ENS Has Completed a Quiet "Self-Revolution"

Original author: Eric, Foresight News

On August 11, Beijing time, the ENS DAO officially voted and executed the "Next Era of ENS DAO" proposal. After nearly a decade of operation, the most important domain name protocol on Ethereum has finally filled a long-missing piece of the puzzle: a legal entity that can represent it in the real world.

The story begins in June of this year. On June 19, ENS Foundation director Katherine Wu published a proposal on the governance forum, with the core idea of handing over the DAO's day-to-day operations, grant management, and long-term treasury strategy to an incorporated ENS Foundation.

The idea immediately sparked an uproar in the community. Rotki founder Lefteris Karapetsas said bluntly on X that the proposal essentially amounted to the DAO dissolving itself and handing a treasury of nearly $500 million to the foundation. He even called out founder Nick Johnson by name for delegating half of his voting power to himself. A researcher at L2BEAT, in a fit of frustration, went so far as to build an alternative domain name solution with no owner and no rug potential. At the height of the controversy, the proposal's author Katherine Wu published a long clarification but disabled the comment section, which only invited more criticism.

The community's concerns were not unfounded. The cohort of DAOs founded in 2021 all believed that token-weighted governance could solve everything, but several years on, voting fatigue, a lack of accountability for grant recipients, and high coordination costs are all problems that ENS has in no short supply. Nick Johnson's response was candid: he said the DAO was almost exclusively concerned with how to spend the money in the treasury, and the extremely low delegation rate precisely illustrates how difficult it is to maintain DAO security through token voting. In other words, this isn't a question of whether to decentralize, but a question of what the DAO form is actually suited to do.

The version that ultimately passed made significant concessions compared to the June draft, and that's where this proposal deserves closer attention.

First, the roughly 54.6 million ENS tokens held by the DAO—representing 54.6% of the total supply—will not be touched at all and will remain on-chain under the control of token holders. The only exception is a one-time transfer of 1 million ENS, earmarked specifically for the foundation's future employee compensation, and these tokens cannot participate in voting, be delegated, or be lent out for staking before they are granted.

Second, the operational wallet containing approximately $16 million in Ethereum and stablecoins will also stay put, remaining under DAO control. The idea in the draft to delegate the operational wallet to the foundation was scrapped.

Third, while the endowment fund of approximately $65 million is handed over to the foundation's board for management, every single transaction must go through a 9-day timelock, during which the Security Council can directly veto any overstepping transaction. Before publishing its first annual budget, the foundation can withdraw at most $500,000 from the endowment for startup expenses. Thereafter, annual expenditures are capped by the publicly disclosed budget, subject to annual audits and quarterly grant reports.

In effect, the final plan split the keys to the "money bag" into several pieces: the foundation holds one, the timelock holds one, the Security Council holds one, and DAO token holders always retain the master key—including the power to appoint and remove directors. The removal process is also spelled out explicitly: a petition must be submitted with evidence, the board has a response window, 30 days are reserved between petition and vote, and an impeached director may publicly submit a written defense.

So what exactly is the foundation supposed to do? The answer is: the things the DAO can't do, and that ENS Labs shouldn't be doing.

ENS runs on-chain, but the rules of the domain name world are made in the meeting rooms of traditional institutions like ICANN, IETF, and W3C. A DAO has no legal personality—it can't sign agreements, can't hire full-time employees, can't push for official recognition of the ".ens" top-level domain at ICANN, and can't file trademark enforcement actions against phishing sites impersonating ENS. Over the years, these tasks either went undone or were shouldered by ENS Labs, which is essentially a Singapore-based engineering company and has never been the protocol's institutional representative.

The new foundation's board has five seats. The executive director is Alexander Urbelis, who also serves as General Counsel and Chief Information Security Officer at ENS Labs, and previously served as CISO for the NFL. The founder seat goes to Nick Johnson. The other three independent directors are Kartik Talwar, Partner at A.Capital and co-founder of ETHGlobal; Brett Sun, co-founder of Prelude; and Anthony Leutenegger, CEO of Aragon. Independent directors are paid an annual salary of 40,000 USDC, and if they decline it, the amount is donated to charitable causes of their choosing. The conflict-of-interest clauses are highly detailed: decisions involving ENS Labs grants must be approved by a majority of independent directors, and the founder seat automatically recuses itself from such votes.

For ENS Labs, this is also a form of relief. It can refocus its energy on products and engineering, and concentrate on advancing ENSv2. In February of this year, Labs made a rather decisive move: abandoning its plan to build a dedicated L2 network called Namechain and deploying ENSv2 directly on the Ethereum mainnet instead, citing Ethereum's own scaling as the reason registration gas costs have dropped by roughly 99%.

With the governance architecture streamlined, the structure of protocol, foundation, and development company each performing its own role has truly taken shape.

The impact of this proposal clearly extends beyond ENS. Over the past few years, the Web3 industry has witnessed too many DAO governance failures—either endless deliberation without resolution, or capture by whales and professional governance players. ENS's answer is to acknowledge the limits of token voting, let it return to what it does best—safeguarding the protocol's neutrality—and hand operations to a professional entity with budget constraints, audits, and removal mechanisms. Votes will become less frequent, but each vote will carry more weight.

Of course, the skepticism won't simply disappear. Handing administrative control of $65 million to a five-person board is, in essence, trading institutional design for execution efficiency. The timelock and Security Council are the technical fuses, but the real test lies in the first budget, the first round of grants, and the first appearance at an ICANN meeting once the inaugural board takes office. What ENS is trying to prove is that critical internet infrastructure can be both credibly neutral and have someone to walk it into the negotiating rooms of the real world. The outcome of this experiment will become a frame of reference for the entire DAO industry in the years to come.