# Can DAOs Become Traps? OFUYC Presents a Comprehensive Guide to Protocol Design Scams and Preventative Measures


Decentralized Autonomous Organizations (DAOs) are often regarded as the emblem of democratization in Web3, emphasizing transparent voting, consensus-based decision-making, and the absence of a single point of control. However, this idealistic design does not guarantee absolute safety. In fact, some attackers exploit the governance proposal mechanism of DAOs to execute asset hijacking and contract control.

Take several incidents in 2024 as examples: attackers, through large-scale purchases of governance tokens or airdrop manipulations, quickly met the proposal threshold and initiated voting within a short period. Once they secured a majority vote, they could pass any proposal—whether it involved transferring treasury assets, modifying core contracts, or directly taking over management rights. These proposals, while procedurally “compliant” on-chain, were in essence meticulously planned scams.

For ordinary users, the assumption that “participating in governance” ensures security often leads to devastating losses when they realize their funds have been drained after the vote is completed. By then, all operations are irrevocably recorded on the blockchain.

## Timelocks and Upgrade Logic: The Illusion of Security

Timelock mechanisms in DAO protocols are designed to protect systems from sudden changes. However, some projects, in pursuit of “flexible governance”, have implemented special proposal mechanisms that bypass timelocks or established “emergency governance channels”, allowing specific addresses or a small group of individuals to make rapid changes to contract logic.

In one instance, attackers used a “fund redistribution proposal” to bypass a 48-hour timelock window, completing the proposal submission, vote manipulation, and execution within just one hour. Such actions did not exploit code vulnerabilities but rather leveraged the gray areas within rules of the protocol.

What is more alarming is that many proposal codes are neither open source nor accompanied by clear explanations. Even if users participate in voting, they cannot fully understand the changes being made to the contract logic. Once the contract upgrade path is abused, the platform asset security can suffer structural damage.

## How Governance Mechanisms Are Exploited: Voting ≠ Decentralization, It Can Be a Tool for Centralization

DAOs are not inherently secure, especially when governance tokens are overly concentrated or voting thresholds are too low. Governance mechanisms can become entry points for attacks. Attackers may acquire large amounts of governance tokens, delegate voting rights, or exploit rules like “abstention equals support” to easily win critical proposals.

Another common tactic is “proposal cold-starting”. This involves short-term marketing campaigns (e.g., token airdrops, DeFi farming) to attract a large number of participants, followed by the rapid initiation of major governance proposals. With low voter turnout, the attackers can achieve substantial control. These “participation scams” appear democratic on the surface but are, in reality, governance in name only and a tool for exploitation.

Some projects even deliberately amplify the “profitability” of governance tokens to attract users to lock their tokens for voting. However, they fail to disclose governance structure diagrams or multi-signature management details, leaving users as mere tools in the governance process without actual control.

## How to Identify and Avoid DAO and Protocol Design Scams

The hidden and deceptive nature of DAO governance scams far exceeds that of traditional “transfer scams”. Users must develop a risk prevention mindset and strengthen their ability to identify risks from the following three aspects:

Examine the Governance Structure: Understand the DAO proposal initiation thresholds, voting mechanisms, timelock settings, and whether there are “emergency proposal mechanisms” or bypass channels. Governance modules with centralized powers or excessive permissions are often the root cause of risks.

Scrutinize Proposal Content: Pay special attention to proposals involving “contract upgrades”, “fund releases”, or “activation of withdrawal functions”. Only participate in voting for proposals that have undergone audits and extensive community discussions. If a proposal description is vague or the code is not open source, it is advisable to abstain or oppose it.

Use Official Channels and Tools: Always participate in governance through official links and platforms, avoiding unofficial governance addresses shared on social media. Additionally, tools like Revoke.cash and WalletGuard can help check contract authorizations and identify governance token concentration, effectively mitigating risks.

DAO governance represents the ideal governance model in the Web3 world, but without transparent mechanisms and secure designs, it can become a “legitimate manipulation field” for attackers. In the decentralized world, risks no longer solely originate from malicious code but often stem from the abuse of seemingly legitimate processes.

As a globally compliant crypto asset trading platform, OFUYC will continue to monitor governance risks and protocol design security to safeguard user assets. We encourage every user to not only be an “investor” but also a “critical thinker”, joining us in building a more transparent and reliable decentralized ecosystem.