ECB Report: High Token Concentration Threatens DeFi Governance

A new ECB working paper reveals that the top 100 holders control over 80% of governance tokens in major DeFi protocols like Aave and Uniswap.

A European Central Bank working paper reveals that a small number of participants exert disproportionate influence over key decisions, complicating the determination of liability within the MiCA regulatory framework.

The analysis covers protocols such as Aave, MakerDAO, Uniswap, and Ampleforth, finding that the top 100 holders control over 80% of the governance tokens in each of them.

Concentrated Power Undermines Decentralization

Although governance tokens are distributed across tens of thousands of addresses, real power is concentrated within a limited circle of participants. Data reveals that a significant portion of coins can be linked to the protocols themselves or to centralized exchanges, including Binance, which emerges as the largest identified central holder.

Additionally, the voting process reinforces this concentration. Delegated voting means a small number of “delegates” control a significant share of actual power. In some cases, such as Ampleforth, just 20 participants hold nearly all the delegated voting power, while concentration remains high in MakerDAO and Uniswap as well.

This structure calls into question the fundamental assumption that decentralized autonomous organizations (DAOs) function without central control. In practice, the model increasingly resembles traditional corporate structures, but without the same level of transparency and accountability.

Regulatory Dilemma for MiCA

The ECB’s findings come at a pivotal moment as the European MiCA regulatory framework excludes “fully decentralized” services from its scope. The problem, according to the authors, is that in practice, it is extremely difficult to determine whether a given protocol meets this condition.

Identifying the actual controlling entities is even more complex. Public data does not allow for a clear distinction between tokens held by founders, developers, or protocol reserves, nor does it show whether exchanges vote on their own behalf or for their clients.

This creates a so-called “regulatory vacuum” where a clear “anchor point”—an entity that can be held responsible—is missing. According to the analysis, this anchor likely differs across protocols and may require access to non-public information.

DeFi Between Innovation and Systemic Risk

The ECB’s conclusions align with broader warnings from international organizations, including the Financial Stability Board, that DeFi does not eliminate intermediaries but rather creates new forms of concentration.

This raises questions about the sustainability of the current model, especially in the context of crypto market institutionalization. While DeFi continues to position itself as an alternative to traditional finance, it is effectively beginning to reproduce some of the same risks—but with less clear control mechanisms.

Ultimately, regulatory pressure is likely to intensify, with the focus shifting from formal decentralization to actual power concentration—a factor that could prove decisive for the future of DeFi in Europe.