Concentration of Power vs Egalitarian Design in DAOs

* Article: Concentration of Power and Participation in Online Governance: the Ecosystem of Decentralized Autonomous Organizations. By Andrea Peña-Calvin, Javier Arroy et al.

URL = https://dl.acm.org/doi/pdf/10.1145/3589335.3651481

Abstract

"Blockchain technology enables a new form of online community: Decentralized Autonomous Organizations (DAOs), where members typically vote on proposals using tokens. Enthusiasts claim DAOs provide new opportunities for openness, horizontality, and democratization. However, this phenomenon is still under research, especially given the lack of quantitative studies. This paper presents the first census-like quantitative analysis of the whole ecosystem of DAOs, including 30K DAO communities on the main DAO platforms.

This enables us to provide insights into the allegedly “democratic” nature of DAOs, building metrics concerning their lifespan, participation, and power concentration. Most DAOs have a short lifespan and low participation. There is also a positive correlation between community size and voting power concentration.

Like other online communities, DAOs seem to follow the iron law: becoming increasingly oligarchic as they grow. Still, a significant amount of DAOs of varying sizes defy this idea by being egalitarian by design."

Excerpt

From the conclusion:

"This work presents the first census covering all currently relevant DAO platforms, resulting in 10K DAOs. The dataset is open-licensed and available for further research. The analysis conducted enables us to extract several characteristics of this new type of community on a large scale and draw parallels with other online communities. First, 20K of the initial 30K DAOs were empty DAOs, likely used for testing. As with other software tools, casual or testing use is common, but on the blockchain, it is permanently recorded and may distort the perception. More importantly, numerous DAOs are inactive or abandoned. This may suggest that, given the Web3 hype, many people started DAO projects but did not continue their endeavors. Failure is a pattern well-documented in other online collective projects, such as FLOSS and wiki projects.

Second, we can see how the majority of DAOs exhibit a small to moderate size (in terms of unique voters), while a few stand out as significantly larger. Again, this duality is reminiscent of patterns observed in wiki-based and open-source communities.

Our analysis also reveals remarkable voting patterns. As DAO size increases, its voter turnout and the number of proposals a voter participates in greatly decrease. While the presence of passive members is also common in online communities, it poses a challenge to the scalability of representative governance in DAOs.

We also observe high levels of inequality in the distribution of voting power. Notably, there is a statistically significant correlation between larger DAOs and greater inequality. This prompts us to consider inequality as a typical “feature” of collaborative online communities once they reach a certain size, suggesting that DAOs may conform to the “iron law of oligarchy”. This is particularly relevant for DAOs, since “power can be bought” quite literally, as many DAOs allow the purchase of governance tokens. Thus, mitigating power imbalances within these communities may be a critical consideration for fostering more inclusive and equitable decision-making processes. However, we do identify a small number of large egalitarian DAOs that defy the iron law of oligarchy and demonstrate the variety of ways in which these organizations can present themselves.

In sum, through exhaustive data collection and in-depth quantitative analysis, this work brings valuable insights into the power distribution and participation patterns within the DAO ecosystem. This work, along with its public dataset, serves as a base to delve into new research questions about these communities, such as how inequality affects governance effectiveness or decision-making outcomes."