Several leading DeFi protocols are still controlled by whales

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

recent findings by DeFi Researcher Thor Hartvigsen has revealed the extent to which whales could control some major crypto projects.

On February 28, the researcher revealed the findings from tracking the best whales from eight “high-throughput protocols.”

Furthermore, the findings are a revelation, but not surprising given the nature of funding crypto projects. Most of the projects are backed by venture capital, and these giants still have large pools of tokens.

Battle of the DeFi Whales

The Lido liquid staking platform was the first project to be analysed, as 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 with an estimated value of $309 million at current LDO prices. “Paradigm’s 100 million LDO grant round ends in May 2023 and Dragonfly unlocks an additional 10 million LDO tokens on August 25, 2023,” the researcher noted.

The GMX decentralized perpetual exchange also has a lot of influence from whales. About 7% of the circulating supply is held by just four whale accounts, including top whale Arthur Hayes, who owns 200,500 GMX tokens worth $15 million.

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

DeFi stablecoin performance platform Curve is another one with influence of whales. The researcher discovered that a handful of founding wallets hold nearly 400 million CRV tokens. The current circulating supply of CRV is 752 million, but these founder tokens are locked to be awarded for the next two years.

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

The decentralization argument

Crypto projects like to promote how decentralized they are, especially in DeFi. However, this is simply not the case when a handful of whales can influence governance. vote with their huge bags.

Also, they might liquidate some of their large stashes on a whim, which would affect token prices at the time. As usual, it would be the small retailer that would get burned if this happened.

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

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




BeInCrypto has reached out to the company or person involved in the story for an official statement on recent developments, but has yet to hear back.

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