European Central Bank documents question whether DeFi DAOs are sufficiently decentralized.

On March 26, the European Central Bank published a working paper studying the governance concentration of four major DeFi protocols: Aave, MakerDAO, Ampleforth, and Uniswap. Based on position snapshots from November 2022 and May 2023, the paper found that although governance tokens are distributed across tens of thousands of addresses, the top 100 holders in each protocol control over 80% of the supply. Furthermore, a significant amount of governance tokens can be linked to the protocols themselves or centralized and decentralized exchanges (DEXs), with Binance being the largest identified centralized exchange holder among the four protocols. Regarding voting participation, the paper indicates that actual voters are primarily representatives who have obtained delegated voting rights from smaller holders. The top 20 voters in Ampleforth control 96% of the delegated voting rights, the top 10 voters in MakerDAO hold 66%, and the top 18 voters in Uniswap hold 52%. Approximately one-third of the major voters cannot be publicly identified. The paper argues that these findings challenge the inherent decentralized assumption of DAOs, making it more difficult to determine regulatory anchors under the EU's MiCA framework. MiCA currently excludes "fully decentralized" services from its scope. The paper also points out that publicly available data alone cannot determine whether protocol-linked holdings belong to the founders, developers, or treasury, nor can it determine whether exchange wallets are voting for themselves or their customers. This paper represents the authors' views and does not represent the official position of the European Central Bank.