The reason a cap that a vote can raise is not a cap

A protocol launched with a “hard cap” of one billion tokens. Two years later, a governance vote raised the cap to 1.5 billion. The vote passed with seventy-three percent support — largely from early holders whose staking rewards would be funded by the new issuance. The cap was real until the people it protected decided to remove it.

What everyone sees

Buyers at launch see “1 billion max supply” and model their investment accordingly. They compare it to Bitcoin’s immutable cap and assume equivalent permanence. The governance footnote — “cap modifiable by vote” — reads as a theoretical possibility, not a practical likelihood. When the vote arrives, the cap’s removal feels like a betrayal, but it was always within the rules.

What is actually happening

Barbereau, Smethurst, Papez, Liebenau and Sedlmeir showed that governance-modifiable parameters are not constraints — they are policies that reflect the current majority’s preferences. When the majority benefits from inflation (through staking or treasury funding), the incentive to raise the cap is structural. The cap is not removed despite governance — it is removed because of governance. The mechanism designed to protect holders becomes the mechanism that dilutes them.

Why it stays hidden

The hidden mechanism is incentive-aligned cap removal. The holders most likely to vote are those with the largest stakes — typically early insiders and large stakers whose rewards depend on continued issuance. The cap is structurally vulnerable to the very group that benefits from lifting it. The vote is not a check on power; it is an exercise of it.