Deep within the crypto Twittersphere, a community of techno-optimists is pursuing a near-faithful vision of reimagining on-chain ownership and governance. This philosophy overturns the long-held belief that members of native on-chain organizations lack meaningful control and accountability over the projects they invest in. Led by MetaDAO, this movement, based on the theoretical foundations of prediction market governance, is creating a new ownership and capital formation structure for fully on-chain entities. This model empowers investors with economic rights, profit distribution, and equity protections, addressing a core pain point that has long plagued decentralized autonomous organization (DAO) token investments: projects often claiming "decentralization" in name only. The decade-long dream of truly blockchain-native organizations may finally be a reality. We call this new asset class "ownership tokens." What do traditional on-chain organizations look like? The core problem facing today's DAOs lies in their fragmented structure. Many blockchain-native organizations combine a token-based on-chain governance layer with a separate off-chain legal structure. To interact with the real world (e.g., enter into contracts, hire employees, manage intellectual property, or hold funds on or off-chain), a traditional legal entity, such as a foundation or limited liability company, is required. This "legal wrapper" typically raises equity funding from venture capital investors to fund the protocol's development and operations. It maintains only a loose connection to the DAO through governance and is completely economically separate from the DAO's tokens and their holders. This design creates a structural rift. The off-chain entity can be governed by directors and shareholders, adhere to traditional corporate law, and hold the DAO's equity and assets. Its legal obligation is to act in the best interests of the entity and its shareholders, not token holders. In contrast, the on-chain organization is composed of token holders, who have limited power to influence certain aspects of the protocol's direction and treasury management. However, their tokens do not equate to ownership or control of the DAO's legal entity, which can act independently of token holders. Tokens typically do not carry any rights to the profits, assets, or other assets owned or controlled by a legal entity in any capacity. This separation leaves token holders vulnerable to market risk without legal remedies or economic claims against the underlying business; the assets effectively represent risk without actual control or ownership. If the off-chain entity fails, mismanages funds (or absconds with funds), or takes actions contrary to the best interests of the community, token holders have little recourse. This is because they have no enforceable rights against the business or its assets, but are subject to the economic consequences. On the other hand, if the team managing the project builds a successful product and generates significant economic value, there is no guarantee that this success will be reflected in the value of the token (although historically, equity owners have tended to fare well in such situations). We’ve seen both of these scenarios play out countless times over the years. The result was a parallel split in value between the company’s equity and the tokens issued by the DAO. The off-chain entity captured economic value like all companies do (e.g., through intellectual property, service contracts, and revenue generated by the underlying application), while the on-chain token accrued value primarily through in-application utility, governance influence, or outright speculation. As a result, the DAO’s tokens were assigned a different value than the equity of its “legal wrapper.” This dual model, where an on-chain community of token holders governs the off-chain enterprise core, has become the standard implementation for most DAOs. This model has significant flaws, the most notable of which is that on-chain participation only provides visibility and voice, while ultimate power, ownership, and protection mechanisms remain anchored in traditional legal structures that are separate from the tokens and their holders. The next generation of on-chain organizations aims to bridge this gap by integrating economic, legal, and operational rights directly into a single, natively enforceable system through on-chain tokens and governance mechanisms. Decision-making within the Traditional DAO Model Most DAOs employ a “one coin, one vote” governance mechanism, where the number of tokens held by an individual directly correlates to their influence over the outcomes of governance decisions. Consequently, control over proposal outcomes is distributed proportionally to token ownership, meaning the decision-making process can only be as decentralized as the token supply distribution. In practice, voting power in many DAOs is concentrated in the hands of large holders, early insiders, or professional representatives, resulting in governance mechanisms that often resemble plutocracy rather than a truly distributed decision-making process. In addition to token concentration, social influence can exacerbate the centralization of the "one coin, one vote" model. A small group of prominent individuals, including founders, contributors, or key representatives, often influence outcomes by shaping narratives, shaping sentiment, and even determining which decisions are up for voting. Some token holders defer to these individuals or simply delegate voting, allowing reputation networks and social hierarchies to drive decision-making. Furthermore, because governance tokens are fungible and can be easily acquired through multiple channels (e.g., redeeming them on the market, lending, and leasing), DAOs are also vulnerable to vote buying and short-term governance attacks. Participants can accumulate voting power around key proposals and then immediately exit, undermining the legitimacy of the process. This situation recently occurred in the Arbitrum DAO vote, where the hostile party was able to obtain votes at low cost and substantially influence the voting results; history is full of such cases [
1 Core Innovation
Ownership coins are designed to address a key issue with blockchain-native organizations: some traditional DAOs allow token holders to vote on decisions, but do not grant any share in the organization's underlying economy, do not control all types of decisions made by the organization, and do not protect the organization from rogue leaders (for example, the ability to dissolve the DAO and distribute funds proportionally to token holders). The ownership coin model embeds on-chain governance into a legal entity that holds all assets (e.g., funds, intellectual property, contracts, codebase, and infrastructure), where the operating agreement legally requires designated members to execute decisions approved by the on-chain voting mechanism, establishing enforceable accountability between blockchain governance and real-world execution. When the on-chain community controls the governance mechanism and that mechanism has exclusive legal authority over the entity, token holders have tighter control over everything within the entity’s purview, providing legally defensible protection for their collective rights and interests. Ownership is therefore expressed through control and enforcement rather than passive shareholding; legally, tokens do not constitute equity in the entity, but rather determine its behavior and value distribution through enforceable control.
How It Works
The architecture consists of three parts and was established by MetaDAO and MetaLex in collaboration. First, a limited liability company (LLC) owns all assets and legally recognizes only on-chain governance as its decision-making power. Second, the futarchic mechanism (MetaDAO's on-chain governance platform on the Solana blockchain) makes all binding decisions regarding these assets, as well as all strategic, operational, and capital allocation choices for the organization, through market pricing. Third, members are legally obligated to enforce these on-chain decisions in the real world, bridging the gap between code and law. The entity used is the DAO LLC, established through MIDAO, enabling ownership token businesses to embed governance smart contracts into their operating agreements within a framework governed by recognized algorithmic governance. The result is: community controls the futarchic mechanism → the futarchic mechanism controls the LLC → the LLC owns all assets and enforces all business decisions. Token holders thus effectively control the organization’s balance sheet and strategic direction. This is enforceable control over a real entity, including its economics, decisions, and future, enforced by law and smart contracts (i.e., DAO resources are managed by on-chain smart accounts with set spending parameters), not token governance. An example of an ownership coin operating protocol can be found here. Separation of Legal and Market Powers In this system, membership interests are not equity shares, but rather legal roles tied to on-chain governance. Each member holds a single, indivisible, and non-transferable membership interest that cannot be sold, transferred, or inherited. Members do not own shares in the organization or possess any automatic economic rights. Instead, they are legally obligated to execute the future outcomes of the monarch mechanism. Because every expenditure or distribution requires explicit futures market approval, and DAO funds are held in on-chain smart accounts, no one can unilaterally extract value off-chain. All capital flows and decisions are transparently conducted through smart contracts. This framework separates legal enforcement (members who execute decisions) from economic and decision-making power (the futures market controlled by token holders). The result is a governance system that is more resistant to plutocracy, as the market determines direction, the law enforces outcomes, and members serve solely as executors of the community's will. While the legal framework provides enforceable accountability as a key pillar, the system is designed to operate primarily through transparent smart contracts and aligned economic incentives. This should make legal recourse a last resort, rather than a conventional enforcement mechanism. Compensation follows the same rules and logic as governance. Team incentives and member compensation are determined by futures markets and paid programmatically via smart contracts, rather than at management's discretion. Performance-linked tokens unlock only when predefined metrics (such as token price or company valuation) or market conditions indicate real value creation, ensuring that rewards track measurable outcomes rather than tenure or insider privileges. Because all payout and compensation proposals must be approved through the same on-chain mechanism that governs all other decisions, compensation becomes transparent, enforceable, and economically aligned with community performance. Economic Integration Traditional DAOs often attempt to simulate ownership through fee switching (sharing fees with token holders) and token buybacks, mechanisms that simulate economic coordination and control but do not establish substantive ownership or accountability. These workarounds rely on off-chain discretion and consume financial resources, resulting in token value only loosely tied to the organization's actual economic performance while draining capital that could be used for more productive purposes, such as growth or acquisitions. In contrast, ownership tokens base their value on direct, enforceable control over the organization's actual assets. All company assets are designed to be governed entirely by the Futures mechanism. Therefore, the community's governance decisions directly determine how value is created (or destroyed), distributed, and preserved, and thus how much of that growing or shrinking value is tied to the token. In this scenario, governance control and economics become inextricably linked. In traditional DAOs, the token value and the value of the DAO's equity fluctuate independently. Ownership tokens bridge this gap. While legal ownership of the assets remains with the limited liability company, token holders effectively own the entity because they manage the entity's behavior, direct its capital, and shape its value flow through the Futures mechanism. This integration realigns the value flow, linking company performance and token price into a single, executable system. Therefore, the value of the DAO and the value of its token should become one. Ownership tokens have the potential to transform DAOs into legally anchored, economically coherent digital companies, where code, capital, and law operate as a single system. Token holders gain effective ownership not through legal ownership, but through enforceable control over a real entity that owns real assets. Decisions made by token holders on the chain will be legally binding.
Weiliang
Catherine
Anais
Alex
Miyuki
Kikyo
Joy