Governance Token

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governance layer

Governance Token is a type of digital asset that grants holders the right to participate in decision-making processes within a decentralized protocol, DeFi platform, or DAO. By holding governance tokens, users can propose changes, vote on upgrades, adjust protocol parameters, and help steer the direction of the project. These tokens are essential for community-led management and reducing centralized control.

Use Case: A governance token holder can vote on adjusting yield rates in a DeFi protocol or participate in protocol upgrades, helping shape the future of decentralized finance.

Key Concepts:

DAO (Decentralized Autonomous Organization) — An organization managed by smart contracts and token holders rather than a centralized team.
Decentralization — The process of distributing power and control away from a single authority.
Protocol — The set of rules and smart contracts that govern how a blockchain or DeFi system operates.
Voting Power — The influence a token holder has when participating in governance decisions.

Governance Token	Utility Token
Enables voting, protocol changes, and project governance.	Used for accessing services, paying fees, or other utility functions.
Vote on proposals, suggest upgrades, control treasury spending.	Use dApps, claim rewards, pay for network usage.
UNI, AAVE, MKR, COMP	ETH (gas), BAT, BNB (fee discounts)

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