Like any other platform or organization, block chain technology must take several decisions. In the centralized system, the board of directors, chairperson, and CEOs are responsible for making these decisions, but in the block chain, no single person manages the coin. Due to this, the global communities are working their way to provide a decision-making process that most users agree with. The vast community’s favorite answer to that question is in a democracy where everyone can vote for their options.
KuCoin also works on different governance coins, including Origin Dollar Governance and many other coins. The best platform offers the latest USDC Price, Crypto Price, ADA/BTC exchange options, and many other features so you can earn in multiple ways without unnecessary risk. In this article, we shall discuss in detail the governance token. So let’s begin. If you are new to Crypto tokens, you might want to know what is a crypto token and are they taxable or not
What Is Governance Token?
Unlike conventional companies, where the board of directors holds all the rights to the company’s decisions, that are usually not more than 10 people. They hold enormous power for the company’s future. Still, in decentralized autonomous organizations and decentralized Finance, the community is responsible for taking these decisions, and they have to vote when there is a need to take serious decisions. The voting is based on the governance that gives the holder the right to vote on issues.
How Do Governance Tokens Work?
Governance tokens are the core on which the decentralized organizations are based. The purpose of using the governance token is to eliminate the possibility of making the policies of decentralized platforms aimed toward the benefits of a single community and completely neglecting the other community.
The users can get the governance token for their services and activities on the platform and their loyalty for a definite time. With these tokens, the users can participate and vote for their favored policies when needed. The voting procedure is based on a smart contract that automatically applies the winning policies.
The Benefits Of Governance Token
Using the governance token for the policy and decision making process has many benefits. This feature eliminates the risk that a small and powerful group can use these decisions to their advantage. There is also the advantage of close collaboration among the users for building decentralized platforms from which everyone can take advantage.
The Risk Of Governance Token
There are also several risks associated with Governance Token. The platforms award the token in exchange for their activities and time on the platform. There is a possibility that some users might have more Governance Tokens than others, which can negatively impact the decision making process. It is reduced significantly several times by one person one vote policy, but there is also the possibility of influencing voting options by bigger firms.
KuCoin offers its users Governance Tokens to participate in the voting session. There are various advantages and limitations of Governance Token, but in the long run, it is probably the best way to run leaderless platforms.