Decentralization is the buzzword for the modern technology landscape. After blockchain arrived in mainstream discussions in the world of technology, decentralization has been one of the top priorities of developers and businesses interested in the potential of blockchain. Interestingly, the scope of decentralization is no longer limited to blockchain-based solutions and decentralized apps. The growing popularity of top governance tokens has called for discussions regarding Decentralized Autonomous Organizations DAOs.
Imagine complete organizations being developed as a decentralized network of organization members, which allocates the relevant weightage in form of resources with each node. At the same time, DAOs ensure decentralization by allowing equal voting rights to every member. What is the role of governance tokens in the future? The following post helps you find the answer with an outline of the most popular governance token examples.
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Origins of Governance Tokens
Before diving into the details of the best governance tokens available now, it is important to identify how they came into existence. The trends in crypto and trends in blockchain open the stage for many new innovative advancements with promising opportunities for future developments. New trends in the domain of DeFi have the capability to point out how blockchain delivers massive potential for the world of DeFi.
The origins of governance tokens come from Decentralized Autonomous Organizations or DAOs, which are basically a group of people following specific rules for achieving shared goals. The DAOs do not have a centralized governing authority, and any single person does not control the complete organization or exercise ownership.
The notable entries in a governance tokens list would show you how they have been driving many notable DAOs and DeFi projects. DAOs have smart contracts which help in executing certain actions upon reaching particular conditions. They have the traits of offering trustless environments to execute transactions or share information. At the same time, DAOs can create the foundations of organizations without any hierarchical arrangement. Members of the DAO can exercise equal control over the organization through the governance tokens. The uses of governance token examples should also focus on how they offer the system of voting rights in DAOs. The basics of governance tokens showcase their significance and why you should be reading about them.
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Most Popular Governance Tokens in 2022
Governance tokens are one of the crucial components in the newly emerging decentralized ecosystem. The “decentralized ecosystem” refers to anything which has the elements of decentralization, such as NFTs, DeFi, and the metaverse. Governance in these decentralized projects has been taking the first priority, particularly for establishing one of the core tenets of blockchain.
With the help of governance tokens, DAOs could ensure that the users are in control. As of now, governance tokens have been primarily associated with DAOs of DeFi protocols. However, you can also come across metaverse DAOs, which have made a substantial impact in recent times. Here is an outline of the most popular governance tokens you must know about in 2022.
1. Curve DAO
One of the first examples in a crypto governance tokens list would refer to the CRV token of Curve DAO. Curve is one of the most popular DeFi applications with a market-maker system and functionalities as a liquidity provider. The CRV token was introduced in 2020 as an instrument for facilitating on-chain governance.
Curve DAO basically governs the operations of Curve as a platform, thereby emphasizing the importance of CRV tokens. The CRV governance token is responsible for determining how the platform should work and how it should develop in the future. Most important of all, the role of a governance token in carrying out automated market orders and facilitating a liquidity pool to users can establish new precedents for the growth of DeFi.
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2. Uniswap DAO
Uniswap, a leading decentralized exchange, also joined the list of top governance tokens in September 2020. The governance token of Uniswap, UNI, has helped the DEX establish the roots of a highly significant DAO in modern times. Uniswap encountered substantial growth in trading volumes upon reducing trading fees for certain stablecoin swaps. The growth in trading volume of Uniswap indicates the migration of users from other DeFi projects.
Most important of all, the Uniswap DAO also garnered headlines with the proposal for passing $40 million from the project treasury in May. However, the users in support of the proposal primarily included notable delegates from big corporate companies. The UNI governance token came into play and ensured the pushback, thereby passing off the proposal albeit with a smaller budget.
UNI is one of the most effective governance token examples with proof of how governance can be truly decentralized in nature. The UNI token grants collective responsibility for Uniswap governance, the UNI community treasury, the Uniswap Default List and SOCKS liquidity token.
3. Aave
The next notable entry in a crypto governance tokens list would refer to AAVE, the native token of Aave protocol. Aave is a popular crypto lending platform governed by the principles of decentralization, with the facility for direct interactions between borrowers and lenders. The primary foundation of the Aave protocol rests on the Ethereum blockchain.
On top of it, the popularity of Aave indicates the possibilities of integration with other networks. In early 2021, the AAVE token experienced a meteoric rise of 2300 percent, with many investors hailing it as one of the best tokens in DeFi. At the same time, the radical volatility of the crypto market has never spared anybody, and AAVE is not an exception.
Apart from its performance as a crypto token, AAVE also offers exclusive governance rights to token holders. Token owners could express their voices regarding the future of the Aave protocol. Just like a DAO, AAVE token owners can decide on the addition of new features or the utilization of treasury funds. Furthermore, AAVE can also serve as collateral within the Aave protocol, thereby opening up doors for lowering transaction fees.
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4. Compound
Compound is an obvious addition to the list of best governance tokens tailored for decentralized governance in a DAO. It is a promising example of the effectiveness of DAOs in the field of DeFi in facilitating how users access crypto lending. Investors could lock the governance tokens in Compound protocol alongside starting interest payments.
The striking highlight of Compound protocol is the facility of distributed interest on the assets they contribute to the platform. The decentralized lending platform offers an effective gateway into the world of DeFi while also offering governance privileges to the users.
COMP token is one of the renowned governance token examples which serves practical influence in ensuring cryptocurrency lending. The platform can help people in borrowing crypto alongside ensuring decentralization of the complete process. Compound does not impose any requirement of credit checks from different borrowers, alongside ensuring anonymity of the process. With the assurance of these benefits, COMP also empowers the users of the Compound ecosystem. Every token represents a crucial vote for debate on governance proposals.
5. Decentraland
The Decentraland metaverse is also another playground for a top choice in a crypto governance tokens list in the form of LAND. The LAND NFT tokens represent the virtual parcels of land, and MANA token serves as the cryptocurrency in the metaverse platform. A decentralized body takes responsibility for the governance of the virtual land parcels rather than a central authority. The Decentraland DAO works more like a decentralized city planning community or a homeowner’s association.
Based on the share of virtual property in the Decentraland metaverse, every user could express their vote on the planning decisions. New users are gradually showing interest in Decentraland DAO, with many big companies landing big purchases in Decentraland. A plot of virtual land in the Decentraland metaverse was auctioned off for $2.4 million last year. On top of it, Samsung has also set up its virtual headquarters in Decentraland.
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6. 0x
0x is also one of the important mentions among the top governance tokens for its functionalities. It is a popular choice among DAO projects, and it can offer peer-to-peer transactions through the Ethereum blockchain foundations. 0x planned the transformation to DAO governance in April 2021 and set the foundation stone for 0x DAO. It would primarily focus on maintaining the treasury of the community only.
As of now, the token does not exercise any governance privileges over improvements in the project. On the contrary, it would offer the responsibility of managing treasury funds and driving a positive impact on the ecosystem alongside notable token holders. The native token of 0x DAO, ZRX, could soon claim a place among the most popular and value-based governance tokens in the domain of DAOs.
7. Decred
The search for different types of governance token examples can also bring you across Decred. As compared to the other DAO projects, Decred has been developed on its own blockchain. Most important of all, Decred leverages a hybrid consensus mechanism featuring a combination of Proof-of-Stake and Proof-of-Work protocols. The decentralized protocol also helps members in purchasing tickets or exert their voice in governance proposals.
The governance token of Decred, DCR, served a vital role in addressing the scalability issues for people purchasing Bitcoin. Decred relies on the DAO model for empowering the community members to exercise their vote on the different DAO projects by using DCR. On top of it, Decred is a completely decentralized platform alongside, highlighting the feature of self-governance. Therefore, Decred presents some notable difficulties in going through a hard fork.
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8. Dash
The DASH token is another popular choice among the best governance tokens you should watch out for right now. It is practically one of the notable examples of using DAO projects to fuel future developments in DeFi. The DAO project could provide the assurance of faster transactions in comparison to Bitcoin.
It aims to set new benchmarks in decentralized digital payments and the use of DAOs for crypto applications. Interestingly, DASH has showcased significant growth in recent years. As of now, more than 10 million DASH tokens have been issued. Most important of all, DASH has successfully garnered growth recently by showcasing the emphasis on anonymity.
9. MakerDAO
Another big name among the popular governance tokens would refer to MakerDAO and its stablecoin MKR. MakerDAO delivers a unique governance token with the value of an algorithmic stablecoin. Therefore, it has become one of the preferred platforms for working with different decentralized entities.
The DAO project focuses on exploring new and possible prospects for crypto trends alongside ensuring the effective onboarding of non-crypto assets. Interestingly, MKR token holders showcased one of the practical examples of how decentralized governance can influence projects. MKR holders voted for the use of tokenized versions of short-term trade receivables and freight and shipping invoices.
10. Friends with Benefits DAO
The final entry among top governance tokens would point at FWB, the native token for Friends with Benefits, a membership-only club. The project focuses on experimenting with the use of web3 for transforming social network value. You would find considerable similarities in the FWB governance token’s functionalities with generic applications of governance tokens.
Users can purchase FWB tokens, and more FWB tokens grant the flexibility to enjoy more activities. When you have five DAO tokens, you can receive exclusive access to various community-driven events, alongside ensuring accessibility of Cities Initiative by FWB.
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Bottom Line
The detailed review of functions of different entries in the governance tokens list proves their significance for future of crypto. Decentralization is gaining momentum for all the right reasons. The DeFi landscape continues growing further alongside NFTs and metaverse projects, thereby making governance the foremost priority. The best way forward for the governance of new blockchain-based applications and crypto projects would be to rely on decentralized governance.
The concerns regarding lack of stability in the crypto market have been affecting the participation of users in crypto. Now, governance tokens are put back to power in the hands of users while ensuring that they have a voice in defining the course of the whole project. Learn more about decentralized governance and how governance tokens are the future. Explore new learning resources on DAOs, DeFi and governance tokens now.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!
