Top 100 Holders Control 80% of DeFi Governance Tokens, ECB Study Finds
The working paper, ECB Working Paper No. 3208, examined governance data from four protocols, Aave, MakerDAO (now rebranded as Sky), Ampleforth, and Uniswap, across two snapshots in time: November 2022 and May 2023. The protocols were selected for their size and representation of different decentralized finance (DeFi) activity categories, collectively holding roughly 32% of total value locked on Ethereum at the time of data collection.
Token concentration figures were stark. ECB researchers state that the top 100 holders across all four protocols controlled more than 80% of the governance token supply. For Aave and Uniswap, the top five holders alone captured nearly half of all tokens. Ampleforth was more concentrated still, with the top five controlling close to 60%.
Researchers then attempted to identify who actually sits behind those addresses. For most protocols, roughly half or more of all holdings trace back to either the protocol itself, through treasuries, founders, or developer allocations, or to centralized and decentralized crypto exchanges. Binance, according to the report’s data, held the largest share among centralized platforms across all four protocols, ranging from 2% to 15% depending on the protocol.
The picture was no clearer when researchers examined who votes. Top voters were almost entirely delegates, individuals, or entities to whom smaller token holders assign their voting power. Identifying those delegates proved difficult. Researchers reportedly relied on web searches, Github, social media, governance forums, and the blockchain analytics tool crafted by Crystal Intelligence. Even then, about one-third of top voters across the sample could not be identified at all.
Among those researchers could identify, individuals made up the largest group at roughly 21%, followed by Web3 companies at around 19%. Venture capital firms and university blockchain societies also appeared. For Uniswap, the top voter across both time periods was Andreessen Horowitz, or A16z, which had voting power delegated to it by 125 addresses by May 2023.
The concentration of governance power held steady across both data snapshots, showing little movement. That stability cuts both ways: it suggests existing power structures are durable, and it makes the problem harder to address through market dynamics alone.
The paper also categorized 248 governance proposals across the four protocols. Risk parameters, covering loan-to-value ratios, debt ceilings, stability fees and emergency shutdowns, made up the largest share at 28%. Asset listing proposals accounted for another 23%. Governance structure itself was rarely the subject of a proposal; that category made up only 1% of the sample.
From a regulatory standpoint, the ECB researchers concluded that governance token holders, developers and centralized exchanges cannot serve as reliable regulatory entry points under current conditions. The pseudonymous nature of blockchain addresses, combined with the opaque delegation structure, means there is no clean line of accountability that regulators can draw on.
The EU’s Markets in Crypto-Assets Regulation currently exempts services provided in a fully decentralized manner. The paper argues that the threshold is difficult to apply in practice, because no DeFi protocol in the sample came close to meeting a genuine standard of decentralization. Most protocols retain meaningful control in the hands of insiders.
The authors suggest possible paths forward, including mandatory disclosure of token holder affiliations, tailored legal structures for DAOs, and hybrid models that blend blockchain-based governance with traditional legal accountability frameworks. The Danish Financial Supervisory Authority framework was cited as one practical starting point for assessing whether an offering is genuinely decentralized.
The central bank‘s paper draws a comparison to traditional corporate governance. Both systems see low voter turnout and decisions shaped by a small group of active participants. But traditional finance has proxy voting rules, stewardship codes, and legal duties. DeFi currently has none of those safeguards, and the identities of key decision-makers remain largely hidden from public view.
FAQ 🔎
- Who controls DeFi governance tokens? A small number of addresses — mostly protocol treasuries, founders and centralized exchanges like Binance — hold the majority of governance tokens across major DeFi protocols.
- Can regulators hold DeFi governance participants accountable? ECB researchers found that roughly one-third of top voters could not be identified using publicly available data, making clear lines of regulatory accountability difficult to establish.
- What is vote delegation in DeFi? Token holders can assign their voting rights to delegates who vote on proposals on their behalf, which the ECB paper found concentrates governance power further rather than distributing it.
- • Does the EU’s MiCA regulation cover DeFi protocols? MiCA exempts fully decentralized services, but the ECB paper argues most DeFi protocols do not meet a genuine decentralization standard and may fall within regulatory scope.
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