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).
“A MakerDAO governance proposal to add a new collateral type might require a minimum quorum of 80,000 MKR in votes and a simple majority to pass, with the change automatically executed on-chain.”
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.
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.
Smart Contract
Self-executing programs stored on a blockchain that automatically enforce the terms of an agreement when predetermined conditions are met. Smart contracts enable trustless transactions without intermediaries because the code, once deployed, executes exactly as written and cannot be altered (unless specifically designed to be upgradeable). They form the foundation of DeFi, NFTs, DAOs, and virtually all dApps.
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.