Lisbon Staking Summit — “How to Governance” discussion recap
On November 8th, 2022, I participated in a panel discussion “How to: Governance — Forming Alliances’ at the Staking Summit in Lisbon. Besides myself, the panel included participants from the Polygon, Fantom and Polkadot/Kusama ecosystems. Since Layer 1 governance seems to be somewhat neglected these days, I though it was worth doing a short recap of the main points I shared with my colleagues and the audience:
1/ On Q protocol governance
What are the main characteristics of the Q governance framework?
The Q protocol is intensely focused on and built around web3 governance. There are three things that differentiate the Q protocol from other Layer 1 solutions.
Firstly, the whole governance framework is built around the Q Constitution. It is a legally binding contract between all participants that interact within the network. All stakeholders — root nodes, validators, token holders, and even applications that are built on it — follow these clearly defined rules.
Secondly, while there have been other Layer 1 solutions that experimented with constitutions or similar concepts, they failed to achieve what they set out to do. The reason is that the rules could not be effectively enforced. Q is different because both the protocol’s architecture and the supporting infrastructure are tailored to ensure that rules are enforceable within the protocol. Without enforceability, rules are useless — Q aims to fix this.
Thirdly, the system’s rules don’t only apply to the Layer 1 itself, but can also be used by devs and dapps building on top of Q. For example, you could have a DeFi app with a certain set of rules on how critical parameters are set. Those rules could be integrated into the Q governance and, thereby, make the app itself more robust and prevent governance exploits.
2/ On power structures and the wisdom of the crowd
One of the panel questions was: Do you prefer a “tyranny of the devs” or a “tyranny of the majority”? My answer is simple: Clearly, I would prefer any protocol to be “tyranny-free”. No particular group should have the power to abuse its status at the detriment of another group, or unilaterally push for changes that will violate the rights of others.
The way in which Q aspires to be a tyranny-free protocol is through a clear governance framework that is known to everyone. While participation in the protocol is permissionless, all protocol participants act within known boundaries within which they can operate and according to which decisions are made. Protocol rules — including the rules on how to change the rules — are transparent for everyone, preventing situations when either a loud minority terrorizes a silent majority, or a specific stakeholder group is “held hostage” by the controlling majority of protocol participants.
This rule-based approach is different from the “wisdom-of-the-crowd” approach that many protocols take. I do not mean to imply that the wisdom of the crowd is likely to fail in all circumstances — quite the opposite. In many situations, it does yield good results. The key is figuring out which decisions rules are appropriate for different situations.
3/ On responsibility and voter apathy
How do you address voter apathy? Most importantly, I think we have to accept that voter apathy is a fact. Most people just don’t want to vote every week and keep up to date on all issues on multiple protocols all the time. While the efforts to increase active participation are commendable, they clearly have limits. Any system that relies on frequent participation of the majority of protocol participants is bound to fail.
A solution is to introduce a layered system with different roles that split responsibilities between different stakeholders, taking account of different decision types as well as different levels of domain-specific expertise of protocol participants.
For example, when you have proposals that affect the core characteristics of the protocol, you might want to have a “general” vote with broad participation. However, for more specialized decisions, voting logic should reflect different thresholds and majority requirements depending on the level of severity of the change. Some minor or more technical changes might not require a community vote at all. Takeaway: A tiered system which is tailored towards a protocol’s characteristics might be a better fix than trying to increase voter participation at all costs.
Governance for professional validators
Lastly: Governance participation is an opportunity for validators. Today we still observe that many validators are reluctant to engage actively in governance, whether it is due to lack of resources or concerns around liability. I strongly believe that this is a mistake. In the future, I expect that the quality of governance participation will become a differentiating factor for validators. Going even further, governance support can evolve into a separate business line and open up new revenue streams for validators. We have seen similar development play out in traditional financial markets, where “proxy advisory” for institutional investors has become a multi-billion-dollar business. More likely than not, crypto markets will move into a similar direction.
If you want to exchange view on Layer 1 governance, please feel free to get in touch; if you want to engage in the governance of the Q ecosystem, a good starting point is the Q Discord.
