Monitoring Limits in DAO Governance: Capacity Breakpoints and Endogenous Concentration
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arXiv
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| Format: | Preprint |
| Published: |
2026
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| _version_ | 1866908880195289088 |
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| author | Tchuente, Guy |
| author_facet | Tchuente, Guy |
| contents | Decentralized autonomous organizations (DAOs) are designed to disperse control, yet recent evidence shows that effective governance is often concentrated in a small number of participants. This note studies one simple mechanism behind that pattern. Because decentralized governance is monitor-intensive, rising proposal flow may eventually outpace the capacity of broad-based participation. Using a DAO--quarter panel, I estimate a fixed-effects kink model with DAO and quarter fixed effects and find a statistically significant decline in the marginal responsiveness of active voters once proposal activity crosses an interior threshold. I then study realized voting concentration using kink specifications with data-driven cutoffs. Across specifications, decentralization gains do not persist indefinitely once governance workload becomes sufficiently high, and load-based measures show especially clear evidence of a transition toward more concentrated realized control. The results provide reduced-form evidence consistent with a ``too big to monitor'' mechanism in DAO governance: when proposal flow grows faster than broad participation can keep up, effective control may drift toward a smaller set of highly active participants. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_11222 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Monitoring Limits in DAO Governance: Capacity Breakpoints and Endogenous Concentration Tchuente, Guy General Economics Economics Decentralized autonomous organizations (DAOs) are designed to disperse control, yet recent evidence shows that effective governance is often concentrated in a small number of participants. This note studies one simple mechanism behind that pattern. Because decentralized governance is monitor-intensive, rising proposal flow may eventually outpace the capacity of broad-based participation. Using a DAO--quarter panel, I estimate a fixed-effects kink model with DAO and quarter fixed effects and find a statistically significant decline in the marginal responsiveness of active voters once proposal activity crosses an interior threshold. I then study realized voting concentration using kink specifications with data-driven cutoffs. Across specifications, decentralization gains do not persist indefinitely once governance workload becomes sufficiently high, and load-based measures show especially clear evidence of a transition toward more concentrated realized control. The results provide reduced-form evidence consistent with a ``too big to monitor'' mechanism in DAO governance: when proposal flow grows faster than broad participation can keep up, effective control may drift toward a smaller set of highly active participants. |
| title | Monitoring Limits in DAO Governance: Capacity Breakpoints and Endogenous Concentration |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2603.11222 |