Governance Token Impact

Definition ∞ Governance token impact refers to the influence that specialized digital tokens exert over the operational and developmental direction of decentralized protocols. Holders of these tokens possess voting rights, allowing them to participate in key decisions. This mechanism enables community-driven protocol management. The degree of impact depends on token distribution.
Context ∞ Discussions about governance token impact often address the challenges of voter participation, the concentration of voting power among large holders, and the effectiveness of decentralized autonomous organizations. Ensuring equitable and efficient governance is a constant objective for many blockchain projects. The balance between decentralization and effective decision-making remains a key area of focus.