Blockchain Use Cases: Open Governance
Governance is what we use to structure, sustain and regulate our society. The main goal is to structure a society in such a way that it is streamlined and fair for all participants. Governance can take on many forms depending on the type of organization. In a business, the main purpose of governance is to regulate corporate structure, set company by-laws and policies. In a government, the main purpose is the creation of laws, policies and regulations which affect an entire country.
Recorded history has always pointed to the same weak link in governance — humans. We are responsible for writing the laws, policies and regulations. This leads to humans being the single weakest point in any governance system. We rely on other humans to enforce laws (police, armies), regulations & policies (courts, lawyers) and provide governance (governments and councils). This, as history has shown, leads to a multitude of problems as humans are notorious for acting in their own self interests. We’ve tried various different strategies throughout history to solve these problems which led us to what most of the world has today — democracy. Many people regard this as a ‘least worst’ system rather than an ideal one.
So what if we could solve this? What if we could limit need for involvement from humans? What if we could make governance truly fair, open and transparent?
For the first time in history, there may be a solution.
Decentralized Organizations (DO’s)
At a basic level, the idea behind a DO (decentralized organization) is that we can take the traditional concept of an organization being centralized and opaque and decentralize it using code that is enforceable via a blockchain. Enforceable is the key here. In a centralized system, programs/code can be stopped. On a blockchain, code can be deployed so that it will execute no matter what.
We could take an entire government and transplant it to the blockchain. A smart contract would enable things such as verifiably safe online voting since this voting could be viewed transparently on a public blockchain by anyone. This would lead to greater oversight for all parties involved.
Aragon (pictured above) is a project that I’m very interested in that is developing software to enable the creation and management of DO’s.
Decentralized Autonomous Organizations (DAO’s)
Blockchains also give us the ability to create Decentralized Autonomous Organizations (DAO’s). The key difference between a DAO and a DO is that a DAO includes a much greater deal of automation. Automation allows a DAO to run itself, mostly independent of human interaction.
DAO’s work within a computer program called a smart contract. The smart contract houses all the parameters for the DAO and exists on the internet. DAO’s only rely on individuals to perform certain tasks that the automation itself cannot do (such as proposals).
- Tokens — DAO’s need an internal, valuable property to reward certain activities. These properties are usually funded via an ICO (Initial Coin Offering) which allocates tokens to persons in return for funding via popular Cryptocurrencies such as Ethereum or Bitcoin. These tokens give people control over the network through the use of voting and other mechanisms.
- Autonomous — A DAO is independent of it’s creators once it is deployed. DAO’s are completely open source, which means that they are transparent and incorruptible. Everything that happens within a DAO is maintained on a blockchain. There is no need to involve any third parties.
- Consensus — At the heart of any public blockchain is the ability for people to come together and form a consensus on what should happen within the network. These decisions can be anything from fixing bugs in the code to voting on new upgrades. Consensus enables a DAO to be changed but only if the majority agree. Of course, this is all done in the open so if anyone tries to cheat, it is immediately apparent.
- Proposals — Proposals are put forward by individuals or groups on what should be added or modified within a DAO.
- Voting — After proposals are submitted, token holders are free to vote on them. By staking real money via voting, token holders are incentivized to vote in the DAO’s best interests as this directly increases the value of their tokens and the network.
DAO’s are commonly used as vehicles for crowdfunding. Recently, the concept of an ICO (initial coin offering) has gained incredible popularity. The idea is that a company offers ‘tokens’ in exchange for funding (via other cryptocurrency such as Ethereum and Bitcoin). Once the smart contract is deployed, it handles the collection and allocation of tokens automatically.
There are a few issues that lie within DO’s and DAO’s — one of those being code bugs. If a bug (or critical vulnerability) is found in a smart contracts code, it can be very difficult to change the existing code to fix it. In this situation, token holders would have to vote on what they’d like to happen. Due to the economic incentive, depending on the severity of the bug, the vote may not be in favour of what is best for the community but rather what is best for profit. This is usually not the case, but it illustrates how delicate a DAO can sometimes be.
There is a lot more that could be said about DAO’s but for the purpose of this piece, I chose to stick to just explaining what a DAO actually is.
I imagine a future where DAO’s could be applied to every facet of governance. Imagine being able to vote on any new policies or laws that are proposed by a government in complete transparency. What if we could eventually completely automate a government? Proposals could be submitted by and voted on by the population of a country. Their incentives would obviously be the same as they are now — the betterment of their society — but they’d have more power in making these changes happen instead of relying on a third party or representative to do this for them. This is a future that I’d like to see because many of our current governance systems are broken and dated.
Of course, there will be push-back. People in power don’t usually go quietly. This future may also never happen — but if history has shown us one thing it’s that when information is freely available, society is able to move forward at a rapid pace. The printing press, for better or worse, enabled a consistent flow of information. Then, the internet enabled information to be shared rapidly and by anyone to the entire world. Now, we have blockchain systems. These systems have the potential to revolutionize societies just as the printing press and the internet did.
I’m incredibly excited to see what the future brings!