ECB document questions whether DeFiDAO is sufficiently decentralized

The European Central Bank released a working paper on March 26 that studied the governance concentration of four major DeFi protocols: Aave, MakerDAO, Ampleforth and Uniswap. Based on snapshot data of positions in November 2022 and May 2023, the paper found that although governance tokens are distributed among tens of thousands of addresses, the top 100 holders in each agreement control more than 80% of the supply., and a large number of governance tokens can be linked to the agreement itself or centralized and decentralized exchanges, of which Binance is the largest identified centralized exchange holder among the four agreements. In terms of voting participation, the paper points out that the actual voters are mainly representatives who obtain the entrusted voting rights of small holders. The top 20 voters in Ampleforth control 96% of delegated voting rights, the top 10 voters in MakerDAO hold 66%, and the top 18 voters in Uniswap hold 52%. About one-third of leading voters cannot be publicly identified. The paper believes that the above findings challenge the assumption of inherent decentralization of the DAO and make it more difficult to determine regulatory anchors under the EU MiCA framework. MiCA currently excludes "fully decentralized" services from its scope of application. The paper also pointed out that public data alone cannot determine whether the agreement-related positions belong to the founder, developer or treasury, nor can it determine whether the exchange wallet is voting for itself or its customers. This paper represents the author's views and does not represent the official position of the European Central Bank.