A new working paper from the European Central Bank argues that governance in major decentralized finance protocols is far less decentralized than the industry narrative often suggests. By examining governance data from Aave, MakerDAO (now rebranded as Sky), Ampleforth, and Uniswap at two different snapshots—November 2022 and May 2023—the researchers concluded that decision-making power is concentrated among a relatively small group of token holders, delegates, and centralized exchanges. At the time of data collection, the four protocols represented about 32% of Ethereum-based DeFi total value locked, making them a meaningful sample for judging broader governance patterns.
Token Ownership Was Concentrated Across All Four Protocols
One of the clearest conclusions in the ECB paper is the extent of token concentration. According to the study, the top 100 holders controlled more than 80% of governance token supply across the four protocols combined. Concentration was especially pronounced in Aave and Uniswap, where the top five holders together accounted for nearly half of all governance tokens. In Ampleforth, the top five holders were even more dominant, controlling close to 60% of supply.
The researchers then tried to identify who stood behind those addresses. In many cases, a substantial share of tokens could be traced back to the protocols themselves through treasuries, founder allocations, and developer allocations. Other large balances were associated with centralized and decentralized crypto trading platforms. Among centralized venues, Binance stood out as the largest platform-linked holder across the sample, with exposure ranging from about 2% to 15% depending on the protocol.
These findings challenge the idea that governance tokens naturally distribute control among broad user communities. Instead, the paper suggests that even when ownership appears dispersed onchain across many addresses, practical control may remain clustered in protocol insiders, exchange wallets, or a narrow group of large holders.
Delegation Did Not Eliminate Concentration
The voting side of governance showed a similar pattern. The ECB paper found that leading voters were typically not ordinary users acting independently, but delegates—individuals or organizations that had accumulated voting power from many smaller token holders. Delegation is often presented as a tool that makes governance more functional by allowing active participants to vote on behalf of passive holders. But the report argues that, in practice, delegation can also intensify concentration by channeling dispersed token ownership into the hands of a small number of influential actors.
To determine who these top voters were, the research team relied on public web searches, Github, social media activity, governance forums, and blockchain analytics tools developed by Crystal Intelligence. Even with that effort, the identities of roughly one-third of top voters could not be established. That result is particularly important for policymakers, because it implies that a meaningful share of the actors exerting influence over DeFi protocols remain effectively anonymous or insufficiently attributable.
Among the top voters whose identities could be determined, individuals accounted for about 21%, while Web3 companies represented about 19%. Venture capital firms and university blockchain clubs also appeared in the sample. The composition of this group suggests that DeFi governance is not simply a direct democracy of token holders, but a layered system in which professionalized actors, organized communities, and institutional entities can accumulate outsized influence.
A16z Emerged as Uniswap’s Most Powerful Voter
Within the Uniswap ecosystem, the paper identified Andreessen Horowitz (A16z) as the top voter in both observed periods. As of May 2023, A16z had received delegated voting power from 125 addresses. That does not necessarily mean A16z held all of the underlying tokens directly, but it does show how governance delegation can translate into significant practical authority for a single actor.
The broader pattern was not limited to Uniswap. Across the sample, the concentration of governance power remained relatively stable between the two data snapshots. In other words, the passage of time and routine market activity did not materially reduce concentration. The ECB views this stability as a double-edged sword: it may imply resilience and continuity, but it also indicates that entrenched power structures are not easily diluted by organic participation alone.
Most Governance Proposals Focused on Operations, Not Structural Reform
The paper also categorized 248 governance proposals across the four protocols. The largest category involved risk parameters, including loan-to-value ratios, debt ceilings, stability fees, and emergency shutdown-related settings. These proposals accounted for about 28% of the sample. Asset listing proposals represented another 23%. By contrast, proposals addressing the governance framework itself made up just 1% of the total.
This imbalance suggests that most DeFi governance activity is devoted to operational management rather than questions of constitutional design. In practical terms, token holders and delegates are voting on how the protocol should run, but only rarely on whether the underlying distribution of power is appropriate. That may help explain why concentration can persist even in systems built around open participation and transparent onchain voting.
Regulatory Accountability Remains Difficult
From a regulatory perspective, the ECB paper takes a skeptical view of current DeFi governance arrangements. The researchers argue that governance token holders, developers, and centralized exchanges cannot yet serve as reliable regulatory entry points. The combination of pseudonymous addresses and opaque delegation structures makes it difficult to assign clear responsibility for decisions, especially when large voting blocs may be controlled indirectly or without robust public disclosure.
The study places this issue in the context of the European Union’s Markets in Crypto-Assets framework, or MiCA. MiCA currently exempts services that are provided in a fully decentralized manner. However, the ECB authors contend that none of the protocols in their sample came close to meeting a meaningful threshold for true decentralization. In their view, most protocols still exhibit substantial insider control or concentrated governance influence, which complicates any straightforward claim to regulatory exemption.
This does not mean the paper claims all DeFi protocols should automatically be regulated in the same way. Rather, it highlights the difficulty of applying a legal category such as “fully decentralized” when actual governance power is concentrated and key actors may not be publicly identifiable.
Possible Policy Directions
The paper outlines several potential avenues for improvement. These include disclosure obligations for token holder affiliations, bespoke legal structures for decentralized autonomous organizations, and hybrid frameworks that connect onchain governance processes to traditional legal accountability. The Danish Financial Supervisory Authority’s framework is mentioned as one possible practical reference point for assessing whether a given service is genuinely decentralized.
The ECB also compares DeFi governance to traditional corporate governance. In both systems, voter participation can be low and outcomes may be shaped by a small group of engaged actors. But traditional finance has additional guardrails, such as proxy voting rules, stewardship standards, and legally enforceable duties. DeFi, by contrast, often lacks equivalent safeguards, while many of the people exercising meaningful influence remain partially or wholly outside public view.
That comparison captures the central tension in the ECB’s findings. Onchain voting may be transparent at the transaction level, but transparency of addresses does not necessarily equal transparency of control. If a protocol’s most influential token holders or delegates cannot be confidently identified, and if voting power stays concentrated over time, then governance may be decentralized in form more than in substance.
For the DeFi sector, the report is likely to fuel a familiar debate: whether decentralization should be judged by code, by token distribution, by voting participation, or by legal and operational control. The ECB paper does not settle that debate, but it adds empirical evidence that governance in several major protocols remains heavily concentrated—and that this concentration has significant implications for accountability, compliance, and the future regulatory treatment of DeFi in Europe.