What is the purpose of the governance token in DAO?

By owning these tokens, individuals can actively participate in the decision-making process of protocols. This ensures that the community has a say in the direction and development of the project, fostering a more democratic and inclusive environment.

In many instances, governance tokens empower holders to vote on critical issues such as protocol upgrades, feature implementations, and even changes to the tokenomics of the project. This direct involvement helps align the interests of the community with the long-term success of the protocol.

Furthermore, some governance tokens extend their voting rights to encompass the governance of the tokens themselves. This means that holders can vote on proposals that affect the supply, distribution, or even the burning of tokens, offering a level of control that is unprecedented in traditional financial systems.

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Governance tokens often enter circulation in various ways but they share a common trait: providing holders with voting rights. This mechanism is crucial in decentralized ecosystems where traditional governance structures are absent.