Challenges with Today’s Governance Models and Tools
We are all familiar with today’s main governance systems which could be registering to be able to vote (as an identity), choosing a leader whether it is for running a country or a company, or recommending a potential business solution for the best interest of the project. Sadly, they all come with their issues which we are all too familiar with. Even when dealing with more recent tools such as decentralized organizations, blockchain voting or governance tokens, there are main friction points preventing an efficient governance process to exist. Let’s have a closer look at these main pain points and how one could solve them.
Friction for Onboarding Newcomers
Both standard governance and e-governance tools seem to share at least one common attribute: it is hard to onboard new users to them. Take the example of the inhabitant of a democratic country — they have to manually register themselves at their city office and sign a suite of papers after filling a few forms — and every few years they receive more papers to be completed in order to vote; and to vote, they have to go to a specific place, wait and manually cast their vote on a piece of paper. For a blockchain based scheme, one would have to buy some kind of tokens, deposit them in a newly created “wallet” (something they are not usually familiar with), maybe exchange them for another token, and finally use some strange, unfamiliar software to create a vote.
In both cases, the onboarding process is hard, slow and inefficient. We say that there is too much friction for newcomers. This would lead to a lack of involvement from potential voters as we are seeing all over the world. However, a successful governance system needs to be able to poll the opinion from a maximum number of involved parties in order to reach the best decision for everyone. In general, more data leads to better decisions. However, if participants can not take part in the governance process, this irremediably leads to less data and thus suboptimal decisions.
Another challenge is the lack of transparency in existing governance model. For this one, we will divide our analysis in three parts which corresponds to the main types of governance systems.
Corporate Governance Models
Most corporate governance models are made of a board, shareholders, a few committees and the executive team of a company. For a shareholder without a seat at the board or at one of the committees, it is often hard to know exactly what happened during the board meeting.
Political Governance Models
With most (democratic) governance models, people vote for a set of representatives or a president to make decisions for them. Once the officials are elected, they may organize debates between each other and make decisions after such debates. In some cases, it is hard to actually know what has been discussed and have an understanding of the full picture.
Generally, this may lead to a misunderstanding of the decisions made, which creates an opportunity for the propagation of fake news or the misinterpretation of actual news since nobody has the same information. Although these models generally have systems in place to provide some transparency, they are not always fully kept up to date (some decisions are hidden from the public), often have confusing interfaces and are barely checked by the citizens.
We’d need a better way to ensure transparency in a convenient and universal way. Having a good, clear and reliable source of news could prevent the propagation of fakes news on the long term. This is especially relevant since fake news are plaguing our democratic process such as elections nowadays.
Crypto and Blockchain Based Governance Models
Blockchain governance is one of the fields where many innovations and experiments are being developed and experimented in the wild. However, they are not necessarily exempted from the limitations mentioned here. Although they could be considered more transparent due to the votes being public, they still depend on a precise set of engineers, teams or companies to make some of the decisions related to the organization. Indeed, most decentralized organizations are still depending on a fully incorporated and legal company within its own structure. In this case, nothing prevents the company from taking non voted and non accepted decisions that could impact the blockchain organization itself.
On Voting Systems
Some of the most recent voting systems propose to introduce a “coin” or “token” to represent votes; however, as we will see, this approach is not bullet proof.
Coin Based Voting: Risk for Unbiased Voting
In the most basic implementation of coin voting, people block tokens in favor or against a given proposal. We see a few issues with such a simple model:
- People need to block a certain amount of coins — often associated to an amount of money — for a certain period of time. This can be a major inconvenience and relates to our initial point on the onboarding of newcomers.
- People need to have the relevant coins in the first place! How do newcomers put their hands on these coins? Ideally without having to go through an exchange or unknown wallet software. Again, this creates friction for newcomers.
- There may be a lack of accountability and identification. Indeed, for certain use cases, it may be needed to identify who voted for what. Fortunately, we have ways to mitigate this by implementing correct KYC and digital identity schemes.
- In most cases, the vote tokens are tradable and can be freely exchanged. This creates an opportunity for people with deeper pockets to acquire more voting power by buying more tokens; thus, leading to the centralization of power in the hands of a minority. Some systems have been implementing counter measures against this challenge. One of the preferred solutions to this could be the successful use of Quadratic Voting. We have also recently started seeing people taking extremely short term loans to influence votes in their favor.
- By default, everybody could see who voted for what with most existing implementations. This is especially true when the coin voting system is implemented on a blockchain, which by default is a publicly accessible network. There are ways to solve those such Commit / Reveal schemes but they’d come at the expense of usability. Using a permissioned network to implement a token based voting scheme without revealing the details of the currently casted votes could be an interesting tradeoff in that specific case.
Execution Still Depends on Humans
In most cases the decisions taken by an organization still needs to be executed by trusted humans. Humans, being error prone and biased creatures by default, may often lead to situations where the same humans may not act fully as expected by the voters.
A potential solution to this challenge would be to minimize relying on humans to make decisions. This is already somewhat possible with blockchain based organizations where some of the decisions can be executed automatically when a vote passes. For instance, Decentralized Autonomous Organizations (DAO) can already vote on self executed fund allocations proposals. However, some additional automation and interactions would be needed in the event such an organization needs to interact with the “outside” or “non blockchain” world — for instance, if a DAO needs to buy some offices or send some representatives to a business meeting.
Today, we have seen the different challenges of various governance models and their implementations: lack of convenience or transparency, need for human based execution, potential biases, to name a few. We also mentioned potential solutions to these challenges such as alternative voting systems, privacy enabled schemes and new ways to cast votes. Fortunately, there is a community of researchers, enthusiasts and experts now looking at better centralized or decentralized governance solutions and tools, which we hope will bring forward new and improved ways for people to organize on both a global and local scale.