On-chain Governance
Introduction
On-chain governance is a means of upgrading blockchain protocols using on-chain voting. This differs from off-chain governance which requires agreement of all stakeholders (core developers, node operators, miners, and users) to update their software. With on-chain governance, anyone can propose a code change into the protocol and then token holders vote during an encoded voting period on whether or not it should be integrated. This system offers a voice to all token holders and provides an efficient way of settling disputes.
Proponents argue that on-chain governance would create binding agreements, thus, eliminating any uncertainty surrounding changes and ensuring that any code change that was successfully voted for will be implemented. On-chain governance also brings a sense of accountability since all updates regarding a decision can be found and tracked, leaving an audit trail for the public to freely access. Additionally, there exists a high level of guaranteed, absolute transparency which, not only reinforces the ideas of consistency and fairness, but also gives users the opportunity to determine if a certain blockchain community is right for them to join before they commit to anything since they can access their chosen decision making process.
Two disadvantages that have been discovered through experimentation with this system are low voter turnouts and voter manipulation by powerful token holders. Furthermore, many fear that this system benefits powerful token holders, allowing them to influence future decisions that will focus solely on profit and not on achieving the goals of public blockchains.
Suggested Reading
The Crypto Governance Manifesto by Steven McKie
Why on-chain governance by Phil Lucsok
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