Why Governance Token Value Accrual Is a Myth for Most Appchains

Governance tokens are non-productive assets. They lack a direct claim on protocol cash flow like fees. This separates them from the fee-generating utility of the underlying chain, creating a fundamental valuation gap.

Appchain governance is a cost center. Managing upgrades, treasury, and parameters requires work. For most projects, this operational burden provides negative, not positive, economic value to token holders.

The market has priced this in. Look at the fee-to-token-value ratio for chains like Arbitrum and Optimism. Billions in fees have generated minimal sustainable price appreciation for their governance tokens, ARB and OP.

Evidence: dYdX migrated to an appchain, separating its fee-generating perpetuals product from its DYDX governance token. The token's value remains speculative, untethered from the core business revenue.

Governance is not cashflow. Token holders vote on upgrades and treasury spend, but this does not create a direct revenue stream. The token's value relies entirely on speculative demand for its utility, not on capturing protocol fees like a traditional equity dividend.

Fee abstraction destroys capture. Modern appchains use gas fee abstraction and account abstraction to subsidize user costs. This improves UX but redirects fee revenue to sequencers or validators, bypassing the governance token entirely. Chains like Arbitrum and zkSync implement this by design.

Value accrual requires forced usage. Real value capture happens when an asset is a mandatory input for a system's function, like ETH for Ethereum gas or SOL for Solana compute. Most appchain governance tokens are optional administrative tools, not required economic bandwidth.

Evidence: Examine dYdX's migration from L1 to an appchain. Its DYDX token still governs, but the chain's staking and fee revenue accrue to validators in USDC, not to token holders. The promised 'value accrual' narrative evaporated post-migration.

Governance tokens are coupons, not equity. They grant protocol parameter votes but no claim on fees or revenue. This decouples token price from fundamental protocol usage, creating a speculative feedback loop reliant on perpetual growth.

Real power resides off-chain. Core development teams, multisigs, and foundations retain ultimate upgrade authority. DAO votes often ratify pre-decided technical roadmaps from teams like Offchain Labs (Arbitrum) or Optimism Foundation.

Evidence: The veToken model from Curve/Convex demonstrates that concentrated, rent-seeking governance has value. For generic appchains, delegate apathy is the norm; voter participation for major proposals rarely exceeds single-digit percentages of the token supply.

Governance is a feature, not a business model. Token voting on treasury allocations or parameter tweaks does not create cash flow. The protocol's core revenue from fees or MEV flows to the chain's native asset (e.g., ETH on Arbitrum) or to the protocol's treasury, not to the token holder.

The value capture is misaligned. An appchain's native gas token (like ARB or OP) captures the fundamental demand for block space. The governance token is a secondary political instrument. This creates a perverse incentive structure where token holders vote to enrich the base-layer asset, not their own.

Successful tokens require a direct claim on cash flow. Look at Frax Finance's veFXS model or MakerDAO's MKR burn mechanism. These are value tokens because they are the direct recipients of protocol profits. Most appchain governance tokens lack this fundamental plumbing.

Evidence: Arbitrum's ARB token has zero claim on the network's $100M+ annual sequencer revenue, which accrues to the Arbitrum DAO treasury in ETH. Governance is a liability, not an asset.