On Exercising Governance Power in Decentralized Autonomous Organizations

2026-07-28

AI Summary

This study addresses the inherent tension between trust and transparency in DAO governance mechanisms, demonstrating that design flaws—distinct from code-level vulnerabilities—can be exploited to mount novel “governance attacks.” By systematically analyzing 48 active Ethereum-based DAOs through static smart contract audits and formal modeling of governance workflows, the work characterizes prevalent design patterns across proposal submission, voting, and execution phases. It introduces a multidimensional classification framework for governance contracts and, for the first time, formally articulates the concept of “governance attacks.” The analysis identifies critical vulnerabilities present in real-world DAO implementations, offering both theoretical insights and practical guidance to enhance the security and robustness of decentralized governance systems.

Abstract

A decentralized autonomous organization (DAO) is a governance entity that allows its stakeholders to manage blockchain-based protocols through smart contracts. The DAO explicitly specifies how stakeholders make and enforce decisions concerning a protocol's operation in a smart contract, aptly referred to as its governance contract. The design of this governance contract, therefore, has far-reaching implications for the security (trust) and privacy (transparency) of the smart contracts managed by the DAO and its stakeholders. In this work, we (i) explicate the trust and transparency trade-offs of the design choices in implementing a DAO and (ii) highlight how poor choices introduce critical vulnerabilities, using real-world examples as case studies. To this end, we analyze $48$ public, actively used Ethereum-based DAOs that control a vast capital. We classify the design choices into a handful of key dimensions that succinctly capture how a DAO's stakeholders initiate a protocol change, vote on it, and, based on the voting outcome, execute that change. Our analyses crucially uncover a new class of attacks, which we call governance attacks, that directly exploit the fundamental design of a DAO's governance mechanisms, even if we assume bug-free implementations.

Problem

• Decentralized Autonomous Organization
• governance attacks
• trust-transparency trade-off
• smart contracts
• blockchain governance

Innovation

• governance attacks
• decentralized autonomous organization
• smart contracts
• trust-transparency trade-off
• Ethereum DAO