The power of governance: A study on the relationship between on-chain DAO governance and token performance
Year: 2025
Type: article
Abstract: Decentralized autonomous organizations (DAOs) leverage blockchain technology to facilitate collaboration and decentralize decision-making through rules encoded in smart contracts. DAOs challenge traditional governance theory by combining ownership and management using governance tokens. A governance token’s performance is traceable based on token price changes and subject to influencing factors. Understanding these factors is essential to ensure DAOs’ long-term viability as a new organizational form. However, insights into the drivers of token performance are still limited, leaving both DAO founders and potential token holders in the dark about which on-chain governance design choices to adopt to attract potential token holders. We apply signaling theory to elucidate how on-chain governance design choices influence token performance and use a unique dataset of 204 DAOs. We find that a minimum token quorum positively relates to token performance, while embedding voting incentives, such as non-fungible tokens or additional governance tokens, can negatively relate to token performance. Moreover, we identify founders’ stake as a contingent factor moderating these signals.
Institutions: TU Dortmund University, Technische Universität Braunschweig
Language: English
Subfield: Information Systems
Field: Computer Science
Domain: Physical Sciences
Open Access status: hybrid
Estimated APC paid: $3,900
OpenAlex ID: W4410136275