Principal-Agent Problem

Definition ∞ The Principal-Agent Problem describes a conflict of interest that arises when one party (the agent) is expected to act in the best interests of another party (the principal), but may instead act in their own self-interest. This situation often occurs when information asymmetry exists between the principal and the agent. It is a fundamental concept in economics and organizational theory.
Context ∞ The Principal-Agent Problem is highly relevant in the context of decentralized governance and fund management within the cryptocurrency space. Discussions often center on how to design protocols and governance structures that minimize conflicts of interest between token holders and those who manage or develop the network. Future considerations will likely involve further refinement of incentive alignment mechanisms and the development of robust accountability frameworks.