How Does Token Dilution Specifically Impact a Decentralized Autonomous Organization (DAO)’s Governance and Treasury?

Dilution decreases the voting power of existing token holders, concentrating influence in the hands of new, large investors. This shift can undermine the decentralized nature of the DAO and alter its original mission through new governance proposals.

For the treasury, excessive dilution may be a sign of poor capital efficiency, suggesting the project is selling future value too cheaply to fund current operations. This risks long-term sustainability.