A new working paper from the European Central Bank argues that governance across major decentralized finance protocols is far less decentralized than the industry narrative often suggests. Using snapshots from November 2022 and May 2023, the study examined governance data from Aave, MakerDAO (now rebranded as Sky), Ampleforth, and Uniswap. At the time of data collection, these four protocols together represented roughly 32% of Ethereum’s total value locked, making them a meaningful sample for assessing how governance power is distributed in DeFi.
Token ownership is heavily concentrated
The ECB researchers found that concentration levels were extreme across all four protocols. According to the paper, the top 100 holders controlled more than 80% of the total governance token supply. In Aave and Uniswap, the top five holders alone accounted for nearly half of all governance tokens. Ampleforth showed even greater concentration, with its top five holders controlling close to 60% of supply.
The report did not stop at wallet balances. It attempted to determine who stood behind the largest addresses. In most of the protocols studied, more than half of total holdings could be traced back either to the protocol itself through treasury wallets, founder allocations, or developer allocations, or to trading venues including centralized and decentralized exchanges. Among centralized platforms, Binance emerged as the largest identified holder across the four protocols, with protocol-specific exposure ranging from about 2% to 15%.
These findings challenge the notion that token-based governance naturally disperses power across a broad base of participants. Instead, the data suggest that a relatively small set of insiders, treasury-controlled entities, and major platforms may hold meaningful influence over protocol outcomes.
Delegation has concentrated voting power further
The ECB paper also examined who actually votes in governance, and the picture was similarly concentrated. In practice, the most powerful voters were often delegates, individuals, or organizations that had accumulated voting power from many smaller token holders. Rather than broadening participation, delegation appears to have reinforced the role of a small number of active actors.
To identify top voters, the researchers used public web searches, Github activity, social media, governance forums, and blockchain analytics tools developed by Crystal Intelligence. Even with those methods, they found that around one-third of the top voters could not be identified at all. That anonymity, or at least opacity, is central to the paper’s regulatory concern.
Among the voters the researchers were able to classify, individuals accounted for about 21%, while Web3 companies represented about 19%. Venture capital firms and university blockchain clubs also appeared in the sample. In Uniswap’s case, Andreessen Horowitz (A16z) was the top voter in both observation periods. As of May 2023, the firm had received delegated voting power from 125 addresses.
The stability of governance concentration across the two snapshots is another important takeaway. The ECB noted that the structure of influence did not change significantly over time. That persistence may signal resilience, but it also suggests that market dynamics alone are unlikely to dilute entrenched governance power.
Most proposals focus on risk settings, not governance reform
The study categorized 248 governance proposals across the four protocols. Proposals tied to risk parameters such as loan-to-value ratios, debt ceilings, stability fees, and emergency shutdown measures represented the largest share at 28%. Asset listing proposals followed at 23%. By contrast, proposals focused on governance structures themselves made up only 1% of the sample.
This distribution is revealing. DeFi governance frameworks are often presented as critical pillars of decentralization, yet the governance systems themselves are rarely the subject of meaningful redesign. Most voting activity remains focused on operational and financial settings rather than on the architecture of power.
ECB questions whether clear accountability exists in DeFi
From a regulatory perspective, the report raises concerns about who can realistically be held responsible inside these ecosystems. The ECB researchers concluded that under current conditions, governance token holders, developers, and centralized exchanges do not provide reliable entry points for supervision or enforcement. Pseudonymous blockchain addresses, combined with opaque delegation structures, make it difficult for regulators to determine who actually exercises control and who should bear legal responsibility.
The paper compares this with traditional corporate governance. Both systems can suffer from low voter turnout and from decisions being shaped by a relatively small group of active participants. But traditional finance operates with proxy voting rules, stewardship codes, and explicit legal duties. DeFi governance, by contrast, lacks comparable safeguards, while key decision-makers often remain hidden from public view.
MiCA’s decentralization exemption may be hard to apply
The study also touches on the European Union’s Markets in Crypto-Assets regulation, or MiCA, which currently exempts services provided in a “fully decentralized” manner. The ECB paper argues that applying that standard in practice may be difficult because none of the sampled protocols came close to qualifying as truly decentralized. In the researchers’ view, most retain meaningful internal control by insiders or affiliated actors, even if they operate through onchain governance mechanisms.
That conclusion could matter for future policy debates in Europe. If major DeFi protocols do not meet a meaningful threshold for decentralization, regulators may have stronger grounds to treat them as governable entities rather than autonomous networks beyond the scope of conventional oversight.
Possible policy paths ahead
Rather than stopping at diagnosis, the paper outlines several possible directions for reform. These include mandatory disclosure of affiliations for major token holders, tailored legal structures for decentralized autonomous organizations, and hybrid models that connect blockchain-based governance with traditional legal accountability. The ECB also points to the Danish Financial Supervisory Authority’s framework as one practical starting point for assessing whether a service is genuinely decentralized.
Overall, the study adds to a growing body of evidence that decentralization in governance may be more limited than protocol branding implies. When token ownership is highly concentrated, voting power is delegated to a small elite, and many influential actors remain unidentified, the promise of decentralized decision-making becomes harder to defend. For regulators, investors, and users alike, the ECB’s message is clear: governance labels alone do not guarantee decentralization, and accountability remains one of DeFi’s most unresolved structural problems.