Sam Macpherson, CEO of Spark Protocol, is advocating for a fundamental rethink of how decentralized autonomous organizations are governed. Rather than forcing thousands of token holders to reach consensus on every decision, his proposed solution is elegantly competitive: let independent sub-organizations operate autonomously and vie to deliver the most value back to the parent protocol.

This architecture, known as the sub-DAO model, positions the core protocol as a rule-setter and infrastructure maintainer while delegating day-to-day operational decisions to semi-independent teams. It reflects a broader industry reckoning with DAO governance, as several major DeFi protocols — including Compound and Uniswap — have documented persistent challenges with low voter participation and decision-making bottlenecks that have slowed product development across the sector.

The Problem with Flat DAO Governance

Macpherson has been raising alarms about the deficiencies of flat DAO governance structures since 2021 and 2022, during the era when MakerDAO — now rebranded as Sky — still operated under its original monolithic design. MakerDAO was one of DeFi's earliest and largest protocols, issuing the DAI stablecoin (now USDS), which is collateralized by a multi-billion-dollar portfolio of crypto assets and real-world tokens. The governance challenges Macpherson identified at MakerDAO were therefore not marginal — they affected one of the most systemically important protocols in decentralized finance.

In a flat DAO, virtually every consequential decision passes through a single governance bottleneck. Token holders are asked to vote on matters ranging from technical protocol parameters to marketing budgets. The consequences are well-documented: sluggish decision-making, widespread voter fatigue, and the crystallization of political factions whose primary activity becomes obstructing rival proposals rather than advancing the protocol.

Macpherson's diagnosis reframes factionalism not as a defect requiring elimination, but as an inherent dynamic that must be channeled productively. The sub-DAO model does not attempt to suppress political competition. Instead, it provides a constructive outlet by allowing distinct teams to function independently and demonstrate their value through measurable results rather than governance maneuvering.

Under this framework, the core DAO — Sky, in this instance — establishes high-level rules and safeguards the protocol's foundational infrastructure. Sub-DAOs such as Spark then assume responsibility for operational execution: running lending markets, managing risk parameters, and deploying capital.

Spark Protocol as a Working Proof of Concept

Spark Protocol launched as a sub-DAO within the Sky ecosystem in 2023. The protocol operates Aave-style lending markets built on Aave's open-source technology, circulating assets through permissionless pools where borrowers and lenders are matched without intermediaries.

Spark's deployed capital reached $3.6 billion in 2025, with projections exceeding $5 billion in 2026 — figures that place it among the larger decentralized lending platforms by total value locked.

Operational autonomy is central to this model's effectiveness. Conventional DAO structures would necessitate governance votes for the type of rapid decision-making that lending markets demand. Interest rate adjustments, collateral parameter modifications, and risk management responses sometimes need to occur within hours of shifting market conditions. A sub-DAO with delegated authority can execute at the pace the market requires — a capability that has been a recurring pain point for flat-structured DAOs across DeFi, where governance cycles can take days or weeks to resolve.

The Endgame Framework and Its Implications for DeFi Governance

Spark operates not in isolation but as a component of the broader Endgame framework that Sky, formerly MakerDAO, has been implementing. This restructuring envisions multiple independent sub-DAOs competing within a shared ecosystem and represents one of the most ambitious governance overhauls attempted in decentralized finance to date.

The underlying logic draws from established market economics. Concentrating all lending operations under a single team creates a monopoly with its attendant inefficiencies. Introducing several sub-DAOs competing for the same collateral and user base generates pressure to innovate, reduce costs, and improve product offerings. The core protocol benefits by drawing resources from whichever sub-DAO delivers the strongest performance.

Rather than a single governance body attempting to optimize every function simultaneously, the Endgame model allows specialization to emerge organically. One sub-DAO might concentrate on conservative lending strategies backed by blue-chip collateral. Another might pursue higher-yield opportunities in riskier markets. Capital and users naturally gravitate toward the teams that deliver the best outcomes.

Critically, a sub-DAO that underperforms can be replaced or defunded without necessitating a sweeping governance overhaul of the parent protocol — a degree of adaptability that flat structures fundamentally lack. If Sky's multi-sub-DAO experiment proves durable, other large DeFi protocols navigating similar governance gridlock may look to the model as a tested alternative to the monolithic structures that defined the first generation of on-chain organizations.