Most Defi projects remain centralized
Most Defi projects are highly centralized due to the token distribution model, according to a joint report by analyst firm DappRadar and Monday Capital.
The authors of the report stated that in the MakerDAO, Curve, Compound, and Uniswap projects, tokens are unevenly distributed, which creates favorable conditions for large holders. At the same time, the Maker control system is the most "mature".In the MakerDAO forum, community members can conduct preliminary analysis and discuss proposals that are up for voting. The forum is open even to those who are not MKR holders. However, the voting process in Maker can be controlled by large token holders. These include 20 addresses, which account for 24% of the total MKR volume. However, analysts concluded that, compared to other projects, the distribution of tokens in Maker is fairer.
As for Compound, the main holders of COMP tokens were venture capitalists, team members, and some projects, in particular, Dharma and Gauntlet. Only 2.3% of addresses have the ability to delegate. This means that only this small part of the community can participate in project management, and if you exclude exchange addresses, this figure can be even lower. Similar problems arise in the Uniswap and Curve projects. In Curve's case, one address controls 75% of all votes.
Analysts identified three main factors contributing to the centralized management of Defi projects. Firstly, many users do not consider their tokens as a voting tool but use them to participate in profitable farming. Network members receive voting tokens as a reward. At first glance, the idea seems like a good one - control goes to those who use the product. But in this case, material motivation becomes stronger than the desire to manage.
Second, such systems operate on the principles of plutocracy, where wealth determines power. We are talking about the absence of minimum requirements for voting participants to ensure the required level of decentralization, and no one is able to compete with large token holders. The identification of participants in decentralized protocols is difficult enough, and plutocracy becomes the only method of governance.
Third, upfront investment also plays an important role in centralizing governance. VCs and other investors often hold a large volume of tokens, and for this reason, other users lose interest in voting. The analysts concluded that it is the distribution mechanisms that encourage the centralization of management, so the current result should not surprise anyone.