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Governance Token

A token that grants holders the right to vote on proposals and influence the direction of a decentralized protocol or DAO.

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Overview

Governance tokens are the backbone of decentralized governance. They allow projects to distribute decision-making power to their community members rather than keeping it centralized within a core team.

How it Works

  • Voting Power: Typically, one token equals one vote.
  • Proposals: Holders can submit or vote on changes to the protocol, such as fee structures, treasury allocations, or technical upgrades.
  • DAOs: Governance tokens are essential for the operation of Decentralized Autonomous Organizations.

Examples

UNI (Uniswap), COMP (Compound), and MKR (MakerDAO) are prominent examples of governance tokens.

Related Terms

Token