Governance Tokens and DAOs in DeFi

DeFi protocols began as centralized entities where developers and founders made all decisions. This created a single point of failure and contradicted the core promise of decentralization. Governance tokens and Decentralized Autonomous Organizations (DAOs) emerged as a solution, enabling communities to collectively steer protocol direction, allocate resources, and evolve systems without relying on a central authority. Understanding governance mechanisms is essential for anyone participating in DeFi ecosystems.

What Are Governance Tokens?

Governance tokens are cryptocurrencies that grant holders voting rights within a protocol.