What is a governance token?

A governance token is associated with rights in a protocol or community’s decision process, such as proposing changes, voting or delegating voting power. The project’s rules and contracts define those rights. Holding the token does not automatically make its owner eligible to vote on every proposal.

Why can a token balance differ from voting power?

A system may measure voting power at a historical block, require delegation or impose separate participation conditions. Tokens held on an exchange are not necessarily recognized as the customer’s voting power. The technical distinction between a coin and a token does not establish the asset’s governance rights.

Do not automatically equate a governance token with company shares. Voting rights, company ownership, revenue rights and direct control over a treasury are separate matters. A token’s name or market price does not prove that any of those additional rights exists.

Example

Suppose a protocol defines voting power as the delegated balance at a proposal’s snapshot block. Alex has 300 tokens delegated to their own address at that block, so their voting power is 300. Buying another 200 later does not raise their weight to 500 on the same proposal. The difference comes from the predetermined measurement point rather than the current balance.

The real vote list in our Snapshot review shows how a count of votes differs from their weighted power.

After identifying the token’s rights, examine decision-making power in governance: voting weight and execution authority may belong to different parties.