The decentralized nature of blockchain has led to a multitude of governance options that exist on the market today. Having a governance system may seem counterintuitive for currencies that are supposed to be open for change by all users, but can having a governance entity help stop malicious behavior, and optimize currencies? And if so, what is the best kind of system? Four panelists who have experience with different types of governance models joined David Wachsman, CEO of Wachsman, to discuss what he calls “the biggest problem we have today in blockchain.”
Arthur Breitman defines governance as “a process that companies use to make decisions about the use of a shared resource.” These decisions are about security, innovation, and other technical aspects of the blockchain. As blockchains are ultimately shared resources (although individuals own their own coins), there needs to be some kind of structure for being able to change them. Emin Gün Sirer emphasizes that blockchain governance is more difficult because they must be decentralized. Typically, the creator of the currency defines a set of rules, and the only way to change them is by forking, or creating a new version of the currency (as was the case for Bitcoin).
End users are ultimately the ones who benefit from blockchains, although they aren’t often experts in the field. Miners are essentially the only people who can actually change a block, therefore the preferences of end users are usually unheard except for on forums. Emin Gün Sirer sees this as a big problem. He noted that there is a “big schism” between Bitcoin users and miners, and that he has “never seen a community so hateful towards some of the core people who do the most important work.” However, Arthur Breitman argues that who should make governance decisions is “not a should question.” He says that the reason for governance is “to make good decisions” and “to have a system that’s technically good.” If any end user makes a change to a currency, just because it gives them a “warm fuzzy feeling” that they are part of the decision, it most likely won’t be as good of a decision as if an expert did it.
Forking has its benefits, because users can choose which protocol they prefer and the amount of popularity each version gets is therefore based on popular opinion. However, the option to fork can potentially lead to a total lack of structure if there are too many forks. There needs to be some kind of system in place to prevent that and to make the best decisions. Primavera de Filippi said that while she thinks that forking is good because it allows for experimentation, it is also an “exit strategy.” Jenna Zenk agrees, adding that forking takes away from the network, which is important for blockchain.
There was a bit of disagreement amongst the experts about whether or not core development teams are too centralized to be in the blockchain space. According to Primavera de Filippi, core development teams might be necessary just for efficiency’s sake, because those experts are easy to identify, but listening to other affected parties is important as well. However, Emin Gün Sirer opposes that idea, arguing that core development is a centralized term that “doesn’t belong in the community.” He thinks that there should be a governance mechanism, but a decentralized one, without a gatekeeper.
Creators of currencies can decide how much can or cannot be changed from the beginning, and also implement new rules after the currencies have been tested out over time. Because the currencies are new, there is a lot of room for experimentation at different levels of governance. At Tezos, for example, they try to make what can be changed as narrow as possible, in order to, according to Breitman, “maximize the type of things you don’t have to make decisions about.” That way, people can decide to fork, or use coins in different ways, and only very important structural concerns should be agreed upon by everyone.
The panel ended with a debate about which implementation of a DAO has been the best. They all agreed that DAOs are worth experimenting with, and the existing ones have taught the industry a lot about governance. Emin Gün Sirer describes DAOs as being “fantastic in showing everything that can go wrong,” because of the Ethereum hard fork. Jenna Zenk argues for the Aragon framework on Ethereum, that helps people create and manage DAOs. Primavera de Filippi explains how her project, DAOStack, aims at governing the DAO by “separating the governments into sense-making and decision-making entities.”
This was only a sample of the takeaways from the “Governance: the Path to Decentralization” panel. The full transcript of the panel is available below for more insights.