Successful models of blockchain governance

Recently notable thought leaders of the Bitcoin and Ethereum community have come out against on-blockchain governance systems.

Their arguments can be summarized as follows:

(1) Open source software governance works
(2) If something ain’t broke don’t fix it 
(3) No one actually uses on-blockchain governance systems anyways [1]

This is misguided for the following reasons:

(1) There are systems of decentralized governance that are working well (most notably DASH).

(2) The success of any governance model is entirely dependent on what it is measured against. Every organization needs to make decisions about questions like “how much do the core developers get paid?” and “how much do the marketing people get paid?” Any structure (such as a non-profit foundation) should be measured against alternative mechanisms for achieving the same result. In general, one is static and built on some amount of learned best practice, while the other is experimental and based on best-of-kind decentralized technology. Without measurable outcomes you can’t have a proper comparison.

(3) Informal governance does not always give a strong sense of stability. Take for example, the recent writings of Vinay Gupta, who suggested Ethereum take a strong stance in favor of some forms of censorship. In Bitcoin, which has a ‘no governance’ policy, censorship is effectively impossible. In Ethereum, it remains to be seen what censorship policy will exist.

(4) Open source projects often produce vaporware. With blockchains we typically see a “burst” bias towards getting a prototype product out the door, but then a trickle effect as core devs leave after they’ve collected their initial coins and seen some initial pump. This is in many ways an aggravated version of the common “vaporware” problem of open source, where devs only work on a project so long as it is interesting.[2]

(5) Open source projects often end up scratching their own itch. One common tendency of projects lead by a consensus of highly technical people is that they often focus in on technical problems instead of consumer problems. The most historically successful models are fusions like 37 signals which use a CEO to integrate technological development with consumer focus and product usability.

(6) Other hybrid solutions exist. The Swarm Fund model, for example, is an incentivized consortium model. It allows token holders to elect board members who then are legally obligated to make major decisions in a way that is transparent and accountable to token holders. This is similar to the R3 or Visa models, in that they allow for a large network of existing stake holders.

What is unique about blockchain in these hybrid solutions is they allow for legal and regulatory compliance to be built into the system, something that is basically impossible on the pure public blockchain model. Most notably, both the original Harvard consensus and the SEC DAO report also suggest a platform which is end-to-end managed by its community is highly likely not to be a security.
It is likely decentralized governance solutions will work only when they provide a 10x advantage over what is currently available. I strongly recommended DASH to members of the Decentralized Autonomous Society because I thought decentralized budgeting and staking was a 10x advantage over other digital cash systems. I equally strongly recommend Swarm Fund today, because I think it is a 10x advantage over any other mechanism I’ve seen for reconciling private and public blockchain worlds and integrating major institutional partners, especially if it manages to inspire trust by integrating a high degree of transparency into its board operations and fiscal management (such as this sneak preview here).

Additionally, although I have never wavered in my support of ambitious projects like Ethereum, I do not wish for key figures in the community like Vitalik to ever have to put themselves at risk over the decisions of whether or not to censor some project. I would much prefer to see these projects organically evolve beyond their founders and create a stable platform for decision-making that does not have the risks of informal governance.

Perhaps Christmas is also making me notice my newly white hair. In my early 20s I was an unmitigated a fan of technology for its own sake, including projects like Google Wave. Now that I have grey hairs I increasingly focus on things that have clear utility to some end user and a governance structure that is complementary to delivering that utility.

So for the holidays, I would much prefer product to ponzis, even when they are cute and furry. That said, I will of course continue to share love for kittens everywhere.

Cryptokitties wish you a Merry Christmas!

[1] Please read the full versions of Nick, Vitalik, and Vlad’s opinions. I don’t mean to be blasé, and ultimately consider this only the starting point of a multi-decade dialogue on these subjects. 
[2] Full disclosure: I have personally been responsible for several open source projects gone vaporware due to lack of sustained interest.