Fairness in Token Delegation: Mitigating Voting Power Concentration in DAOs

TL;DR

This work investigates fairness in token delegation for DAO governance, showing that current delegation systems and ranking-based interfaces amplify power concentration and misalignment between token holders' priorities and delegates' actions. It proposes a multi-modal pipeline that links on-chain governance events from five protocols with off-chain forum discussions across 14 DAOs, enabling measurement of interest alignment via LLM-derived signals. Key contributions include a large, integrated dataset, an empirical analysis revealing pervasive centralization and misalignment, and a methodology to quantify alignment between holders and delegates. The findings highlight interface biases as a lever for reform and suggest alignment-aware delegation to improve representativeness and resilience in DAO decision-making.

Abstract

Decentralized Autonomous Organizations (DAOs) aim to enable participatory governance, but in practice face challenges of voter apathy, concentration of voting power, and misaligned delegation. Existing delegation mechanisms often reinforce visibility biases, where a small set of highly ranked delegates accumulate disproportionate influence regardless of their alignment with the broader community. In this paper, we conduct an empirical study of delegation in DAO governance, combining on-chain data from five major protocols with off-chain discussions from 14 DAO forums. We develop a methodology to link forum participants to on-chain addresses, extract governance interests using large language models, and compare these interests against delegates' historical behavior. Our analysis reveals that delegations are frequently misaligned with token holders' expressed priorities and that current ranking-based interfaces exacerbate power concentration. We argue that incorporating interest alignment into delegation processes could mitigate these imbalances and improve the representativeness of DAO decision-making.

Figures (10)

• Figure 1: Delegation interface on Tally Arbitrum@Tally. The platform displays delegates ranked by default according to total voting power received, as shown in the dropdown menu. This design choice promotes highly visible delegates, such as "Entropy Advisors" and "LobbyFi", potentially reinforcing a rich-get-richer dynamic. Token holders are provided with limited contextual information to guide their delegation choices, with no support for value- or issue-based alignment. Such interface-level biases can contribute to centralization and ideological misrepresentation in decentralized governance.
• Figure 2: Overview of our interest-aligned delegation pipeline. We collect data from 14 DAO governance forums and link user identities to on-chain addresses via a username-to-wallet matching list. After filtering, we trace forum discussions to corresponding governance actions, applying keyword extraction and sentiment analysis to build ideological profiles. Finally, -based prompts map these features into interpretable voter interest categories (e.g., community engagement, DAO equity, or treasury management), which serve as the basis for interest-aligned delegate recommendations.
• Figure 3: Concentration patterns in DAO governance. Figures (a–d) show CDFs of token holders, delegatees, and delegators across major DAOs. Together, these distributions reveal the systemic skew where a few actors dominate holdings and delegated power, while most token holders and delegators remain marginal.
• Figure 4: Prompt used for Proposal Categorization
• Figure 5: Categorization of proposals in our analyzed forum data, using the proposed taxonomy (Category - Subcategory - Importance)