Token-Based Governance
Web3 / social community
Token-based governance is a model where voting power within a DAO is directly proportional to the number of governance tokens an individual holds. This approach gives economic stakeholders direct influence over organizational decisions, creating alignment between token value and governance outcomes. Members vote on proposals ranging from protocol upgrades to treasury allocation, with voting power calculated as a simple function of token balance. While this model provides clear incentive alignment for major stakeholders, it can concentrate decision-making power among wealthy holders and may disadvantage active contributors who lack substantial token holdings. Example: Uniswap uses UNI token-based governance where each UNI token equals one vote in protocol decisions. Token holders vote directly on proposals affecting the decentralized exchange's operation, fee structures, and treasury deployment. Why it matters for Web3 social and community: Token governance creates direct economic incentives for participation and aligns voter interests with protocol success, but requires mechanisms to prevent plutocratic outcomes where wealth dominates decision-making.
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