Two prominent names in the field of play-to-earn scholarships are at odds after members of Merit Circle DAO (Decentralized Autonomous Organization) submitted a proposal to refund an investment made by Yield Guild Games because they consider YGG's added value insufficient.
Yield Guild Games and Merit Circle offer so-called scholarships to players. Players, often in developing countries, can borrow the NFT, which serves as the entry fee for the game. In return, the player must send back a portion of their earnings from the game.
In October, YGG invested $175,000 in Merit Circle to expand its scholarship program. However, some key members of the Merit Circle DAO believe this investment is insufficient in terms of added value.
Many Merit Circle DAO members had expected YGG to introduce more investors and generate social media coverage.
"Unfortunately, we were also disappointed with YGG's response as it shows how little value they have created in the last 7 months," wrote DAO member and investor Sad Cat Capital. "As a VC firm, we pride ourselves on the activism we do for projects we love."
YGG says the agreement between the two DAOs was an exchange of tokens for capital, and no part of the deal provided for "value-added services."
All of this highlights a key challenge to the viability of DAOs: as leaderless organizations run by their members, they are vulnerable to the political whims of interest groups that may believe they have more control over the DAO than the registered, real-world arm of the DAO.
Although many DAO members have strong opinions about YGG's role, the investment agreement was signed by Merit Circle Ltd, the DAO's Gibraltar-registered counterpart, which is controlled by Merit Circle executives and early investors.
While DAO members can submit a proposal for improvement that they can vote on, it is not known if the signed contract includes a clause to cancel and refund the investment, making any such proposal non-binding.
YGG's token is currently trading for 68 U.S. cents, down 62% from the previous month, according to CoinGecko. Merit Circle's token is priced at US$1.10 and is also facing strong market headwinds, dropping 44% in the last 30 days.