"Decentralized Finance" (DeFi) is largely a myth, with about half of all voting power held by the protocols themselves or major exchanges.
The industry frequently argues against regulation on the grounds that no single entity is in charge. However, transaction data reveals that power is highly concentrated in the hands of the developers and exchanges, meaning the systems are often just as centralized as traditional banks.
Who to Regulate? Identifying Actors Within DeFi’s Governance
SSRN · 6478108
Decentralised Finance (DeFi) emerged in 2021 as a fast-growing crypto segment, attracting policymakers’ attention due to its innovative approach of delivering financial services without relying on centralised intermediaries. This paper assesses DeFi governance arrangements for regulating and supervising DeFi using a comprehensive dataset. We find that governance token holders of four protocols (Aave, MakerDAO, Ampleforth, Uniswap) are highly concentrated with around half or more holdings linked