Decentralization illusion in DeFi: Evidence from MakerDAO. (arXiv:2203.16612v1 [cs.CR])
Decentralized Autonomous Organization (DAO) is very popular in Decentralized
Finance (DeFi) applications as it provides a decentralized governance solution
through blockchain. We analyze the governance characteristics in the relevant
Maker protocol and its stablecoin Dai (DAI) and governance token Maker (MKR).
To achieve that, we establish several measurements of centralized governance.
Our empirical analysis investigates the effect of centralized governance over a
series of factors related to MKR, DAI and Ethereum, such as financial,
transaction, exchange, network and twitter sentiment indicators. Our results
show that governance centralization influences both the Maker protocol and
Ethereum blockchain. The main implication of this study is that centralized
governance in MakerDAO very much exists, while DeFi investors face a trade-off
between efficiency and decentralization. This further contributes to the
contemporary debate on whether DeFi can be truly decentralized.