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What is a governance token?
A governance token is a token that gives its holders votes on how a protocol or DAO is run, such as changes to its rules or how its treasury is spent. Usually, the more tokens someone holds, the more voting weight they have.
What it means for you
These tokens can usually be bought on exchanges, so a few large holders can outvote everyone else. Once a vote passes, the result is often carried out automatically by code, so a change you voted against can still apply to the protocol your tokens depend on.
How it works
Holding the token is what grants a vote, and because the tokens trade on exchanges, anyone can buy voting power. A proposal goes to a vote weighted by tokens held, and if it meets its quorum and majority, a smart contract can carry out the result automatically, with no intermediary. Many systems let holders delegate their votes to another address. Some organizations avoid bought influence with reputation-based membership instead, where voting weight is earned through participation and cannot be bought, transferred or delegated.
Source: ethereum.org: Decentralized autonomous organizations (DAOs) · checked 4 October 2026
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