Governance tokens play a central role in blockchain projects by giving holders the power to influence key decisions within decentralised organisations or protocols. Unlike traditional financial assets, governance tokens grant voting rights rather than ownership of a company. Holders can propose changes, vote on upgrades, and help shape the direction of the project. This includes decisions about protocol parameters, fee structures, treasury management, partnerships, and new feature rollouts.

The purpose of governance tokens is to distribute control among community members instead of concentrating it in a small group of developers or founders. This approach strengthens decentralisation, increases transparency, and ensures that users who are directly impacted by the project’s success have a say in its development. For example, in decentralised finance (DeFi) platforms, token holders may decide how rewards are allocated or how risk is managed.

Another benefit is that governance tokens create stronger community engagement. When users have voting power, they are more likely to stay involved and contribute long-term. Governance tokens can also increase project resilience, as decisions are made collectively rather than by a single authority.

In essence, governance tokens turn users into stakeholders, giving them both responsibility and influence. They transform blockchain projects into community-driven ecosystems where innovation and growth are guided by consensus.