DeFi 101Aug 31

Governance tokens explained

DeFi Decision Making


· DeFi platform developers create governance tokens

· Token holders influence decision-making processes n DeFi projects

Governance tokens in DeFi are tokens created by platform developers that allow holders to have a say in shaping the future of protocol. As a governance token holder, you can influence decision-making processes in different DeFi projects, including proposing and changing the governance system.

DeFi governance tokens work the same way as regular ERC20 tokens. The main difference is that the issuing projects give token holders decision-making power in key protocol parameters.

As a token holder, you can participate in decision-making in different capacities, including determining trade fees for decentralized exchanges, setting asset risk parameters in money markets, assets listing, and protocol inflation schedule.

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