The protocol is decentralized, but what about its governance?
A scientific article was published by Monday Capital in conjunction with Dappradar that demonstrates that most Defi projects are highly centralized.
"Decentralized Governance in DeFi: Examples and Pitfalls" this is the title of this article, which points out the way in which protocols tokens are distributed as the main reason for centralizing governance.
The vast majority of DeFi projects start from a centralized governance structure where the decision making process and the project can only be done by a team or an individual.
However, they end up gradually moving towards the decentralization of their governance. The distribution model is not effective to generate the desired decentralization.
The majority of governance tokens are distributed as an incentive to those who promote liquidity in the protocol by stimulating competitive and speculative behavior by them.
This form of distribution makes the tokens slowly concentrate in a few hands, as only whales managed to win a large amount of tokens due to their great ability to provide liquidity.
Another point addressed was the discussion forums in which the whole community participates and discusses proposals of the protocols but afterwards few can vote.
For example, MarkerDAO is a forum that is open to all members of the crypto community (whether or not they have the MKR token).
However, MakerDAO's voting process can only be voted on by MKR token holders (20% of the circulating supply is found in only 20 addresses).
As for Compound, the article points out that only 2.3% of the addresses that hold the COMP token can delegate and participate in the governance of the protocol.
In Curve, for example, a single address controls approximately 3/4 of the votes.
This article also identified problems such as those mentioned above in the UniSwap protocol.
The main reason for this centralization is the fact that many users do not consider their tokens as a voting tool.
Another reason is that the first investors often end up concentrating a large amount of tokens with them, causing other users to lose interest in voting since their votes are not relevant in the protocol.
The group of researchers who carried out this scientific article promised to bring a new study presenting new alternative models of governance to assist in the optimization of these projects with the decentralization of their governance.
