Definition ∞ On-chain governance risk pertains to potential vulnerabilities or negative outcomes associated with decision-making processes directly recorded and executed on a blockchain. This includes risks such as voter apathy leading to low participation, concentration of voting power among a few large token holders, or the potential for malicious proposals to be approved. Imperfections in the governance mechanism can result in protocol stagnation, security exploits, or decisions that do not serve the broader community’s best interests. Addressing these risks is crucial for the long-term stability and decentralization of blockchain projects.
Context ∞ The effectiveness and fairness of on-chain governance models are subjects of continuous debate and refinement within the decentralized finance and blockchain communities. Efforts are underway to design more resilient governance structures that promote broad participation, resist centralization, and protect against various forms of manipulation. Understanding these risks is essential for assessing the long-term viability and trustworthiness of decentralized protocols.
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