Does letting agents stake a reputational 'trust' asset on the legitimacy of work-verification verdicts raise the quality-adjusted productivity of a fully autonomous agent production economy (requester -> producer -> paid validator, with audits, dispute votes, and adaptive strategies), compared with cheaper institutions at IDENTICAL total verification budget? Mostly no - with a precisely mapped exception, and sharp design rules either way. At matched budget, plain audit routed by accumulate-only validator reputation significantly beats every democratic variant at every tested adversary rate (Holm-corrected Mann-Whitney p<=0.033); when expert audits are cheap, a central noisy auditor dominates everything; and paid validation without accountability is worse than no verification at all. The stylized model's verifiability gradient is real (pooled slope +0.237 per unit of voter signal quality, cell-clustered permutation p=0.0035): truth-staked voting overtakes optimized audit only at jointly high signal quality and adversary rates, and reputation's remaining lead there is erased by identity-reset (whitewashing) attacks - to which truth-staking is intrinsically robust, since a reset identity just donates fresh stake to informative voters. Within democracy the ordering is unambiguous: settle stakes against later ground truth, never against the majority (the deployed coherence-settlement default has an absorbing rubber-stamp equilibrium and loses measurably, p=0.033 at 80 seeds). Staking buys almost no population-level honesty; it works by stake-weighted meritocracy - concentrating trust, hence voting weight, on an informative minority - which also makes it natively sybil-proof where one-agent-one-vote collapses. 'Legitimacy laundering' is second-order at steady state and becomes real only under epistemic finality, which simultaneously starves truth-staking of settlements; the institution's binding resource is eventual ground-truth revelation. A capability-gradient small-LLM instantiation (1B producers, 4B verifiers, hidden-test ground truth, all local) reproduces the model's behavioral premises - including a causal incentive-framing effect on LLM validator strictness (TNR 0.705 paid-per-approval vs 0.864 accountable) - and transfers the institutional structure across two measured operating points, significantly so (Spearman +0.79, permutation p=0.014) at a production-unviable point where the parameter-matched model predicts the observed regime inversion.This manuscript was generated autonomously by the AI Scientist running inside Claude Code (Anthropic); every reported number traces to the project's experiment outputs. It is deposited by the named curator, who takes responsibility for its release.Source & method: https://github.com/qurore/ai-scientist-cli
Execution Tickets (ET) have emerged as a leading proposal for mitigating MEV-related centralization risks by internalizing MEV through a protocol-level lottery system. This paper provides an empirical game-theoretic analysis (EGTA) of the ET mechanism under an infinite-supply design, modeled as a Tullock contest. We evaluate a 2-slot lookahead window as a minimal temporal design that limits multi-slot MEV while preserving support for user pre-confirmations. By introducing a forfeiture parameter, we parameterize a continuum between All-Pay and Winner-Pay regimes. We then map the fairness-revenue frontier, revealing a fundamental design tension: higher contest decisiveness and forfeiture rates can improve protocol revenue, but may reduce allocation fairness by entrenching dominant builders. We identify a quantitative Goldilocks zone that balances MEV-capture efficiency with market diversity.
A designer of verification chooses two things: what a verifier reads from disclosed evidence, and how far the information reaching the verifier can be held apart from the information reaching the party whose conduct verification is meant to discipline. This paper asks when these two margins can be designed separately. In a Bayesian persuasion model with a meanreading deterrence audience and a verifier who applies a coherent risk measure, the sender's value is a contest between two envelopes-a concave envelope serving deterrence and a convex envelope serving liability-whose gap carries all interaction between the margins and equals the sender's willingness to pay for audience separation. Directional factorisation is exact: which reads are gaming-proof is decided by the read's belief-curvature alone, independent of routing. Calibration and value factorisation fail generically, but the failure is confined to two explicit terms-a product-structure term, in which the read's responsiveness and the seal enter only through their product, and a band term activated by disclosure mandates-each of which vanishes to first order, at a saturated deterrence margin, or under level-insensitive reads. Finally, the routing margin's own invariance is a curvature pairing, not a consequence of coherence: equilibrium deterrence is unmoved by the seal, for every prior and every stake, if and only if a belief-convex read is paired with a concave compliance response; off the pairing, the seal moves deterrence through sheltering when the read is gameable and through retreat below an explicit saturation threshold even when the read is coherent.
Stefano Balietti, Pietro Saggese, Markus Strohmaier
Decentralized Autonomous Organizations (DAOs) use token-weighted voting to allocate resources, set protocol rules, and legitimate collective decisions. Yet, support in DAO voting is strikingly concentrated. What happens inside the ballot that produces this concentration? We study DAOs' governance at the proposal-choice level, linking each choice's voting-power share to three observable features: whether it expresses an approval-oriented stance, where it appears in the choice list, and whether it is selected by the proposal author. We find that (i) author-selected choices show the strongest and most robust association with voting-power share, with a 58.8% increase relative to non-author choices; (ii) approval-oriented choices retain a positive but slightly less consistent advantage (27.1%); and (iii) first-listed choices also attract systematically higher shares, consistent with position and order effects (7.7%). Results are robust across several specifications, which include subtracting an author's own voting power from computations. We use bias descriptively, to denote systematic associations rather than proven causal distortion. The results shift attention from proposal outcomes alone to the interface and social signals through which choices are presented. In DAO governance, ordering, author signals, and vote visibility should be treated as institutional design choices, not neutral implementation details.
Decentralized autonomous organizations (DAOs) represent a novel organizational form designed to enable collective decision-making without formal hierarchy. Despite their decentralized design, many DAOs exhibit tendencies toward centralization in the governance process. This study explains this governance paradox via the lens of transaction cost economics (TCE), highlighting how human asset specificity contributes to the emergence of centralized governance structures in settings where formal authority is absent. Specifically, we argue that human asset specificity, assessed through the technicality, complexity, and readability of governance proposals, is associated with a higher degree of centralization in the governance of DAOs. We test our hypotheses using a novel dataset of 3,807 proposals across major decentralized finance (DeFi) DAOs. Consistent with the predictions of TCE, empirical analyses show that proposals characterized by higher technicality, higher complexity, and lower readability are associated with higher levels of centralization. These results imply the relevance of TCE for governance in decentralized organizations-a novel form of organizations and offer practical guidance for protocol designers seeking to preserve decentralization in DAOs.
Stefan Kitzler, Masarah Paquet-Clouston, Bernhard Haslhofer
The Decentralized Finance (DeFi) ecosystem has experienced over \$10 billion in direct losses due to crime events. Beyond these immediate losses, such events often trigger broader market reactions, including price declines, trading activity changes, and reductions in market capitalization. Decentralized Autonomous Organizations (DAOs) govern DeFi applications through tradable governance assets that function like corporate shares for voting and decision-making. Leveraging DeFi's granular trading data, we conduct an event study on 22 crime events between 2020 and 2022 to assess their economic impact on governance asset prices, trading volumes, and market capitalization. Using a dynamic difference-in-differences (DiD) framework with counterfactual governance assets, we aim for causal inference of intraday temporal effects. Our results show that 55% of crime events lead to significant negative price impacts, with an average decline of about 14%. Additionally, 68% of crime events lead to increased governance asset trading volume. Based on these impacts, we estimate indirect economic losses of over $1.3 billion in DAO market capitalization, far exceeding direct victim costs and accounting for 74% of total losses. Our study provides valuable insights into how crime events shape market dynamics and affect DAOs. Moreover, our methodological approach is reproducible and applicable beyond DAOs, offering a framework to assess the indirect economic impact on other cryptoassets.
Recent research has introduced a decentralized autonomous organization (DAO) managing a house – No1s1 (no-ones-one). While the concept has been technically implemented, it remains open how to govern and maintain the house in a decentralized manner. In this study, we investigate how a DAO can govern and maintain physical assets. For this, we use a Design Science Research methodology coupled with a requirements-driven approach and demonstrate through an artifact how such a governance and maintenance system can be implemented. The proposed system features two tokens rewarding active interaction with the physical house leading to a local community. We evaluate the system with a scenario-based study with users showing how the community can govern and maintain the house. Thus, the paper contributes to a better understanding on how a DAO with physical assets can be governed and interact with these assets, and to the better understanding of blockchain governance in general.
ABSTRACT This study examines how task assignment mechanisms affect the participation of workers on decentralized blockchains. In developing the theory, I highlight that blockchain represents a distinct organizational form for coordinating operations under a highly decentralized structure, in which the essential tasks of system infrastructure maintenance are assigned to third‐party crowd workers through the unique governance mechanism of consensus protocol. I specifically focus on two widely adopted consensus protocols in the context of cryptocurrency, namely, proof‐of‐work (PoW), which assigns tasks that sustain the blockchain system operation based on workers' investments in computing power, and proof‐of‐stake (PoS), which assigns these tasks based on workers' investments in the native cryptocurrency as stakes. I argue that compared with PoW, PoS increases worker participation and task decentralization because the investment requirement of task participation in the form of blockchain native assets reduces workers' transaction costs in task contracting and their tendencies for hyper‐competition. My empirical analysis leverages a natural experiment on Ethereum, namely, the “Merge” event on September 15, 2022, in which the blockchain changed the assignment rules by switching the consensus protocol from PoW to PoS. The results under a difference‐in‐differences research design confirm my arguments.
With the rise of smart contracts, decentralized autonomous organizations (DAOs) have emerged in public good auctions, allowing "small" bidders to gather together and enlarge their influence in high-valued auctions. However, models and mechanisms in the existing research literature do not guarantee non-excludability, which is a main property of public goods. As such, some members of the winning DAO may be explicitly prevented from accessing the public good. This side effect leads to regrouping of small bidders within the DAO to have a larger say in the final outcome. In particular, we provide a polynomial-time algorithm to compute the best regrouping of bidders that maximizes the total bidding power of a DAO. We also prove that such a regrouping is less-excludable, better aligning the needs of the entire DAO and the nature of public goods. Next, notice that members of a DAO in public good auctions often have a positive externality among themselves. Thus we introduce a collective factor into the members' utility functions. We further extend the mechanism's allocation for each member to allow for partial access to the public good. Under the new model, we propose a mechanism that is incentive compatible in generic games and achieves higher social welfare as well as less-excludable allocations.
Fei Wu, Thomas Thiery, Stefanos Leonardos, Carmine Ventre
The block-building process on the Ethereum network has changed significantly with an upgrade of its consensus protocol. Network participants access blocks through block building auctions at a decentralized financial market, termed builder market, where builders vie for the right to build blocks and earn Maximal Extractable Value (MEV) rewards. This paper employs empirical game-theoretic analysis to examine builders’ strategic bidding incentives in the Ethereum block building auctions, termed MEV-Boost auctions. We study various scenarios with different auction game settings and evaluate how critical elements such as network connectivity and access to MEV opportunities impact builders’ strategic bidding incentives. Through our analyses, we highlight the challenge of creating a decentralized yet competitive builder market.
This chapter presents a research perspective that explores the transformative impact of blockchain technology on Behavioral and Experimental Economics. It addresses critical digital challenges such as subject identity verification and privacy, trust in researchers, and the design of experimental incentives. By advocating for a blockchain-integrated framework, the chapter aims to enhance data authenticity, privacy, and incentivization through decentralized mechanisms and smart contracts, thereby ensuring research that is transparent, tamper-proof, and practical. Additionally, the chapter proposes a paradigm shift toward a “play to learn” model, which bridges decentralized science with the realm of gaming finance to advance research and development. This integration signals a new era of interdisciplinary research, offering profound insights into human behavior within the digital economy and illuminating new research pathways that connect Web2 to Web3 environments.
Purpose This paper aims to explore the problem of power imbalance within decentralized autonomous organizations (DAOs) and propose potential solutions that could contribute to enhancing the democratic nature of DAOs. Design/methodology/approach In this paper, the authors apply a qualitative methodology. Using a thematic coding analysis, the authors process data collected from interviews with 11 experts. Findings Multiple factors contribute to the perceived lack of democracy within DAOs, such as token concentration and effective stakeholder communication. Next, quadratic voting has the potential to enhance democracy within DAOs, but this mechanism must be implemented mindfully. Finally, the results were nuanced when it comes to the effectiveness of liquid democracy in DAOs to enhance voter participation and representation. Originality/value To the best of the authors’ knowledge, this paper is one of the first research contributions to propose recommendations to address the power imbalance within DAOs and to contribute to the advancement of decentralized decision-making structures.
Voting serves as a fundamental pillar of governance, supporting collective decision-making. Different from traditional one-person-one-vote systems, blockchain technology-enabled decentralized autonomous organizations (DAOs) allow users to participate in governance via token-weighted voting. Some DAOs employ open voting where all votes cast are visible in real-time. However, given the unique characteristics of DAOs and the automated enforcement mechanisms of smart contracts, open voting in DAOs can unintentionally invite strategic behaviors, such as misaligned voting and cascade initiation. Some other DAOs implement shielded voting, concealing real-time results until the voting period ends. Shielded voting theoretically reduces tacit collusion by preventing voters from reacting to ongoing voting outcomes. This study empirically investigates the efficacy of shielded voting (vs. open voting) on key outcomes in collective actions: free-riding (measured by voter turnout and large token holder dominance) and strategic behaviors in DAOs. We leverage a natural experiment on a voting platform for DAOs. Our results show that shielded voting decreases overall voter turnout. Notably, shielded voting disproportionately affects smaller token holders, whereas larger ones with more voting power (the top 5%) are relatively unaffected, thereby exacerbating the dominance of large token holders. Further analyses reveal that shielded voting increased average voting response time per voter and per token, suggesting that shielded voting raised information search costs, discouraging voter turnout. Meanwhile, the negative relationship between shielded voting and voter turnout is attenuated by the proceeding voting distribution. In others words, a clear majority in the earlier votes suppresses voter turnout more in open voting than in shielded voting. This indicates that shielded voting increased perceived outcome uncertainty, motivating voter turnout. Moreover, we show that shielded voting influences voters' strategic behaviors by reducing misaligned voting, resulting in a more balanced distribution of votes across options. Also, shielded voting prevents cascade initiation, leading to less competition in initial voting. Our results reveal a central trade-off with shielded voting in DAOs: Shielded voting curtails strategic behaviors but significantly lowers voter turnout by demotivating smaller token holders' participation.
Currently, over 90% of Ethereum blocks are built using MEV-Boost, an auction that allows validators to sell their block-building power to builders who compete in an open English auction in each slot. Shortly after the merge, when MEV-Boost was in its infancy, most block builders were neutral, meaning they did not trade themselves but rather aggregated transactions from other traders. Over time, integrated builders, operated by trading firms, began to overtake many of the neutral builders. Outside of the integrated builder teams, little is known about which advantages integration confers beyond latency and how latency advantages distort on-chain trading. This paper explores these poorly understood advantages. We make two contributions. First, we point out that integrated builders are able to bid truthfully in their own bundle merge and then decide how much profit to take later in the final stages of the PBS auction when more information is available, making the auction for them look closer to a second-price auction while independent searchers are stuck in a first-price auction. Second, we find that latency disadvantages convey a winner's curse on slow bidders when underlying values depend on a stochastic price process that change as bids are submitted.
James Austgen, Andrés Fábrega, Sarah Levin Allen, Kushal Babel · 6 authors
Decentralized Autonomous Organizations (DAOs) use smart contracts to foster communities working toward common goals. Existing definitions of decentralization, however-the 'D' in DAO-fall short of capturing key properties characteristic of diverse and equitable participation. We propose a new metric called Voting-Bloc Entropy (VBE, pronounced ''vibe'') that formalizes a broad notion of decentralization in voting on DAO proposals. VBE measures the similarity of participants' utility functions across a set of proposals. We use VBE to prove a number of results about the decentralizing effects of vote delegation, proposal bundling, bribery, and quadratic voting. Our results lead to practical suggestions for enhancing DAO decentralization. One of our results highlights the risk of systemic bribery with increasing DAO decentralization. To show that this threat is realistic, we present the first practical realization of a Dark DAO, a proposed mechanism for privacy-preserving corruption of identity systems, including those used in DAO voting. Our Dark-DAO prototype uses trusted execution environments (TEEs) in the Oasis Sapphire blockchain for attacks on Ethereum DAOs. It demonstrates that Dark DAOs constitute a realistic future concern for DAO governance.
Stefan Kitzler, Stefano Balietti, Pietro Saggese, Bernhard Haslhofer · 5 authors
We present a study analyzing the voting behavior of contributors, or vested users, in Decentralized Autonomous Organizations (DAOs). We evaluate their involvement in decision-making processes, discovering that in at least 7.54% of all DAOs, contributors, on average, held the necessary majority to control governance decisions. Furthermore, contributors have singularly decided at least one proposal in 20.41% of DAOs. Notably, contributors tend to be centrally positioned within the DAO governance ecosystem, suggesting the presence of inner power circles. Additionally, we observed a tendency for shifts in governance token ownership shortly before governance polls take place in 1202 (14.81%) of 8116 evaluated proposals. Our findings highlight the central role of contributors across a spectrum of DAOs, including Decentralized Finance protocols. Our research also offers important empirical insights pertinent to ongoing regulatory activities aimed at increasing transparency to DAO governance frameworks.