Unveiling the Overlooked Expenses of On-Chain Governance

Challenges of Decentralized Governance: The ConstitutionDAO project highlighted the issues of high Ethereum gas fees, which limited participation in decentralized governance, leading to a concentration of power among wealthier participants and undermining the promise of equal access and community-driven decision-making.

Economic Inefficiencies and Voter Apathy: On-chain voting introduces significant costs, discouraging participation and resulting in voter apathy, where a small number of wallet addresses often control outcomes, creating a plutocracy rather than a truly decentralized governance model.

Security Risks and Decision Paralysis: Decentralized governance structures are vulnerable to exploitation, as seen in the Beanstalk Farms incident, and the overwhelming number of proposals can lead to decision paralysis among members, further complicating effective governance.

Need for Innovative Governance Models: Various experimental governance models, such as two-step voting and Futarchy, aim to balance participation and efficiency, but challenges remain in ensuring that governance remains accessible and effective for all community members.