Concentration in governance control across decentralised finance protocols

Abstract

Blockchain-based systems are frequently governed through tokens that grant their holders voting rights over core protocol functions and funds. The centralisation occurring in Decentralised Finance (DeFi) protocols’ token-based voting systems is typically analysed by examining token holdings’ distribution across addresses. In this paper, we expand this perspective by exploring shared token holdings of addresses across multiple DeFi protocols. We construct a Statistically Validated Network (SVN) based on shared governance token holdings among addresses. Using the links within the SVN, we identify influential addresses that shape these connections and conduct a post-hoc analysis to examine their characteristics and behaviour. Our findings reveal persistent influential links over time, predominantly involving addresses associated with institutional actors or smart-contracts, which hold significant fractions of token supplies across the sampled protocols. Finally, we observe that token holding patterns and concentrations tend to shift in with protocol valuations and dollar denominated Total Value Locked.