What is Governance Coin (What is Governance)?

What is a governance coin? Governance tokens represent the voting rights of users and are known as “Decentralized Autonomous Organizations” (DAOs). Compared to other types of cryptocurrencies, governance tokens allow participants to propose their own ideas through smart contracts. Bitcoin, Ethereum, EOS, and other projects use governance functions for management. Projects like Polkadot or Cosmos require governance to determine the future direction of their ecosystem. In traditional finance, anyone can create a new governance system and gain returns by controlling their funds. However, most blockchain systems currently do not have this capability—networks like Solana or Tezos do not have governance rights or delegate to third-party entities. While this makes some governance mechanisms easier to understand, they also have many different characteristics: permissionless, fully democratic, without the need for audits, and highly scalable. (Note: One of the favorite views in the crypto community is that every community has its own rules and code.)

What is governance?

Governance is one of the most common concepts in blockchain technology, allowing any organization to make decisions within the community without relying on third parties. Compared to traditional democratic structures, this type of governance can be seen as a more efficient way to achieve decentralized consensus and power decentralization. This means that every participant can propose, change, or directly influence the decision-making of others, whether it is from their own proposals or their vested interests.

However, if we assume that many members in a network want to have their voting system like in Bitcoin, they will take control and perform these operations themselves—meaning that there must be a common agreement when people want to use smart contracts.

Therefore, governance is a good choice because they can be composed of multiple roles to ensure the integrity and transparency of the entire system. What is governance? In the crypto world, governance mainly includes the following: voting mechanisms, management processes, and protocol-level governance. Among them, governance refers to a method of using certain assets as collateral to obtain support for specific tokens or simply issuing new currencies to make certain tokens possible.

Usually, the term “election” is defined by a group of programmers, but most people know this as “legal code.” So, if you hold some tokens and delegate them to someone or a group you trust, you can grant that token the right on your behalf if it can trust it. For example, your team will ask your shareholders to make modifications to their company shares; then, if no one is willing to do so, the committee may refuse to approve your board members.

These reasons lead to many complex problems and risks, such as lack of clarity, challenges in financial stability, and the ability to act collectively. It is almost impossible for companies trying to achieve this goal using public policy. However, if such a system is established, it can indeed happen. “What is governance? Governance is an incentive measure that allows communities to coordinate cooperation between different projects. How does it work? First, it has three core elements: “fundamental principles” and “implementation rules.” The second layer refers to a task: identifying entities that fulfill obligations and taking appropriate steps to address issues when necessary; the third layer is the governance process, which aims to provide new solutions to improve the current operating model. The main advantage of governance is that it promotes community development. The purpose of governance is to improve efficiency and prevent corrupt behavior. In traditional economic systems, all parties have equal opportunities to participate and can compete between different countries. (Note: US House Speaker Joe Biden once said, “Over time, we will see more institutions adopting such tools.”)