Does The Blockchain Requires Governance? A Bigger Question To Answer
Blockchain is a subset of distributed ledger technology, but for the technical world, it is more than just a ledger. It is a diverse community for software developers, miners, and engaged users. It is also an ecosystem for the software and an economy of merchants, industries, and exchanges. Blockchain can be interpreted as a complete full-fledged organization for developments in all strata of society.
Ever wondered how do we govern the decisions and protocols of a blockchain platform?
Theoretically, the blockchain platform is free from any form of governance; they should be “permission-less decentralized ledger.” It is very important to monitor the growth and development of blockchain in its early stages so as to ensure a healthy growth of this inevitable future technology.
DIFFERENT WAYS OF BLOCKCHAIN GOVERNANCE
The debate for governing blockchain and implementing certain rules and regulation has been a talk in the fintech industry for about a decade and various private permissioned blockchain platforms have even laid a set of rules and protocols to be followed by its members.
Basically, there are two approaches of blockchain governance.
1. Off-chain governance – This has been the governance characteristic of our old open source projects the only difference being that the members select a handful of trusted actors who form a core team. This group is responsible for fixing bugs, adding new features, improving scalability, fixing security glitches, maintaining neutrality among members and balancing decision making powers between users, miners, and companies etc.
Initially, the system seems to be almost centralized, but all the users are given equal opportunity to talk about their interest and if enough users disagree then there is always a potential for rebellion. A “hard fork” can be initiated by creating a parallel blockchain which acts a powerful check against poor governance by the team of chosen individuals. Example of this form of Blockchain platform are Bitcoin, Ethereum, Litecoin, ZCash etc. and some successful rebels who initiated ‘hard fork’ are Bitcoin Cash and Ethereum Classic.
2. On-chain governance – This model of governance is contrary to the above model, thus turning blockchain into self-governing democracy. Here the centralized method is completely rejected and the process functions according to direct votes given by each and every user on the blockchain. On-chain governance is a radical proposition as it gives users the freedom of governing their complete financial system. This form of governance is the true essence of theoretical approach of the blockchain, but unfortunately, it can be very hazardous in some instances. Some of the famous blockchain projects based on this model are Tezos, DFINITY, and Cosmos.