$26 Billion, 70% in Native Tokens: The Time Bomb of DAOs

A treasury that bites its own tail. Imagine a company that holds 70% of its treasury in its own shares. Every drop in the stock price would gnaw at its ability to pay its employees, and every attempt to sell to cover bills would further plunge the stock price. This is exactly how most DAOs operate, these decentralized autonomous organizations whose treasury is managed collectively by token holders. Here’s an explanation. Key points of this article:

• The majority of DAO treasuries are held in their own token, creating a concerning financial loop.
• GSR's report revealed that this situation has exposed DAOs to major financial risks, illustrating a structural vulnerability.

GSR estimates the problem at $26 billion

The London firm GSR Markets, a specialist in market making for digital assets, published a straightforward report on August 7.

More than 70% of the assets held in DAO treasuries consist of the native token of the protocol itself, with the remainder distributed among stablecoins, ETH, Bitcoin, and other reserves.

The total of these treasuries now exceeds $26 billion as of the first quarter of 2026. The figure seems comfortable until one realizes that the bulk relies on tokens that can lose 30 to 50% of their value in just a few weeks.

Indeed, when the price drops, three things happen simultaneously:

• the value of the treasury shrinks,
• the protocol's revenues (often denominated in the same token) decline,
• the DAO must sell more tokens to cover ongoing expenses like salaries or security audits.

This additional selling, in turn, weighs on the price, closing the loop.

DAOs trapped in the governance trap?

Let’s understand the situation clearly. Selling one’s own token during a booming period remains almost taboo within a community of holders.

Indeed, as the report explains, a proposal to convert to stablecoins or more stable assets like ETH regularly faces governance resistance, even when the financial logic is undeniable.

Moreover, the problem is also structural, as a good portion of active contributors in a DAO hold native tokens themselves, which personally incentivizes them to avoid any decision that could impact the price in the short term.

As a result, everyone agrees in theory on the need to diversify, but in practice, no one wants to carry the proposal. Let’s not be overly negative, though. The figure is slowly improving; the average concentration was still 82% in 2023 according to GSR, compared to 70% today.

Separating operational reserves and long-term bets

In light of this observation, GSR recommends:

• a simple architecture,
• an operational reserve covering twelve to twenty-four months of operation, to be held in stable assets,
• long-term holdings that can remain in native tokens as long as they are covered by hedging strategies (risk coverage).

The firm notably suggests option structures called collars, which involve buying protection against declines while selling part of the upside potential to finance the cost.

It should be noted that despite GSR's authority, the market-making pioneer has a bias against this statistic since it sells precisely this type of service. This does not invalidate the diagnosis: vulnerability has been documented over several bearish cycles, and the industry is progressing, but too slowly to prevent the next correction from replaying the same scenario.

The Political Resistance Within DAOs

Let’s change the angle a bit. On the side of DAOs, diversifying a treasury is not just a technical question; it is also a political question. Proposing to sell part of the native token to buy stablecoins or ETH is often perceived by the community as a lack of confidence in the project.

Contributors and large holders, who are often the most active in governance, themselves have significant exposure to the token. As a result: everyone agrees on the principle of diversification... as long as no one has to vote to implement it. This collective inertia explains why, despite several bearish cycles, the proportion of native tokens in treasuries remains so high.

Uniswap, or How 100% of UNI Can Melt a Treasury

Uniswap provides the clearest illustration of the problem. For years, its treasury was composed of nearly 100% UNI tokens. As a result: its value in dollars followed exactly the token's price. In 2021, it nearly reached $19 billion. A few months later, during the bear market of 2022, it collapsed between $1.5 and $2 billion and remained stuck there for nearly a year and a half.

Several attempts at diversification have emerged. The most spectacular remains the UNIfication proposal of December 2025: the DAO voted to burn 100 million UNI directly from the treasury (about $600 million at the time). The vote was massive: 125.3 million UNI in favor against only 742 against, resulting in over 99.9% approval. This is one of the rare times the community agreed to significantly reduce exposure to the native token.

In short, even the largest DeFi protocol on the planet took years to begin to exit the feedback loop described by GSR. And it still has not completely exited.

This problem goes beyond just the realm of DAOs. Publicly traded companies that accumulate billions of dollars in bitcoins face similar difficulties as soon as the market turns, proving that the lesson is worth well beyond decentralized finance.

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