The Top Governance Tokens That Are Making The News in The DeFi Sector
Blockchain technology has influenced all typed of industries: real estate, postal services, healthcare etc. It turned the financial space into a safer arena. With the inclusion of blockchain technology and the emergence of cryptocurrencies, people can now see the financial world’s new face. Decentralized finance or DeFi is one such revolutionary step towards making this financial sector even more secure and seamless. It is basically a consortium of decentralized apps and services that address different concerns in the blockchain world and comes up with new concepts, like yield farming.
Yet another decentralized finance project has appeared and it holds the potential to outshine other initiatives. We are talking about the brand-new governance token project. Governance tokens provide the power to crypto holders to influence the workings of decentralized projects, including the product feature, roadmap, staffing, etc.
Why Governance Tokens?
Governance tokens have become the most popular decentralized finance product that has created a buzz among the crypto holders. Unlike the utility tokens, DeFi governance tokens have pitched themselves to be based on fundamental analysis. It is evident that all the DeFi projects have well-defined revenue even at their protocol level in the form of interest rates and fees.
To better understand the influence of governance tokens, let us compare with stock analogies. In stock trading, the holders are entitled to vote on the company’s board and a portion of the distributed dividends. With this, the stockholders have the power to influence the developments in the corporate surroundings and profit from success. The workings of crypto governance tokens are quite straightforward and can be compared with dividends.
MKR or Maker uses the burn and buyback method in order to get the value of MKR governance tokens. The interest paid by the borrowers is utilized to buy the MKR token via auctions and later burned. Through this mechanism, a realistic price growth dynamic increases the demand and reduces the simplicity of MKR. While the mechanism is somewhat closer to the stock buybacks, it creates value for the holders, just like dividends.
Top DeFi Governance Token Projects That Are Ruling
Believe it not, the top governance token projects have shot up to $4.3 billion USD in the Ethereum ecosystem. The reason governance cryptocurrency is gradually becoming a big hit among the crypto holders is because of the authority it gives to them in the DeFi platforms. Though governance holds a strong position in the ecosystem, many people still don’t understand it. It is quite evident that the Ethereum ecosystem is reigning and rising.
Here are the top governance token projects that have made their way into the Ethereum ecosystem.
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