Governance tokens are used to give voting power and rights to the community based on democratic votes on a blockchain project. Using these tokens you may trade, stake, or do yield farming. But the primary function is that the owners can influence the future of the protocol by being involved in the decision-making process. It gives its holders the right to vote on smart contract changes.
Why do we need them?
It encourages early adopters to support the project by providing liquidity for rewards and to participate in the growth of the protocol. There is regular feedback from the involved ones, which allows us to discuss and know if something is wrong. It allows the token to increase in value and raise the project team's funds for future investments. Furthermore, the protocol will have an important network effect, which will encourage holders to maintain their positions, thus protecting the project and increasing the token value.
Kromatika will be launching its governance token in Q3 2022!