Uncover the advantages of on-chain governance | Polkadot Gov2 leads a new direction in Web3 governance

While we are developing and cooperating in the blockchain, enjoying the benefits brought by the blockchain, have we ever thought about how a comprehensive governance mechanism is acting as a guardian to ensure the efficient operation of applications and programs on the chain? A more open, interactive, and inclusive blockchain environment is closely linked to a superior, iterative governance model.

From off-chain governance in early blockchain developments to on-chain governance adapting to the transition from Web2 to Web3, the discussion and controversy about the blockchain governance model has always been the focus of industry insiders. A good governance model should not only focus on the establishment of consensus protocol, but also provide an effective incentive model to promote governance operation. We will focus on the characteristics of off-chain and on-chain governance, appreciate Polkadot’s spirit of pursuing excellence in governance mechanism, and discuss the governance magic weapon of blockchain industry in the Web3 era.

Off-chain Governance:

Openness and Control Controversies

The original blockchain governance starts from off-chain governance, and the representative blockchain to adopt off-chain governance is Ethereum.

Ethereum, as a public blockchain, is permissionless for application creation and transactions, and anyone can participate. The current governance used by Ethereum is conducted off-chain, with the participation of all stakeholders, and any decision to change the protocol occurs through an informal process of community discussion and, if approved will be implemented in code.

Stakeholders involved in governance in this community include Ethereum holders, application users, application/tool developers, node operators, EIP authors, miners/validators, and protocol developers. Ethereum uses EIP to drive new governance proposals and protocol development . These proposals are submitted to the project’s official repository and different stakeholders express their approval or disapproval of the proposals through private and community Ethereum’s off-chain governance , which is known for its openness and flexibility and has successfully withstood multiple hard forks.

In recent years, although this governance model is still used, it has brought a series of problems criticized by developers and professionals of the industry.

• Lack of governance incentives, a small percentage of core developers control the process and cause failure.
• The development process of a central group makes the community vulnerable to bribery.
• Decision-making informality allows stakeholders to compete for control through different means

On-chain Governance:

The Eager Pioneer of Blockchain

If off-chain governance has its inevitable flaws and shortcomings, how come on-chain governance has become the new governance model and is being applied by all major blockchains?

“Web3 spirals are driven not by individual project breakthroughs, but by the evolution of the entire system, including community, product, and governance. Web3 provides more user engagement through product iteration, community engagement, incentives and governance,” said Dr. Yaoqi Jia, technical director of Parity, at the Web3 conference.

The previous article talks about the blockchain Ethereum, representative of on-chain governance, however, the DAO project launched a crowdfunding campaign and was subsequently hacked and some $60 million of Ethereum was stolen in 2016. When the blockchain is changed by the will of a few, can it still be called decentralized? The hack has hit the Ethereum community hard, and people are starting to think: who has more power to govern in the development of a blockchain, the community or the developers?

Thus, this approach to on-chain governance emerged as a viable answer.

On-chain governance allows project developers (or node controllers) to be the primary force behind corporate decisions and to vote on any new development projects. This governance model is essentially a type of decentralized governance model due to its distributed decision-making characteristics — each node can vote and make decisions collectively, rather than having a central body in charge. The on-chain rewards for participating in the development process/nodes provide an incentive to participate in the voting process. Here are a few well-known blockchain projects that have adopted on-chain governance to give us a glimpse of what are the advantages of on-chain governance.

Uniswap Community

The Uniswap community is one of the largest online governance protocol communities currently, with over $4 billion in funding and $782 million in 24-hour transaction volume, and the community around Uniswap is experimenting with decentralized decision making at scale. For the first few years, the core team focused primarily on building core functionality and increasing the use of their platform.

But last year, Uniswap Labs (the core developer of the protocol) iterated new governance principles — “Sharing community ownership, developing a vibrant, diverse and concentrated governance system, actively steering the protocol toward the future and self-sustainability.”

“Uniswap Labs and the Uniswap community want the protocol and the funds to be governed by the people who use it. This formal governance system has two components: an on-chain vote on the parameters of the protocol, and an on-chain vote on the allocation of treasury funds

Tezos

Tezos is the first project to propose on-chain governance, describing itself as a “Self-amending cryptoledger” and assuming that it can evolve and upgrade without forking and continually updating itself by formalizing proposals, voting and implementing them. If approved, the updates will be used to test the network, a concept known as a “Self-amending cryptoledger”.

This on-chain governance mechanism transfers power directly to users, keeping power away from centralized organizations such as developers and mining groups. And each user has sufficient economic motivation to participate in the improvement of governance and proposals to vote, which fully ensure fairness and inspiration.

DFINITY

DFINITY’s on-chain governance is very flexible and can be seen as an evolutionary upgrade to Tezos. It allows in-chain voting on system rules and direct, retroactive changes to the ledger itself. If users don’t like the proposals, they can roll back or edit the ledger other than the governance rules themselves. While DFINITY’s governance system seems to defy the inherent “Immutability” of the blockchain, proponents claim that such a system is the reason why such an accident like TheDaoFork can be successfully resolved. DFINITY has further enhanced the superiority of the chain governance, prevented illegal content from invading the governance system, and better protected the rights and interests of the community participants.

Gov2：

Polkadot’s Superior Governance System

Polkadot, as a blockchain which also adopts on-chain governance, has similar but not identical to other forms of on-chain governance with its advantages of high inclusiveness, user-friendliness and flexibility and convenience.

Overall, Polkadot’s governance on the chain is broadly divided into three roles: Council, technical committee, DOT holders.

Council

The Board of Directors is elected by the DOT holders for a one-year term, and any DOT holder can run for the campaign.

The Council is responsible for drafting and formulating bills, as well as rejecting dangerous or pointless ones. At the same time, the DOT holders can also propose bills, which are reviewed by the Council to accelerate them to the referendum stage or be filtered out.

DOT holders

DOT holders are the equivalent of the Senate, deciding whether a referendum proposal will pass and which method of implementation will be chosen. Each DOT holder can vote to exercise his or her rights, while DOTs in pledge can also vote.

In order to prevent “dominance”, Polkadot has also set up leveraged voting, which allows DOT holders to vote with up to 6 times leverage, and the number of coins held does not directly determine the voting weight of the account to ensure fairness.

Technical Committee

After the proposal passes the referendum, it will be implemented by the technical committee.

The Technical Committee, composed of the official technical team of Polkadot ‘s, is equivalent to a government executive vote, but it would be restrained by the council.

A technical committee cannot initiate a proposal, but it has the right to accelerate the implementation after the referendum result. Once the technical committee issues an implementation, all nodes will self-upgrade.

The “Council + DOT Holders + Technical Committees” model is the governance structure of the First Version of Polkadot Ecology Edition Decentralized Governance System (v1) , which is based on parliamentary democracy. It worked well in the first 2–3 years of its launch, helping to ensure the proper use of treasury funds, maintaining rapid upgrades and deploying more vital repairs in a timely manner. Comparing to off-chain governance, it has obvious technological advancement and mechanism novelty, but it still suffers from reduced inclusiveness, diversity and impairing the voting rate and legitimacy.

Thus, the next generation of Polkadot’s governance system (Gov2) was introduced, and the transition from v1 to v2 fully demonstrates Polkadot’s dedication to excellence in its governance facilities. This new governance system adheres to Polkadot’s governance principles while allowing for a wider and more flexible range of referendums and significantly increasing the number of collective decisions the system can make. There is only one first-class decision-making mechanism in the Gov2 system: the referendum, and there is no explicit limit to the number of referendums open for voting at any one time. In addition, Gov2 has an independent track that tailors referendum dynamics to its implied level of privilege, providing rigorous safeguards and long-term considerations for the implementation of motion referendums.

Overall, Gov2 simplifies the governance process, lowers the threshold, and allows more users and decision makers to enjoy more convenient and flexible governance facilities that other blockchains are currently struggling to match in terms of on-chain governance technology. After the final professional audit, Gov2 will be launched on the Kusama network, and the brand-new Polkadot’s ecological governance system is bound to lead the blockchain industry to the governance development track.

Web3 Future Governance:

More Flexible, Inclusive and Fairness

Adaptability and scalability are two key features of blockchain governance. From the above analysis, it is clear that Polkadot is not only good at boldly adopting on-chain governance mechanism compared with other blockchains, but also continuously refining the governance system to achieve the goal of upgrading the governance system and flexibly adapting to the carrying capacity.

For users in the industry, actively participating on-chain governance to exercise their rights and participate in the ecological development of the project is actually also participating in a new type of social experiment on the chain. The rise and fall of ecology is the responsibility of everyone, and the increase of investment value after participating in ecological governance will give users a more sense of achievement. For project ecology, it is also stimulated more potential possibilities.

The blockchain governance mechanism pointing to Web3 should further deliver the ownership of community management construction to users, and the transparency and fairness of the process mechanism should be further improved. Undoubtedly, on-chain governance is more in line with this technical picture than off-chain governance, and can provide a relatively smooth and efficient operating environment for the development of Web3.

However, there is still a long way to go to build a trustworthy governance model that is inclusive and flexible enough, and needs to be constantly upgraded to meet new needs. Polkadot has already taken the first step, and I believe other blockchains will follow Polkadot’s lead and explore effective paths towards a better community development future.

References:

Blockchain and token| The advantages and disadvantages of on-chain governance and off-chain governance

Things about governance on-chain and off-chain

On-chain and off-chain: The Endless Block chain governance debate.

Importance of governance on-chain is seen from the bifurcation problem

Analysis of Polkadot Chain Governance Mechanism