| Author: | Zhu, Haokang |
| Title: | The value of decentralized governance : evidence from DAOs |
| Advisors: | Wei, Steven (AF) |
| Degree: | DFinTech |
| Year: | 2025 |
| Department: | Faculty of Business |
| Pages: | vi, 201 pages : color illustrations |
| Language: | English |
| Abstract: | The article examines the evolution and challenges of decentralized governance by using democratic elections and shareholder voting as familiar reference points, before focusing on the recent phenomenon of Decentralized Autonomous Organizations (DAOs) powered by blockchain technology. While decentralized governance is intended to foster fairness, participation, and accountability, historical and contemporary examples reveal a recurring tendency for power to become concentrated in the hands of a few. This centralization undermines the participatory ideals that such systems are meant to uphold, often marginalizing weaker stakeholders and reducing the inclusiveness of decision-making. DAOs represent a novel experiment in organizational structure, embedding governance mechanisms directly into programmable smart contracts on blockchains. Unlike traditional organizations with top-down hierarchies, DAOs are characterized by transparency, openness, and the ability for any token holder—regardless of geography or affiliation—to participate in decision-making processes. All actions, from proposal submissions to voting outcomes, are immutably recorded on the blockchain, providing an unprecedented opportunity for researchers to empirically study governance dynamics in a transparent environment. Despite these advantages, DAOs are not immune to the pitfalls of power concentration and internal conflict. The article notes that, in practice, DAOs can experience polarization, coordination challenges, and the emergence of influential actors dominating governance—compromising the spirit of decentralization. To understand the dynamics and drivers of participation within DAOs, the article details a comprehensive research approach. This includes collecting and analyzing a rich dataset comprising blockchain transaction records, governance proposals, voting data, white papers, token transfer histories, and social media discussions. The research employs quantitative methods such as blockchain data parsing, natural language processing, regression analysis, and difference-in-differences models to uncover causal links between governance structures, participation rates, and organizational outcomes. A key contribution of the study is the development of the DAO Index, a metric designed to quantify the degree of decentralization within a DAO. By correlating this index with performance indicators like token price and organizational value, the research investigates whether greater decentralization enhances value creation, or if some centralization is sometimes beneficial for efficiency. The DAO Index allows for systematic comparison across organizations and advances understanding of how governance structures impact financial and operational outcomes. Additionally, the paper explores the bidirectional relationship between governance participation and token prices—whether active participation drives up token value, or vice versa. These insights are vital for designing incentive mechanisms that align individual behavior with collective goals and sustain organizational legitimacy. Beyond economic considerations, the article addresses legal and regulatory issues, highlighting the need for adaptive frameworks that can accommodate the unique characteristics of DAOs. The research provides guidance for policymakers balancing innovation with risk management in the Web3 era. In conclusion, the article bridges empirical research and theoretical analysis to illuminate the opportunities and limitations of decentralized governance. Its findings are relevant not only for blockchain-based organizations but also for broader debates on the digital transformation of organizational structures. By offering practical and theoretical insights, the research supports the development of more adaptable governance models for the digital age. |
| Rights: | All rights reserved |
| Access: | restricted access |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| 8535.pdf | For All Users (off-campus access for PolyU Staff & Students only) | 4.98 MB | Adobe PDF | View/Open |
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