Blockchain Governance

 

Photo by Bill OxfordonUnsplash

SpaceChain’s CEO Zee Zheng sat down for an exclusive interviewwith Tim Draper, the noted venture capitalist, in which Draper outlined his thoughts on the near-term, long-term, and super-long-term applications of space technology. He believes the near-term use-cases will be all about surveillance, the long-term will be about governance, and the super-long-term will be about human habitation. We will explore each of these in a blog series inspired by Draper’s vision.

As humanity looks toward the heavens for future expansion, we will need to pack our bags with a toothbrush, a change of clothes, and all the value transfer protocols and smart contract capabilities we can. As blockchain becomes an increasingly important technology, we will need the space infrastructure to support it as we move out into the solar system. Along with those responsibilities comes the long-term focus of blockchain governance. So what is blockchain governance?

Investopedia defines on-chain governance as “a system for managing and implementing changes to cryptocurrency blockchains. In this type of governance, rules for instituting changes are encoded into the blockchain protocol. Developers propose changes through code updates and each node votes on whether to accept or reject the proposed change.” 

The foundations of on-chain governance stem from the idea that in the digital world, activities of individual entities within a network could be given parameters for interaction that all participants would need to abide by. Essentially creating code that mimics a constitution, a judiciary, methods for upgrades like a legislative branch, and other functions of governance that usually reside within a more malleable social context. This is called the “code is law” idea, codified hereby Lawrence Lessig. 

The main advantage of on-chain governance is the codification of rules that govern the entire network and can be known by all participants in the network. This is obviously useful in setting expectations and limits for network participants. But having rules and having all participants informed about the rules is also one of the main flaws of on-chain governance because once rules are set, bad actors invariably set about trying to manipulate the rules to their advantage. 

Another challenge for governance is user participation. If a critical majority, however a protocol may define that, do not utilize their voting power then the protocol ends up being controlled by a small number of participants, often negating the point of decentralization in the first place. Several major blockchain projects such as EOS, Tezos, Dfinity, and Decred have introduced on-chain governance centered models where governance is an integral part of the protocol. 

Off-chain governance more closely resembles traditional governing structures. Established cryptocurrencies such as Bitcoin and Ethereum use this model of governance through a balance (semi-balanced?) of power between core developers, miners, users, and business entities as part of the community. Bitcoin’s sustainability thus far can largely be attributed to its recognition of the need for a slow evolution that is composed of gradually implementing improvements,” said Brian Curran of Blockonimi.

He added: “On-chain governance solutions for blockchains primarily implement some form of direct democracy through on-chain voting mechanisms that are optimized for that specific network. One of the primary concerns of bootstrapping on-chain governance is the historical precedent for governance in general. Governance models clearly take a long time to develop. Particularly considering that managing hierarchical governance is challenging in itself, extrapolating governance to a novel technology of decentralized users presents another problem entirely.”

Ultimately rules set down by quill, by code, or by social contract are only as good as the thought that goes into them and only time will tell if off-chain governance can become successful on-chain governance. But regardless of the method of governance, as a blockchain infrastructure company, SpaceChainwill be there supporting the protocols from multiple jurisdictions around the globe and with many international partners. We believe the new space economy should be a robust global venture with many countries and stakeholders represented, so regardless of shifts in political policies we are able to attain a stable push toward this new future. 

If you’d like to learn more about blockchain governance in general, here are some resources to get you started.

Blockchain Governance 101by Vlad Zamfir, co-founder of the Ethereum protocol

Making Sense of Blockchain Governance Applications– Josh Stark

Vitalik Buterin Discusses On-chain Governance– Vitalik Buterin, creator of Ethereum

It’s Too Soon for On-Chain Governance– Michael J. Casey

On Chain VS. Off Chain Governance: The Ins And Outs

 

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