How can DAOs avoid whale attacks when $17 million in tokens can control a $2 billion protocol?

Decentralized Autonomous Organization, abbreviated as DAO, stands for decentralized autonomous organization, and DAOs are widely used in the governance aspects of many blockchain projects.

Although the literal meaning is a decentralized autonomous organization, many DAOs are not actually autonomous, with control typically concentrated in the hands of large token holders who have the power to influence governance decisions. A recent article explores whether decentralized autonomous organizations can avoid the influence of these large governance token whales to reduce their impact.

$17 Million Can Manipulate $2 Billion, Governance Attacks Become a Major Issue in DAOs

In a recent article, author Yohan Yun stated that controlling at least $17 million worth of governance tokens by a whale or a small group of holders can potentially attack protocols controlling over $2 billion in user funds. He also pointed out that the inaction of other whales is also a problem, as their large voting power usually protects protocols from attacks, but many do not take action.

Luca Prosperi, CEO of M^0 Labs, also commented, "The current low participation in DAO governance settings means that the funds required to attack these governance protocols are not substantial."

An example is a whale named Golden Boys, who prompted Compound DAO to distribute $25 million worth of COMP tokens to the revenue-sharing protocol Humpy controlled by Golden Boys. After two failed attempts, Humpy succeeded on July 28th.

The Humpy team accumulated around 325,333 COMP tokens on the open market, just 75,000 tokens short of the required 400,000 legal voters, although the proposal was eventually canceled.

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Governance Tokens Mostly Held by VCs, Who Often Choose to Stay Silent

Who holds most of the governance tokens? Why do they often choose to stay silent? Taking Compound as an example, a16z holds 361,000 COMP, accounting for 90.25% of the legal voters. However, Dan Hughes, founder of DeFi platform Radix DLT, mentioned that VC firms rarely vote on governance decisions or even intervene in proposals related to "governance attacks."
"If you have such a large voting power, you can either choose to vote on (almost) everything or not vote at all," added Dan Hughes.

"Voting on only a few proposals can send a disruptive signal, even if the reality may not be so. If your stance is to abstain, then you should not accept delegations and delegate your voting power to multiple third parties."