The best off-chain governance system

Recent attention to blockchain governance has encouraged people to think about governance systems in more detail. This article will explore different levels in off-chain governance.

Off-chain versus On-chain

The first step to analyze blockchain governance, is to distinguish two forms of governance: off-chain and on-chain.

The main difference between these two forms is whether governance processes are made explicit in the consensus rules or not.

- Off-chain governance: how ideas are shared, discussed, get funding, and turn into code. Off-chain governance can happen anywhere: on social media, on GitHub, during conferences, or over dinner. Twitter, Reddit and GitHub are all part of the off-chain governance system of a project.

- On-chain governance: how code is ratified. On-chain governance comes in many different versions, but we can discern three approaches in practice: fork-based, stake-based, and entity-based.

If you are interested in on-chain governance:

Off-chain governance platforms

Blockchain projects such as Bitcoin, Ethereum or Monero aim to operate in a decentralized way. In practice, this means that there is no central control over their public blockchain. However, off-chain governance processes still need a platform where contributors can come together and collaborate. In many decentralized projects the question arises: how to organize off-chain governance in a robust and decentralized way?

Most projects rely heavily on Twitter, Reddit or GitHub as their governance platforms. However, in order to engage people with diverse backgrounds, it should be possible to participate in off-chain governance processes via other platforms as well.

It is important to consider who to include into what. There are several levels of participation. Higher levels naturally have higher barriers. We can discern four different levels of participation: getting in touch, interacting with the community, contributing work, and exercising power.

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Off-chain governance is about participation

Levels in off-chain governance

As stated, it is important to consider who to include into what. There are several levels of participation. Higher levels naturally have higher barriers.

Level 1: get in touch

To onboard people and help them out, chats work just fine: Slack, Discord, Matrix, RocketChat, IRC and such. Casual platforms like Twitter and Facebook also fit. Most superficial conversations are level 1 governance.

Level 2: interact with the community

Next, when people get around and have something to say, they have a choice. If it is something quick and not too important they can use chat. If they want to start a thoughtful discussion that will survive in history, it’s better to use something topic-based: Medium, Reddit, forums, or mailing lists.

Commenting on Medium stories, Reddit threads, or forum posts is no more difficult than responding on Twitter or Facebook. Login, search, click, enter text, submit: these are trivial actions. If a person has the skills to understand and take part in discussions around projects such as Bitcoin or Ethereum, they can surely handle Medium or Reddit.

Level 3: contribute work

An even higher level is if they have work to contribute: a good idea, a bug report, code, design, and so on. A platform similar to GitHub is necessary at this level, since you need an issue tracker to work more effectively.

Level 4: exercise power

The highest level is exercising power. This is “formal” off-chain governance. This level demands more from the people and the platform in use.

Participants must know what they are doing. They need relevant information to understand the items currently on the agenda. Since their decisions will impact the future of a digital currency, ideally they are aligned with the project through skin in the game — reputation or wealth to lose.

The platforms used to exercise power (submitting, reviewing and voting on proposals) must satisfy special requirements:

  • Version controlled documents and databases.
  • Data is timestamped and signed to verify integrity.
  • Decentralization: the platform must survive shutdowns with no data loss and minimum time to recover (easy to replicate).
  • It must be very expensive to overwrite content, which is achieved by anchoring data into a secure public blockchain.
  • Sybil-resistant voting system to make collective decisions.
  • Payment barriers to register and submit proposals. Note, we’re talking about small amounts to combat sockpuppets and spam.
  • Balanced approach to malicious behavior. Transparent, publicly provable censorship to strip outright spam, and at the same time prevent silent censorship like on Twitter and Reddit.
  • For proposals funded by digital currencies: ideally, disbursements are automated and control is decentralized.

Satisfying all these different requirements can be tricky. However, if the aim is to organize formal off-chain governance in a robust and decentralized way, it is necessary to mitigate as many attack vectors as possible and solve the issue of information asymmetry.

Conclusions

All blockchain projects are governed, although some governance systems are more visible than others. This article has explored four levels in off-chain governance: getting in touch, interacting with the community, contributing work, and exercising power.

Each of the four levels require different forms of participation. For these reasons, it is wise to embrace multiple platforms for off-chain governance.

When it comes to exercising power —formal off-chain governance — both the people and the platform are important. Governance participants should have access to relevant information and skin in the game, while the platform should be designed to mitigate as many attack vectors as possible.

The best off-chain governance system utilizes a unique mix of platforms, tailor-made for the community.

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I ask questions and search for solutions.

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