Historically, the concept of governance has always been a polarizing topic, be it the governance of a country, company or any other influential institution. Overall, blockchain is an ecosystem of technologies, merchants, companies exchanges, developers, miners, and users. There are several critical decisions to be made within this ecosystem. Blockchain like any other human ecosystem must be governed. This article aims at shedding some light on blockchain governance, its participants and frameworks.
Blockchain needs governance systems to manage funds, update code bases and define the goals of the network. Most often the above-noted issues elicit significant contentions amongst stakeholders. It is therefore imperative that the blockchain network has a proper framework for making a decision on these issues.
Participants in Blockchain governance.
Every blockchain network has a central code repository that holds the software for maintaining and implementing protocols. These repositories are managed by a team of developers who have the ability to add or remove certain code. Anyone can submit a code update proposal. After an improvement proposal is submitted, discussed and reviewed, the developers agree on whether it should be implemented or not.
Full nodes refer to any computer within the blockchain network that runs a full version of the blockchain. They are the backbone of any blockchain. Overall, a full node must have a full copy of the network ledgers as well as the peer to peer routing protocols. All miners generally use full nodes for mining, however, there are some full nodes that do not participate in mining. For any changes to be effected on the network nodes must update the new codes through a soft-fork or a hard-fork.
Most blockchains have an organization or foundation(in some case LLC) that is responsible for managing the network funds and reimbursing developers. Most blockchain foundations are non-profit, however, some cryptocurrencies like Ripple are managed by a profit-making company. The foundations are responsible for providing funding and steering the crypto’s overall direction.
Types of blockchain governance.
This model is similar to traditional governance structures, whereby there are attempts to strike a balance between the stakeholders in the network. The community stakeholders include miners, users, developers, and business entities. Generally, off-chain governance is relatively centralized since it excludes users with little technical knowledge and financial muscle.
Off-chain governance offers disenfranchised users the flexibility to execute hard forks for decisions they do not agree with. While this is mostly a radical decision, it is an important exit strategy for those who do not believe in the directions taken by the network. Overall, off-chain governance takes time and is often a culmination of broad contributions. The success of Bitcoin development acts to show the benefits and resilience of this model of governance.
On chain-governance is a new iteration of blockchain governance that allows direct democracy via an on-chain voting process. Through on-chain governance, token holders are allowed to vote and decided on major developments and changes on the network. While this is a novel shift to complete decentralization it also creates some major challenges for the community. Since time immemorial, direct democracy has elicited concerns of mob justice and mob psychology.
Over and above, the question of governance is a critical one for the crypto-world if it indeed aspires to reach a point of universal acceptability. As the industry continues to evolve industry players will continue to mull over which way to go. Which way is taken will have a significant impact on how the crypto-world will look like going into the future.