00:00Welcome back to Decentralized News. Today's video looks at governance tokens.
00:04So a governance token is pretty much a token that is there to distribute power within a blockchain project to token holders
00:13and sort of give them the ability to influence management decisions.
00:18Give us a like and a subscribe if you'd like to learn more about governance tokens
00:23and have these type of explainer videos continue to be published on this channel.
00:28I'd really appreciate it. So what do we need to know?
00:31Essentially, governance tokens, like I said, do allow holders to actually vote on decisions in decentralized autonomous organizations.
00:38If you want to know more about DAOs, go to Decentralized.News.
00:41Of course, our main site, we've done actually a listicle on the top five decentralized autonomous organization tokens.
00:49The DAOs also use governance tokens to distribute power among members to influence decisions
00:56rather than sort of concentrating it in a top down like manner as with almost a conventional legacy establishment.
01:04So most of these institutions have a sort of a hierarchical type of setup where you've got a board of directors
01:12or other sort of leadership comprised of either a few or several people sitting at the top of that organization
01:19and making these very important decisions about the future of those organizations.
01:23So with DeFi and other blockchain-based projects, they are trying to sort of take a different approach
01:29where, you know, they're not conferring all the power in the hands of those centralized parties.
01:33Rather, they are sort of distributing it to token holders who get involved in this DAO or these distributed autonomous organizations.
01:43So the process of sort of moving forward with these types of voting systems is called on-chain governance.
01:52And so, you know, of course, you know, you still have the leaders of those projects setting the parameters
01:56in terms of eligibility of change and how the approval processes work, etc.
02:01But of course, you know, the governance token itself is very important to this whole process.
02:05As with some, let's say, ERC-20 tokens, you can say vote on those governance tokens to effectively sort of vote on different proposals,
02:18whether that means protocol changes or UI changes or just cost of transaction fees on a protocol, for example.
02:28So those votable parameters themselves do vary from project to project, of course.
02:33And this is why these governance tokens are very important.
02:37People want to have that power.
02:38And of course, you can also use these for staking, lending, borrowing, yield farming,
02:42and for getting cash from fees as cash flow from fees just through holding them.
02:48So, you know, let's look at one or two of these governance tokens.
02:52And one is Maker, which has the token ticker MKR, which is pretty much a DAO that uses a use to pretty much lend a variety of different assets
03:04and borrow a DAI stable coin.
03:07And token holders can also accrue fees on loans on the platform and vote on different proposals or collateral types for loans.
03:15The Maker token itself has also seen some pretty significant growth.
03:19The last bull run, Comp, is another one.
03:21I personally hold Comp myself as a DeFi protocol that allows borrowing and lending for a variety of cryptocurrencies.
03:27Comp is the governance token, which can also be liquidity mined by holders.
03:33And holders can also vote on collateral types for loans and receive interest fees on holding outstanding loans as well.
03:42So, Tectonic is another one.
03:43Tonic is the token ticker.
03:45It's supposedly a decentralized lending and borrowing platform, allowing users to participate in either the liquidity side or the borrowing side.
03:54So, while starting out as a centralized entity, they are sort of putting that decentralized autonomous organization type structure on their roadmap.
04:03And token holders are supposed to be able to vote on interest rates, collateralization ratios, and token allocations, etc.
04:10So, it is a governance token, which is another example of these types of tokens.
04:18So, what should you be aware of when you are looking at governance tokens?
04:22So, make sure you also check the token supply, the distribution, the vesting schedules, and things like that.
04:27Do proper due diligence on any of these projects that do claim to be DAOs and just to make sure you do not lose your money on these.
04:36This is, yeah, pretty much, I think, something that we will see evolve into probably the future of how organizations will run and how crowdsourcing, crowdfunding,
04:49and just pretty much putting more efficiency into markets through, you know, deploying of capital and also rewarding early adopters to certain projects, etc.
05:02And I think this is something we will continue to see more and more.
05:05I just wanted to do this quick explainer video since somebody did ask me to do a quick explainer on what governance tokens are and to just give some examples of some of those.
05:14So, make sure you check out the links in the description to my book, Stokenized Trillions, Blockchain Applied.
05:18If you're also interested in learning more about blockchain and distributed ledgers and all of that good stuff.
05:24And don't forget to check out our main site, free resources and tools there, best cryptocurrency exchange reviews, DeFi platform reviews, and also the NFT marketplaces and all that good stuff.
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