Definition
The system by which decisions are made within a blockchain protocol or decentralized organization. Token holders typically vote on proposals that affect the protocol's future direction.
Why It Matters
Governance determines how blockchain protocols evolve, how funds are allocated, and how communities make collective decisions in a decentralized manner.
Example
Compound governance token holders vote on a proposal to add a new asset as collateral to the lending protocol.
Related Terms
DAO
Token
Smart Contract