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Governance token

A token granting votes over a protocol's parameters, treasury or upgrades, whose economic value depends on what the votes control.

Holders vote on proposals: fee levels, token-emissions, treasury spending, contract upgrades. Voting power is usually proportional to tokens held or locked.

Value depends entirely on whether governance controls anything worth controlling. A token voting on a treasury and a revenue switch has a claim; a token voting on cosmetic parameters has a claim on nothing, however active the forum is.

Watch concentration. If insiders hold the majority, the vote is consultative at best. Also check whether a timelock and governance-quorum protect against a governance attack, where someone borrows enough tokens to pass a proposal that drains the treasury.

Related: dao, governance-proposal, governance-quorum, timelock

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