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

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Less than 1% of all holders have 90% of the voting power in DAOs: Report
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Decentralized Autonomous Organizations (DAOs) are all the rage in the ever-expanding crypto ecosystem and are often seen as the future of decentralized corporate governance.

A DAO is an organization without a centralized hierarchy and is designed to work in a bottom-up manner so that the community collectively owns and contributes to the decision-making process. However, recent research data suggests that these DAOs are not as decentralized as expected.

A recent report by Chainalysis analyzed the operations of ten major DAO projects and found that, on average, less than 1% of holders own 90% of the voting power. This finding underscores the high concentration of decision-making power in the hands of a few, a problem that DAOs were created to solve.

This centralization of decision-making power is embodied in Solend, a lending DAO based on Solana (SOL). The Solend team attempted to take over the whale’s account and perform the clearing itself through the over-the-counter (OTC) desk to avoid cascading liquidations on the DEX book.

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The takeover proposal passed with 1.1 million votes in favor to 30,000 against, however, of those total votes, 1 million came from a single user holding a large amount of governance tokens. The vote was later overturned after being slammed.

Related: What a DAO for a Bank or Financial Institution Would Look Like

The Chainalysis report highlights that while all governance token holders have the right to vote, given the number of tokens required to do so, the right to propose new proposals for the community and pass them will not be easy for everyone thing.

The report estimates that 1 in 1,000 to 10,000 governance token holders has enough tokens to create a proposal. At the time the proposal was passed, only 1 in 10,000 to 1 in 30,000 holders had enough tokens to do so.

By volume, the decentralized finance (DeFi) ecosystem accounts for 83% of all DAOs’ treasury value and 33% of all DAOs. In addition to DeFi, venture capital, infrastructure and non-fungible tokens (NFTs) are other ecosystems where the number of DAOs has increased.



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