There are multiple layers of the blockchain that get ignored. The consensus layer is all the rage, with everyone talking about different alternatives to PoW and how theirs is more eco-friendly or provides faster TPS, but this article will focus on one of the other important layers, the governance layer.
I do not work with any of the companies mentioned in this article and have received no compensation for my opinions or content.
This is a question we’ve heard our entire lives.
When something goes wrong, we immediately think “Who is at fault” and “Who is going to fix it”.
At a restaurant, if you receive poor service or horrible food, you ask for the manager. When you have an issue with the plumbing at your rented apartment, you call your landlord. In almost every facet of life, we expect ownership, responsibility, and accountability. These are also what we refer to as centralized systems; where the control of decision making and issue resolution rests in the hands of a specific entity.
The big deal around the blockchain is that it enables the creation of decentralized systems through public ledgers. By having databases that are transparent in the way they function and fair for all to access, we can start to create new organizations that are not controlled by anyone one person or group. This prevents single points of failure, abuse of power, and corruption. The trade-off of having a decentralized system is in decision making. In a centralized system, its very easy to see how this is accomplished; the person or people “in charge” make a decision and execute on it. In a decentralized system, how do we come to agreement when we don’t know who is in charge?
The massive shift in economics that comes with Bitcoin is it’s decentralization. For the first time in history, there is a man-made store of value that is not controlled by an entity. This is valuable because of trustlessness; we can rest assured that the ironclad mathmatics of the Bitcoin consensus guarantee a limit to the issuance of bitcoins; no more than 21 million. But if no one controls or owns Bitcoin, how do decisions get made? Who is responisble for choosing bigger blocks vs. segwit? Where is the Bitcoin building and who can I complain to when the price goes down?
It might seem funny but these are real questions I still get today. There is no building, there is no person. All decisions are made by the users of the system. To be more specific: “bitcoin” is decided by the software version that the most nodes are running. The popular misconception has been that the miners control Bitcoin, but that was proved to be false during the scaling wars — where the nodes and exchanges were able to see that their vision for the future was adopted by the majority — and the big blocks group eventually turned into the present day Bitcoin Cash.
Governance is much more complex than just deciding what choice is best; it is also about deciding “What is our Main Objective”. In Bitcoin’s case, it’s the decision between Concrete Trustlessness vs the Pursuit of Value Maximization. Pierre Richard has a fantastic discussion on Bitcoin’s Governance that is essential to understanding how important a well formed governance layer is to Bitcoin (and all blockchains for that matter).
One of the great things about decentralized systems is that disagreements are very visible. Even in the case of Bitcoin and Ethereuem, not everyone agrees that these systems have fair governance models.
“Ethereum’s shadow-government hard-forked to fix the DAO hack. Bitcoin mining pools voted on which fork to support when a software upgrade introduced a long unintended fork. The Ethereum foundation has used Trademark law to define the official version of the chain that exchanges are allowed to list. Segwit was accepted due to a summit of community leaders who voted on a compromise that included increasing the block size only to be betrayed due to the phased-rollout plan that later abandoned big blocks.”
EOS uses a separate layer of 6 centrally appointed arbitrators who make decisions on cases presented to them and send their decisions to the final decision makers — the 21 Block Producers of EOS. This system allows for there to be more expertise in making decisions, but it’s fundamentally a centralized decision making process. Xu Yin, CEO of Oath Protocol, also sees drawbacks:
Limiting the number of arbitrators on the platform and requiring specific expertise and training also leads to a very low case turnover, making it an unscalable and slow solution. In addition, the arbitrators charge fees for their time and expenses associated with resolving cases, leading to high fees and making it a bad fit for low-value cases, e.g. below $1,000.00
By “holographic consensus” we mean that a deciding group allows any subset, a smaller party within itself, to make decisions on its behalf, under certain conditions. A good holographic consensus guarantees a high degree of coherence, and thus strong correlation of sub-group decisions with the will of the greater majority.
One of the critical parts we discussed earlier was deciding what is the focus of the community and which proposals are worthy of discussion. DAOstack handles this with the use of their GEN token. GEN holders stake the proposals they believe deserve attention, and if their proposal passes, they earn more tokens.
In this model, DAOstack architect and CEO Matan Field says that their platform acts as “the ground from which a whole ecosystem can grow and thrive”. The belief is that each kind of proposal is a unique case and will require its own resolution system to deal with each issue. The DAOstack is a collection of modules that allow developers to refer to which features they need in their issue resolution. The first example of this is Alchemy, “an intuitive user interface for budgeting and resource allocation for decentralized organizations.” With this module and more to come, DAOstack can create an ever growing library of decision making matrices that can be deployed by communities for the specific use cases that fit their needs.
It’s definetely a forward-thinking model that will require more attention in the future. I’m still unsure how the voter mechanics are handled and where this sits in comparison to EOS’s fixed 21 decision makers. There is alot of flexibility, but that might be too much for individual communities to sitdown and figure out for themselves.
By building out the toolset for executing on decision making faster, DAOstack is positioning itself to potentially win on multiple fronts. If the innovation of the attention directing GEN token docent succeed, it might be the individual modules that support a different governance mechanism that end up being used. You can learn more about the DAOstack here.
Each case is assigned 11 jurors that select the case based on their expertise and the reward pool. If the decision requires a highly experienced group to make judgement, the reward pool will be larger to compensate them accordingly for their professional opinion. Smaller cases/proposals will still be able to be decided on, but with a less experienced group or one that is still trying to build up its jury reputation.
This marketplace of cases structure addresses a few issues we had with the other systems. The decision making attention can be addressed by supply/demand — the more important decisions can afford to attract better juries and jurors will select the cases they are interested in or believe they have the ability to judge. The counter against this that less funded projects/proposals will not get visibility or the decision making they need instantly.
What’s immediately appealing about this system is the fact that it is modelled on something we know. The addition of an incentive model and a reputation metric makes this an improvement on our existing legal system, by giving compensation to successful jurors. Instead of trying to dodge jury duty, there will be jurors who quickly welcome as many cases as they can handle. Xu Yin believes this a superior model because “Allowing a community of ordinary users to resolve disputes based on their own experience and reasoning would introduce fairness and credibility to the process that is often plagued by bias, conflict of interest, and even simple mistakes.”
I’m still not sure how the marketplace model can guarantee randomness in juror selection. This is an area that I’d want further discussion, because the Anglo-American Jury system explicitly works because of randomness. If there are jury reward pools that are so high that only a few professional jurors can access, you risk perpetuating the existing problem of elite decision makers.
The stark contrast to the other governance models is that the Oath Protocol is explictly built for governance, dispute resolution and nothing else. The token is used to compensate jurors for their time and the reputation system keeps a history of how often jurors make the correct decision. NEM, Quarkchain, and QTUM are all official partners and shows that the future is bright for this model of governance.
Oath just launched its Juror sign-up a few days ago and I’m looking forward to being part of a decentralized jury in the next few weeks. If you are interested in becoming a juror too, here is my referral link.
There are multiple ways to go about governance and, just like the decentralized systems that birthed them, mulitple layers to the process. We know that it’s not only about deciding what is the correct decision, but also choosing which proposals deserve our attention, and what is our overall guiding goal. This lack of quick and decisive action seems like a small price to pay for the trustless, transparent, and secure systems that blockchain brings.
Thank you for reading and I hope you enjoyed this article
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