The economic impact of DeFi crime events on decentralized autonomous organizations (DAOs)

Prof. Masarah Paquet-Clouston’s project, The Economic Impact of DeFi Crime Events on Decentralized Autonomous Organizations, conducted in collaboration with PhD student Stefan Kitzler and Dr. Bernhard Haslhofer from the Complexity Science Hub, examines the economic impact of DeFi crime events on decentralized autonomous organizations, or DAOs. These organizations govern decentralized finance applications through tradable governance assets that function similarly to corporate shares, giving holders voting and decision-making rights. Because DeFi systems are young, valuable, openly accessible, and built on public code, they can be attractive targets for profit-driven attackers seeking to exploit vulnerabilities.

The project investigates how crime events shape DAO market dynamics, focusing on changes in prices, trading activity, and market capitalization. Using open-source blockchain and market data, the research studied 22 crime events affecting 14 DAOs and compared affected organizations with broader market trends. The findings show that crime events often lead to increased governance asset trading volume and price declines, suggesting that holders may quickly sell their assets after an attack.

A key contribution of the project is its distinction between direct and indirect financial losses. While direct losses capture what victims immediately lose, indirect losses include broader market capitalization impacts. Overall, the results show an estimated of $1.3 billion in DAO market capitalization losses for these 22 crime events, far exceeding direct victim costs and accounting for 74 % of total losses. The work provides empirical evidence that can help DeFi organizations, DAOs, investors, and future adopters better understand cybercrime risks and the importance of stronger security practices.

The full paper is available in open-access here: https://www.sciencedirect.com/science/article/pii/S2405918825000236