Chainalysis: 90% of power in all DAOs is concentrated in the hands of only 1% of participants

The Chainalysis research agency has published a report on how decentralized the DAOs of the Web 3 are. It turns out that the real power and decision-making right in the management of such organizations are in the hands of 1% of the participants.

Decentralized Autonomous Organization (DAO) were supposed to be the most effective and democratic governance structure. But in practice, the proverbial “equality” was very conditional.

How DAO works

In the organization of such a structure the participants create a native token. It is distributed among users, partners and stakeholders. This asset has its own price on the secondary market, as well as a certain “weight” in voting for this or that management decision.

Theoretically, this ensures equality of DAO participants. But Chainalysis experts state that in practice this ecosystem is much more centralized.

How are DAO participants actually making decisions?

For their analysis, Chainalysis experts collected data from 10 large organizations. Any holder of a token manager can vote for one or another decision in each of them.

But it takes from 0.1 to 1% of all outstanding assets to put forward a decision. But that’s not all. In order to advance your idea, you will already need 1 to 4% of the stock.

In other words, only 1 out of 1,000 or even 10,000 users can come up with some kind of solution. In practice, this means that even a few members of this 1% can together block any idea. At the same time, 99% of DAO participants have no real power.

If we are talking about a single proposal for a solution, then the situation is even more revealing. 1 user out of 10 or even 30 thousand can put forward the initiative and ensure that it will win the vote.

The concentration of power in the DAO sphere is a worrying sign. It is the equality of token holders that is the fundamental advantage of such systems. But, apparently, this “advantage” is only in theory.