Governance tokens represent voting power on a crypto or blockchain project. Governance tokens are widely used by decentralized finance protocols that need to distribute voting powers to users in a democratic fashion to remain decentralized. Those that hold governance tokens can influence decisions concerning the project, with votes often weighted by the number of governance tokens held by the user.
Some examples of the decision-making powers that governance token holders might have include:
- Changes to the core protocol
- Changes to the project roadmap or new products and features
- Decisions relating to investment, grants, or resource allocation
- Changing fee distribution structures
- The UNI token for Uniswap is an example of a governance token.