How to Build a DAO That Survives the First Bear Market

Short summary: This hands-on playbook gives decision-makers the inside scoop on building DAOs that not only weather tough times but actually come out stronger. It dives into cool strategies like treasury diversification with tokenized T-bills, resilient governance parameters and tooling, bicameral voting, identity and privacy enhancements, cross-chain risk controls, legal wrappers, and a solid 90-day hardening plan based on real-world case studies.

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Why most DAOs fail their first winter (and how not to)

A bear market puts everything to the test--your treasury, voting processes, contributor incentives, and even your legal stance. During the last cycle, we noticed:

• Treasuries are way too invested in their own governance token, leading to some panic selling when prices hit rock bottom (or they're at risk of governance capture when the market dips).
• There’s a lot of governance apathy and vote buying going on, which is really holding back progress on roadmaps.
• Bridge exploits have turned cross-chain governance into a potential target for attacks.
• Legal “unknowns” are becoming serious concerns for holders who simply participated in votes.

Great news! We've got live patterns--legal, financial, and technical--that really made a difference for DAOs in 2024-2025. This guide breaks down those patterns into clear, actionable choices, complete with current examples and figures.

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1) Treasury: model for a 24‑month runway, then diversify like an institution

If your treasury isn't set up to cover 18-24 months of operations without having to sell off native tokens at a low price, you're likely going to see a drop in governance quality. It’s best to kick things off with a conservative runway model that considers all the essentials (think salaries, audits, grants, bug bounties, infrastructure, legal fees, and some slippage buffers). From there, aim to diversify into three different buckets, making sure you have clear targets and rules for rebalancing.

• Liquidity and Spend (Stablecoins + Cashlike RWAs): Think about keeping 12-18 months worth of burn in assets that you can easily redeem, like regulated money-market investments and top-notch stablecoins. By 2024-2025, the landscape for tokenized T-bill funds really took off:
  • BlackRock’s BUIDL (which is tokenized through Securitize) hit over $1B in assets under management (AUM) in March 2025. They also rolled out more share classes across major L1s and L2s, making it super practical to use as collateral and a solid source for on-chain yields. (coindesk.com)
  • Superstate introduced continuous pricing for USTB, meaning NAV updates and interest accrue every second--perfect for keeping those treasuries in sync with DeFi’s constant settlement cycle. (superstate.com)
  • Franklin Templeton (BENJI), WisdomTree (WTGXX), and a few others have become go-to DAO partners through RWA rails. (theblock.co)
• Growth-Beta (ETH, LSTs): Reserve around 6-12 months' worth of burn for strategic liquidity, staking yields, and keeping in tune with the ecosystem.
• Governance/Native Token: It’s all about holding onto your tokens with some discipline and having a clear plan for when to sell less. Use them to kickstart governance rather than treating them like a slush fund.
• Let's adopt a policy to keep 18 months of burn covered, using a solid mix of regulated tokenized T-bills and top stablecoins. We’re thinking something like 70% in BUIDL/BENJI/USTB and 30% in USDC/GUSD. We should also rebalance this quarterly to keep our runway in check.
• How about streaming operating budgets directly to our vendors and teams in real time? This could help cut down on the awkward sell pressure and boost accountability. Sablier and Superfluid are great tools for this. We've seen ENS DAO and Optimism lead the way in streaming payouts for service providers and grants. You can check out more about it here.
• For any idle ETH we have, let’s kick off an RFP to invest a capped portion, say around 7,500 ETH, into low‑risk, composable strategies on our home L2. This should be reviewed by an independent committee with a public scoring system. Arbitrum’s Growth and Treasury programs serve as a great live example of this approach. Want to know more? Just head over to this link: here.

Case Study: Arbitrum's STEP Program

• Kicking off in mid-2024, the STEP initiative funneled tens of millions into tokenized U.S. Treasuries. Fast forward to May 2025, and the DAO gave the green light for another 35M ARB (which is about $11.6M) aimed at Franklin Templeton, Spiko, and WisdomTree products. The result? A solid on-chain yield, improved liquidity planning, and reduced risk with the native token. (theblock.co)

Case Study: ENS Endowment Discipline

The ENS DAO is doing a great job keeping track of its operational revenues, expenses, and runway. They’ve got the Endowment in the hands of pros (shoutout to Karpatkey!). As of H1 2025, the DAO’s assets, which include both ETH and stablecoins, indicate a runway of about 9.8 years based on their current burn rate. This kind of transparency really sets the bar high for solvency signaling. You can dive deeper into the details here.

What to Avoid:

• Single-asset treasuries or the mindset of “we’ll sell if we must.” Nouns showed us that having a solid treasury mix and exit strategies is super important--especially when market prices and sentiment start to drift apart. In fact, over half of the DAO split in 2023, pulling out around $27M. So, it’s smart to plan for dissent before it actually happens. (blockworks.co)

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2) Governance that stays legitimate under pressure

A bear market really brings out the cracks in governance structures. Check out the design choices below that have stood the test of time:

Set Parameters that Reflect Your Holder Base

• Proposal Threshold: Make sure there’s some "skin-in-the-game." Aim for a range of 0.1-1.0% of voting power or get a nod from well-known delegates.
• Quorum: Aim for a quorum between 3-6% of the total supply. For those high-stakes changes, consider using an adaptive or super-quorum approach. You can check out OpenZeppelin’s GovernorVotesQuorumFraction and SuperQuorum for some solid standards. (docs.openzeppelin.com)
• Prevent Late-Quorum Sniping: You definitely want to enable GovernorPreventLateQuorum. This way, votes can’t suddenly shift outcomes in the final block without giving others a chance to chime in. (docs.openzeppelin.com)
• Timelocks: For everyday treasury operations, set timelocks to be between 24-72 hours. For protocol upgrades, a bit longer--about 5-7 days--should do the trick. And remember, it’s a good idea to have separate executors for “routine” versus “critical” tasks.

Professionalize delegation (and pay for it)

• By 2025, DAOs that really nailed down decision-making started backing high-context delegates with some cash. Uniswap kicked things off with their Delegate Reward Initiative and Treasury Delegation program, locking up around ~18M UNI (about $113M) to boost delegate voting power. They even incentivize the top performers to show up, which helps improve participation and the quality of proposal reviews. Check it out here: (theblock.co).
• It’s also a smart move to publish a “delegate charter” that outlines essential stuff like required disclosures, office hours, conflict-of-interest controls, and stipends based on KPIs.

Bicameral or Multi-House Structures for Legitimacy and Speed

The Optimism Collective takes a unique approach by dividing authority between the Token House, which includes economic stakeholders, and the Citizens’ House, made up of impact-driven badgeholders. This setup is specifically for Retro Funding, where they allocate over $10 million in OP tokens to builders. By separating value capture from the legitimacy of public goods, they aim to create a balanced system.

Why not think about designing your own “second house” for grants and retro-rewards to help reduce governance capture? You can get more details here.

Security councils with transparent constraints

• For Layer 2s and core infrastructure DAOs, having an elected Security Council that operates with a high-threshold multisig (think 9 out of 12 members) allows them to take emergency actions without needing a vote. However, this has to be done under a constitution that insists on transparency, post-event reviews, and a limited focus. You can check out Arbitrum’s constitution as a great example. (docs.arbitrum.foundation)

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3) Identity, privacy, and anti‑bribery: upgrade your voting stack

Sybil Resistance and Social Pressure Distorting Votes During Drawdowns

When we talk about drawdowns, it turns out that Sybil resistance and social pressure can really mess with the voting process. As we stepped into 2025, we saw some practical upgrades that tackled these issues:

• Verifiable uniqueness for sensitive votes: Let's make sure each vote is unique but still respects privacy. We can do this by integrating cool privacy-preserving KYC/uniqueness options like Civic Pass and Gitcoin Passport. This way, we can implement a one-person-one-vote system or quadratic rounds for more nuanced decision-making, all while keeping token-votes in play for economic policy. It’s important to adjust stamp weights and keep criteria updated to dodge any sneaky gaming of the system. Check it out here!
• Shielded voting by default on Snapshot: Big news! Shutter and Snapshot have teamed up to introduce permanent shielded voting using threshold-homomorphic encryption. This approach is fantastic because it'll help prevent coercion and vote-buying signals, with a solid production roadmap expected in 2025. It would be great to make this the go-to method for those tricky votes that spark a lot of debate. Learn more here.
• Research-backed guardrails: Recent studies have shown that token-weighted systems can inadvertently expose voter choices--even with secret ballots. To tackle this, we should think about limiting how much power whales hold, and when possible, adding a bit of noise to the tallies to enhance resistance to bribery (known as B-privacy). Pairing this with delegate caps could really help strengthen our voting systems. For more details, check this out here.

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4) Cross‑chain governance: minimize bridges, assume they fail

Bridges are still the biggest source of systemic risk in on-chain systems. Every governance message that goes over a bridge picks up that risk.

• Be the architect of your “home‑chain” governance: focus on executing upgrades where the assets and contracts actually reside. Try to steer clear of bridging governance calls if you can just deploy a local executor and sync using the canonical methods.
• If bridging governance is unavoidable:
  • Stick to audited and widely trusted bridges that come with strong validator sets and clear incident response plans. Keep an eye on the research: from 2021 to 2023, bridge exploits racked up losses over $2-3B. Make sure to design for complete value accounting and keep an eye on live monitoring tools like XChainWatcher and accounting invariants. (arxiv.org)
  • Don’t forget a human safety net: require a high-threshold Security Council to co-sign any major cross-chain actions.
  • Introduce a pause and observe period: set up a delay window on the destination chain to allow the community to review things before moving forward.

Concrete lesson: The hacks of Binance’s BSC Token Hub (2022), Wormhole (2022), and Nomad (2022) all stemmed from different bugs, but the end result was the same--massive minting or message acceptance failures. It’s a reminder to never let governance hinge on just one cross-chain assertion. (investopedia.com)

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5) Legal wrappers: remove existential risk for voters and contributors

The whole notion that “a DAO can’t be sued” came crashing down with the Ooki case. In 2023, a U.S. court decided that a DAO qualifies as a “person” under the Commodity Exchange Act. This ruling meant enforcement could go after web assets and impose penalties, putting voter liability on the table for unwrapped organizations. So, it’s time to wrap your DAO up. (cftc.gov)

What’s Coming Up in 2024-2025:

• Wyoming is rolling out its DUNA (Decentralized Unincorporated Nonprofit Association) statute on July 1, 2024. This is a game-changer for DAOs! With this legal framework, they’ll gain legal recognition, limited liability for their members, a clearer tax position, and the ability to make contracts and even show up in court. Plus, it doesn’t put a stop to for-profit activities. By 2025, several prominent DAOs are already considering or jumping on the DUNA status bandwagon. Check out the details over at CoinDesk.
• The Marshall Islands have also made some solid moves with DAO LLCs, which were updated in late 2023. These amendments introduce series-LLC structures for sub-DAOs and make it clear that most governance tokens won’t be treated as securities, as long as they don’t come with economic rights. This clarity is especially helpful for grant houses and working groups. For the full scoop, head over to CoinDesk.

Regulatory changes can swing in unexpected directions. Back in March 2025, the U.S. took Tornado Cash off OFAC’s SDN list after some unfavorable court decisions. This really highlights the importance of having solid legal strategies with contingency plans and clear guidance for contributors, instead of just vague reassurances. (reuters.com)

Action Items:

• Get the commission counsel to suggest a wrapper (like DUNA, DAO LLC, a foundation, plus some operating companies), along with contributor agreements, IP, and tax advice.
• Create a straightforward "Legal & Risk" page that voters, delegates, and grantees can easily understand.

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6) Contributor operations: reduce churn, increase signal

Compensation and Accountability in Downturns

When the economy takes a hit, it's no secret that compensation and accountability can slip pretty quickly. To stay on top of your game during tough times, consider adopting these patterns:

• Streamed, milestone-gated payments: Let’s turn those big lump-sum grants into ongoing streams that hit pause if milestones aren’t met. Plus, we can automatically publish burn dashboards and track earnings to date. Check out how ENS DAO handles service-provider streams for a solid example. (discuss.ens.domains)
• Delegate pipelines: Why not fund about 5-15 delegates who really understand the context? Set clear KPIs and get monthly reports from them. Uniswap’s 2025 programs--like delegate rewards and treasury delegation--are great references for designing incentives and distributing power. (theblock.co)
• Grants as catalysts, not subsidies: Let’s keep overhead in check and use staged unlocks, clawbacks, and measurable protocol KPIs (like total value locked, integrations completed, and audits finished). A real-world example of this is how the Uniswap Foundation budgets grants and reports on their impact. (uniswapfoundation.org)

Let’s be real: not every program makes it. Back in April 2025, Gitcoin decided to shut down its software division, Grants Lab, and phased out Allo Protocol/Grants Stack to shift their focus. If you’re involved in a project, it’s smart to have a plan for a graceful wind-down and data archiving in case you need it. Check out the details here.

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7) Tooling that doesn’t become a single point of failure

• Governance contracts: Let’s go with the OpenZeppelin Governor that comes with some handy features like vote extensions, time-locks, a super-quorum for those high-risk moves, and a Proposal Guardian for emergencies to cancel things if needed. Just remember to audit any custom extensions you throw in there. You can check out more about it here.
• Multisig and modules: Using a Safe with Zodiac modules (think Reality for Snapshot-to-execution) is a great way to blend off-chain legitimacy with on-chain action while keeping accountability among signers. For more details, take a look at this link: here.
• Monitoring and incident response: It’s super important to keep an eye on your proposal pipelines, multisigs, and executors. Set up some playbooks for actions like pausing, rotating roles, and canceling proposals. Heads up: OpenZeppelin is planning to sunset Defender as a SaaS by July 1, 2026, shifting focus to an open-source Relayer/Monitor, so make sure you budget some time for migration in 2025-2026. More info can be found here.

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8) Design for dissent: controlled exits beat chaotic forks

A rage-quit or fork mechanism can really act as a pressure relief valve--if you set it up with the right safeguards. Take Nouns DAO’s recent fork, for example. It ended up draining about $27 million and showed us that if you don’t align incentives, exit options combined with treasury “book value” can be exploited by arbitrageurs. If you’re thinking about introducing an exit strategy, consider adding: higher initiation thresholds, cooling-off periods, anti-sybil identity checks, and limits on pro-rata claims for funded liabilities. (coindesk.com)

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Your 90‑day bear‑market hardening plan

Week 1-2: Governance and Budgets

• Let’s kick things off with some parameter updates: we’ll set a proposal threshold, define the quorum, decide on vote extensions, and set up some timelocks. Plus, we need to publish a constitutional “risk classes” matrix that outlines what situations call for a super-quorum.
• Time to create a Security Council, maybe something like a 9 out of 12 setup, and set up an emergency policy along with reporting duties. Check out the details here.
• We’re aiming to get a budget for the next 24 months approved. Let’s also plan to invest 12 to 18 months into tokenized T-bills or stablecoins, working with at least two issuers (think BUIDL and BENJI/USTB). More info can be found here.

Week 3-4: Delegation, Privacy, Identity

• Roll out a funded delegate program with KPI-based stipends and share monthly scorecards. Let's use treasury delegation to give a boost to underrepresented yet active delegates! Check out more on this here.
• Get shielded voting up and running on Snapshot for those tricky votes (thanks to Shutter!). You can read about it here.
• Make sure that sensitive one-person-one-vote decisions are gated behind Gitcoin Passport or Civic Pass. You can find out more about this on Civic's blog.

Week 5-6: Cross-Chain Risk

• Keep track of all governance calls that involve a bridge. When possible, switch these out for local executors and canonical synchronization. Introduce necessary delays and require council co-signatures for any cross-chain upgrades. Also, make sure to document bridge runbooks that include halt procedures. Check it out here: (arxiv.org)

Week 7-8: Legal and Comms

• Let's get a solid legal framework in place, like a Wyoming DUNA or a DAO LLC, if it fits the situation. We should also put together an easy-to-understand legal brief for our voters and contributors. This will cover important stuff like liability, taxes, and reporting. You can check out more about this here.
• We need to draft a memo on “operating in volatile regulation.” This will lay out our clear stances and procedures for handling incidents, especially for things like changes in sanctions posture--think of situations like the Tornado Cash case back in March 2025. For more on that, take a look at this article.

Week 9-10: Operations and Security

• We're looking to switch payouts and grants over to streaming, complete with pause and clawback controls. Plus, we’ll be requiring milestone-based unlocks and keeping things transparent with public progress logs. Check out more details here.
• It's time to set up some monitors for our proposal pipelines, multisigs, and treasury wallets. We'll be testing out pausing and signer-rotation drills on a quarterly basis. Also, let’s get ready for the transition from Defender SaaS to open-source relayers and monitors in 2025-26. Dive into the full scoop here.

Week 11-12: Transparency and Audits

• Let’s roll out a quarterly solvency dashboard that covers the essentials like runway months, RWA/stable/ETH/native splits, and counterparty exposures.
• It’s time to get an external governance review in motion--this will look at parameters, participation, and the delegation map. Plus, we’ll conduct a security tabletop exercise aimed at identifying potential bridge and governance failure modes.

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Implementation checklist (copy/paste into your forum)

• Treasury
  • Policy: Keep 18 months of runway in tokenized T-bills and stablecoins from at least two different issuers.
  • Streams: Every grant and operation will be streamed, with a pause or clawback option tied to milestones.
  • ETH RFP: Focus on low-risk strategies for our home L2; we'll have a committee that publishes the criteria.
• Governance
  • Parameters: Quorum is set at 4% (adaptive), and we’ve got a proposal threshold of at least 0.25%. Oh, and vote-extension is on!
  • Timelocks: For operations, we’re looking at 2-3 days, while protocol changes will take a bit longer, around 5-7 days.
  • Delegation: We’re funding 10 or more delegates with quarterly reviews and we’ll be keeping an eye on conflict disclosures.
• Identity & Privacy
  • Make shielded voting the default for those important Snapshots.
  • Use Passport/Pass gating to ensure one-person-one-vote and manage those quadratic rounds.
• Cross-chain
  • Local executors; a waiting period for bridged governance.
  • Security Council co-signs on cross-chain upgrades.
• Legal
  • Get the DUNA/DAO LLC set up; make sure contributor agreements are in place; publish those IP and tax memos.
• Security & Monitoring
  • Keep an eye on multisigs and proposals, plus run those quarterly incident drills.
  • Transitioning Plan Defender → moving to open-source tools.

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The mindset shift: govern like you expect winter every year

Downturns aren’t just unexpected events; they’re more like seasons that we go through. The DAOs that really thrived in 2024-2025 took some smart steps to level up their game. They got serious about their treasury by investing in on-chain RWAs, empowered their delegates, and added layers of identity and privacy to their voting processes. They also made cross-chain execution safer and wrapped themselves in legal protections so that builders and voters wouldn’t find themselves in a mess.

If you take this playbook to heart and hold yourself accountable every quarter, your DAO won’t just make it through the next bear market--it’ll actually come out stronger, building trust, attracting talent, and saving time along the way.

7Block Labs is here to support your team with a complete hardening plan from start to finish. We’ve got you covered on everything--from crafting your policies and integrating the right tools, to upgrading governance and coordinating the necessary legal aspects. This way, you’ll be fully prepared before the market throws any challenges your way.