Protocol Governance Capture
Protocol governance capture occurs when a small group of stakeholders, such as large token holders, venture capital firms, or core developers, exert disproportionate control over the decision-making processes of a decentralized autonomous organization. In crypto derivatives protocols, this control can be used to alter collateral requirements, change fee structures, or prioritize specific asset listings that benefit the capture group at the expense of smaller participants.
This undermines the decentralized ethos of the protocol, as the mechanism intended to be democratic becomes an instrument for centralized rent-seeking. It often happens through mechanisms like vote buying, delegated voting power, or lack of participation by the broader community.
When capture is achieved, the protocol may become less resilient to attacks or less aligned with the interests of its users.