DAOs Are Out, Borgs Are In

BORGs are the obvious choice to replace the highly flawed and ineffective DAO model

OPINION
article-image

sdecoret/Shutterstock modified by Blockworks

share

DAOs were originally conceptualized as leaderless crypto-native organizations governed autonomously by communities of token holders. 

Today, hardly any purported DAOs truly fit this original description — and the term’s overuse has reduced it to a meme.

It’s time to re-think Web 3 governance. In its recent white paper, Delphi Labs reimagines a new type of crypto-native organization as a balanced synthesis of trustless on-chain automations and traditional legal structures. 

This hybrid governance model, aptly dubbed a BORG (or CybOrg), stands to redefine Web 3 — and eventually many other industries. 

The flawed DAO model

The DAO model, as currently conceived, is fundamentally flawed. 

Few, if any, self-identified DAOs even approach being decentralized or autonomous. Most are essentially unincorporated businesses that are offloading regulatory liability onto token holders. For example, in two recent court cases, officials in the United States insisted that token holders of bZx DAO and Ooki DAO may be personally liable for legal violations by their respective core teams. 

Even DAOs that are credibly attempting to decentralize still depend heavily on their core teams.

In truth, it simply isn’t possible — technologically or otherwise — to effectively govern a complex organization without centralized human decision-makers. 

The cybernetic organization

The advent of decentralized blockchains and artificial intelligence (AI) has made possible a new type of organization: the trust-minimizing BORG. 

In the words of Delphi Labs, a BORG is “a traditional legal entity that uses autonomous technologies (such as smart contracts and AI) to augment the entity’s governance and activities.” The paper adds that “BORGs do not merely use autonomous technologies… BORGs are legally governed by autonomous technologies through tech-specific rules implanted in their charter documents.”

Read more: DAOs and BORGs — What’s the Difference, and Who Cares?

Unlike DAOs, BORGs are compatible with established regulatory frameworks, and can be assimilated into companies’ existing bylaws. In fact, almost any entity — from venture-backed startups, to publicly traded companies, to investment funds — can become a BORG. What matters is that its traditional off-chain legal structure, at least in part, is also enforceable on-chain using trustless, self-governing smart contracts. 

Delphi Labs anticipates that BORGs will partly serve as “DAO-adjacent” entities. However, BORGs’ greatest impact is likely to be on traditional enterprises. 

Invasion of the BORGs

BORGs’ utility spans practically every business function where the incentives of stakeholders and human intermediaries are imperfectly aligned. 

One example cited by Delphi Labs is “tokenized preferred stock that embeds a complex set of liquidation and dividend logics.” This is a compelling idea, but it only scratches the surface. 

Ultimately, the entire complex edifice of corporate governance, with all the costly frictions it entails, could potentially become the domain of autonomous BORGs. 

BORGs can unlock immense efficiencies. Rather than risk costly proxy fights, a corporation can hard-code its charter into smart contracts, and immutably bind itself to on-chain shareholder votes. Instead of filing burdensome disclosures, management can outsource financial accounting and reporting to self-directed AI. 

Asset management faces even greater disruption. From quantitative hedge funds to index-tracking ETFs, any investment strategy that isn’t highly context-dependent can likely be managed more efficiently — and securely — by a trust-minimized BORG. 

BORGs are neither democratic nor technocratic by nature. They are neutral, and can be calibrated to varying circumstances or goals. For example, one corporate BORG may be programmed to treat shareholder votes as authoritative; another may treat them as one of many inputs in a dynamic optimization function. 

Similarly, BORGs are perfectly capable of conforming to government regulations. However, as blockchain-native entities, they can potentially be rendered impervious to state interference. 

BORGs are more than an aspirational ideal. Fully decentralized and autonomous organizations may still be far off, but trust-minimized BORGs are viable today. It won’t be long before BORGs begin reshaping countless industries. Web3 should take the lead. 



Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates.png

Research

The convergence of DePIN and energy generation aims to address modern grid challenges by incentivizing distributed generation.

article-image

Sol Strategies will be the tokenized stock platform’s first listing

article-image

Craig Fuller, CEO and founder of FreightWaves, breaks down how tariffs are and will impact shipping and inventories

article-image

This limited-edition run of sparkling water is more for existing traders than crypto newcomers, but mainstream distribution is part of the plan.

article-image

US states are now competing for Bitcoin bragging rights

article-image

The deal is likely to fuel further M&A around derivatives trading and infrastructure, Architect Partners’ Michael Klena says