Blockchain protocols enforces state transitions deterministically. But governance of the rules themselves is not enforced by any internal democratic process. There’s no institutionalized loss. There are only stalled or abandoned proposals.

I first encountered the concept of "institutional loss." AI explained that it refers to clear mechanisms of cost and consequence when decisions fail - likely from political science or institutional economics theory. Simply put, it's institutional design where wrong actions have costs and right actions have rewards.

Blockchain currently lacks such clear reward-punishment mechanisms. For example, in the Nouns community, Fork is a design that causes massive treasury losses, yet the designers and those who voted yes face no consequences - while those who bid high prices for Nouns with real money get hurt.

When governance reaches deadlock, project founders and major token holders aren't questioned, or even if questioned, they pay no price.​​​​​​​​​​​​​​​​