Decentralized Autonomous Organizations (DAOs) hold the key to a future where governing is more transparent, community-led, and not under the control of a central governing body. However, despite the revolutionary nature of their presence, a great many DAOs still face a basic problem, which undermines their very authenticity and is a Sybil attack. This is a rapidly rising question now, especially with the increased complexity level of their presence: “Why are Sybil attacks difficult to prevent in token-based DAOs?”
In essence, token-based DAOs are based on blockchain addresses rather than identifiable personas. Although the openness of the system facilitates permissionless networks and worldwide accessibility, the room for compromise is also widened. Actually, the nature of the attack called the "Sybil attack" reveals how the openness of the DAO system can be used for manipulating the governance process within the DAOs.
Understanding which these types of attacks occur, we need to analyze the technological foundations for the governance of DAOs, among other foundations.
What is Sybil Attack on Token-Based DAOs?
A Sybil attack is a situation that happens when a single person or a group of people control several identities to get excessive power in a given system. In token-based DAOs, these identities are primarily presented by different wallet addresses that possess governance tokens.
Since voting power in a majority of DAOs is distributed according to token holdings rather than identifying individuals, attackers can diversify their token holdings across different wallets or strategically accumulate them in a way that makes them seem like multiple distinct actors in the DAO.
Why Token-Based DAOs Are Structurally Flawed
1. Token Weighted Voting favours Capital over Identity
Token-based DAOs are generally based on voting systems that are scaled by the number of tokens being held by a member. However, such systems are based on the following presumptions: It is assumed that every member who possesses tokens has some influence within the network. Tokens may be:
Accumulated quietly
Split among various wallets
Acquired without long-term commitment
This leads to confusion over what actually represents decentralized participation versus controlled behavior.
2. Pseudonymity Limits Identity Verification
Blockchain networks are pseudonymous by design. Wallet addresses do not contain any information about the owner, and DAOs do not use identity verification in general.
However, this gives rise to a dilemma:
Checking identity enhances security
Preserving anonymity protects decentralization
A significant factor making Sybil attack prevention challenging is balancing between these two conflicting goals.
3. Low Cost of Creating Multiple Identities
A new wallet is created with little resource cost. There is nothing inherently expensive about identity creation, which means Sybil attacks are cost-effective, especially during decision-making related to:
Treasury allocations
Protocol Upgrades
Token Incentives/Airdrops
Without friction, there is minimal downside risk for attackers.
The Economic Incentives Behind Sybil Attacks
The main reason Sybil attacks continue to thrive is that the attack cost tends to be lower than the cost of defending. The attackers need not necessarily control the network for a long time to pass a motion or cancel a harmful change.
At the same time, the DAOs will need
Governance tooling
Monitoring mechanism
Community oversight
This is what makes prevention a never-ending task instead of a one-time solution.
Social and Behavioral Factors Magnifying the Problem
Sybil attacks are not purely technical in nature, they are also social. So most DAOs suffer from low voter turnout, meaning the outcomes can be determined by a relatively small number of wallets.
In such environments:
A coherent clique can dominate low-turnout votes
Long-existing wallets can earn unofficial trust despite the lack of control
Apparent decentralization may mask the concentrated influence of a few.
These dynamics undermine governance legitimacy and disfranchise true contributors.
Token Liquidity and Secondary Markets
Governance tokens are often freely tradable, which introduces another layer of complexity. Tokens can be:
Bought shortly before a vote
Debt borrowed using DeFi mechanisms
Sold immediately after governance participation
This disconnects the governance power from long-term alignment: a participant might have an influence on decisions without having any ongoing stake in the DAO's success.
Common methods for mitigating the Sybil problem—and their limitations
For instance, there are various schemes that have been tried with the aim of mitigating the risks of Sybil attack, yet each has its associated costs
Common approaches include:
Minimum token holding periods
Delegated or representative voting
Awareness platforms regarding
Quadratic voting models
Vote escrow and time-lock tools
Although these approaches increase the attack cost, none are completely effective in resolving this problem.