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Report Warns Investors About The One-Percent Problem In Web3

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coingape.com 16 July 2022 14:55, UTC
  
Reading time: ~2 m

According to a report published by Chainalysis, Web3 ownership is surprisingly centralized. A decentralized Autonomous Organization or DAO claims to provide a decentralized structure of management.

However, an analysis of 197 DAOs by Chainalysis highlighted that nearly 1% of token holders control over 90% of the voting power.

How DAOs Work?

DAOs rely on Web3 principles to provide a democratized structure of governance over any project. The founders create a new cryptocurrency, which gives owners a specific amount of voting power. 

The report highlights that one percent of people have over 90% of the voting power. This means that less than 1% of the people can overturn the other 99% on any decision. 

The report highlights the Solend SLND1 proposal as a case in point. Solend claims to be a decentralized lending and borrowing protocol on Solana. However, the price of Solana saw a significant drop during the bear market and the protocol’s biggest whale faced a margin call. The protocol called for a vote on a proposal to liquidate positions through an OTC rather than the open market.

While the DAO passed the proposal, over 1 million of the total 1.1 million votes in favor of the proposal came from one single voter. The vote received severe backlash from many experts in the industry. Michael van de Poppe, CEO, and founder of Eight Global questioned Solend’s promise of decentralization and failure to comply with the principles of Web3.

Since then, Solend has stepped back from the proposal.

NFTs Growth Has Slowed Down

Outside of DAO, the report also analyzed the growth of NFTs in 2022 compared to 2021. According to Chainalysis, NFTs growth has not been on the same level as 2021. The report did however point out that the number of active buyers and sellers continue to grow in 2022. 

The report has also revealed that NFT has gained global popularity. An analysis of the traffic to popular NFT marketplaces has revealed that Central and Southern Asia has the most enthusiasm, followed by Northern America.


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