We study whether small token holders have voice in the governance of decentralized autonomous organizations (DAOs), and whether that voice creates value. We develop a model in which the informed party is the protocol user rather than the large holder: users learn the long-run consequences of governance through protocol usage. Discussion forums aggregate users’ dispersed information, and delegation concentrates their dispersed votes into a decisive bloc and lowers the cost of participation. Using account-level data on 2,830 proposals from DeFi DAOs, we provide evidence that small token holders use the protocol more intensively than large holders. Discussion forums and delegation raise small holders’ participation and influence over outcomes. Small-holder victories are rare, but when they occur, small holders prevail by pooling their votes through delegation rather than by allying with large holders. Their victories earn positive abnormal returns, and the reaction is larger when the preceding deliberation reached more consensus. Small-token-holder voters are less likely to sell around proposals classified as small-holder victories.
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DAO governance