A Study of Voting Power Distribution and Diversity Metrics in Decentralized Autonomous Organizations

Abstract

This study empirically investigates the distribution of control and diversity in decentralized autonomous organizations (DAOs) on the Ethereum blockchain. It uses a number of measures-the Nakamoto coefficient, Gini coefficient, Her-findahl-Hirschman index, Theil index, Shannon entropy, and Simpson diversity index-to assess decentralization and fairness in the distribution of control tokens. The analysis reveals a complex landscape in which some DAOs exhibit decentralization with diversity in the distribution of control, while others exhibit significant concentration of power and inequality in the distribution of power. A key observation is the coexistence of a broad distribution of control among EOA addresses with significant inequality in the ownership of control tokens. This indicates that a broad distribution of control does not always correlate with a fair distribution of management tokens. The study also highlights the possibil-ity of delegation mechanisms that may lead to a more equitable distribution of power compared to direct representa-tion. This study provides insight into the governance dynamics of DAOs by demonstrating the complex multi-level bal-ance between decentralization and centralization in a decentralized technology infrastructure.