What are governance tokens?

Governance tokens are an incredibly important part of the crypto ecosystem, and are set to become more prominent as things evolve and mature. Here, we explain exactly how they work. Governance /n/ “ The system by which parties are directed and controlled.”

What is Terra's governance token?

For example, the Terra network uses a governance token called luna. Luna is traded on digital exchanges, just like a regular cryptocurrency, but one of its core functions is to enable its holders to participate in votes on the network policy.

What are Defi tokens?

They represent the main utility token of DeFi protocols since they distribute powers and rights to users via tokens. With these tokens, one can create and vote on governance proposals. Community members can spend tokens to directly influence the direction and characteristics of a protocol. It is possible to:

Are governance tokens a nightmare for blockchain democracy?

Investors often fear that at one point, the whale will, through sheer financial power, take over a majority of the tokens and singlehandedly create proposals and reach a selfish decision—a nightmare for blockchain democracy. Governance tokens represent the foundation block of all things decentralized.