Governance Token

Governance tokens are the primary means of achieving decentralized governance in DAO, DeFi, and DApp initiatives. They are frequently given to active users in recognition of their dedication and contributions to the community. To ensure the projects' continued growth, token holders vote on critical topics. Typically, voting is done using smart contracts, and the results are automatically applied. Each project sets different rules for how its governance token works. Tokens will be distributed to stakeholders such as the founding team, investors, and users according to different calculation models. Some governance tokens only vote on a specific set of governance issues, while other tokens vote on most things. Some governance tokens can earn monetary dividends, while others can't get it.

Advantage and Disadvantage

Governance tokens have some significant advantages. Eliminate conflicts of interest that are common in centralized governance. Decentralized governance, enabled by governance tokens, delegates this control over a wider community of stakeholders, balancing the interests of users and the organization itself.

Another benefit of governance tokens is the ability to build active, collaborative, and close-knit communities. All token holders have an incentive to vote and improve the project. Tokens are equivalent to one vote in most cases, so they can provide the basis for fair and impartial decision-making. Any token holder can initiate a voteable proposal. The details of each vote are visible to everyone, reducing the possibility of fraud.

The biggest challenge for government tokens is the so-called whale problem. Whales are people who hold the majority of a particular cryptocurrency. If the largest whales in a crypto project hold a significant portion of the total supply of its governance tokens, they can move the voting process in their favour. Should be evenly distributed.

However, even if the governance tokens were fairly and widely distributed, there is no guarantee that the majority vote will always be the best for the project. The one-person-one-vote voting system has a long history and a track record of mixed success. There have been instances where token holders voted in favor of the founding team and large investors at the expense of the wider community.

Smart Contract Development

// SPDX-License-Identifier: MIT

pragma solidity 0.8.0;

import "@openzeppelin/contracts/access/AccessControl.sol";

import "@openzeppelin/contracts/token/ERC20/IERC20.sol";

interface IClaimable {

   function owner() external view returns (address);

   function transferOwnership(address newOwner) external;

   function acceptOwnership() external;

}

interface IMintableToken is IERC20, IClaimable {

   function issue(address to, uint256 amount) external;

   function destroy(address from, uint256 amount) external;

}

interface ITokenGovernance {

   function token() external view returns (IMintableToken);

   function mint(address to, uint256 amount) external;

   function burn(uint256 amount) external;

}

contract TokenGovernance is ITokenGovernance, AccessControl {

   bytes32 public constant ROLE_SUPERVISOR = keccak256("ROLE_SUPERVISOR");

   bytes32 public constant ROLE_GOVERNOR = keccak256("ROLE_GOVERNOR");

    bytes32 public constant ROLE_MINTER = keccak256("ROLE_MINTER");

   IMintableToken public immutable override token;

constructor(IMintableToken mintableToken) {

       require(address(mintableToken) != address(0), "ERR_INVALID_ADDRESS");

       token = mintableToken;

       // Set up administrative roles.

       _setRoleAdmin(ROLE_SUPERVISOR, ROLE_SUPERVISOR);

       _setRoleAdmin(ROLE_GOVERNOR, ROLE_SUPERVISOR);

       _setRoleAdmin(ROLE_MINTER, ROLE_GOVERNOR);

       // Allow the deployer to initially govern the contract.

       _setupRole(ROLE_SUPERVISOR, _msgSender());

   }

   function acceptTokenOwnership() external {

       require(hasRole(ROLE_SUPERVISOR, _msgSender()), "ERR_ACCESS_DENIED");

       token.acceptOwnership();

   }

   function mint(address to, uint256 amount) external override {

       require(hasRole(ROLE_MINTER, _msgSender()), "ERR_ACCESS_DENIED");

       token.issue(to, amount);

   }

   function burn(uint256 amount) external override {

       token.destroy(_msgSender(), amount);

   }

}