Decentralization is a key component of any Web3 ecosystem. However, some leading DeFi projects are still controlled by founders and venture capital funds.
DeFi researcher Thor Hartvigsen has found that some of the flagship projects are largely controlled by whales. On February 27, he tweeted his observations of the founders and venture capitalists behind decentralized finance protocols.
Battle of the DeFi Whales
The first project to analyze was the liquid staking platform Lido. According to Hartvigsen, a whopping 10% of the LDO offering is controlled by venture capital giants Paradigm Capital and Dragonfly Capital. The vesting period for Paradigm ends this May, and Dragonfly will unlock another 10M LidoDAO on August 25th.
The GMX decentralized exchange is also heavily dependent on whales. About 7% of the circulating supply belongs to four large holders. Among them is the founder of the platform, Arthur Hayes, who owns 200,500 tokens worth $15 million. Frax Finance has a similar situation. According to Hartvigsen’s findings, 15% of FXS supply comes from just five addresses.
Curve DeFi platform is next on the list. The researcher found that about 400 million CRV tokens are stored in the wallets of the founders of the project, blocked for the next 2 years. For comparison, the current circulating supply is 752 million coins.
Other notable whale-controlled projects include dYdX, Synthetix (SNX), and Polygon (MATIC). About 8% of the MATIC supply is in the wallets of five venture capital funds.
Decentralization under threat
Decentralization is the cornerstone of the very concept of the crypto space. However, the loud statements of the creators of DeFi platforms are not always true. Large token holders jeopardize the safety of users – for example, they can get rid of part of the supply of coins, which will seriously affect the price of the asset.
A striking example of the influence of whales on the fate of crypto projects is the recent history of Uniswap and a16z. The venture giant used its 15 million UNI tokens to vote against the use of the Wormhole bridge to deploy Uniswap V3 on the BNB blockchain. Andreessen Horowitz invests heavily in the competing LayerZero platform and has prioritized it for deployment. This case caused a serious outcry in the crypto community and once again proved that DeFi protocols need to seriously reconsider their approach to tokenomics in order to maintain their status and user trust.
Source: bitcoinlinux.com
