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.
Glossar
Utility Token
Network Access ⎊ Utility Token represents a digital asset designed primarily to grant holders access to a specific product or service within a decentralized network, rather than representing a claim on future profits or ownership equity.
Governance Token
Asset ⎊ A Governance Token grants its holders the right to propose and vote on changes to a decentralized protocol's operational parameters, often including modifications to risk models or fee structures.
Tokenomics Design
Framework ⎊ The term "Tokenomics Design" encapsulates the strategic architecture governing a cryptocurrency or digital asset's economic incentives, supply, and distribution.
Protocol Upgrades
Framework ⎊ Protocol upgrades, within cryptocurrency, options, and derivatives, represent structured modifications to underlying system rules or operational procedures.