Introduction
On June 16th, Compound—the "DeFi Bank"—launched its governance token COMP distribution mechanism. Users who deposit or borrow on Compound became eligible to receive COMP tokens based on predefined rules.
Similarly, Curve—a decentralized stablecoin platform—announced plans to issue governance tokens. Users providing liquidity since January 2020 may qualify for these tokens.
Why are DeFi projects increasingly adopting governance tokens? What role do they play in DeFi ecosystems? Are governance tokens a viable investment?
What Are Governance Tokens?
Blockchain tokens serve diverse purposes:
- Store of Value: Bitcoin facilitates value storage/transfer.
- Transaction Fees: ETH pays for gas fees.
- Work Rights: PoS tokens (e.g., EOS, Harmony) validate blocks.
- Fee Capture: Tokens like Kyber capture value via burns.
- Governance: Tokens such as MKR and 0x enable voting.
Most tokens combine functionalities. For example, MKR governs MakerDAO while capturing fees.
Governance Value Capture
Governance tokens derive value from locked asset volumes. Larger assets increase governance demand, creating溢价 (premiums).
👉 Discover how Compound’s COMP compares to MKR
MakerDAO vs. Compound: Governance Mechanisms
MakerDAO (MKR)
- Voting Rights: MKR holders adjust risk parameters (e.g., collateral types, liquidation ratios).
- Economic Benefits: Interest payments in MKR are burned, reducing supply.
- Crisis Response: The "3.12" crash caused $5M in bad debt, triggering MKR auctions.
| Mechanism | Impact |
|---|---|
| MKR Burns | Deflationary pressure |
| Debt Auctions | MKR issuance covers losses |
Risks: Prolonged crises could spiral MKR devaluation.
Compound (COMP)
- Distribution: 42.3% of COMP (4.23M tokens) drips daily to users over 4 years.
- Voting: Proposals require 1% of COMP staked to initiate.
**Key Features**:
- 50% of daily COMP goes to lenders, 50% to borrowers.
- Active assets earn more COMP.Are Governance Tokens Good Investments?
Valuation Metrics (PE Ratio)
PE = Market Cap / Annual Earnings
- High PE: Growth optimism (e.g., Augur [REP]: PE 16,761).
- Low PE: Undervalued or low growth (e.g., Bancor [BNT]: PE 56).
| Project | PE | Notes |
|---|---|---|
| Aave | 74 | Innovates with flash loans. |
| Kyber | 98 | Burns tokens to capture fees. |
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FAQs
Q1: How do governance tokens gain value?
A1: Through utility (voting, fee capture) and ecosystem growth.
Q2: Can small holders influence decisions?
A2: Rarely—large holders dominate governance votes.
Q3: What’s the biggest risk?
A3: Over-issuance during crises (e.g., MakerDAO’s debt auctions).
Conclusion
Governance tokens power DeFi’s decentralized decision-making. While their value hinges on protocol adoption, metrics like PE ratios help assess investment potential.
Final Tip: Diversify and research before investing.
⚠️ Disclaimer: Crypto investments carry high risk. This content is educational—not financial advice.