Several Leading DeFi Protocols Are Still Controlled by Whales

Decentralization is a key component of any crypto network. However, some of the industry’s leading DeFi projects still have large quantities of their token supplies controlled by founders and venture capital firms.

Recent findings by DeFi researcher Thor Hartvigsen have revealed the extent to which whales could control some of the top crypto projects.

On Feb. 28, the researcher revealed findings from tracking down the top whales of eight “strong performing protocols.”

Furthermore, the findings are an eye-opener but hardly surprising given the nature of crypto project funding. The majority of projects are venture capital-backed, and these behemoths still hold big bags of tokens.  

Battle of the DeFi Whales

Liquid staking platform Lido was the first project to be analyzed since it has seen remarkable growth over the past year. However, venture firms Paradigm Capital and Dragonfly Capital control a whopping 10% of the LDO supply.

This equates to almost 100 million tokens worth an estimated $309 million at current LDO prices. “Paradigm’s 100m LDO vesting round finishes in May 2023 and Dragonfly unlocks 10m additional LDO tokens Aug. 25, 2023,” the researcher noted.

Decentralized perpetual exchange GMX also has a lot of whale influence. Around 7% of the circulating supply is held by just four whale accounts, including top whale Arthur Hayes who holds 200,500 GMX tokens worth $15 million.

Frax Finance has a raft of VC investors, many of which still control whale wallets full of FXS tokens. According to Hartvigsen’s findings, a whopping 15% of the FXS circulating supply is held by just five whale accounts.

DeFi stablecoin yield platform Curve is another one with whale influence. The researcher discovered that a handful of founder wallets hold nearly 400 million CRV tokens. The current circulating supply of CRV is 752 million, but these founder tokens are locked for vesting for the next couple of years.

Other platforms with heavy whale dominance include dYdX, Synthetix (SNX), and Polygon (MATIC). Five VC whale accounts hold around 8% of the entire MATIC supply.

The Decentralization Argument

Crypto projects like to tout how decentralized they are, especially in DeFi. However, this simply isn’t the case when a handful of whales can influence governance voting with their huge bags.

Additionally, they could liquidate some of their hefty stashes at a whim which would affect token prices at the time. As usual, it would be the small retail holder that gets burnt should this happen.

Furthermore, the most glaring recent example was Andreessen Horowitz’s (a16z) influence over a Uniswap governance vote. Earlier this month, the firm used its 15 million UNI token voting block to vote against a proposal. The proposal was for the use of the Wormhole bridge for Uniswap V3 deployment on the BNB Chain. a16z is heavily invested in rival bridge platform LayerZero which it favored for the deployment.

It seems that the “decentralized” part of DeFi should be reconsidered for some platforms.




BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.

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