A unique aspect of DeFi, decentralized governance proposals control the behavior of a DeFi protocol and, quite often, are the cause of changes in its liquidity composition in affecting investors. For instance, governance proposals that alter weights in AMM pools or collateralization ratios in lending protocols typically help liquidity flow in or out of the protocol. A more concerning aspect of DeFi governance from the risk perspective is the increasing centralization of the governance structure of many DeFi protocols.
The Five Big Risk Vectors of DeFi
