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What are governance tokens, and how do they work?

What are governance tokens, and how do they work?

Governance tokens are a type of cryptocurrency that allow tokenholders to vote on the direction of a blockchain project. The primary purpose of governance tokens is to decentralize decision-making and to give holders a say in how the project is run.

Governance tokenholders are usually more invested in the project’s success as they stand to gain or lose more, depending on the outcome. Community members can use tokens to influence the direction and features of a blockchain protocol directly. As such, it is possible to implement changes related to the user interface, vote on fees and reward distribution, or even modify the underlying code of a project.


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