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Insight into the design of Blockchain Governance!

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Insight into the design of Blockchain Governance!



“When decentralized blockchain protocols starts displacing the centralized web services that dominate the current internet, we will start to see the real Internet-based sovereignty. The future Internet will be decentralized”- Olaf Carlson-Wee.

In this blog we will discuss that what is “Blockchain Governance”? Blockchain is a gradually developed technology which is shaping the lives of organizations and our society. Unlike the traditional modes of governance in digital domain, blockchain governance is based on consensus mechanism. “Governance” term is defined as the ability to participate in the policy making. When we talk about blockchain the term “governance” spin around two sets of models: decentralized governance model and on-chain vs off-chain governance model. Decentralized services through the blockchain are to encourage better governance. Objective is to avert the concentration of power in the hand of the few to prevent anarchy and prepare legal laws and regulation customized according to the requirement of the people. The idea is that protocols should be directly managed by private networks of individuals based on trust and market rules.

Now we will try to understand two different setting which is: Off -chain and On-chain.

Off-chain Governance: when observed Off-chain governance is very much similar to the traditional governance structure. It is a system that try to take every stakeholder interest into account. It is more centralized governance which is slow in design balancing between different end users. Here the consensus is controlled by the community leaders. There is a no transparency in the information presenting what is exactly happening in the network. Off-chain governance involves higher degree of human interference opposite of On-chain governance.

On-chain governance: As the name suggests this governance is directly on the blockchain protocol. It is an essentially a decentralized form of governance with fast decision-making design. With clarity in information, it has good insight on what is happening in the network. Here consensus is directly done by the protocol and stakeholders voting.

Some emerging examples of blockchain governance models in action are Bitcoin and Ethereum. Bitcoin governance model is a combination of “On-chain” and “Off-chain” governance. Although there is some debate about the percentage of centralization in Ethereum, the second most popular cryptocurrency. The future of blockchain governance will surely test the capacity to recover over the difficulties of centralization.

What is your opinion on “Blockchain Governance”? and which model do you like the most?

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Comment (1)

  1. Vinod Kumar


    24 August 2021 at 2:20 pm

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