Blockchain Governance And Why it Matters
When we think of the word “governance,” we generally associate that term with the government or corporate governance in the business sector. In both cases, the term describes how an organization adheres to or amends rules that dictate the organization’s behavior. For example, in government we elect officials who represent our interests-advancing our causes and giving us a voice at the city, state, and national levels. In corporations, shareholders appoint board members who make decisions, hiring/firing executives who drive the direction of the company. Whether those executives and elected officials follow the agenda spelled out by shareholders and the electorate however, is up for debate.
Blockchain Governance And Why it Matters
by Justin Ho,
Head of Operations at bitsian
In the blockchain space, governance has begun to take a larger role in the evolution and maturation of the ecosystem. Acute awareness of governance mechanisms was perhaps dragged into the spotlight by the announcement of Libra and the Libra Association. This association is comprised of founding members as well as non profits around the world that promote and develop the ideals of Libra (founding members contributed $10mm to back the initial pool of assets). Changes to the Libra blockchain protocol require a two-thirds supermajority of Libra Association votes which is currently comprised of 28 members with equal voting weights. The Association is scheduled to expand to 100 members in the future through yet to be determined means. Seems democratic enough right?
Voices Need to be Heard
Now suppose you converted your life savings from USD to Libra, because almost everyone (~2.3 billion active users) is on Facebook and theoretically it’ll make transactions between parties quicker and cheaper. Everything you’ve ever worked for and saved up for is now in the hands of Libra. The Libra Association then decides to devalue the coin, or they decide to stop serving the country your overseas relatives reside in, or they stop serving a certain religious group. What recourse do you have? None. You didn’t have any say in dictating the governing policies. In fact, you didn’t even get to decide who got to join the Libra Association in the first place
You are fully economically invested in the system and yet hold precisely zero influence over the direction of Libra’s future development.
Is that just? Is that fair? At least with politicians and company board members, you can vote others into office. With Libra, you wield no real capacity for voicing your dissen
This is why governance has become an increasingly important topic. The history of blockchain forks such as the Ethereum/Ethereum Classic fork which split the community over how to handle large scale theft of coins and subsequent blockchain “rollback”, as well as the Bitcoin/Bitcoin Cash fork which divided the community over blockchain scalability implementations underscore real world issues that are contentious at times and can serve to fragment a growing user base.
The intention is not to advocate a static code base.
Rather, we want to promote the evolution of blockchain technology via a Darwinian approach where the survival of the fittest chain leads to the best overall experience (however one may define “best”).
There is possibly no other platform currently in existence that allows so many global users to cast their voice in an immutable data structure, free from forced influence, and free from sovereign borders. Admittedly, it may be chaotic in its raw unrefined state, but the capacity to distill that noise into meaningful results, to give everyone direct input into a product/process is nothing short of unprecedented. In order to ensure that the chaotic nature of a decentralized network does not drown out their users, a number of blockchain governance mechanisms have emerged. In subsequent posts, we hope to share with you a few of these processes, their pros/cons, and why some may make more sense for one type of user over another.
Get in touch with me at email@example.com with thoughts or questions. Eager to hear from you.
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