Key facts:
There are more than 6,000 DAOs, of which 10% concentrate 65% of all proposals.
The votes also multiplied, although they remain limited in frequency and variety.
The activity in the governance of decentralized autonomous organizations (DAO) has had a significant increase in the last year. According to a report, these not only grew in quantity, but also in proposals, votes cast and level of decentralization.
Specific publications on this topic in CriptoNoticias explain that the DAOs work like digital companies. What distinguishes them is that their voting system is determined by a smart contract and the holders of an asset called a governance token participate in it.
According to data provided by Snapshot Labs and shared on Twitter by Emre Caliskan, an engineer at the firm Electric Capital (dedicated to raising capital for startups linked to cryptocurrencies), DAO multiplied 8.8 times in 12 months.
In addition, the proposals presented in these organizations increased 8.5 times. These are initiatives that are introduced in a DAO to modify some aspect of its structure or operation. That there are more proposals leads to that there are also more votes to decide on them; a growth of 8.3 times was recorded in terms of number of votes.
Specifically, the number of existing DAOs went from 700 to more than 6,000. Yes indeed, growth has been driven by 10% of these organizations, which accounted for 65% of the proposals. The number of DAOs with only three proposals voted or less is also still too large, and exceeds 60%.
Beyond the proposals the participation of DAO members has grown considerablyfrom 448,000 votes to 3,700,000 million between May 2021 and 2022.
The peak of votes occurred in November 2021, when more than 17,000 people voted in ConstitutionDAO, a decentralized organization that raised funds to buy an original copy of the United States Constitution at Sotheby’s auction house. Such an event was reported at the time by CriptoNoticias.
The negative side of the analyzed votes is that 50% of users only voted once, while another 75% only voted on a single DAO. In other words, although participation has increased, it is not recurrent and is generally limited to a single organization.
It should be noted that this statistic can be altered by the fact that the same person can use different wallets to vote in two different protocols, so that their votes would be counted as if they were two different individuals.
Getting a community to actively participate in governance is no easy task, according to these data. However, as shown in the image below, some DAOs have a very loyal community. This is so to the point that several of them register an average of more than 10 votes per user.
Centralization, a latent problem for many DAOs
Beyond the undeniable growth denoted by the aforementioned statistics, there is a challenge that many DAOs still have to solve: that of not falling into centralization.
According to the analyzed data, 25% of the proposals reach 0.8 in the Gini coefficient. This is an index that is used to measure the centralization of a protocol according to the voting power of the members. On this scale, 0 is a high level of decentralization, while 1 indicates very low decentralization.
As seen in the graph above, the good news is that the average of all DAOs in the Gini coefficient has dropped from 0.81 to 0.62. This represents a reduction of approximately 23% and, ultimately, greater decentralization when deciding on basic aspects of the protocol.
DAOs are a method of organization that not only gains followers, but has even drawn the attention of regulators. While some protocols like the Ethereum Optimism scaling solution distribute their governance tokens in high demand, governments like the United States are debating laws that could include DAOs in tax regulations.