Paper: Evaluating DAO Sustainability and Longevity Through On-Chain Governance Metrics
Authors: Silvio Meneguzzo, Claudio Schifanella, Valentina Gatteschi, Giuseppe Destefanis
Date: April 2025 (Version 2)
Estimated Reading Time: 25 minutes

The paper presents a structured method to evaluate the sustainability and effectiveness of Decentralised Autonomous Organisations (DAOs) by proposing a set of Key Performance Indicators (KPIs). The authors identify major governance issues like low participation rates, financial centralization, and inefficiencies in voting mechanisms that challenge DAOs’ long-term viability. Using a curated dataset of 50 DAOs with active on-chain governance, the study assesses each organization across four dimensions: network participation, financial robustness, governance efficiency, and decentralization. It employs non-parametric statistical tests to identify significant patterns, showing that DAOs with more balanced performance across these KPIs tend to exhibit greater resilience. The paper stresses the need for integrated, data-driven evaluation frameworks and proposes that sustainable DAOs require balanced socio-technical structures. Overall, it advances DAO governance analysis with reproducible metrics and emphasizes a multidimensional view for practical and academic applications.

Core insights:

  1. Participation Is Critically Low in Most DAOs. Many DAOs show under 10% participation from their token holders in governance, undermining the decentralized promise. This low engagement often allows a few large stakeholders to dominate proposals and decisions.
  2. Financial Power Is Concentrated. Treasury sizes vary widely, but larger treasuries are not always more decentralized. In many cases, funds are controlled by a small number of holders, reducing economic decentralization despite financial robustness.
  3. Voting Mechanisms Often Lack Balance. While some DAOs achieve high approval rates, overly short or long voting windows can reduce deliberation quality or deter engagement. Moderation in voting time and approval rates tends to correlate with healthier governance.
  4. Decentralization Is Multidimensional. Effective decentralization is not just about token distribution. The paper incorporates proposer diversity and automation of decision execution to provide a fuller picture. Few DAOs are both decentralized and automated.
  5. Composite KPI Scores Reveal Structural Weaknesses. The composite scores across the four KPIs help identify DAOs with balanced, sustainable governance structures versus those skewed by over-centralization or disengagement. High-performing DAOs display coherence across social, financial, and technical metrics.

The authors establish a KPI framework focusing on four pillars of DAO health: network participation, accumulated funds, voting mechanism efficiency, and decentralization. Each KPI is clearly defined with quantifiable metrics and thresholds, making them replicable and comparable across DAO ecosystems.

One key observation is the consistently low voter turnout in many DAOs, confirming prior studies that only a minority of token holders actively participate. This undermines decentralization by allowing a few actors to control the agenda and outcomes. The data show that participation is often inversely related to DAO size- smaller DAOs tend to have higher engagement. However, even with financial maturity, larger DAOs do not necessarily foster more involvement, emphasizing the importance of community incentives and accessible governance tools.

The analysis of treasury data reveals that while some DAOs manage over a billion dollars, their tokens are often not widely circulated. This raises concerns about economic centralization and its impact on inclusive decision-making. The KPI thresholds based on treasury size and circulation percentages help classify financial robustness, but they also expose how wealth concentration might be masking deeper governance flaws.

Voting efficiency is another area where the paper adds depth. DAOs with very short voting durations tend to fast-track decisions, risking insufficient scrutiny, while very long durations can dampen engagement. The study proposes a middle ground 3 to 14 days as optimal. This parameterization could inform best practices for proposal timelines, depending on DAO type and complexity.

Decentralization is treated with nuance. The authors consider not only the distribution of token ownership but also whether governance actions are automated or require manual intervention. They also assess proposer concentration. This multi-layered approach is essential, as decentralization is often cited as a goal without precise definitions or measures.

Perhaps the most significant contribution is the synthesis of the four KPIs into a composite score. This facilitates comparison across DAOs and identifies structural imbalances. High-scoring DAOs such as Public Nouns and Union tend to be smaller, more participatory, and more automated. Conversely, well-funded but centralized DAOs like Uniswap score lower on decentralization and participation, suggesting that financial strength alone is not sufficient for sustainability.

This paper prompts several critical questions for further study:

Finally, the study provides an open-source dataset and a methodological pipeline, which is invaluable for researchers and practitioners aiming to replicate or extend the analysis. This promotes transparency and fosters continuous improvement in DAO evaluation practices.

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