1 research outputs found
The Vulnerable Nature of Decentralized Governance in DeFi
Decentralized Finance (DeFi) platforms are often governed by Decentralized
Autonomous Organizations (DAOs) which are implemented via governance protocols.
Governance tokens are distributed to users of the platform, granting them
voting rights in the platform's governance protocol. Many DeFi platforms have
already been subject to attacks resulting in the loss of millions of dollars in
user funds.
In this paper we show that governance tokens are often not used as intended
and may be harmful to the security of DeFi platforms. We show that (1) users
often do not use governance tokens to vote, (2) that voting rates are
negatively correlated to gas prices, (3) voting is very centralized.
We explore vulnerabilities in the design of DeFi platform's governance
protocols and analyze different governance attacks, focusing on the
transferable nature of voting rights via governance tokens. Following the
movement and holdings of governance tokens, we show they are often used to
perform a single action and then sold off. We present evidence of DeFi
platforms using other platforms' governance protocols to promote their own
agenda at the expense of the host platform