What is Decentralized Science (DeSci) in Crypto and How It’s Reshaping Scientific Research?
When discussing innovative developments in scientific research, Decentralized Science (DeSci) stands out as a bold response to the long-standing issues in academia, which are limited access, skewed funding, and paywalled publications. It leverages blockchain technology to enhance scientific research, making it more transparent, collaborative, and openly accessible. No more hidden data or slow publishing processes—DeSci proposes a model where scientific knowledge is shared, funded, and validated through decentralized protocols. Built on core Web3 principles, DeSci enables researchers to tokenize intellectual property, access funding through DAOs, and publish their work without gatekeeping. By reducing reliance on centralized institutions, it opens the door to global participation. In this post, we explore what Decentralized Science in crypto means and how it’s reshaping the future of scientific research. Key Takeaways What Is Decentralized Science (DeSci)? Source: Ideogram Decentralized Science, or DeSci, is a blockchain-powered movement that aims to transform the way scientific research is funded, published, and accessed. It challenges the traditional, centralized academic system by promoting open collaboration, transparent data sharing, and permissionless participation. Through decentralized protocols, researchers can publish their findings without institutional gatekeepers, secure funding through tokenized models, and protect intellectual property using blockchain-native tools, such as IP-NFTs. The origins of DeSci can be traced back to the broader Web3 movement, where decentralization emerged as a solution to issues of trust and central control across various industries. As blockchain matured, early experiments, such as Open Science and crypto-based publishing platforms, laid the groundwork for DeSci. Today, it continues to evolve through decentralized autonomous organizations (DAOs), cryptocurrency incentives, and global research communities seeking a fairer and more inclusive scientific model. How DeSci Uses Blockchain Technology for Scientific Research Source: Forbes Decentralized Science (DeSci) integrates blockchain technology to reshape how scientific research is conducted, funded, and shared. Unlike traditional systems where data is siloed, access is restricted, and incentives are often misaligned, DeSci leverages blockchain’s decentralized architecture to create a more transparent, inclusive, and efficient ecosystem for science. Here’s how it works in practice: Core Blockchain Innovations in DeSci Tokenization of Intellectual Property (IP-NFTs) One of the most impactful innovations in DeSci is the tokenization of scientific intellectual property using IP-NFTs (Intellectual Property Non-Fungible Tokens). An IP-NFT is a blockchain-based token that represents ownership of a specific piece of scientific research, be it a dataset, a discovery, or a biotech invention. These tokens can be bought, sold, licensed, or fractionally owned, allowing researchers to monetize their work directly without relying on academic journals or corporate intermediaries. For instance, Molecule and VitaDAO collaborated to fund longevity research by turning research projects into IP-NFTs. In one notable example, VitaDAO invested $300,000 in June 2024 in the research of Dr. Michael Torres and Dr. Anthony Schwartz to suppress harmful protein formations that drive aging, by issuing an IP-NFT that gave token holders a stake in the research outcomes. This model not only democratizes access to funding but also aligns incentives between researchers and supporters. Use of DAOs for Community Governance Decentralized Autonomous Organizations (DAOs) play a critical role in DeSci by enabling community-driven governance. In contrast to centralized academic institutions or research councils, DAOs use smart contracts and token-based voting to manage decisions, from allocating funds to approving projects. For example, AthenaDAO, focused on women’s health research, allows members to propose, vote on, and fund research initiatives in a transparent manner. Contributors earn governance tokens, giving them a stake in the project’s success and ongoing direction. This structure streamlines bureaucracy and accelerates the research approval process. Transparent On-Chain Data and Metadata Another key advantage of blockchain is the immutability and transparency of data stored on-chain. DeSci platforms allow researchers to timestamp and publicly share datasets, methodologies, and results. This addresses reproducibility issues, enhances data integrity, and enables real-time collaboration. By recording research data and metadata (who authored it, when, and what changes were made), DeSci ensures traceability. A blockchain-based ledger provides proof of authorship and prevents tampering, which is crucial for maintaining scientific credibility. For example, bioinformatics results, clinical trials, or experimental records can be time-stamped and verified on platforms like Bio.xyz, ensuring they’re accessible and auditable by any researcher globally. Key Platforms and Protocols Molecule Protocol Molecule is a foundational infrastructure for DeSci. It connects researchers directly with funders and biotech enthusiasts through its IP-NFT framework. Researchers upload proposals, which are reviewed and potentially funded by DAOs or independent backers. Once funded, the research is tied to an IP-NFT, creating a tradable and transparent ownership structure. Molecule has helped launch several early-stage biotech projects that would have struggled under traditional grant models. VitaDAO, AthenaDAO, and ValleyDAO VitaDAO focuses on longevity research. It has raised over $5 million to fund anti-aging and regenerative medicine, with contributors voting on which studies to support. AthenaDAO aims to close the gender gap in medical research by funding studies on women’s health that are underrepresented. Through community governance, it allocates resources to address issues related to hormonal, reproductive, and mental health. ValleyDAO targets synthetic biology and climate change research. By tokenizing IP in this space, it promotes open innovation for sustainable biotech solutions. Each DAO operates independently but shares common blockchain tools, including governance tokens, treasury management, and smart contracts, to ensure trust and accountability. Bio.xyz serves as an accelerator for DeSci DAOs. It supports emerging research collectives by providing infrastructure and strategic guidance, enabling them to build governance models, launch tokens, and issue IP-NFTs. GenomesDAO and INNBC GenomesDAO empowers individuals to store and control their genomic data securely using blockchain. Users can choose who accesses their genetic data and get compensated for it, protecting privacy while enabling research. INNBC (Innovative Bioresearch Coin) supports research in HIV, cancer, and regenerative medicine. It utilizes its token to establish a DeSci ecosystem, where participants can fund projects and access research updates. Use Cases of DeSci in Crypto Below are the most important use cases where DeSci is already making a meaningful impact: Academic Publishing Traditional academic publishing is notoriously slow, expensive, and exclusionary. Centralized journals often charge high fees for both
What Is Coin Flippening in Cryptocurrency?
Flippening is one of the terms you come across in crypto conversations when talk shifts from dominance to disruption. It describes the moment a competing cryptocurrency, most notably Ethereum, overtakes Bitcoin in key metrics like market cap, transaction volume, or network activity. The idea has sparked debates, market predictions, and technical analyses for years. As Ethereum grows stronger, backed by smart contracts, DeFi, and NFTs, the conversation around coin flippening feels more relevant than ever. Analysts are tracking data points, developers are building fast, and investors are watching closely. So, what does coin flippening truly mean, and how close are we? Key Takeaways What Is Coin Flippening? The word “flippening” refers to a potential shift in the cryptocurrency market where a competing coin, most often Ethereum (ETH), surpasses Bitcoin (BTC) in one or more key performance metrics. These include market capitalization, daily transaction volume, number of active addresses, and total network fees generated. It represents more than just numbers; it signals a change in how value, utility, and innovation are recognized in the crypto space. Originally coined during Ethereum’s rapid rise in 2017, coin flippening quickly became a popular term among analysts and investors. While Bitcoin has long held the top spot as the original and most capitalized digital asset, Ethereum’s expanding use cases—ranging from smart contracts and decentralized applications (dApps) to decentralized finance (DeFi)—have led many to believe a flippening is not just possible, but inevitable. Metrics That Indicate a Flippening To understand if a coin flippening is taking place, or is even close, we need to look beyond price alone. Several on-chain and network-level metrics are used to measure a cryptocurrency’s strength and impact. Here are some indicators analysts monitor when evaluating a potential flippening, especially between Bitcoin and Ethereum. Market Capitalization Market cap is the most common metric used to rank cryptocurrencies. It’s calculated by multiplying the current price of a coin by its circulating supply. Bitcoin has historically held the top position in terms of market capitalization. However, Ethereum has closed the gap significantly during major bull runs, especially when network activity surges due to DeFi, NFTs, or Layer-2 adoption. A flippening in market cap would mean Ethereum becomes the most valuable cryptocurrency, not just by price, but by total economic weight. Daily Transaction Volume This metric reflects how much value is being transferred across a network on a daily basis. Ethereum often outpaces Bitcoin here, especially during periods of high DeFi or stablecoin activity. More transactions often signal greater real-world utility and user engagement. Sustained higher daily transaction volume from Ethereum could suggest it’s being used more actively, strengthening the case for a functional and utility-driven flippening. Number of Active Addresses Active addresses indicate the number of wallets interacting on the blockchain within a specific period. It’s a useful measure of network participation and adoption. While Bitcoin remains strong in terms of long-term holders and institutional wallets, Ethereum frequently shows a higher number of active users, thanks in large part to dApps, NFTs, and token transfers. If Ethereum consistently leads in active address count, it signals broader user involvement and transactional diversity. Total Fees Generated Fees paid by users reflect demand for block space. When network usage is high, fees go up, often indicating that users find the network valuable enough to pay for speed or access. Ethereum has regularly outperformed Bitcoin in this area, especially during DeFi booms or high-traffic periods. High fee generation suggests strong demand, utility, and active participation. It also speaks to miner/validator incentives, reinforcing network security. Developer Activity A strong and active developer community is essential for network growth and innovation. Ethereum has consistently ranked higher than Bitcoin in terms of monthly developer contributions, GitHub commits, and open-source project builds. More developers mean more experimentation, upgrades, and user-focused applications. This metric underscores Ethereum’s evolving ecosystem and its momentum as a programmable blockchain, unlike Bitcoin’s more conservative development path. Factors Contributing to the Flippening The coin flippening is not driven by hype alone. It’s built on measurable shifts in utility, innovation, and market perception. Below are the major drivers contributing to this shift: Ethereum’s Growing Utility Ethereum has become the backbone of some of the most active sectors in crypto. From decentralized finance (DeFi) and non-fungible tokens (NFTs) to smart contracts and Layer 2 scaling solutions, Ethereum’s versatility continues to attract developers, users, and capital. Its programmability allows developers to create decentralized applications (dApps) that can execute complex tasks directly on-chain. This positions Ethereum as more than just a store of value—it’s a foundational layer for a wide range of decentralized ecosystems. Moreover, Ethereum dominates in real usage metrics, including network fees, number of deployed contracts, and volume on decentralized exchanges (DEXs). These real-world use cases contribute to Ethereum’s economic gravity and add weight to the flippening narrative. Ethereum’s Supply Reduction After the Merge The Merge, Ethereum’s shift from Proof of Work (PoW) to Proof of Stake (PoS) in September 2022, fundamentally changed how new ETH is created. One of the most significant outcomes has been the reduction in ETH issuance and the introduction of deflationary pressure through EIP-1559, which burns a portion of transaction fees. Post-Merge, Ethereum’s net issuance has dropped significantly—at times turning negative. This means that more ETH is being burned than minted, reducing the total supply over time. This deflationary mechanism adds upward pressure on ETH’s price and strengthens its position in market cap comparisons with Bitcoin, which continues to rely on inflationary PoW issuance. As scarcity increases alongside growing demand, ETH becomes an increasingly competitive asset. Bitcoin’s Limitations While Bitcoin remains the most recognized cryptocurrency, it faces several structural limitations that have opened the door for Ethereum’s rise: Bitcoin vs Ethereum: The Main Flippening Battle The phrase “coin flippening” often centers on one of the most compelling rivalries in crypto: Bitcoin vs Ethereum. While both dominate the market and serve critical but different functions, the conversation around a flippening focuses on whether Ethereum can eventually overtake Bitcoin as the most valuable and influential cryptocurrency. This
What is Interplanetary File Systems in Blockchain/Crypto?
Before the introduction of InterPlanetary File Systems (IPFS) in 2015, data on the internet relied heavily on centralized servers, making it vulnerable to censorship, single points of failure, and high storage costs. According to Statista, as of 2023, global data creation reached 120 zettabytes, most of which flowed through centralized platforms like Google, AWS, and Microsoft Azure. This dependency raises concerns around data control, access limitations, and long-term availability, especially for blockchain and crypto-based systems relying on transparency and decentralization. Read Also: Merkle Trees: All You Need to Know Now, with the rise of Web3 applications, NFTs, and decentralized apps (dApps), IPFS offers a more secure, distributed alternative to traditional web infrastructure. Its content-addressable model aligns naturally with blockchain’s immutable structure, making IPFS in crypto an increasingly essential component for scalable, censorship-resistant platforms. So what then is InterPlanetary File Systems in blockchain/crypto? This blog breaks down what IPFS really is, how it works, and why it’s becoming a critical backbone for decentralized technologies. Key Takeaways What is the Interplanetary File System (IPFS)? The InterPlanetary File System (IPFS) is a peer-to-peer (P2P) distributed file storage protocol designed to make the web faster, safer, and more open. Unlike traditional web protocols like HTTP that fetch files from specific servers, IPFS retrieves data based on content addressing—meaning each file is identified by a unique cryptographic hash rather than its location. This content-addressing system ensures that once a file is added to the IPFS network, it cannot be altered without changing its hash. This makes IPFS tamper-resistant and ideal for applications requiring data integrity, such as blockchain-based platforms and decentralized applications (dApps). IPFS works by allowing users to host and access content across a decentralized network of nodes. When you upload a file to IPFS, it’s broken into smaller blocks, cryptographically hashed, and distributed across multiple nodes. Anyone requesting the file can retrieve it from the closest or fastest available source, improving speed and reliability, especially in regions with limited server infrastructure. This decentralized design not only reduces reliance on central authorities but also enhances data availability, making IPFS a key infrastructure layer for projects in Web3, NFTs, and decentralized identity systems. How Does Interplanetary File Systems Work Let’s break down how IPFS actually works under the hood. Content-Based Addressing Instead of Location-Based In the traditional web (HTTP), files are accessed by their location, typically a domain name pointing to a centralized server. For example, visiting “http://example.com/image.jpg” takes you to a specific server to retrieve that file. In IPFS, files are accessed by what they are, not where they are. This is called content addressing. When a file is added to IPFS: So instead of accessing a file by URL, you access it via its CID. If the content changes—even slightly—the hash and CID also change. This guarantees data integrity. Read Also: What Is Blockchain Network Congestion? Distributed Hash Table (DHT) for File Discovery Once a file is added and assigned a CID, the next challenge is finding it on the IPFS network. IPFS solves this using a Distributed Hash Table (DHT)—a system where each node stores information about some files and knows which peers are hosting other files. Think of it as a decentralized index or lookup system. When you request a file using its CID: File Chunking and Merkle DAGs Large files in IPFS are not stored as single blocks. Instead, they are chunked into smaller blocks (typically 256 KB). These chunks are then organized into a Merkle Directed Acyclic Graph (Merkle DAG). A Merkle DAG: This system supports deduplication—if two files share chunks (like two PDFs with the same introduction), those chunks are stored only once. Peer-to-Peer Content Delivery Since IPFS is peer-to-peer, there are no centralized servers. Every participant (node) in the network can: When you request a file, the data is fetched from multiple peers simultaneously, much like how BitTorrent works. This makes IPFS resilient, faster in many cases, and able to scale naturally as more users join. Pinning and Persistence IPFS doesn’t automatically store files forever. By default, nodes may garbage-collect files they no longer need. To ensure long-term storage of a file, you need to pin it. Pinning tells your IPFS node to keep the file permanently. There are also services like Filecoin, Pinata, and web3.storage that offer paid or incentivized solutions for pinning files across multiple nodes, providing decentralized persistence. Versioning and Mutability with IPNS Since IPFS is content-addressed, content is immutable—a CID always points to the same data. But what if you want a link that always points to the latest version of a file? That’s where the InterPlanetary Naming System (IPNS) comes in. IPNS uses public-private key pairs to assign human-readable names (or addresses) that can point to updated CIDs over time. For example: This enables mutable references in an otherwise immutable system. Cryptographic Security and Trust Every piece of content in IPFS is identified by its cryptographic hash. This ensures: How IPFS Integrates with Blockchain Technology The InterPlanetary File System (IPFS) and blockchain technology serve different but highly complementary purposes in the decentralized ecosystem. While blockchain ensures secure, tamper-proof, and transparent ledgers for financial transactions or data verification, IPFS provides scalable and efficient decentralized storage. Due to the storage limitations and high costs associated with on-chain data, blockchains benefit significantly from off-chain solutions like IPFS to handle non-transactional data, especially large files. This seamless interaction between blockchain and IPFS is what powers some of the most essential infrastructure in Web3 today. These are: Common Use Cases of IPFS in Blockchain Storing Smart Contract Data Smart contracts are typically stored on-chain, but they are limited in capacity and not ideal for handling large datasets or files. IPFS is often used to store supplemental data that smart contracts reference using CIDs (Content Identifiers). Examples include: This off-chain storage reduces blockchain bloat and gas fees while keeping the data accessible and verifiable. NFT Metadata and Media Files Non-Fungible Tokens (NFTs) often represent ownership of digital assets like images, videos, audio, or 3D models. However, storing
Best Offline Crypto Wallet for Safe Storage
Nothing beats knowing your cryptocurrency is securely stored, far from online threats. As digital assets continue to grow in value, protecting them has become increasingly important. The best offline crypto wallet for safe storage offers unmatched security by keeping your private keys completely disconnected from the internet, shielding your funds from hackers and breaches. Offline crypto wallets are designed for individuals serious about securing their Bitcoin, Ethereum, or altcoins in the long term. They offer simplicity, control, and peace of mind — three things you can’t afford to overlook when it comes to managing your investments. In this article, we’ll break down the top offline wallets to help you choose the perfect option for safe storage. Key Takeaways What Is an Offline Crypto Wallet? Source: Ideogram An offline crypto wallet, also known as a cold wallet, is a tool that stores your cryptocurrency’s private keys without any internet connection. Unlike online wallets, which stay exposed to potential hacks and security risks, offline wallets protect your assets by keeping them completely isolated from online threats. These wallets come in different forms — hardware devices, paper wallets, and even air-gapped computers. What they all share is a strong focus on security and control. When you use the best offline crypto wallet for safe storage, you take ownership of your assets without relying on third parties like exchanges or custodial services. Difference Between Offline (Cold) Wallets and Online (Hot) Wallets When it comes to securing cryptocurrency, understanding the difference between offline (cold) wallets and online (hot) wallets is essential. Both serve the same basic purpose — storing your digital assets — but the way they handle security and access differ significantly. Cold wallets are offline, meaning they aren’t connected to the internet. This isolation makes them highly secure against online attacks but slightly less convenient for frequent transactions. Hot wallets, on the other hand, are connected to the internet, offering quick access but exposing assets to greater risk. Here’s a quick breakdown: Feature Offline (Cold) Wallets Online (Hot) Wallets Internet Connection No Yes Security Level Very High (immune to online hacks) Lower (vulnerable to hacking and phishing) Ease of Access Lower (manual connection needed) High (instant access) Best For Long-term storage, large amounts Daily transactions, small amounts Common Types Hardware wallets, paper wallets, and air-gapped devices Mobile apps, desktop wallets, and exchange wallets Risk of Theft Very Low Higher Setup Complexity Moderate (hardware setup, key management) Simple (app download, quick setup) Best Offline Crypto Wallets in 2025 Name Price (USD) Touchscreen Connectivity Security Air-gapped Coins Supported Special Features Ledger Nano X 149 No Bluetooth, USB-C CC EAL5+ Secure Element No 500+ (Ledger Live), 5,000+ (3rd-party) Bluetooth, NFT support, Optional Ledger Recover Ledger Stax 399 Yes (Curved E Ink) Bluetooth, USB-C, Qi, NFC CC EAL6+ Secure Element No 500+ (Ledger Live), 5,000+ (3rd-party) Qi charging, Magnet Shell, NFC, Ledger Recover Ledger Flex 249 Yes (E Ink) Bluetooth, USB-C, NFC CC EAL6+ Secure Element No 500+ (Ledger Live), 5,000+ (3rd-party) Gorilla Glass, Lightweight Trezor Safe 5 169 Yes (Color) USB-C EAL6+ Secure Element No 1,000+ MicroSD slot, Open-source, Multi-share backup Trezor Safe 3 79 No USB-C EAL6+ Secure Element No 1,000+ Open-source, Compact, Tor support Trezor Model One 49 No Micro USB Open-source No Limited (No XRP, ADA, XMR) Budget-friendly, Simple UI Trezor Model T 129 Yes (Color) USB-C Open-source, Shamir Backup No 1,000+ Shamir backup, MicroSD, PIN/passphrase COLDCARD Mk4 167.94 No USB-C, NFC, Virtual Disk Dual Secure Elements Yes Bitcoin only PSBT, Duress PINs, Fully offline COLDCARD Q 239.99 Yes (LCD) QR, NFC Dual Secure Elements Yes Bitcoin only Full keyboard, QR scanner, Battery power ELLIPAL Titan 2.0 169 Yes (4.0″) QR code only CC EAL5+ Secure Element Yes 10,000+ No USB/WiFi/Bluetooth, QR signing ELLIPAL Titan 2.0 Bundle 238.99 Yes (4.0″) QR code only CC EAL5+ Secure Element Yes 10,000+ Includes mnemonic metal, 100% air-gapped ELLIPAL Titan Mini 99 Yes (2.4″) QR code only CC EAL5+ Secure Element Yes 10,000+ Pocket size, same air-gapped QR signing ELLIPAL Titan Mini Bundle 168.99 Yes (2.4″) QR code only CC EAL5+ Secure Element Yes 10,000+ Includes mnemonic metal, durable compact size SafePal X1 69.99 No USB-C EAL5+ Secure Element No 100+, 10,000+ via DApps Budget USB wallet, open-source firmware SafePal S1 49.99 Yes QR code only EAL5+ Secure Element Yes 100+, 10,000+ via DApps No USB/WiFi/Bluetooth, QR signing SafePal S1 Pro 89.99 Yes QR code only EAL5+ Secure Element Yes 100+, 10,000+ via DApps Larger screen, upgraded battery Tangem Wallet 49.9 No (Smartcard) NFC (via phone) EAL6+ Secure Element Yes (No battery) 6,000+ Card format, 2-3 card setup, mobile-native Cypherock X1 179 No USB-C Secure Element + Shamir Yes (Key split) 9000+ No seed phrase risk, 4 cards split, biometric auth NGRAVE Zero 398 EUR Yes (Color Touch) QR code only EAL7 Secure Element Yes 3500+ Light sensor, fingerprint, Graphene backup Ledger Nano X – Best for Beginner Price: $149 The Ledger Nano X is the best offline crypto wallet for those getting started with secure digital asset storage. It combines portability, ease of use, and strong security features, making it ideal for daily crypto management. With Bluetooth and USB-C connectivity, it works seamlessly across desktop and mobile devices. The Ledger Live app supports over 500 coins and NFTs, while third-party wallets extend compatibility to over 5,000 assets. Read Also: Top Crypto Wallet Security Best Practices Its certified secure element and optional Ledger Recover service add reliable protection. Lightweight and compact, the Ledger Nano X offers a smooth, mobile-first experience without compromising the safety of your cryptocurrency holdings. Pros Cons Ledger Stax – Best for Touchscreen Navigation and Daily Convenience Price: $399 Currently, the most advanced Ledger device, Ledger Stax, stands out for its intuitive curved E Ink® touchscreen, offering a seamless experience for users who prioritize both security and ease of use. Its compact, credit card-sized design, wireless Qi charging, and Bluetooth® support make it ideal for day-to-day access across desktop and mobile platforms. With support for over 500 coins via the Ledger Live app
What Is a Governance Token?
By removing middlemen and concentrating power within a specific community, decentralized finance (DeFi) has made it possible for people to engage with financial services in innovative ways. At the center of this innovation are decentralized autonomous organizations (DAOs), composed of members who collectively make decisions, rather than a central authority acting unilaterally. But how are these decentralized systems governed fairly and transparently? In large part, the answer lies in governance tokens: digital assets that grant holders voting privileges, influence over the protocol’s direction, and ownership rights. Try to imagine being a part of the decision-making behind features that involve your favorite crypto platform. Key Takeaways Governance Token A governance token is a kind of cryptocurrency typically tied to decentralized protocols, decentralized applications, or DAOs, and allows for stakeholders, typically token holders, to vote to govern those protocols. Courtesy: Metaverse Post Essentially, governance tokens act as voting chips, which means holders can help steer the future direction of the project by proposing or voting on major protocol changes, whether that’s suggesting a technical upgrade, treasury spending, fees, or even a new partnership. In DAOs specifically, governance tokens are commonly used for proposing and voting to achieve consensus on proposals from stakeholders. By using a token-based governance method, the growth and development of protocols are less about the whims of a centralized authority and more focused on community involvement. Governance tokens can help bind users to the protocol, allowing users to have an influence over risk parameters or collateral requirements or even the reward system in DeFi projects. Since these types of decisions can be financially relevant to governance, token holders are incentivized to act in the best interest of the protocol. A number of notable projects have released governance tokens as a core piece of infrastructure. For instance, UNI, the governance token for Uniswap, allows holders of UNI to vote on proposals regarding the development of the protocol as well as how to use treasury funds. Also, MKR, the governance token for MakerDAO, allows holders to vote on risk management decisions regarding types of collateral and debt ceilings when issuing Dai stablecoin. Read Also: What is a Token: Beginners Guide How Governance Tokens Work Governance tokens are the heart of decentralized decision-making, and they enable holders to have some level of influence over a protocol. Now, how do these tokens actually work? The way these tokens work differs based on the blockchain and DAO itself, but most governance systems convert membership into some sort of voting structure that is governed by rules. Voting Mechanisms: On-Chain vs. Off-Chain A significant distinction in governance tokens is whether voting occurs on-chain or off-chain. Courtesy: Webopedia On-chain voting is a vote directly on-chain, which means it is public and immutable. There is full decentralization in on-chain voting since every vote is executed through a smart contract; however, on-chain voting can be slower and costly (the gas fees, especially if you are on Ethereum). Examples are protocols like Compound and Uniswap, where, such as with Compound, if a proposal passes, it is executed automatically. Off-chain voting is faster and gasless and occurs on behalf of the voter, mainly using platforms like Snapshot. Off-chain voting is effective, but when the time comes to take the vote off-chain and execute it on-chain, it introduces a small layer of centralization risk. Voting Systems: Token-Weighted vs. Quadratic Voting Most governance tokens are token-weighted, meaning that holders of larger token quantities have more voting influence. This can present a concern for centralization if a few holders control a significant amount of governance. Courtesy: Frontiers To mitigate this issue, there are a few projects that are attempting different variations of governance, such as quadratic voting. In this case you would have voting power that increases at a decreasing rate. (e.g., if you have 1 token, you have 1 vote, but if you have 10 tokens, you only have the square root of 10 votes.) This is potentially beneficial in leveling the playing field for smallholders and reducing whale concentration of governance power. There is also the issue of quorum thresholds, or how many votes must occur for a proposal to be passed, usually set as a minimum number of votes to be considered a valid proposal. The issue is that mass apathy is a danger to direct voting systems like those that many DAOs use. Your proposals may be great, but if only 2 or 3 people show up, who really cares? What Do Token Holders Vote For? Holders of governance tokens usually have the ability to vote for key protocol parameters like: Benefits of Holding Governance Tokens Governance tokens are not merely a voting privilege; they offer much more than governance rights. There are advantages to governance tokens beyond governance where holders benefit significantly, and they are: The biggest value of a governance token is the clarity of being able to influence the development of a project. Unlike centralized finance, governance protocols are more honest, and the token holders can vote on developments, upgrades, partnerships, and major policy changes. For example, Uniswap token holders decide the fee structure and treasury allocation decisions of their holders. Governance token holders also typically receive early intel on upcoming feature releases, upgrade releases, integrations, and major strategic decisions. Some DAOs give their token holders exclusive access to beta releases or testnets for some period of time before their full rollouts. Having access gives a token holder an advantage by being able to make informed decisions ahead of important software updates, being able to make recommendations that can inform final updates, and being able to provide liquidity mining or staking opportunities to have first-mover advantages. Holding a governance token could also offer reward tokens to the holders of these tokens. There are DAOs that also provide extra yield for locking up governance tokens (for instance, Curve’s vote-locking model) or a percentage of fees or profits to some token holders (e.g., SushiSwap’s xSUSHI). Active participants in governance often build a reputation in the DAO, resulting in:
