Decline in DAO Activity Amidst DeFi Growth
In 2025, there has been a noteworthy decline in both voter participation and proposals within prominent decentralized autonomous organizations (DAOs). However, the decentralized finance (DeFi) sector has experienced growth in other aspects. As transaction costs have decreased, innovative applications have emerged, many of which are now inclined to share their revenue with token holders. According to a new report titled “State of DeFi” published by DL News, along with its affiliates DL Research and DefiLlama, the landscape of DAOs has shifted toward a quieter and less decentralized environment this year.
DAO Governance Sees a Significant Drop
Last year marked a peak for DAO governance, but 2025 has shown a stark decline in both the volume of proposals and voter engagement across multiple major DAOs. This downturn raises concerns for crypto enthusiasts who aspire for a future financial framework devoid of intermediaries, advocating for a system where decisions are democratically made by a vast community of user-owners rather than a select few executives. The report examined the governance of six leading DAOs, including Aave, Lido, Uniswap, Arbitrum, Balancer, and Frax, and discovered that proposals had decreased by at least 60% and up to 90% year-over-year. While voter participation dwindled across most protocols, Lido experienced an uptick in engagement due to new governance rules. This trend towards decreased voter involvement has been an ongoing challenge for DAOs, which have sought to enhance tokenholder participation for years. Interestingly, despite the drop in voters, the total number of votes cast rose in all six DAOs, indicating that more individuals are delegating their voting power to representatives, resembling a shift towards a governance model dominated by a smaller group of seasoned delegates and strategic token holders. The report suggests this evolution may enhance governance predictability, yet it raises critical concerns about the risk of minority tokenholder disenfranchisement.
Emerging Trends in the DeFi Sector
The report identifies several trends emerging in 2025. One notable observation is the gradual diversification of revenue within the DeFi landscape. Historically, earnings have been concentrated among a limited number of exceedingly profitable platforms. However, in 2025, wealth began to distribute more broadly, albeit slowly. While revenue growth was noted across nearly all significant sectors, a clear pattern emerged where a small number of protocols continued to dominate fee collection. The top 10 protocols accounted for 60% of total fees, with the top 20 capturing a staggering 80%. This is an improvement compared to 2024, when the top six protocols took home 70% of all fees. Among these, stablecoin issuers Tether and Circle maintained a dominant position, securing 54% and 18% of total fees, respectively. Additionally, perpetual exchanges like Hyperliquid experienced significant success, collectively representing 7.5% of all fees in 2025, with their revenue proving resilient regardless of market fluctuations.
Governance Tokens and Revenue Distribution
Governance tokens faced a challenging situation last year, as they allowed users to engage in DAO decision-making, yet many users were reluctant to delve into the complexities of protocol management. This raised questions about the actual value of such tokens to investors. However, changes emerged in 2025, with the proportion of protocols sharing revenue with tokenholders tripling from 5% to 15%. Major platforms like Aave and Lido initiated buyback programs this year. The report indicates that as competition intensifies and tokens increasingly resemble traditional financial assets, more protocols are likely to adopt similar strategies. A contributing factor to this shift is the evolving regulatory landscape in the United States, which has shifted from a more hostile stance under the previous administration to a more favorable one, potentially allowing for more lenient categorization of tokens as commodities.
Reduction in Blockchain Costs Drives Innovation
Another significant development is the notable reduction in blockchain transaction costs. Ethereum, in particular, has seen a dramatic drop in average transaction fees, decreasing by 86% since 2021, even as the transaction volume has nearly tripled. In 2021, blockchains accounted for 54% of all user fees, while applications captured 34%. By 2024, the distribution had shifted to applications claiming 47% of fees compared to blockchains’ 42%. In 2025, applications dominated fee generation, capturing 66% of all fees while blockchains only managed to secure 19%. The report attributes this transformation to increased competition, initiated by Solana’s ascent in 2021, which demonstrated that high throughput and low transaction fees were achievable. This competitive environment has resulted in many protocols amassing significant cash reserves, enabling them to innovate and allocate a portion of their revenue to tokenholders.
