Key Finding
Ownership concentration has a negative effect on platform growth, but platform size, token illiquidity, and long-term incentives can mitigate its negative effect
Abstract
Decentralized autonomous organizations (DAOs) are entities without central leadership and operate based on a set of decision-making rules encoded into smart contracts using blockchain technology. In this study, we develop a theoretical model of DAO governance featuring strategic token trading under token-based voting to investigate potential conflicts of interest between a large participant (a "whale") and many small participants. Our results show that ownership concentration has a negative effect on platform growth, but platform size, token illiquidity, and long-term incentives can mitigate its negative effect. We confirm these predictions using novel voting data on major DAOs between 2020 and 2024.
© Jungsuk Han, Jongsub Lee, Tao Li, 2025
All rights reserved. Distributed for discussion purposes only; not to be reproduced without permission.
The views expressed are those of the author(s) and do not necessarily reflect those of ECGI or its members.
For copyright queries or takedown requests, contact wp@ecgi.org.
