In the crypto world, decentralised autonomous organisations (DAOs) have become a fad, and they’re sometimes regarded as the future of decentralized corporate governance.
The DAO, or decentralized autonomous organization, is a type of organization designed to operate at the level of the community rather than in a top-down manner. The DAO is made up of member nodes who contribute resources to projects and are rewarded with voting rights.
However, new study data suggest that these DAOs are not as decentralized as they were intended to be.
According to a study published in recent weeks by Chainalysis, the operations of ten major DAO initiatives are controlled by less than 1% of all stakeholders, with 90% of the voting power. The study reveals that a small number of individuals have a lot of decision-making power, an issue DAOs were intended to remedy.
With the Solana-based lending DAO Solend, we saw a concentration of decision-making power that was evident before. To avoid cascading liquidations across the DEX books, the Solend team attempted to take over a whale’s account and execute the liquidation themselves through OTC desks, according to insider sources.
After the proposal to takeover was approved with 1.1 million “yes” votes versus 30,000 “no” ones, a single individual holding a lot of governance tokens cast almost all of them. After a heavy response, the decision was later reversed.
While all governance token owners have voting rights, the ability to submit a new proposal for the community and to pass it is not simple for everyone, according to the Chainalysis study.
The study predicted that between 1 in 1,000 and 1 in 10,000 governance token holders will have enough tokens to start a proposal. Only about one in 10,000 or one in 30,000 tokenholders may pass a proposal.
The decentralized finance (DeFi) ecosystem, which incorporates 83 percent of all DAO treasury value and 33% of all DAOs by total, is the most significant. Beyond DeFi, venture capital, infrastructure, and NFTs are other ecosystems that have seen a notable increase in the number of DAOs.