Check out our new platform: https://thecapital.io/DeFi is one of the fastest-growing sectors in blockchain technology. With a huge upsurge in the adoption of DeFi with regards to cryptocurrency, it has established itself as a complete game-changer.In comparison to centralized banks, DeFi has been projected as a secure, confidential, transparent, and permissionless solution to help yield farmers earn higher profits and accelerate their monetary growth. The decentralized nature of this ecosystem empowers investors to make deals without the intervention of central authority, corporations, or agencies that monitor and approve the business functions. Smart contracts are employed to make sure the deals are executed appropriately.But if there is no single authority, then who takes all the decisions in the platform, like fee structure, strategies?To ensure transparency in the system, DeFi platforms follow a democratic governance model based on a liquidity pool. In such a model, the power to make decisions is distributed among the yield farmers instead of restricted to few. DeFi platforms provide governance tokens to investors. While the platform is developed by a specialized team, the ultimate aim is to pass over the authority to the token holders.What are governance tokens?The cryptocurrency industry has experimented with different token models to establish multi-sided networks with long-term focused investors. As a result of this experimentation, three distinct token models have been introduced — free tokens, governance tokens, and collateral of last resort tokens, however, often these features are combined.Let’s discuss governance tokens in detail…Governance tokens give holders the right to influence the existing strategies and create new ones. One of the biggest advantages of these tokens is that they give the holder a direct stake in decentralized finance platforms. Those who receive tokens have the influence to decide how platform economics transform over time.So far, DeFi governance tokens have been used to vote on various proposals like which assets are supported, collateralization levels for certain assets, and where protocol fees should be directed.Concurrently, governance tokens are used as a method of increasing the incentives available to investors. In this ever-changing market, the governance model plays a key role in determining the future of any DeFi platform. Thus, a strong, comprehensive, and progressive governance model is a prerequisite requirement.APY.Finance, an automated yield farming platform, recognizes the importance of an evolutionary governance model. Therefore, the company has integrated a democratic model that ensures security and transparency in any cryptocurrency transaction. Based on a multi-layered structure, this model has been meticulously devised to strengthen the future prospects of the platform. To create an ‘incentive-powered liquidity pool’, instead of a static system, APY.Finance will roll out its governance model in different phases backed by a detailed and practical approach.In the first phase, DeFi experts will put together the code to create result-oriented yield farming strategies and will carefully monitor for time-sensitive incidents. At the same time, to begin the process of democratization, the developers will launch a liquidity mining reward program for yield farmers. This means that a significant part of the APY tokens goes to the community.Once this phase is completed, by distributing APY token, the developers will move forward towards the process of progressive decentralization. This would help developers to achieve their visionary goal of a 100% community-owned platform.The APY governance token will give the community complete empowerment and will get the holder’s right to initiate a proposal on platform parameters, such as strategy risk score changes or even yield allocation, and vote on the same. The final decision will be taken based on the majority of the votes. This true democratic spirit will be reflected in each decision taken collectively by the pooled community. The community will have the power to evaluate risk scores for each strategy and distribute funds based on risk rating.The company believes that the APY governance token will have a magnificent power over the capital by evaluating risk scores, proposing changes to strategies, and introducing new strategies.https://twitter.com/thecapital_iohttps://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/hrefRole of Governance token in DeFi ecosystem was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.