Token Hoarders Defeat the Purpose of Most DAOs: Study

A pair of researchers from the University of Texas at Austin and Princeton University operated A study to determine how tokenization affects decentralization in Decentralized Autonomous Organizations (DAOs). Their findings indicate that many of the challenges to autonomy are related to individual users’ reasons for participating.

According to their research, the larger the DAO, the more incentive participants have to consider investing in DAO tokens:

“The presence of investors takes away the subsidy from the users thus hurting their participation. More importantly, investors can also take a majority stake to gain control of the platform.

In a typical token-based DAO scheme, instead of implementing decisions by a CEO or leader, distributed authority is issued via tokens to individual participants. This prevents the people maintaining the DAO from exploiting the participants as their tokens act like votes.

According to the team’s research paper, “the main difference between tokens and securities is that tokens are a claim on the platform’s services while securities are a claim on its revenue.”

As long as participants in a DAO are engaged with the purpose and are willing to spend their tokens to vote on actions that further that purpose or services and utilities that provide value to the community, the DAO continues to thrive. .

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The researchers modeled The DAO over time to determine how user growth and tokenization affected the results. According to the team’s research paper, their primary finding is that tokenization serves the purpose of transferring ownership from initial equity holders to users of the platform, but the tradeoff is that there is no single entity that can subsidize network participation. Is.

This clearly leaves the door open for investors to treat purpose-driven DAOs like traditional stocks.

“The potential for higher returns has hurt cryptocurrencies as a means of payment, as people do not want to spend them,” Said “They can easily take us back like Amazon and Apple, that’s the whole point we were trying to get away from,” lead researcher Michael Saukin said in a press release.