Governance Capture
A situation in which a protocol's governance process becomes dominated by a narrow group whose interests diverge from the broader community, letting them steer decisions for their own benefit.
Governance capture describes a situation in which a protocol's decision-making process becomes effectively dominated by a relatively narrow group — whether a concentrated set of large token holders, a small number of highly coordinated participants, or an entity with disproportionate voting power acquired cheaply or temporarily — whose specific interests diverge from the broader token-holder community, letting that group steer governance decisions toward outcomes that specifically benefit themselves rather than the protocol's broader stakeholders.
Governance capture risk is closely tied to how concentrated a token's voting power is, which is part of why supply distribution (see Kaavon's "Supply Distribution" glossary definition) and voting-power concentration are commonly scrutinized factors in assessing a DAO's governance health. Protocols attempt to mitigate capture risk through mechanisms including supermajority (see Kaavon's "Supermajority" glossary definition) requirements for especially consequential decisions, a security council's (see Kaavon's "Security Council" glossary definition) veto power over clearly harmful proposals, and governance designs like vote-escrowed tokenomics or liquid democracy that attempt to align voting power with longer-term, more broadly distributed commitment to the protocol's health.
Examples
- A protocol where a small number of large holders control enough voting power to unilaterally pass proposals faces meaningful governance capture risk, even if voting is technically open to all token holders.
- Requiring a supermajority for the most consequential governance decisions is one common mitigation against governance capture by a narrow, temporarily well-positioned group of holders.