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In DAOs, 90% of the voting power is held by less than 1% of all holders: Report

28-Jun-2022 By: Somesh Gaur
In DAOs, 90% of the

In DAOs, 90% of the voting power is held by less than 1% of all holders: Report

To create a proposal, a user must own between 0.1 percent and 1 percent of the total amount of tokens in circulation, and to pass it, they must hold between 1 percent and 4 percent.

The popularity of decentralised autonomous organisations (DAOs), which are frequently viewed as the future of decentralised business governance, has grown in the constantly increasing crypto ecosystem.

The purpose of decentralised autonomous organisations (DAOs), which lack centralised hierarchies, is for the community to collectively own and participate in the decision-making process. But according to recent research findings, these DAOs are not as decentralised as they were meant to be.

Less than 1% of all holders own 90% of the voting power, according to a recent Chainalysis analysis that examined the operations of ten significant DAO initiatives. The discovery emphasises how concentrated decision-making authority is among a small group of people, a problem that DAOs were intended to address.

The Solana (SOL)-based lending DAO Solend was a clear example of this concentration of power. To prevent liquidations from spreading over the DEX books, the Solend team attempted to take over a whale's account and carry out the liquidation themselves via over-the-counter (OTC) platforms.

With 1.1 million "yes" votes and 30,000 "no" votes, the takeover proposal was approved; however, of the total "yes" votes, 1 million were cast by a single user who had a significant number of governance tokens. The decision was later reversed following a strong backlash.

The research emphasised that while all governance token owners have voting rights, it can be difficult for everyone to put forth a fresh proposal for the community and get it approved given the quantity of tokens needed to do so.

According to the study, between 1 in 1,000 and 1 in 10,000 governance token owners possess a sufficient number of tokens to formulate a proposal. Only between 1 in 10,000 and 1 in 30,000 token holders have enough tokens to pass a proposition.

33 percent of all DAOs are found in the decentralised finance (DeFi) ecosystem, which also accounts for 83 percent of all DAO treasury value. Apart from DeFi, other ecosystems that have experienced an increase in the number of DAOs include infrastructure, venture capital, and nonfungible tokens (NFTs).

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