Governance Token
A token that gives holders voting rights on protocol decisions like fee changes, upgrades, and treasury spending.
Explained Simply
Governance tokens give holders the ability to vote on proposals that shape a protocol's future. Uniswap (UNI), Aave (AAVE), and Maker (MKR) are governance tokens. Decisions might include changing fee structures, adding new assets, allocating treasury funds, or upgrading smart contracts. Governance tokens are central to the idea of decentralized organizations (DAOs). Critics argue that governance is often dominated by a few large holders (whales), making it less democratic than promised.
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