Samuel William R_ Sanchez

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What is a governance token?

A governance token grants holders the right to vote on decisions within a blockchain project or decentralized organization (DAO). These decisions can include protocol upgrades, fee structures, or treasury management. Examples include UNI (Uniswap) and AAVE. Governance tokens promote decentralization by giving communities a say in project development. However, voting power is often proportional to token holdings, which can lead to centralization if a few entities hold large amounts. While governance tokens add utility beyond speculation, their value depends on the project’s success and the strength of its ecosystem. They are an important aspect of decentralized finance governance.