Governance Token
A token granting voting power or proposal rights in protocol governance, typically used by DAOs and DeFi platforms.
Governance tokens align users with protocol direction by letting holders vote on parameters, upgrades, or treasury use. Voting may be token-weighted or reputation-based.
Holders stake tokens to vote on fee changes; proposals that pass are executed by a timelock controller that updates the protocol contracts.
Risks include low turnout, vote buying, and capture by large holders. Mitigations include quadratic voting, delegation, and participation incentives.
Delegation lets active community members aggregate voting power from many small holders to improve decision quality.
Related Terms
DAO (Decentralized Autonomous Organization)
→A DAO is an on-chain governance structure where rules are encoded in smart contracts and decisions are made collectively by token holders or members.
Token
→Tokens are programmable digital assets residing on a blockchain, often representing a variety of tangible and intangible assets.
Decentralized Exchange
→A decentralized exchange (DEX) is a platform that allows users to trade digital assets directly with each other, without the need for an intermediary, such as a brokerage or bank.
All terms and definitions may update as the Cryptionary improves.
