TechFlow News, March 27: The European Central Bank (ECB) released a working paper conducting an in-depth analysis of the governance structures of four major DeFi protocols—Aave, MakerDAO, Ampleforth, and Uniswap—revealing that their levels of decentralization are severely overestimated.
Key findings of the paper are as follows:
1. High concentration of governance token holdings. The top 100 holders in all four protocols collectively hold over 80% of the total token supply. In Aave and Uniswap, the top five holders alone control nearly half of all tokens; in Ampleforth, concentration is even higher, with the top five holders accounting for nearly 60%. A large portion of tokens resides in protocol-owned addresses (e.g., treasuries, founders) or at centralized/decentralized exchanges—with Binance being the centralized exchange holding the largest quantity of governance tokens.
2. Voting power concentrated among a small number of delegated representatives. Top voters are predominantly delegated representatives; approximately one-third of them cannot be identified, while the rest—where identifiable—are mainly individuals, Web3 companies, university blockchain clubs, and venture capital firms. For example, in Uniswap, the top voter is the prominent VC firm a16z, whose number of delegates increased from 100 to 125.
3. Decentralization exhibits significant “form over substance.” The paper notes that actual control over most DeFi protocols remains concentrated in the hands of a few entities—creating a marked gap between practice and the decentralized ideals they profess. Some protocols are thus characterized as “pseudo-DeFi.”
From a regulatory perspective, the paper highlights that existing public data inadequately trace the real-world identities of governance token holders and voters, posing substantial challenges to regulatory approaches anchored on governance token holders, developers, or centralized exchanges. The paper recommends enhancing token-holding transparency, clarifying governance responsibilities across stakeholders, and exploring dedicated legal frameworks for DAOs to advance the development of a robust DeFi regulatory system.
