Decentralized Autonomous Organization (DAO) is very popular in Decentralized Finance (DeFi) applications as it provides a decentralized governance solution through blockchain. We analyze the governance characteristics in the Maker protocol, its stablecoin DAI and its governance token Maker (MKR). To achieve that, we establish several measurements of centralized governance. Our empirical analysis investigates the effect of centralized governance over a series of factors related to MKR and DAI, such as financial, network and Twitter sentiment indicators. Our results show that governance centralization influences the Maker protocol and that the distribution of voting power matters. The main implication of this study is that centralized governance in MakerDAO very much exists, while DeFi investors face a trade-off between decentralization and performance of a DeFi protocol. This further contributes to the contemporary debate over whether DeFi can be truly decentralized.

We introduce a test to assess mutual funds’ “conditional” performance that is based on updated information and corrects data snooping bias. Our method, named the functional false discovery rate “plus” ( $ fFDR^+ $ ), incorporates fund characteristics in estimating fund performance free of data snooping bias. Simulations suggest that the $ fFDR^+ $ controls well the ratio of false discoveries and gains considerable power over prior methods that do not account for extra information. Portfolios of funds selected by the $ fFDR^+ $ outperform other tests not accounting for information updating, highlighting the importance of evaluating mutual funds from a conditional perspective.