How to build a neutral Blockchain Governance Organization? A glimpse behind the scenes!
As already explained in my former Medium-post, Blockchain is starting to form a counter-model to established central platforms. For many, Blockchain is the synonym for decentralized organizations, but most people forget that, while pure technology is used, such an organization is always needed to handle business transactions digitally.
How does such a decentralized organization look like? In recent years, Blockchain organizations have been formed almost exclusively through foundations. Although foundations are well-suited for the protection of intellectual property, they are not a good choice for the actual organization of processes. New ways have to be found here. As of today, there is no blueprint of decentralized organizations. But the topic is extremely dynamic and of great interest.
Today and in this article, we would like to provide an insight into the organizational structure of the evan.network and to explain it. After several months of work, we have initiated this structure at the same time as we started our production network.
With the evan.network, we have created the first cross-company public Blockchain network that exists as a real organization.
evan.network as an Authority Node structure
In contrast to well-known public Blockchains, which work on the basis of unknown nodes in the Proof-of-Work consensus, the evan.network works with known node operators, the so-called Authority Nodes.
Probably, you might be thinking now: What the heck are Authority Nodes? In simple words, these are validators of the evan.network Blockchain. They sign new blocks and add them to the Blockchain, of which they store a copy on their servers. So they form the technical infrastructure of the evan.network.
As already mentioned, the node operators are well-known in the evan.network. Basically, every legal person is allowed to become an Authority Node operator. It happens by signing the ANOA, the ‘Authority Node Operations Agreement’. This is an operating agreement defining the infrastructure needed for a reliable node operation.
The E.N.O. — the organization operating the evan.network
Each Authority Node operator is also a member of the network organization — evan.network organization (E.N.O.). But what is the E.N.O. and what is its purpose?
The E.N.O. is a structure developed specifically for the evan.network, which combines the Authority Nodes required for network operation into an independent organization. The evan.network is functionally mainly performed by the Authority Nodes. Therefore, it is necessary that the technical network structures existing between the Authority Nodes get an organizational representation.
The E.N.O. shall provide two benefits: the governance of the evan.network and the participation in the network’s evolution.
What is the E.N.O. for?
The purpose of the organization is to ensure the integrity, functionality, stability and security of the freely accessible, neutral and distributed network infrastructure of the evan.network. The purpose is realized in particular by the organizational enclosing and connecting as well as the control of the Authority Nodes necessary for the operation of the evan.network. Part of the realization of this purpose is the establishment and control of required common network standards. The organization also acts as a platform for the joint development of the technical and social structure of the network.
The E.N.O. defines the framework within which Authority Nodes do three essential things:
- propose ideas for formal changes or technical improvements to their companions.
- discuss their own and the proposals of other nodes and provide their perspective.
- decide in votes on proposed and discussed ideas. If the majority of nodes decides on a technical improvement, it will be added to the evan.network’s product backlog.
Broadly spoken, the E.N.O. shall facilitate the decentralization of power, ideas and perspectives in the evan.network
Stages of construction of the E.N.O.
With the E.N.O., we want to establish a completely independent organizational structure for the operation of the evan.network. In order to establish a functional structure, many questions have to be answered, for example:
- How can the best possible legal framework be created, in particular to avoid liability risks for member companies?
- How much operational participation do member companies really want?
- How can the technological and technical competence of the representatives of the member companies be ensured so that decisions can be made carefully?
- What is the optimal relationship between participation and ability to execute?
In order to answer these questions together with the network members and to learn from practical experience, we decided to expand the E.N.O. in several stages.
Currently, we are in the transition phase. The E.N.O. is established, the first Authority Node operators are onboard as members, and now we start and test the decision making processes. To ensure a stable network operation, all operating tasks are managed and orchestrated by evan GmbH. Step by step, more and more decisions will be transferred from evan GmbH to E.N.O. and its member companies during the transition phase.
In the steady state phase the network is mostly controlled by the E.N.O. — to ensure that all the necessary structures are established and optimized. Now it is time to decide jointly, whether the E.N.O. shall become an external corporation like an European Cooperative, a Stichting or similar or whether it shall remain an internal corporation with an associated company, responsible for the network’s operational business.
The role of evan GmbH
In the transition phase, evan GmbH has a special position within the organization and receives specific statutory privileges. This has the background and the explanation that only evan GmbH will act for the evan.network externally and will establish rights-of-use relationships with third parties using the evan.network. In this set-up, evan GmbH acts as an intermediate protective shield, since all possible obligations arising from these usage rights relationships are assumed by evan GmbH alone.
Nevertheless, the goal is that in the future the E.N.O. will exist without the evan GmbH and operate the evan.network independently.
How does the E.N.O. work legally?
As already stated at the beginning of this article, there is no blueprint for the realization of a Blockchain legal form.
If you want more information about the legal forms suitable for Blockchain, I would like to refer you to Markus Büch, who has also supported us significantly in the creation of the E.N.O.
The E.N.O. is a corporation that is independent of its members and does not participate in legal transactions (therefore, it acts as an internal corporation).
First of all, this legal form may appear unusual since it is exclusively inward-looking and cannot participate in legal transactions. However, we have successfully combined four points that, as we discovered, are crucial neutrality-criteria for companies
- Participation — The organization clearly regulates in what ways network members can participate in solving essential network issues. This would prevent the organization and its members from the arbitrary use of a central provider.
- Selflessness — The organization is intended to connect companies and is therefore not commercially active itself and does not operate a commercial business. In particular, the purpose of the organization is not to make a profit for itself or its members, but to provide any services selflessly.
- Independence — The membership and operation of an Authority Node ensures that the platform is independent of other members. In short, as long as a (my) node is running, my application can continue to run.
- Limitation of liability — although the node operators are a corporation part, in its current form they are not entitled to act as such in legal transactions or carry out legal transactions in an external relationship in particular. The organization acts exclusively for and towards the network members. Therefore, since it does not enter into any legal transactions, it bears no liability risk, which is an essential acceptance factor for companies.
The structure of the E.N.O.
The E.N.O. has two defined structures in its statute. The ‘Koordinationsrat’ (coordination council) and the ‘Netzwerkforum’ (member forum).
The first one is comparable to the board of a classical association: it takes the lead in operational and organizational matters. The latter one is comparable to a parliament or popular vote: every member has one vote and can participate in decisions.
The members of the ‘Koordinationsrat’ are elected by the entire ‘Netzwerkforum’ for a certain period. Thus, any member who is willing can assume more responsibility for the implementation of the governance rules of evan.network laid down in the company’s articles of association. Or even for adapting these rules when it becomes necessary.
Summary: We had several reasons to build the E.N.O. that way. First of all, our approach is legally accepted while maintaining high flexibility. We did not want to create a legal form at such early stage due to potential risk of later finding out that it does not properly meet our objectives. Our roadmap includes the option to transform the E.N.O. into a legal form that allows it to interact with third parties. But this will happen only when the Authority Nodes as organization members are willing to take this step, and when it becomes clear, what rules and structures are necessary for such an organization.
The dualism of ANOA and E.N.O. statute will provide both reliability and neutrality to the evan.network.
The ANOA makes sure that all Authority Nodes run on the same technical level, leading to a resilient and secure technical backbone of the network.
The E.N.O. statute provides participation rights for all members, making sure that no single entity can take over the organization and transform the evan.network into a centralized platform.