What is Governance?
Crypto Glossary Definition
Governance refers to the method by which a cryptocurrency evolves over time. Certain coins have explicit 'on
Why Governance Matters
On-chain governance lets token holders vote on protocol changes — fee structures, treasury spending, upgrades — directly, rather than leaving those decisions to a company. In practice, voter turnout is often low and voting power concentrated, so governance outcomes can still be shaped disproportionately by a small number of large holders.
Governance in Practice
A DAO member holding a meaningful stake of a lending protocol's governance token receives a notification that a new proposal is open for a vote: whether to adjust the protocol's interest rate model and redirect a portion of treasury funds toward a new development grant program. Rather than a company's board making this decision behind closed doors, any token holder can read the full proposal, discuss it publicly with other members, and cast a vote weighted by how many governance tokens they hold, all recorded transparently on-chain. He votes in favor after reading the reasoning, but later notices the final tally shows only a small fraction of eligible tokens actually participated, and a handful of large holders, including a venture fund that received tokens early, account for most of the votes that did get cast. This mirrors a pattern common across many on-chain governance systems: turnout tends to run low, and voting power concentrated among early or large holders means outcomes can still be shaped disproportionately by a small number of participants, even though the process is nominally open to everyone. He starts researching delegation features some protocols offer, letting smaller holders assign their voting power to more engaged community members, as one partial fix for the low-turnout problem he witnessed firsthand in this vote.
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