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Crypto Terms:  Letter G

What is Governance Token?

Meaning:
Governance Token - a token that can be used to gain the decision-making rights in the voting processes of blockchain projects.
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Let's find out Governance Token meaning, definition in crypto, what is Governance Token, and all other detailed facts.

Governance tokens provide the token holders with the decision-making power which allows them to make decisions on new feature proposals and shape the governance system itself.

In many instances, smart contracts automatically apply the changes suggested, evaluated, and voted using governance tokens on the on-chain governance processes. In other instances, the project's maintenance team is tasked with implementing the changes or recruiting someone to do so.

Supporters of governance token-based systems argue that they provide user control, which is consistent with the original cryptocurrency objectives of decentralization and democratization. The organizations that give users decision-making power are usually called decentralized autonomous organizations (DAOs).

Maker (MKR) is a well-known example of a governance token. The holders of this token can vote on decisions relating to the decentralized finance (DeFi) protocol on which the decentralized stablecoin DAI runs.