Governance Token
A token that gives holders voting rights on decisions about a DeFi protocol's development and rules.
Many DeFi protocols are governed by their users through governance tokens. Holding AAVE tokens lets you vote on changes to the Aave protocol. UNI tokens give you a say in Uniswap's future. Proposals might cover fee changes, new asset listings, or treasury spending.
Governance tokens are different from stablecoins. USDC is designed to stay at $1. Governance tokens fluctuate in price based on demand and speculation. Some people buy them to participate in governance; others trade them for profit.
You might encounter governance tokens when using DeFi. Some protocols distribute their governance tokens as rewards to users who deposit or provide liquidity (this is sometimes called "yield farming" or "liquidity mining").
Related Terms
DeFi (Decentralized Finance)
Financial services built on blockchain smart contracts that operate without traditional intermediaries like banks.
Token
A digital asset created on an existing blockchain. USDC is a token that runs on multiple blockchains.
Staking
Locking up cryptocurrency to help secure a blockchain network, earning rewards in return.
Liquidity Pool
A smart contract holding paired tokens (like USDC/ETH) that enables trading on a decentralized exchange.
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This definition is provided for educational purposes. USDC.org is an independent resource and is not affiliated with Circle Internet Financial.