Technical Definition
Governance Risk
The risk that a protocol's decision-making process is captured or misused to change rules against users' interests.
By Crypto University Editorial
DAO (Decentralized Autonomous Organization) · Proposal · Governance Token · Treasury · Sybil Attack
✦ Key Insight
Governance capture can achieve what an exploit would, without breaking any code — a passed vote can legitimately drain a treasury or change the terms of your position.
✕ Common Misconceptions
Judging governance by the number of token holders rather than by voting concentration. Also missing that an admin multisig with upgrade rights makes the vote advisory.
Detailed Explanation
Where governance controls contract upgrades, treasury spending and risk parameters, whoever controls governance controls the protocol. Concentrated token holdings, low turnout, borrowed voting power and emergency multisigs all create routes to capture.
In Practice
“A proposal passes on low turnout because a small number of large holders vote together, changing a parameter that affects every open position on the protocol.”