The boom in DeFi’s popularity has been fueling talks of Governance Tokens, Gas and Gwei on the Ethereum network.
Today, on Crypto Terminology: A to Z, we’ll unpack these three words for you.
First up: Governance Token.
Governance tokens are usually issued to encourage community-led growth and self-sustainability.
In June 2020, algorithmic money making protocol, Compound, released its own governance token called COMP. This marked the beginning of a liquidity mining craze in the DeFi field.
Other notable listings of governance tokens, such as YAM, SUSHI and UNI, drove up the number of transactions conducted on the Ethereum blockchain. This led to congestion of the network and drove up gas fees.
From sending tokens to running dApps on a blockchain — payments are involved in most operations. The pricing mechanism used to calculate fees involved in operating the Ethereum network is called “gas”, typically paid in ETH and measured in gwei.
Gwei is great for measuring small values, and is widely used when calculating gas prices of governance tokens. Even though the road to widespread adoption of governance tokens is still in its infancy, with its rapid gain in popularity, would you choose to hold governance tokens by way of riding this emerging DeFi wave?