Ethereum (CRYPTO: ETH) co-founder Vitalik Buterin has slammed the concept of governance tokens, stating that such tokens should not be considered as “valuable”.
What Happened: According to Buterin, the idea that a token should be valuable because it conveys governance rights is “pathological.” Buterin tweeted that people are buying governance tokens in the hope that “someone will buy” from them and “will be able to twist the protocol” in their favor in the future.
The notion of "governance rights" as a narrative for why a token should be valuable is pathological. You're literally saying "I'm buying $X because later on someone might buy it from me and a bunch of other people to twist the protocol toward their special interests"
— vitalik.eth (@VitalikButerin) November 29, 2022
A governance token is an ERC-20 token on the Ethereum network used as a digital voting chip for community proposals. A person's voting power is determined by the number of tokens they hold.
Vitalik is concerned that governance tokens could be stockpiled or sold for profit, thereby relinquishing control of protocols to entities, an idea contrary to decentralization. He is also opposed to speculating on the future value of governance tokens based on perceived future value.
“As a regular individual, 'pay $500 to get a 0.0001% chance to influence the outcome of some votes' is just not a good trade. The only people for whom it is a good trade are multimillionaires and hedge funds (including attackers),” he tweeted.
Price Action: At the time of writing, ETH was trading at $1,271, up 7.87% in the last 24 hours, according to Benzinga Pro.