Voter coalitions and democracy in Decentralized Finance: Evidence from MakerDAO

29 Pages Posted: 24 Oct 2022 Last revised: 19 Jun 2023

See all articles by Xiaotong Sun

Xiaotong Sun

University of Glasgow

Xi Chen

New York University (NYU) - Leonard N. Stern School of Business

Charalampos Stasinakis

University of Glasgow

Georgios Sermpinis

University of Glasgow

Date Written: October 20, 2022

Abstract

Decentralized Autonomous Organization (DAO) provides a decentralized governance solution through blockchain, where decision-making process relies on on-chain voting and follows majority rule. This paper focuses on MakerDAO, and we find three voter coalitions after applying clustering algorithm to voting history. The emergence of a dominant voter coalition is a signal of governance centralization in DAO, and voter coalitions have complicated influence on Maker protocol, which is governed by MakerDAO. This paper presents empirical evidence of multicoalition democracy in DAO and further contributes to the contemporary debate on whether decentralized governance is possible.

Keywords: governance, Decentralized Autonomous Organization (DAO), voting

JEL Classification: D72, D85, G32

Suggested Citation

Sun, Xiaotong and Chen, Xi and Stasinakis, Charalampos and Sermpinis, Georgios, Voter coalitions and democracy in Decentralized Finance: Evidence from MakerDAO (October 20, 2022). Available at SSRN: https://ssrn.com/abstract=4253868 or http://dx.doi.org/10.2139/ssrn.4253868

Xiaotong Sun (Contact Author)

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Xi Chen

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Charalampos Stasinakis

University of Glasgow ( email )

University Avenue
Adam Smith Business School
Glasgow, Scotland G128QQ
United Kingdom

Georgios Sermpinis

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

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