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Monitoring Limits in DAO Governance: Capacity Breakpoints and Endogenous Concentration

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  • Guy Tchuente

Abstract

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.

Suggested Citation

  • Guy Tchuente, 2026. "Monitoring Limits in DAO Governance: Capacity Breakpoints and Endogenous Concentration," Papers 2603.11222, arXiv.org.
    • Handle: RePEc:arx:papers:2603.11222
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    File URL: http://arxiv.org/pdf/2603.11222
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    1. Dion Bongaerts & Thomas Lambert & Daniel Liebau & Peter Roosenboom, 2025. "Vote Delegation in DeFi Governance," Papers 2503.11940, arXiv.org.
    2. Guy Tchuente, 2025. "Too Big to Monitor? Network Scale and the Breakdown of Decentralized Monitoring," Papers 2511.23320, arXiv.org.
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