A Comprehensive Study of Governance Issues in Decentralized Finance Applications

Wei Ma, Chenguang Zhu, Ye Liu, Xiaofei Xie, and Yi Li

ACM Transactions on Software Engineering and Methodology, 2025

Abstract: Decentralized Finance (DeFi) is a prominent application of smart contracts, representing a novel financial paradigm in contrast to centralized finance. While DeFi applications are rapidly emerging on mainstream blockchain platforms, their quality varies greatly, presenting numerous challenges, particularly in terms of their governance mechanisms. In this paper, we present a comprehensive study of governance issues in DeFi applications. Initially, we collected 3,165 academic papers and numerous corporate reports. After thorough screening, we selected 44 academic papers and 11 corporate reports for detailed analysis. Drawing upon insights from industry reports and academic research articles, we develop a taxonomy to categorize these governance issues. We collect and build a dataset of 4,446 audit reports from 17 Web3 security companies, categorizing their governance issues according to our constructed taxonomy. We conducted a thorough analysis of governance issues and identified vulnerabilities in the governance design and implementation, e.g., voting sybil attack and proposal front-running. Our statistical analysis indicates that a significant portion (35.48%) of governance-related issues is classified as severe. Within these, ownership-related problems constitute the largest share (65.38%). Despite DeFi governance being essential for the long-term success of DeFi projects, our data shows that both auditors and development teams have not fully grasped its significance. Based on audit reports, we also analyzed common vulnerabilities and issues in the governance domain. Our research identifies two primary categories of DeFi governance issues: technology-centric and human-centric. Technology-centric issues can be addressed through updates and iterations, whereas human-centric issues are influenced not only by the development team’s technical skills but also by their understanding of DeFi governance. Data analysis reveals that design and implementation issues are frequently overlooked; although not directly associated with vulnerabilities, these issues can impact the equitable distribution of project benefits. Furthermore, our analysis of 104 projects’ tokenomics configurations, including 15 collected from DeFi platforms, uncovered 27 inconsistent configurations, with only 2 projects exhibiting no issues. This suggests that such issues are relatively common. We therefore advise project teams to ensure consistency between their tokenomics design and the actual code. Our study culminates in providing several key practical implications for various DeFi stakeholders, including developers, users, researchers, and regulators, aiming to deepen the understanding of DeFi governance issues and contribute to the robust growth of DeFi systems.

Cite:

@article{Ma2025ACS,
  author = {Ma, Wei and Zhu, Chenguang and Liu, Ye and Xie, Xiaofei and Li, Yi},
  journal = {ACM Transactions on Software Engineering and Methodology},
  title = {A Comprehensive Study of Governance Issues in Decentralized Finance Applications},
  year = {2025}
}