A governance token is referred to as that token on the blockchain network that provides its holders with the right to participate in various voting decisions that have the potential to influence the ecosystem.

The governance tokens are the tokens created by the developers to let token holders shape the future of the protocol. Various influential decisions can be taken by token holders. These decisions have the potential to change the ecosystem of the blockchain network. The proponents of the system using the governance token believe that they allows the users to have a say in the functioning of the blockchain network. This is true to the original idea of decentralization and democratization in the crypto space.

The organizations that let the users have control over the development of their systems are also known as decentralized autonomous organizations (DAOs). Maker (MKR) is one of the most popular examples of governance tokens. This token lets its users vote on several decisions concerning the decentralized finance (DeFi) protocols running on its stablecoin, DAI.