The crypto money developed to ensure that users take an active role and have a say in important developments and decisions that will shape the future of blockchain technology is called Governance Token or Governance Token. The most important feature of these tokens, as we mentioned in the definition, is that the users who have tokens have the right to have a say about the product to be developed within the scope of the project’s roadmap or the new features to be added to the system. In addition, Governance Token holders can make suggestions for new features to be added to these processes and protocols.
This token, which gives both voting rights and suggestions to its holders, has a democratic process in its own chain structure.
The Idea That “Every Protocol Is Flawed”
Software in all areas of our lives can serve different tasks, but all this software must be updated over time according to technological and up-to-date data, and also its flaws must be closed. Early intervention or unforeseen vulnerabilities can lead to troubling situations. There may be situations where code structure needs to be refreshed to improve it. In all these cases, while the decisions of a single centrality are accepted in traditionalist structures, they take place in a democratic structure that is scattered and everyone has the right to speak.
“Code is Law”
Governance token holders receive voting rights depending on the amount of tokens they have in the updates to be made. The votes collected in this way are automatically applied electronically via smart contracts.
These automated systems, which allow users to control these changes, are called ‘Decentralized Autonomous Organization (DAO)’. All transactions made with this method work automatically and systematically through Smart Contracts. Maker (MKR) can be cited as one of the well-functioning examples of the governance tokens we are talking about. As different examples of governance status, there are cases where decisions are taken through the chain structure known as ‘Blockchain Governance’. For example, in the
Bitcoin
chain structure, management structures were formed away from their owners in matters such as increasing the size of the blocks or processing the SegWit idea.
In large structures such as Bitcoin and Ethereum, such as “Bitcoin Basis” and “Ethereum Basis”, chains that do not have a direct relationship with BTC Or ETH Holders have been developed. The QTUM governance token came out later and sought to establish a formal relationship between management and token holders. As a common form of governance, we see token-based asset management practices coming to the fore. In examples such as DASH and Decred, token holders; It provides incentives with premiums by providing funds to token holders who perform various services related to the functioning of the system such as social relations, social assistance, legal representation from R&D studies.