Decentralized economy is the establishment of an open DeFi

Dogecoin, the "joke" currency that made millionaires overnight; CryptoKitties, cartoon cat digital trading card, priced at more than $100,000; Pringles "flavor" only exists as an NFT digital product, but its price is far more than it can be French fries to eat.

On the surface, these blockchain-based projects sound ridiculous, confuse the public, and are a mockery of financial institutions. They are pranks and pranks that can sometimes make money. But if you can see through these jokes, jargon, and stupid names inside, you will find that a series of important changes are taking place in the field of encryption.

A community of developers and investors is building a solid and sustainable infrastructure to support a new economy: a decentralized economy.

Part of the decentralized economy is the establishment of an open and decentralized financial system (DeFi).

DeFi is still in its early stages and is evolving in a productive manner. There are too many ongoing project experiments, but it is still impossible to reliably predict what will happen next. However, the growing market shows that the basic innovation of the blockchain and the innovation of cryptography and software will continue to exist.

Although the focus on cryptocurrencies is mainly focused on price speculation, the larger game is still going on. The decentralization and automation of cryptocurrency is a transformative model that brings new ways to create and transfer value.

When artificial intelligence, the Internet of Things, robotics, and cryptocurrency converge, innovation clusters create possibilities for new things-autonomous or autonomous business processes.

The rules of this new system are currently being written, usually by users who hold "governance tokens". This can be where the rule writers provide opinions on the development direction of these systems and have voting rights.
The value of voting

There are two important concepts in the architecture of the cryptocurrency ecosystem: decentralization and on-chain governance. Blockchain is an autonomous, peer-to-peer ledger technology used to manage and record transactions.

Blockchain is built for accuracy, transparency, and autonomy. It eliminates the need for third parties or charging intermediaries—verification work is built into the software. Users do not have to deal with gatekeepers or toll collectors, nor do they need to apply for permission to use this public infrastructure.

Permissionless access to public blockchains has fundamentally changed our architecture for designing financial transactions and financial system infrastructure. Because the blockchain is immutable, which means that you cannot edit or change records, this means that trust in third parties is no longer needed, and this innovation itself reduces costs and friction.

Then there is on-chain governance, which mediates the setting and revision of rules governing activities on a particular blockchain. This can be used to build a decentralized autonomous organization (DAO) or DeFi system.

Our current financial system relies on trusted intermediaries, such as mortgage brokers or bank presidents, who make agreements and rules to protect the institutions themselves and consumers. In a decentralized, blockchain-based financial system, this process of writing rules is usually done through the use of on-chain governance.

Early adopters of the new DeFi service can purchase (or obtain) governance tokens, which provide holders with voting rights on how to maintain, upgrade, and manage the blockchain. One token, one vote.

These tokens often play a role after an encrypted network is established. Most blockchain projects start with so-called "off-chain governance," which can mean everything from developers trading emails about how to change the code to founders passing notes passed on in GitHub.

The people who established the currency formulated a set of founding rules. After they were set, many people would continue to establish on-chain governance and use governance tokens.

Once this switch is flipped, the governance token becomes very valuable. On-chain governance is more formal and democratic than off-chain governance. It allows each governance token holder to have the right to vote on decisions and choices that guide a particular blockchain ecosystem.

Some ecosystems may vote on features to be released. It may be the setting of monetary policy or the reserve requirement of loan collateral. Or, it may be what type of consensus mechanism the blockchain uses, which affects the performance, resource usage, and security of the blockchain.

The on-chain governance structure aims to maintain transparency, because everyone can see the proposal, see the calculation of the voting results-and avoid human-led background transactions.

Although the main focus of cryptocurrency investors so far has been speculation on appreciation, as cryptocurrency investment matures, governance tokens may become more important and valuable. The reason is quite simple: as the value of encrypted networks increases, so does the value of governance rights.

Because token holders must hold encrypted assets in order to continue to vote for the benefits of that particular ecosystem, investors will want to obtain and hold more tokens so that they can continue to participate in management. As long as the ecosystem makes good decisions and provides good, competitive services, tokens may accumulate more value over time.

We have similar things in the traditional financial system. If traditional equity provides rights or requirements for cash flow after paying all business expenses, then governance tokens are similar to equity in a way, because they give the right to control the encrypted network and its financial direction.
Right token

If you have a mobile phone, you are a potential investor or user of cryptocurrency. But it's not as simple as opening a Coinbase account: smart investors will ignore the gimmick products that make news and spend time educating themselves about the basic principles of cryptocurrency.

Because they carry the right to help shape the future of cryptocurrencies, as cryptocurrency investments become more mature, governance tokens may become more important.

We are entering a new world, doing more and more things with fewer and fewer things. This may be partly due to technology, because innovation is at the core of the economy. The world is becoming more automated. As this trend continues, we will need mechanisms to manage the boundaries between humans and machines.

In DeFi, the on-chain governance system and the use of governance tokens look quite promising. Crypto is still in adolescence.

The only encrypted asset that gives the holder clear rights is the governance token. Let us participate instead of guessing. Governance tokens give investors not only equity, but also a voice. As we have seen throughout history, voting rights are a powerful thing.