Fluid DAO Weighs Formation of a Cayman‑Based Non‑Profit Foundation Backed by a $3 million Yearly Grant
By [Your Name] – February 24 2026
The governance forum of Fluid, the lending‑and‑borrowing protocol built by Instadapp, is currently debating a proposal that would transfer the platform’s intellectual property to a newly created non‑profit foundation in the Cayman Islands. If the community approves, the foundation would be financed with a recurring $250 k grant from the Fluid treasury – roughly $3 million per year – sourced from the protocol’s revenue stream.
The proposal at a glance
- Submitted: February 23 by DMH, Instadapp’s chief operating officer.
- Structure: A Cayman‑registered foundation that would hold all Fluid smart‑contract code, front‑end applications, domain names, trademarks and related assets.
- Governance: The foundation would have no owners; custodians and directors would manage day‑to‑day affairs, while ultimate authority would remain with FLUID token holders through DAO votes.
- Funding: A monthly allocation of $250 k, paid out of the treasury that is replenished by protocol fees. The budget is intended to cover engineering, security, infrastructure, business development and other operational costs.
- Legal wrap‑up: Transfer of assets is projected to be finalized by mid‑2026, with Cayman‑based counsel overseeing the process.
Why a legal wrapper now?
Fluid’s total value locked (TVL) has surpassed $1 billion, and its monthly revenue has recently topped $1.5 million. The proposal argues that a formal legal entity is required for the protocol to engage with traditional financial institutions, satisfy anti‑money‑laundering (AML) and know‑your‑customer (KYC) obligations, and to open banking relationships without diluting the existing token‑based governance model.
A foundation, the DAO suggests, can serve as a “legal owner” of the protocol’s assets while preserving the DAO’s control: token holders could amend the foundation’s charter, adjust its funding, or even dissolve it entirely through a governance vote. In a comment on the proposal, DMH emphasized that the foundation itself—not the DAO or any individual—would bear any legal liabilities that arise.
Financial impact
According to data from DeFiLlama, Fluid generated about $1.1 million in revenue in January 2026 and peaked at $1.52 million in August 2025. The proposed $250 k monthly grant would therefore consume roughly 16 % of the protocol’s best‑case monthly earnings, leaving a substantial surplus for other treasury activities.
The grant is funded from the same revenue pool that already supports the protocol’s incentive and safety mechanisms, so the net effect on liquidity or user rates is expected to be minimal. However, the regular outflow will obligate the DAO to maintain consistent fee income, adding a layer of fiscal discipline to the governance process.
Community response and risk considerations
The idea of a foundation as a legal “owner” has sparked a mixed reaction:
- Supporters contend that the structure will simplify compliance, protect the protocol from litigation by insulating the DAO, and provide a clear legal avenue for partnerships with off‑chain entities.
- Skeptics warn that creating a separate legal entity could introduce new governance complexities and raise questions about the DAO’s liability exposure if the foundation were sued. DMH responded that any legal costs and liabilities would be confined to the foundation itself, not the token holders.
The proposal also evokes recent debates within the broader DeFi ecosystem, notably the dispute between Aave Labs and the Aave DAO over fee allocation and governance. Those events have highlighted the tension between decentralized decision‑making and the need for traditional corporate structures to navigate regulatory landscapes.
Market reaction
During the 24‑hour period after the proposal’s publication, FLUID’s market price slipped about 6 % from $2.00 to $1.88 before recovering to $1.96. The price movement reflects typical volatility around governance proposals rather than a clear market consensus on the plan’s merits.
Key takeaways
- Legal compliance: A Cayman‑based foundation would give Fluid a recognizable corporate entity, facilitating AML/KYC compliance and banking relationships.
- DAO control preserved: Token holders would retain ultimate authority, with the ability to amend or dissolve the foundation via on‑chain voting.
- Funding model: The $3 million annual grant, drawn from protocol revenue, is designed to cover core operational costs while representing a modest share of Fluid’s earnings.
- Liability containment: The foundation would absorb any legal actions, shielding individual DAO participants and the protocol’s treasury.
- Precedent for the sector: Fluid’s move adds to a growing trend of DeFi projects adopting hybrid structures that blend decentralized governance with traditional legal entities.
The Fluid DAO is expected to vote on the proposal in the coming weeks. A favorable outcome would set the stage for a mid‑2026 completion of the IP transfer and the formal launch of the Fluid Foundation. Stakeholders and observers will be watching closely to see how the model balances the competing demands of decentralization, regulatory compliance, and sustainable funding.
Source: https://thedefiant.io/news/defi/fluid-proposes-creating-foundation
