Governance tokens are typically issued to encourage active participation in the community.
Blockchain projects establish different conditions for self-government. As a rule, it all comes down to changing the service’s commissions and optimizing the algorithm for distributing new tokens.
For example, in June 2020, the algorithmic money-making protocol Compound released its own governance token called COMP, kicking off a liquidity mining mania in the DeFi space.
Other notable governance token listings, YAM, SUSHI, and UNI, have increased the number of transactions conducted on the Ethereum blockchain.
Essence and advantages
Governance is a unique use case for which other assets are not suitable.
Limited emission - no inflation, greater potential for growth.
Profit distribution - for example, some projects give token holders a percentage of the profit.
Earnings on DeFi - governance tokens can be contributed to liquidity pools or staking to generate additional income.
Conclusion: even if an investor does not participate in voting, he can still make money on this instrument.
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