Governance tokens give holders the ability to influence decisions regarding the core protocol, product or feature roadmap, hiring and staffing, and changes to governance parameters.
Governance primarily includes changing the protocol code, such as increasing the block size or inflation rate. In most cases, users can then vote on these decisions with their tokens (1 token = 1 vote). The launch of a governance token offers the opportunity to effectively involve the community in decision-making processes.
Democratization of the blockchain world
Unlike other tokens, which are primarily used for the transfer of value or access to certain services, governance tokens offer their holders voting rights and influence over the decision-making processes of a decentralized ecosystem.
Governance tokens are often distributed to early contributors, investors or users of a blockchain project at its Initial Coin Offering (ICO) or other token distribution events. The holders of these tokens can actively participate in the governance of the network by casting their vote or delegating their voting rights to others. The goal is to promote a more democratic and decentralized decision-making process where the interests of the token holder community are considered in key decisions about the protocol, upgrades and resource allocation.
