Whose Gov is it Anyway? A deeper look into Aave's on-chain governance
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Part 1 - Top Aave Token Holders
Who are the top 5 holders?
Top 5 individual holders in order are the staked Aave contract, Aave ecosystem reserve, Balancer Aave pool, Aave v2 Aave pool and Binance hot wallet.
Top 5 aggregate labelled groups with tokens appear in the bar chart below. We can see Aave is highest holder, followed by a collective group of unlabelled wallets and then binance, balancer and coinbase.
Which of the top holders have voted in a proposal
Only 6 of the top 100 individual holder have ever voted in a proposal. Including Aave's ecosystem reserve, Gnosis safe multisig wallet and various whale addresses.
Largest holders who have never voted? How might they vote, could they control the protocol?
Large holders such as Binance have never voted in Aave governance, but could technically have influenced prior proposals given their current balance of ~2m tokens and the average votes per proposal of 0.5m tokens. While technically Binance could change the outcome of votes if it wanted to but this would likely cause Aave to vote against Binance in favour of the majority of token holders.
Part 2: Overall Voting & Governance Activity
Proposal activity is steadily picking up across the Aave ecosystem.
Which addresses are proposing the most successful and unsuccessful proposals?
Gnosis safe multi-sig is the overwhelmingly the most active address in putting forward proposals.
In the donut chart below we can see the addresses generating the most successful (excecuted) proposals are the same as the addresses proposing the most failed proposals. This tells us that the governance is dominated by these addresses, and also that they are not deemed bad actors by the Aave goveranance community. A bad actor would be putting forward only failed proposals.
Voter turnout %
Voter turnout % is low, with the largest turnout being only 20%. This presents a risk that votes could be swung by large holders. Although there is no evidence of this happening to date.
Conclusion
So who really controls the protocol?
While the largest wallets have the biggest voting power, they are not active in generating proposals or voting. Therefore the true power lies with those putting forward successful proposals as this leads to real changes in the protocol.
Risks still present
With such low voter turnout, the highest two votes attracting only 20% of voters, and some entities such as Binance holding a large % of tokens, there remains a risk that proposals with low turnout could be swung in favour of large holders at the detriment to groups of smaller holders.
Conclusions on current token governance
These results suggest that current token governance systems are unable to:
- Sufficiently deter bad actors - we trust they will not vote against the majority
- Provide decentralization - protocol owned tokens are in majority as a backstop to bad actors
- Successfully engage token holders - we see extremely low voter turnout
Introduction & Methodology
Goal:
Explore who really controls the governance of Aave protocol: large holders or those putting forward governance proposals?
Data Used:
ethereum.aave.ez_votes
ethereum.aave.ez_proposals
ethereum.core.ez_current_balances
References:
Aave Governance Proposals: https://app.aave.com/governance/
Aave Governance FAQ: https://docs.aave.com/faq/governance