What Is a Governance Token?

Not all tokens are made for payments. Some give you voting power and influence instead. These are called governance tokens.

In this article, you’ll learn what governance tokens are, how they work, and why they’re a key part of decentralized projects and DAOs.

What is a governance token?

A governance token gives holders the right to vote on decisions related to a blockchain project, protocol, or decentralized organization (DAO).

This includes voting on:

• Protocol upgrades or code changes
• How treasury funds are used
• Adding or removing features
• Partnerships, liquidity incentives, or governance rules

The more tokens you hold, the more voting power you typically have — like shares in a company.

How does governance work?

Most governance systems work through proposals submitted by community members. Token holders can then vote “yes” or “no” during a set period. If the proposal reaches a minimum threshold, it passes and is implemented automatically or by developers.

This model allows decentralized communities to steer the project’s direction — without relying on a central authority.

Examples of governance tokens

• MKR (Maker): Used to vote on changes to the MakerDAO protocol and DAI stablecoin.
• UNI (Uniswap): Lets holders vote on upgrades and fee structures.
• AAVE: Used for governance in the Aave lending protocol.
• Compound (COMP): Governs changes to Compound Finance.

Why do governance tokens matter?

• Decentralization: Governance tokens let users take control — not just developers or insiders.
• Community involvement: Projects with active governance often have more loyal communities.
• Accountability: Open voting keeps decision-making transparent.

Floin Insight

Governance tokens are key to the future of decentralized finance and Web3. At Floin, we believe that informed communities should have a voice. That’s why we support educational resources and tools to help you understand your rights — and use them effectively.