Who Writes the Rules of a Blockchain?

How valuable is the right to vote on the rules that govern a cryptocurrency? With intense focus on the price of cryptocurrencies, another asset — governance tokens — offers investors more than just the possibility of monetary returns: it let’s them help write the rules of particular blockchain. In the absence of a central governing body, decisions about blockchains are left to their users. But not just any users. Early adopters using a new DeFi service can buy (or earn) governance tokens, which provide the holder with the right to vote on how the blockchain is maintained, upgraded and managed. One token, one vote. These tokens often do have monetary value, but the ability to shape the future of a blockchain as these systems become more integrated into daily business is it’s own substantial asset.

Dogecoin, the joke currency that minted millionaires overnight. CryptoKitties, the digital trading cards of cartoon cats that have sold for over one hundred thousand dollars. A Pringles “flavor” that only exists as a non-fungible token, and sells for, well, a lot more than chips you can actually eat. On the face of it, these blockchain-based projects can sound absurd — baffling to the general public and mocking to the financial establishment. They’re spoofs and pranks that sometimes make money. But if you can look past the inside jokes, jargon, and goofy names, you’ll see that there’s serious work happening in crypto. A community of developers and investors is building a solid, sustainable infrastructure that will undergird an entirely new kind of economy: a decentralized economy. Part of the decentralized economy is building an open, decentralized financial system (DeFi).

Leave a Comment