What Is the Risk of “Governance Capture” and How Does It Affect Value?

Governance capture is the risk that a small group of large token holders (whales) can acquire enough voting power to control the protocol's decision-making process for their own benefit, potentially to the detriment of smaller holders and the protocol's long-term health. This risk decreases the intrinsic value for minority holders as their influence is diluted, and it increases the risk premium in the DCF, reflecting the potential for adverse economic changes.