A system where voting power is determined by the amount of tokens held is generally considered not truly decentralized because it leads to a concentration of power among a small number of large holders (“whales”). This structure resembles a traditional corporation with shareholders, where the wealthiest individuals have the most influence, rather than a true democracy with equal voting power per person.
Core Issues with Token-Weighted Voting
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Wealth Concentration: A small percentage of addresses often controls a significant majority of the total token supply and thus the voting power. This means a few large holders can effectively sway all major decisions.
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Whale Dominance: Large token holders, or “whales,” have disproportionate influence, which may lead to decisions that primarily serve their interests, potentially at odds with the broader community’s goals.
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Low Voter Turnout: Small token holders often have little incentive to participate in governance, as their individual votes have negligible impact, leading to low overall voter participation and further consolidating power in the hands of the active few.
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Vulnerability to Manipulation: The system is susceptible to manipulation tactics like vote buying or the formation of “delegate cartels” and voting blocs that can control the outcome of proposals.