@flings
Governance tokens allow DeFi users to participate in the decision-making process of a protocol. Token holders can vote on key issues like protocol upgrades, fee structures, or changes in governance policies. These tokens are often distributed to users who have contributed to the platform (e.g., liquidity providers). By decentralizing control, governance tokens give the community more influence over the project’s direction. However, the risk is that a small group of token holders with large stakes can dominate decisions, leading to centralization within a supposedly decentralized platform.
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