Abstract

Purpose – With this systematic review, we aim to examine the role of governance in Decentralized Finance and Blockchain. We analyze the main governance models (delegated governance, token-based voting, multi-tier structures, etc.), the allocation of power, the voter engagement and turnout, and the already established literature about DeFi governance. Even though DeFi and blockchain governance have been extensively discussed, little is known about how governance frameworks actually affect accountability, participation, and power concentration. This review aims to fill that gap.

Design/methodology/approach – A systematic literature review was conducted, analyzing peer-reviewed articles. The review focused on extracting actionable insights and recommendations regarding DeFi’s impact on financial inclusion. Finding trends, advantages, drawbacks, and practical insights among the many governance systems in the DeFi ecosystem was the main goal of the review. The implications of DeFi for financial inclusion and democratized access to financial tools were given particular consideration.

Findings – DeFi protocols continue to have inadequate voter turnout, frequently as a result of governance weariness, technological obstacles, and the concentration of voting power among major token holders. However, new developments like governance incentives and quadratic voting hold promise for enhancing equity and participation. Despite the paucity of empirical research, the literature also emphasizes DeFi's potential to improve financial inclusion.

Research limitations/implications – The existing literature and data on DeFi governance place some limitations on the study. The expeditiously evolving essence of Decentralized Finance, the limited empirical data and the varying terminology in studies, may affect the relevancy of the findings.

Originality/value – This research uniquely contributes to the literature by examining the intersection of DeFi and financial inclusion, providing innovative approaches to overcoming financial exclusion. By placing DeFi governance in the larger framework of financial inclusion, this review offers a fresh perspective. It fills in the gaps in the literature, spots new trends, and offers useful advice on how governance design can increase user empowerment and fair access to decentralized financial services.

JEL Classification: G11, G19, G29