With the mass adoption of blockchain technology, a new segment in the decentralized finance (DeFi) ecosystem has become increasingly prevalent and relevant. This area focuses on the implementation of governance of tokens. Numerous governance tokens have been utilized in projects that have become key participants in the DeFi market in the past years. As reported by CryptoSlate, the market capitalization for governance tokens has reached more than 21.37 billion in 2021.
Governance tokens are fungible units that reflect voting power in a blockchain-based project. They’ve recently been primarily integrated into DeFi projects since, to stay decentralized, they need to share rights and powers with users. In other words, governance tokens are established by developers that enable token holders to influence the development of a protocol. Stakeholders can influence project decisions in various ways, including proposing or voting on new feature concepts and changing the governance structure. According to Jensen (2020), governance tokens aim to find a balance between the relative decentralization of voting power among a wide range of active and passive stakeholders while also motivating application usage and securing finance for the core team.
There are several governance tokens, each with a specific function to play in the DeFi ecosystem. One notable example of a governance token is Maker (MKR). This token enables holders to vote on issues relating to the decentralized finance (DeFi) system, which is used to power the decentralized stablecoin DAI. Other governance tokens include Aave, Maker, Dash, Compound, 1inch, and Curve DAO tokens.
Guided by its vision to create a strong foundation for the community by giving them incentives in exchange for their support of the AMM model, CoinSwap Space has updated its on-chain voting mechanisms that will allow the CSS holders to help shape the protocol’s future, allowing greater collaboration opportunities, more involved community, and efficient project development.