Beyond ‘Code is Law’ — Decentralized Governance in the Web3 World

When I started my career back in the 1990s, the Internet, for the first time, brought a way for people and societies to transcend borders, interact, play, work, and create independently of nation-states and governments. This spirit of the early Internet was captured in John Perry Barlow’s Declaration of the Independence of Cyberspace, published in 1996. But somewhere along the way, things went wrong. Today’s Web2 ecosystem is dominated by a handful of players, and most people feel that the web is not the open and positive environment that we were hoping it to become.

The good news is: we may get another chance. Today, the spirit of the early days of Web1 is very much present in the Web3 world. Some of you might be discouraged by the most recent events, but what happened with FTX and most other crypto-related failures this year is not a failure of Web3. On the contrary: It is a failure by “old-world” centralized institutions that attempted to piggyback on the success of Web3. If anything, it only shows that if we are serious about Web3, we need to go all-in and develop systems that not only complement but offer a better alternative to many of the institutions we have become used to. This is what we were all discussing back then, and now our dreams and hopes for a decentralized reality rise again, with Web3 becoming the place where the user is truly sovereign.

The early blockchain protocols like Bitcoin ensured this sovereignty by instituting one pure, brilliant rule of governance: code is law. ‘Code is law’ is a fantastic concept that provides an excellent basis for distributed governance and decision-making. When it comes to the transactional security of a Web3 ecosystem and ensuring decision-making-power is not abused by centralized authorities, ‘code is law’ does a phenomenal job. But the problems start whenever things cannot be coded.

And this happens sooner than you might think: contrary to common belief in parts of the tech world, not everything can be coded. As proven by Sanford J. Grossman, Oliver D. Hart, and John H. Moore, the vast majority of contracts cannot specify what is to be done in every possible contingency. At the time of contracting, future contingencies may not even be describable. This concept — for which Oliver D. Hart received the Nobel Prize in Economics in 2016 — is known as the Incomplete Contracting Paradigm. It provides a theoretical framework for a phenomenon we can observe every day: as more humans enter the Web3 world, good governance, or the act of setting and enforcing rules within ecosystems, requires more room for nuance. For the endless possibilities and situations of the complex human world, equitable and ethical solutions often cannot be coded into a binary yes or no. How should a DAO spend its money? How should a decentralized exchange make decisions? What kind of behavior do we want to allow in our metaverse, and how do we enforce it? Should we moderate our Web3 social media platform, and if so, how?

How do we resolve conflicts and ensure justice in the Web3 world?

All of these questions cannot be captured via smart contracts, which are limited to a straightforward “if-this-then-that” logic. They require interpretation and judgement. Answers might depend on context without that context, the only correct answer will likely be “it depends”.

Yet it is these types of questions that are most relevant — both in the physical as well as in the digital space.

This does not mean that code has no part in human-centered governance — clearly, it does. But societies and communities should be able to use code to aid governance rather than having to limit their interactions. Code cannot answer with, “it depends”. Code cannot know whether you want to act against the community. It can only see what you did but not WHY you did it.

Right now, in Web3, situations reaching beyond ‘code is law’, projects, DAOs, and communities tend to return to centralized decision structures, unaware that better options exist. A small group of participants often decides how and when to enforce their ruling. If we were in the physical world, there are other names for this system — oligarchy, aristocracy, or plutocracy. And we know what happens when power is concentrated too strongly in a small group — even a group with the best intentions.

In short: governance in Web3 today is a complete mess.

So, what do we need? How do we collectively govern Web3?

Web3 needs a sophisticated system that provides the certainty of technically binding transactions but simultaneously offers discretion, nuance, and accountability. A place to recognize the intention behind one’s actions. A system that reflects the strongest principles of ethical governance. Building upon the knowledge that humans have developed over thousands of years, beginning with the philosophers of ancient Greece to the modern, egalitarian systems we use today — combining those with the new capabilities offered by decentralized Web3 systems. A completely new governance framework, building on and going beyond code is law, to enable discretionary decisions, democratize access to international private law, and ensure a fair resolution of disputes in the decentralized world.

There has not been a digital, Web3-oriented, scalable edition of these fundamental standards until now.

Q is the decentralized governance system for the Web3 world. Q differs from existing protocols in three major ways:

Firstly, the Q protocol is built on a defining element that serves as a foundation for its governance — the Q Constitution. The Constitution is binding to everyone interacting with Q. It is a legally binding contract based on international private law. Any change to the protocol requires a change of the Q Constitution — so changes are transparent for everyone. There are no backroom deals, no governance hacks and no “tyranny of the devs”. Anyone can join voluntarily, but if they do, the rules apply.

Secondly, Q has a unique architecture that is designed to ensure that the rules of the Q Constitution can actually be enforced.

There are many elements that contribute to this: technically, logically and legally. Let me just point out two:

• Besides standard validator nodes, there is a second node layer called root nodes, which are the guardians of the Q Constitution and the Q ecosystem. Already today, root nodes include some of the most respectable people and institutions — universities, lawyers, infrastructure providers and more. They are widely distributed over continents and diverse types of businesses and institutions, providing for their utmost independence and decentralization.
• In case of conflicts between stakeholders, Q has a dispute resolution mechanism that is deeply integrated into the protocol. The dispute resolution mechanism is based on private arbitration, whereby independent arbitration courts resolve disputes in line with the Q Constitution in situations when pure on-chain resolution reaches its limits.

Thirdly, the governance system that Q provides can not only be used to change and improve the base layer protocol itself — it can also be used by applications, DAOs or other organizations that build on Q. This is a game changer and the path towards a truly decentralized governance framework. Finally, decentralized protocols have a viable alternative to old-world legal systems, courts and institutions — there is so much more you can build on Q that you simply could not do before.

Is governance ‘beyond code is law’ a better governance model? It is much more. It is the only way for Web3 to stay truly decentralized as it gets more complex and more mainstream users join.

Humans aren’t code, which is why decentralized governance built for humans must use code as a foundation but also reach beyond it to ensure responsibility and accountability.

If you want to learn more about Q and governance ‘beyond code is law’, join the Q Discord or head to the Q protocol Linktree.