Unveiling the Impact of Delegated Voting on Decentralized Autonomous Organizations

A decentralized autonomous organization (DAO) is a novel form of blockchain-based organization designed for collective decision-making. As DAOs emphasize a decentralized, democratic decision-making approach, participation serves as the foundation for their sustainable operation and development. Unfortunately, many DAOs struggle with low participation rates, often falling short of the required quorum. To address this critical issue, an increasing number of DAOs have adopted delegated voting, which allows members to transfer their voting rights to others. However, the impact of delegated voting within the DAO context remains unknown. By leveraging variation in the adoption of delegated voting across DAOs, we find that delegated voting increases members’ participation in proposal voting and enhances decision quality. Our results further show that delegated voting stimulates greater participation in proposals with higher participation costs, including those that are more complex, urgent, or operational in nature. However, in the long term, delegated voting also leads to greater voting power concentration and reduces engagement from both new and active voters, potentially harming sustained participation and the growth of the DAO community. Overall, our findings highlight the need for DAOs to balance the short-term gains from higher participation with the potential long-term risks to decentralization.