Less than 1% of all holders have 90% of the voting power in DAOs: report

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Decentralized Autonomous Organizations (DAOs) have become a rage in the ever-expanding crypto ecosystem and are often seen as the future of decentralized corporate governance.

DAOs are organizations without a centralized hierarchy, intended to operate from the bottom up, where the community collectively owns and contributes to the organization’s decision-making process. However, recent research data shows that these DAOs are not as decentralized as they were intended.

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A recent report by Chainalysis analyzed the performance of ten major DAO projects and found that on average, less than 1% of holders hold 90% of the voting power. This finding highlights the high concentration of decision-making power in the hands of a select few, which the DAO was created to solve.

This concentration of decision-making power was evident with Solana-based debt DAO Soland. The Soland team tried to capture Whale’s account and carried out self-liquidation through over-the-counter (OTC) desks to avoid cascading liquidations in DEX books.

The takeover motion was passed with 1.1 million “yes” votes followed by 30,000 “no” votes, although 1 million of these total “yes” votes were from a user holding a large amount of governance tokens. The vote was later overturned after a vigorous push.

related: What would a DAO look like for a bank or financial institution

The Chainalysis report highlighted that although all Governance token holders have voting rights, it is not very easy for the community to create a new resolution and pass it on to everyone, given the amount of tokens needed to do so. Looking at the numbers.

The report estimates that 1 in 1,000 and 1 in 10,000 governance token holders have enough tokens to make an offer. When it comes to passing resolutions only 1 in 10,000 and 1 in 30,000 holders have enough tokens to do so.

All DAOs held in the decentralized finance (DeFi) ecosystem account for 83% of the Treasury value and 33% of all DAOs by calculation. Apart from DeFi, venture capital, infrastructure, and NFTs are other ecosystems that have seen an increase in the number of DAOs.