Demystifying the DAO Governance Process

TL;DR

This paper analyzes DAO governance processes, identifies vulnerabilities in key components, and develops automated detection methods, revealing significant transparency issues and proposing solutions to improve decentralized governance security.

Contribution

It provides a comprehensive overview of DAO governance, identifies critical vulnerabilities, and introduces automated tools for issue detection across a large multi-blockchain dataset.

Findings

Over 60% of proposals lack consistent descriptions and code.

Majority of DAO components are vulnerable to issues causing financial losses.

Many DAO developers neglect governance transparency and security.

Abstract

Decentralized Autonomous Organization (DAO) becomes a popular governance solution for decentralized applications (dApps) to achieve decentralized governance. In the DAO, no single entity can arbitrarily control the dApps without approval from the majority of members. However, despite its advantages, DAO has also been targeted by several attacks, leading to the loss of millions of dollars. In this paper, we first provided an overview of the DAO governance process within the blockchain. Next, we identified the issues within three components of governance process: Governance Contract, Documentation, and Proposal. Each of these components is vulnerable to issues that could potentially result in substantial financial losses. Then we developed automated methods to detected above issues. To investigate the issues within the existing DAO ecosystem, we constructed a state-of-the-art dataset that includes 16,427 DAOs, 183 documentation, and 122,307 proposals across 9 different blockchains. Our analysis reveals that a majority of DAO developers and members have not given sufficient attention to these issues, especially in the area of proposal. The result shows that over 60% of the examined proposals fail to provide a consistent description and code for their members, highlighting a significant gap in ensuring transparency within the DAO governance process. For a better DAO governance ecosystem, DAO developers and members can utilize the methods to identify and address issues within governance process.