Governance Token

How it works

The DAO issues a token. Holding it gives a member the right to propose, vote, or both. Members get the token by buying it, earning it, or receiving it in a distribution. Voting power is usually one vote per token, so the number of tokens sets the weight of each voice. The token can also give access to the treasury, to gated channels, or to revenue. Governance begins the moment a person holds it.

Use it when

• You need one clear signal of who is inside the system and who is not.
• You want voting weight to follow a stake that people can buy, earn, or lose.
• You want membership to move on chain without a central registry.

Watch out for

• Whoever buys the most tokens buys the most votes, which invites capture by large holders.
• Tokens that trade freely turn governance into a market for votes.

Example

MakerDAO. MakerDAO used the MKR token from 2017 as the entry ticket to vote on the parameters of the Dai stablecoin system.

Related

• Exit Rage Quit
• 5 ♠ Delegation
• 8 ♣ Token Gate