What Is a ‘Governance Token’ and What Utility Does It Provide to Its Holders?
A governance token is a type of cryptocurrency that grants its holders voting rights on the future development and operational decisions of a decentralized protocol, such as a DeFi platform. The utility lies in the holder's ability to propose and vote on changes to the protocol's parameters, fee structures, or smart contracts.
This mechanism facilitates decentralized autonomous organization (DAO) management, allowing the community to steer the project's direction rather than a centralized team.
Glossar
Voting Rights
Governance ⎊ Within decentralized governance models prevalent in cryptocurrency, options trading platforms, and financial derivatives ecosystems, voting rights represent a mechanism for stakeholders to influence protocol parameters, treasury allocation, and strategic direction.
Holders
Ownership ⎊ Holders are individuals or entities possessing a specific cryptocurrency or financial derivative.
Governance Token
Authority ⎊ This specific class of digital asset represents a claim on decision-making power within a decentralized protocol, granting holders the right to propose and vote on changes to system parameters.
Decentralized Autonomous Organization
Governance ⎊ Decentralized Autonomous Organizations represent a novel framework for coordinating collective action, particularly relevant within cryptocurrency ecosystems and increasingly, financial derivatives markets.