Governance Token
A token that grants holders voting rights in a decentralized protocol's governance process. Governance tokens allow the community to propose and vote on changes to protocol parameters, treasury allocation, fee structures, upgrades, and strategic direction. Voting power is typically proportional to token holdings, though some systems implement quadratic voting or delegation to reduce plutocratic influence.
“UNI holders can vote on Uniswap protocol upgrades, fee switches, and how to allocate the $3+ billion protocol treasury. Some DAOs also allow token holders to delegate their votes to active community members.”
DAO (Decentralized Autonomous Organization)
An organization governed by smart contracts and token-holder votes rather than traditional management hierarchies. DAOs enable collective decision-making on protocol upgrades, treasury allocation, and strategic direction without centralized leadership. Proposals are submitted on-chain and executed automatically if they pass a vote.
On-Chain Voting
A governance mechanism where token holders cast votes directly on the blockchain to approve or reject proposals affecting a protocol. On-chain votes are transparent, tamper-proof, and can trigger automatic execution of approved changes via smart contracts. Voting models vary: token-weighted (1 token = 1 vote), quadratic (diminishing returns for large holders), conviction voting (vote weight increases with time committed), and delegated voting (assigning your votes to a representative).
Token
A digital asset created on an existing blockchain rather than its own native chain. Tokens can represent a wide range of assets and utilities — from currency and governance rights to real-world assets and collectibles. Unlike coins (BTC, ETH) which are native to their blockchain, tokens are created using smart contracts on platforms like Ethereum (ERC-20, ERC-721).
Decentralization
The distribution of control, authority, and data processing across a network of participants rather than concentrating it in a single entity. In blockchain, decentralization means no single party controls the network, making it censorship-resistant and reducing single points of failure.