Blockchain technology in today’s times has opened doors to innovative opportunities for businesses and customers as well. Whether it is providing ownership through NFTs, digital scarcity, or governance tokens, the DAO industry has taken the world by storm while portraying innovation across services, platforms, and products. During this innovation, there are numerous challenges in terms of governance, decision-making, and coordination. This is where governance tokens prove their true potential.

What are governance tokens?
Governance tokens simply portray the ownership in a decentralized protocol that offers a set of rights to token holds which ultimately helps in directing the protocol in numerous terms such as how to spend a particular budget, new features to be built, integrations, and partnerships to be considered, and so on.

How do governance tokens work?
In traditional business models, the power is held centrally and every critical or regular decision is taken either by the board of directors, a group of C-suite people, or other superior authorities. While in the case of DAO governance tokens, the strategic decision-making gets distributed in the hands of token holders instead of power being practiced by a central authority.
The decisions under DAO are taken by a formally defined governance process that comprises community votes and proposals. DAO governance tokens have unique traits- immutable ownership and transparent distribution which helps in flawless and distributed decision-making as never before.

Whenever a DAO proposal is sent to a vote, the token holders get the chance of placing their own vote on the chain. Here, the weight carried by a vote is proportionate to the total number of tokens held.

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