There is a common misconception in crypto that governance is and only is voting. Many new projects claim they have or will add governance when they really mean they will add a voting widget. Voting is a common feature in live projects, but the implementations vary substantially and often play only a small role in the overall governance of these projects.

We conflate voting with governance because it’s the primary interface that the average person has with government. In democracies, we vote every couple of years for our representatives. In public companies, we vote to elect board members to manage our corporations and submit shareholder votes at annual general meetings. Markets are a form of voting: buying shows support and selling or shorting shows dissent.

But organizations rarely make every decision by committee. Once leaders are elected, they make the majority of the decisions without further votes. Putting every decision to a vote would introduce so much transactional overhead that the system would grind to a halt. And delegating all decisions to the crowd is ill-advised. Best-practice decision-making within companies suggests we minimize the number of decision-makers and try to match decisions with the most qualified or believable decision-makers.

Voting for corporate or government representatives is delegation1. The voters pick a representative to make decisions on their behalf. Votes allow us to provide basic input on who we think should have power in our system, but nobody would say that our democracy is governed by voters. It’s obvious that the power in our system is elsewhere.

Voting in blockchains

As Nic Carter observed in his Zcon0 talk, “‘Blockchain governance’ has been conceptually stretched to the point of near meaninglessness.” The descriptions are all vague but share a general theme in common: checks on the powerful central entity controlling the protocol. Consider language like “no undue influence from founders,” “democratically take […] decisions,” and “power originates with the token holders.” These are promises that the power in these systems will be in the hands of the community and not a small group of people at the center of the protocol.

an overview of blockchain governance

“An Overview of Governance in Blockchains,” Nic Carter. 2018

In practice, we have yet to see a model of blockchain governance where the community controls the power. While there are some good faith efforts to better balance the power, there’s nothing that delivers on the promise of a wholesale transfer of power from the core teams to the community.

Some of the most well-regarded examples are Tezos’ “self-amending ledger,” Decred’s “autonomous digital currency,” and MakerDAO’s “governance risk framework.” While these could be considered industry-leading designs for governance, none will ever contain all facets of governance in their on-chain mechanisms. And voting is only one piece of each.

Bitcoin and Ethereum’s (arguably highly functional) governance processes can be summarized as follows:

  • Research and proposal: an enterprising person comes up with an idea to upgrade the network, writes a proposal, and posts it to GitHub (BTC proposals, ETH proposals). Behind the scenes, that enterprising person will often try to build support for their proposal through community channels like mailing lists, social media, and online forums
  • Review: Core developers review the proposal and provide feedback
  • Acceptance: In BTC, an economic majority of miners have to decide they want to implement the change. In ETH, approved improvements are scheduled for release in the protocol upgrade.

Rather than place the proposals and votes on-chain, consensus is built off-chain in forums and conversations. There are some forms of voting but they’re largely informal (like the non-binding vote to rescue funds from the Ethereum DAO hack).

And in stark contrast to the aspirations of projects like Tezos, Decred, and Dash, we have the majority of projects that are 100% controlled by a handful of people. This isn’t a problem in and of itself. Most things are probably better developed by a small group of highly qualified and motivated people rather than a random committee. The problem arises when the projects claim decentralization and point to purely symbolic votes on trivial topics as evidence that the community has power.

From a project’s perspective, it’s easier to place power in the hands of the community when the decisions you make are narrow in scope and repeatable. And from the community member’s perspective, governance is a semantically challenging topic to understand and engage with. There’s an overall goal of putting the power in the hands of the community, but it’s hard to tell whether that’s happening. A vote feels like evidence of decentralization or community power, but as we can see from the examples above, the existence of voting is orthogonal to the power of the community.

In sum

If we consider governance, “the process by which we attempt to establish (and maintain/revoke) the legitimacy of decisions, decision making processes, and related governance norms/expectations2,” we can conceive of many ways to establish the legitimacy of decisions. In some contexts, voting can play a critical role. In others, it’s not needed.

The way we govern nations and corporations today emerged over centuries of trial and error in meatspace. They are complex and nuanced and imperfect but functional. Truly illegitimate forms of governance are eventually overthrown.

While I’m a big believer in building better systems for us to live with, it’s naive to think simply putting votes on the blockchain will lead to a world where organizations are controlled by their communities.

Remember, goals and values underlie the formal tools for governance. As Katherine Wu says in “Governance: age-old problem in a new tech era”:

We tend to forget that law is made by the consent of communities of people, oftentimes without any formal action by governmental entities. […] Goals and values go hand in hand, but are created from ongoing community consensus more than predefined rules. Technology may move the discussion forward and give us a framework to build upon, but governance is not a ground zero issue. At the end of the day, it’s about human behavior.

The soft stuff–whether cultivated by a team or organically formed out of anarchy–can not be divorced from the hard stuff (the formal tools for governance).

Governance is not a feature, it is a complex system. Voting is just one (optional) part of that system and does not itself lead to strictly better governance (though it can). A project can have strong governance without voting and a project with voting can have terrible governance. We should be wary of projects that claim decentralized governance solely based on their voting feature and instead seek to understand all sources of influence across the decision-making process.

Thanks to Katherine Wu and Nic Carter for their input on this piece

  1. This model can be called a representative democracy where citizens or stakeholders are called in to provide basic input on a time-consistent schedule. Critics of representative democracy would argue that this model fails to represent the people. Voters “essentially accept or reject players in the same system” and “less than one percent of the population is able to vote on legislation or execute budgets.” However, proposals that increase the frequency of votes and decrease the power of delegates face the challenges of inefficient decision-making, low voter turn-out, and design-by-committee3

  2. Vlad Zamfir’s definition that he tweeted. This is compatible with Carter’s definition: how public blockchain communities and key stakeholders arrive at collective action, specifically with respect to protocol change.” 

  3. Liquid democracy is an intriguing proposal that tries to find a more optimal trade-off point by allowing users to delegate their votes to anybody (e.g. friends) while still relying on representatives to make decisions on legislation and budgets. 

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