and future promises. In contrast to acquiring more NFTs for the treasury, they consistently voted for buybacks of their tokens.
As the influence of this disillusioned bloc grew, FloorDAO’s insiders acknowledged the need for a split. Earlier this year, a vote paved the way for FloorDAO to divide into two groups: one retaining the original name and NFT focus, and another called FloorkDAO, which provided an escape hatch for dissatisfied investors.
The Rise of Activist Investors in DAOs
The emergence of FloorkDAO reflects the increasing power of activist investors within decentralized autonomous organizations (DAOs). In situations where projects struggle to find product-market fit or maintain the book value of their tokens, investors pressure for buyouts rather than continued spending from the treasury.
Many DAOs consider their issued tokens as governance chips, where a larger quantity of tokens grants 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 perceive the actions of activist investors as an attack on the DAO, the activists see themselves as safeguarding their positions and the interests of all token holders who share their discontent. As a blog post from earlier this week stated, “FloorDAO has now successfully forked to allow members who are not aligned with the long-term vision of the DAO to exit.”
