Decentralized Autonomous Organizations (DAOs): Catalysts for enhanced market efficiency

Abstract

The objective of this study is to determine the factors that contribute to market efficiency in the crypto-asset market. Despite prior evidence from the literature demonstrating variations in efficiency across assets and time, few have investigated driving factors beyond liquidity. By using a dataset of 122 crypto-assets with imbalanced data, our analysis discovers that both market conditions and inherent characteristics of crypto-assets significantly impact the predictability of their returns. Specifically, market efficiency is positively associated with increased liquidity and age. Our findings highlight that DAO projects demonstrate greater efficiency compared to non-DAO projects. This result suggests that transparent decentralized decision-making model can help reduce information asymmetry leading to a more efficient market pricing.