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How Much Cost To Pillage a DAO?
✏️ Our Research
The governance of most decentralized crypto organizations is based on the 1 token/1 vote model. In this type of governance, people with a lot of capital or influence have too much power over the community.
This model is not only plutocratic, but also inefficient. As a few wallets monopolize influence over DAO decisions, they become able to use their treasury as they please: an existential risk for any decentralized organization.
The use of this capital for their own interests can range from overpricing a proposal for provide a service to the DAO to attacking it in order to drain its treasury.
In recent years, we've seen attacks on DAO governance with greater frequency. One example is RFV Raiders.
Their aim is to buy governance tokens at a discount to the treasury. By acquiring them, the aim is not to invest in the project, but to force the DAO to close its doors and divide the treasury among its holders - with the RFV Raiders being the largest holders of the governance token.
Regardless of how governance is exploited, this is a risk that all DAOs run.
You have to create ways to protect yourself from attacks like this.
One of them is to create a metric to measure how exploitable DAOs are: and we've done that.
We carried out a research paper this year to see how exploitable the biggest DAOs on the market are. To measure this, we created a metric called EXPLORABILITY.
You can read the full research here:
https://docsend.com/view/asjkarybnq252ids https://twitter.com/guiribabrb/status/1657712123730853889 (thread written by our analyst guiriba)
We found that there are organizations with millions of dollars in the treasury that are easily exploitable by wallets with lots of votes/tokens.
Metrics such as explorability help DAOs to curb bad faith and identify flaws in their governance.
💡 What we want
Therefore, our aim is to expand this research to:
- Analyze more DAOs from different sectors.
- Complement it with more data to improve our metrics on the explorability of DAOs.
- Understand the impact of the delegation model on the governance of DAOs
We see this research as fundamental to contributing to the security of the billions of dollars stored in the treasure of DAOs across the ecosystem.
🔍 Who we are
Paradigma Education is a Brazilian research house focused on crypto: https://paradigma.education/
We carry out analysis of different markets on crypto, but we have several focused on DAO governance. Here are some of them:
Paradigma Education: How Much Cost To Pillage a DAO? History
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accepted into Governance Research Round 11 months ago.
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