on-chain governance

Syllable breakdown

Dictionary meaning

a system of decision-making for blockchain protocols in which proposed changes to the network's rules, parameters, or software are voted on directly by token holders through transactions recorded on the blockchain itself, with approved changes automatically implemented by the protocol code; on-chain governance contrasts with off-chain governance, in which decisions are made through informal community discussion, developer consensus, and social coordination before being implemented by core development teams; on-chain governance is used by protocols including Tezos, Compound, Uniswap, and Maker DAO to update interest rate parameters, add new asset types, adjust protocol fees, and upgrade smart contract code; critics note that on-chain governance tends to concentrate power in the hands of large token holders and can enable hostile governance attacks by well-funded adversaries