DeFi, Not So Decentralized: The Measured Distribution of Voting Rights

Date
2022-01-04
Authors
Barbereau, Tom
Smethurst, Reilly
Papageorgiou, Orestis
Rieger, Alexander
Fridgen, Gilbert
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Bitcoin and Ethereum are frequently promoted as decentralized, but developers and academics question their actual decentralization. This motivates further experiments with public permissionless blockchains to achieve decentralization along technical, economic, and political lines. The distribution of tokenized voting rights aims for political decentralization. Tokenized voting rights achieved notoriety within the nascent field of decentralized finance (DeFi) in 2020. As an alternative to centralized crypto-asset exchanges and lending platforms (owned by companies like Coinbase and Celsius), DeFi developers typically create non-custodial projects that are not majority-owned or managed by legal entities. Holders of tokenized voting rights can instead govern DeFi projects. To scrutinize DeFi’s distributed governance strategies, we conducted a multiple-case study of non-custodial, Ethereum-based DeFi projects: Uniswap, Maker, SushiSwap, Yearn Finance, and UMA. Our findings are novel and surprising: quantitative evaluations of DeFi’s distributed governance strategies reveal a failure to achieve political decentralization.
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Blockchain Cases and Innovations, blockchain governance, cryptocurrency, decentralized autonomous organization, decentralized finance, financial regulation
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10 pages
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Proceedings of the 55th Hawaii International Conference on System Sciences
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Attribution-NonCommercial-NoDerivatives 4.0 International
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