Introduction: Decentralized autonomous organizations (DAOs) are an emerging organizational form that operates entirely on blockchain infrastructure. Within a DAO, organizational governance rules are hardcoded in transparent and immutable smart contracts. In principle, these rules are intended to facilitate decentralized decision-making among token holders who collectively create, discuss, and vote on proposals that govern the organization. Despite their promise, the extent to which DAOs achieve true decentralization in practice remains unclear. This study addresses an underexplored area in the literature by empirically investigating key aspects of DAO governance, particularly the degree of decentralization and participant composition.Method: Network analysis is used to examine proposal voting coalitions among participants as a proxy for decentralization. Sentiment analysis is employed to assess trust among participants. The analysis draws on data from 54 DAOs, including 774 unique proposals and 13,085 associated token holder comments.Results: The findings indicate that DAOs may not achieve the level of decentralization originally envisioned. Moreover, decentralization and participant composition within governance structures play a critical role in shaping trust, voting participation, and overall financial performance in DAOs PracticalImplications: Although current voting mechanisms aim to reduce the dominance of large token holders (whales), DAOs may still fall short of the level of decentralization originally envisioned. Accordingly, more advanced voting mechanisms may be required to further mitigate coordination and strategic behavior in proposal voting. In addition, DAOs could benefit from adjusting the threshold requirements for the Foundation to improve accessibility for token holders and encourage broader participation. Leveraging artificial intelligence (AI) may also help streamline the voting process and improve the clarity of proposals.
Pengnate et al. (Wed,) studied this question.