Do Blockchain Systems Resemble Modern Governments?
By Warfield Capital on ALTCOIN MAGAZINE
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any of the existing blockchain protocols (e.g., Ethereum, Cardano, EOS, etc.) resemble historical governance systems such as meritocracies, direct-democracies, republics, etc. This observation is important to consider when investing in blockchain technologies because we know which governance systems have been the most conducive in producing economic success — that is, through the historical observation and analysis of their outcomes. For example, democratic governments have proven themselves to be more effective in generating economic prosperity than dictatorial governments (e.g., United States vs. North Korea). Keeping this in mind, we can — in theory — determine which base layer protocols will be the most successful, in the long-term, by referencing the historical outcomes of each governance system they choose to adopt.
Before we begin our governance analysis of Ethereum, we need to identify the historical governance system(s) that are germane to its design. As such, we suggest that Ethereum closely resembles both meritocratic and direct-democratic governance frameworks. A detailed description of each is mentioned below:
Meritocracy:A system in which the talented are chosen and moved ahead on the basis of their ability or intellectual ability.
Direct-Democracy:A direct-democracy is a form of democracy in which people directlydecide on policy initiatives. In other words, each person has the right to vote on every policy implementation instead of having a representative vote for them.
It is important to note that these governance systems can overlap and are not always mutually exclusive. In other words, both direct-democratic and meritocratic characteristics can coexist in a single governance system — i.e., at the same time. This position holds true in Ethereum’s design and is explained in further detail below.
Ethereum’s Governance Design:
Ethereum is a public decentralized blockchain technology platform that enables the deployment of smart contracts. Ethereum is governed partially by its own “constitution” — written in code — that defines the parameters of how the network operates. Additionally, three entities are responsible, with varying levels of power and influence, for the direction of the network and its respective constitution. Here is a list of these entities:
- Core Developers
- Full Nodes
- The Foundation
Core Developers manage Ethereum’s constitution by removing or implementing code. This is done through a process called an Ethereum Improvement Proposal (EIP).An EIP is a design document describing a new feature for Ethereum or its processes or environment. In other words, EIPs can be regarded as “amendments” to Ethereum’s constitution.
Moreover, when an EIP proposal is submitted for review, the core developers and community discuss its significance in open meetings, who together, in time, come to an agreement on whether or not it should be implemented. In the event an EIP (or amendment) gains consensus among the core developers and community, the nodes (or computers) that run the Ethereum network have to updatetheir software to include the updated code. This can either be done through a hard-fork, which is not compatible with an older version of the software, or through a soft-fork, which is a backwards compatible change. In other words, nodes are votingon whether or not they want to accept the update by either running the new software or not running the software through soft-forking or hard-forking.
This governance behavior, we argue, resembles both a meritocracy and a direct-democracy in many instances. Ethereum is partially a meritocracy in the sense that only the best EIPs (or amendments), determined via consensus by the core developers and community, are accepted. This is in direct contrast to permissioned blockchain systems that are — in some cases — governed by a single entity; which, in effect, grants them dictatorial decision-making power, ensuring that the best ideas don’t always win.
Additionally, Ethereum resembles a direct-democracy in the sense that all of the nodes of the network can submit their vote on EIPs through either running the new software or not. It is important to note that this behavior, in particular, falls outside of the scope of a representative democracy (such as the United States) becauseeachnode has the right to vote. This is in stark contrast to a representative democracy where a representative (e.g., Senator) submits votes on behalf of a certain number of nodes [people]. Altogether, the ability for individual nodes to vote is a strong sign that Ethereum is extremely democratic in nature.
Moreover, the concept of meritocracy was heavily advocated by the Chinese philosopher Confucius, who invented the notion that those who govern should do so because of merit, not because of inherited status. That said, the oldest merit-based system promoting this ideology dates back to the Han and Qin Dynasties in China and eventually spread to Europe and then to the continental United States. Although Europe and the United States are not 100% meritocratic in their current state of affairs, there remains a resonanceof meritocratic roots in their governance systems. Additionally, some of the greatest ancient civilizations in history utilized direct-democracy to govern their state of affairs with great success; and these roots can be observed in many of the most powerful countries in existence today as well. As such, we consider both meritocracy and direct-democracy as superior governance systems over others, i.e., dictatorships and the like.
Altogether, it is undeniable that historical powers and current powers who previously or currently embrace these governance systems fully — or partially — have, in effect, derived great economic benefit from doing so; as opposed to those who have not, such as the oligarchies, dictatorships, plutocracies as examples. For this reason, we believe that Ethereum’s roots in Confucianism, meritocracy, and direct-democracies serve to be a positive sign for investorsbecause its current instantiation of governance has already been proven to work. Ethereum and its community need only to continue executing on their vision to bring their technology and ideology to the masses. This, we will leave to prosperity…
Warfield Capital is a research and investment firm dedicated to deeply understanding the crypto-ecosystem. We regularly publish our best thinking for you to review, so please be sure to visit our website www.warfieldcapital.comfor more information.
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The purpose of ALTCOIN MAGAZINE is to educate the world on crypto and to bring it to the hands and the minds of the masses. This article was written and composed by Warfield Capital on ALTCOIN MAGAZINE.
