The importance of experimenting on-chain governance

Leo Zhang

By Leo Zhang

One of the thorniest topics in cryptocurrency community is governance. The decentralized nature of public blockchain protocols makes decision-making inherently challenging to coordinate. The design of Bitcoin follows an off-chain approach. The original vision in Bitcoin whitepaper, used the rule of thumb "one CPU one vote", is now heavily skewed due to the aggressive expansion of ASIC miners.

So how does Bitcoin governance work, exactly? Developers write what are called Bitcoin Improvement Proposals in a Github repo, and coordinate discussions through a mailing list. Despite its tendency to create tension between factions, the off-chain governance model favored by many researchers for its lack of formal restrictions.

Are structureless communities truly decentralized in terms of power allocation? Is it better to experiment various formal structures, or let informal structures develop organically? In an in-depth essay below, pseudonymous cryptocurrency researcher Richard Red discusses the merits and shortcomings of on-chain governance, and why it is an important experiment.

What is on-chain cryptocurrency governance? Is it plutocratic?
(Richard Red)

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"Proponents of on-chain governance would tend to see chain splits as sub-optimal, they divide communities and resources and weaken network effects. Where a method of on-chain governance is embedded in the foundation of a project, there is a built-in way of defining what the rules of the protocol are and how they can be changed."

Technical Updates

Decred Politeia testnet update

EOS freezes user funds to prevent potential theft, violating its own constitutions
(Toshi Times, by Andrius Vaškevičius)

"The impetus for the freeze came from the EOS911 initiative that has been adopted to help protect users with compromised private keys against phishing scams. However, the way freeze was implemented caused severe criticism as the BPs discussed the decision over a two-hour-long Telegram conference call and then simply disabled the nodes and backed up the data."

Commentary on EOS block producers freezing balances

Commentary on exchanges' internal processes to handle UTXO

Bitfury integrates Java, allows for private chain anchoring to public networks
(Bitcoin Magazine, by Colin Harper)

"With Java enabled, Exonum users can now launch smart contracts, Palienko added. The Exonum head expects that this initial step will clear the way for Bitfury’s blockchain to bind with the Java Virtual Machine’s auxiliary programming languages, as well."

The machine fired me
(Ibrahim Diallo)

"A simple automation mistake(feature) caused everything to collapse. I was escorted out of the building like a thief, I had to explain to people why I am not at work, my coworkers became distant (except my manager who was exceptionally supportive)."

News & commentary

Commentary thread on the significance of Ethereum to the cryptocurrency ecosystem

When a crypto token turns out to be a security, the legal complications are dizzying
(Quartz, by John Detrixhe)

"When it comes to ICOs, Concannon thinks the legal entanglements could get much more complicated for all parties—the token may become a kind of legal hot potato that’s difficult for an investor to hold, let alone trade. Setting up in Malta or some other non-US jurisdiction may not be enough to put an enterprise fully outside of the SEC’s rules."

Is Bitcoin the future, or an echo of a failed past?
(WSJ, by Paul Vigna)

"For most of its 10-year history, the digital currency bitcoin has been viewed by some people as the future of money. Lately, to get some insight into what the future might hold, some are focusing on how bitcoin compares with currencies of the past."