Glossary
Governance Token
A token that confers voting rights over a protocol's parameters, treasury, and upgrades — usually proportional to balance, sometimes via lockups.
Most DeFi protocols issue a governance token — UNI, AAVE, COMP, MKR — so that the community can vote on fee schedules, supported assets, treasury spending, and contract upgrades. Voting weight is proportional to token balance, sometimes mediated by lockups ("ve" models) to favor long-term holders.
The trade-off is plutocracy: large holders dominate, and acquiring enough tokens to swing a vote (a governance attack) is a real recurring risk that protocols mitigate via quorums, timelocks, and veto multisigs.