Three Blockchain Governance Debates

The 2018 BCH civil war got me to think about governance.

Why? Forks are governance problems. Coordination problems. How can a decentralized network make good, fast, long-term decisions that keep the community aligned? How can global stakeholders network make decisions without splitting themselves?

I don’t have good answers. Maybe no one does. But there are three interesting debates you should mull over.

1. Governance is the killer feature vs. Minimize argument surface
   
   One of the main theses at New York-based crypto VC firm Placeholder is that good governance allows crypto networks to quickly resolve arguments and adopt new features. “With good governance, you can have any feature you want.”
   
   On the other hand, Elaine Ou beautifully commented on Bitcoin’s advantage when it comes to governance. “The more functions a currency has, the more things there are to argue over. Bitcoin’s uncompromising focus allows it to serve a broader user base.”
   
   In theory, I agree with Chris and Joel. In practice, it’s extremely difficult to judge a priori how good a governance system is. One can only draw conclusions a posteriori, after many years, decades, or even centuries of empirical evidence. I’m a big fan of the thesis that a crypto network that does not require much governance, such as Bitcoin, is one that actually has good governance.
2. On-chain governance vs. off-chain governance
   
   On-chain governance refers to the idea that a network’s blockchain nodes automatically upgrade through an on-chain decision process, e.g., votes by block producers.
   
   Proponents of on-chain governance like that it 1) makes collective decision-making more efficient, and 2) does not require a hard fork.
   
   Detractors like Ethereum’s Vlad Zamfir argue against on-chain governance on the grounds that it shifts the balance of power to block producers from full node operators and every day users, disenfranchising the latter. (It didn’t take long for his argument to play out publicly, in the form of alleged collusion amongst EOS block producers.)
   
   In off-chain governance systems like Bitcoin and Ethereum, full node operators provide an important check and balance to block producers. This is how BCH ABC can have a lower hash power than BCH SV, while the market still believes it will win.
   
   It’s a balance. Onchain governance and offchain governance simply make a tradeoff between efficient decision-making and decentralization of power. While on-chain governance doesn’t require hard forks, it also won’t be able to prevent network splits when there is a strong enough disagreement.
3. Centralized governance vs. decentralized governance
   
   This leads to the third debate. What is the right balance between centralization and decentralization when it comes to governance? Decentralization is, after all, a spectrum, rather than a binary state.
   
   Decentralization ensures monetary policy is harder to change, transactions are tougher to censor, assets are harder to seize. But decentralization comes with drawbacks. It’s harder to reach consensus around network upgrades.
   
   Should everyone vote their stake? Should we elect philosopher kings? Run these protocols more like companies?
   
   We’ll get back to you when we have an answer. What do you think?
   
   Qiao Wang
   
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