What Is a Governance Token and How Does It Differ from a Utility Token?

A governance token primarily grants its holders voting rights within a decentralized protocol or DAO. Its main purpose is to allow participation in decision-making processes, such as protocol upgrades or treasury fund allocation.

In contrast, a utility token is designed to be used for a specific purpose within a network, such as paying for services, accessing features, or paying transaction fees. While some tokens can have both governance and utility functions, the key distinction is that governance is about control, while utility is about access and use.