According to a report published by Chainalysis, Web3 ownership is surprisingly centralized. A decentralized Autonomous Organization or DAO claims to provide a decentralized structure of management.
However, an analysis of 197 DAOs by Chainalysis highlighted that nearly 1% of token holders control over 90% of the voting power.
How DAOs Work?
DAOs rely on Web3 principles to provide a democratized structure of governance over any project. The founders create a new cryptocurrency, which gives owners a specific amount of voting power.
The report highlights that one percent of people have over 90% of the voting power. This means that less than 1% of the people can overturn the other 99% on any decision.
The report highlights the Solend SLND1 proposal as a case in point. Solend claims to be a decentralized lending and borrowing protocol on Solana. However, the price of Solana saw a significant drop during the bear market and the protocol’s biggest whale faced a margin call. The protocol called for a vote on a proposal to liquidate positions through an OTC rather than the open market.
