Governance Flywheel

Definition ∞ A governance flywheel describes a self-reinforcing mechanism within a decentralized autonomous organization where active participation in governance leads to improved protocol performance, which in turn attracts more participants. Increased participation enhances the legitimacy and effectiveness of decision-making. This cycle creates positive feedback, driving growth and stability for the protocol. It promotes sustained community involvement.
Context ∞ In crypto news, the concept of a governance flywheel is often discussed in relation to the long-term viability and decentralization of various DeFi protocols. Reports may highlight how token holders are incentivized to contribute to protocol development through voting and proposal submissions. The effectiveness of a governance flywheel is a key metric for assessing a project’s community strength and future adaptability.