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What Is the Function of a ‘Governance Token’ in a DeFi Protocol?

Grants holders voting rights on protocol changes (fees, ratios, upgrades), aligning user incentives with the protocol's decentralized success.
Greeks.Live04.11.25

What Is the Function of a ‘Governance Token’ in a DeFi Protocol?

A governance token grants its holders the right to vote on proposals that affect the future of the DeFi protocol, such as adjusting stability fees, setting collateralization ratios, or upgrading the smart contracts. It aligns the incentives of the users with the long-term success of the protocol, giving them a stake in its decentralized decision-making process.

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