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 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

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.

Off-chain governance is about participation

Levels in off-chain governance

Level 1: get in touch

Level 2: interact with the community

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

Level 4: exercise power

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

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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