
Deciding how to decide: On Decentralized Governance@Scale
TL:DR; Blockchain systems will make decision-making faster and scalable. Good governance is both the key and the challenge.
One of the elements of crypto that is both extremely exciting and also a bit daunting is that when you are building an open crypto-economic system, you have to decide how you are going to decide things.
Who gets to vote? How often? How are votes weighted? What’s the best way to ensure a fair outcome?
I was thinking about these challenges as I made my way through the MakerDAO Governance Framework blog post.
It was pretty tough reading in terms of getting my head around the topic, but at some point. The DAI stablecoin was the first one I ever heard of and, I’ll admit, I didn’t get it the first 2, 3, 4, or 6 times I read the whitepaper. But now that I have been playing around with it, it’s starting to come together.
That’s beside the point because what dawned on me while reading the post was:
“Oh man, MakerDAO is basically convening a Constitutional Convention.”
It’s like 1776 and then 1789 (sorry for the American-centric references, but it’s the one I know best) where the 13 colonies (then states) got together to discuss things like
- how votes would be apportioned (you may have heard of the 3/5ths compromise)
- the Senate, the House. and the Electoral College (even non-Americans know about this)
- constitutional amendments
- separation of powers between executive, legislative, and judiciary
These were all decisions about how to decide.
The same thing is happening in crypto now and the amount of exploration, innovation, and experimentation is mind-boggling.
One of the reasons that I am so excited about what the team at DAOstack (discl: advisor) is working on because they are focused like no one else in the space on the challenge of decentralized governance at scale.
Or, as I like to write it “Decentralized Governance@Scale- DG@S”
This is the mission of maintaining the flexibility, agility and resiliency of small, decentralized networks, but doing it at country or even global scale. Interestingly enough, Matan, the project lead is adamant that money is NOT the way to go. He’s a big believer in the idea that reputation is what should determine voting weight.
ARK, meanwhile, does put governance in the hands of those with the money, but in the form of delegates who basically “pool” votes by having other token holders assign their tokens to them.
So it’s not really the richest person who gets the most say, it’s the delegate who convinces the largest percentage of other token holders that s/he is working for everyone’s best interest who does.
It’s fascinating to watch all of thee unfold and participate in them at the same time.
As we move into the installation phase of crypto more and more people including Fred Wilson (here) and Joel Monegro (here).
One of the projects that has a lot of attention in crypto is 0x. It’s the protocol for decentralized exchanges on which relayers, like Radar Relay and others, build interfaces.
Louis Aboud-Hogben had a great post on Protocol Incentives and the ZRX Token where he explains quite nicely how the various parties have an incentive to hold the ZRX token.
“In the future, relayers will have some incentive to retain tokens in order to maintain a stake in the protocol’s governance.”
Basically, everyone agrees that without having the tokens, you don’t have “skin in the game” and have no right to participate or vote.
The cool part, as Dhruv Luthra writes in Token Distribution and Open Cryptoeconomic Networks
“One of the most exciting use cases for tokens is governance”
I think that is becoming more and more evident as we get deeper into it, particularly with the Ethereum DAO hack and the Bitcoin fork as part of the industry’s legacy.
In my mind, the end result, following all of these various experiments is going to be organizations that move faster, more nimbly, and more effectively.
Jamie Burke of Outlier Ventures said it best in his recent post “Pathway to Decentralisation.”
Information and communication technologies like the telegraph, telephone, and Internet have increasingly allowed decision making to become faster, more participatory, distributed and sometimes automated.
Blockchain systems are the next wave of information and communication technologies and will follow that same trend line.
How we decide how we decide is going to play a big role.
