DAO governance tokens are a kind of cryptocurrency that allow token holders to govern blockchain-based projects. The primary purpose is to decentralize the decision-making and to give holders a say in how the project is run.
In general, it is like a governing authority that regulates the working of an organization; here the power is distributed among token holders individually.
Governance tokens are the core method to realize decentralized governance in DAO, DeFi, and decentralized application (DApp) projects. These are awarded to the users who have made some significant contributions to the community. In most cases, one token equals one vote. Token holders, then, vote on crucial matters to ensure projects’ effective proceeding. Voting is by utilizing smart contracts so that the results can be tabulated and enacted automatically. The governance tokens are noteworthy to use as these can improve organizational efficiency.
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