What are governance tokens?
Governance tokens give holders the right to vote on issues that govern the development and operations of a blockchain project. It’s a method for projects to distribute the decision-making power to their communities. This decentralized governance model helps align the interests of the token holders with that of the project.
How do governance tokens work?
Governance tokens are the core method to realize decentralized governance in DAO, DeFi, decentralised apps (DApp) projects. They are often awarded to active users for their loyalty and contributions to the community. In turn, token holders vote on major issues to ensure the projects’ robust development. Typically, voting takes place via smart contracts, in which case the results are automatically implemented.
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