Source: Acala Network
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As a new organization model, the blockchain network is releasing new human potential. This kind of decentralized organization method is more like a continuous social experiment. When Ru Mao drinking blood, humans choose smaller ethnic groups to maximize the quality of life, so they choose to live in groups and hunt collectively. Later, the small dwellings could not meet more needs for life, and began to evolve more regular groups such as nations, countries, and companies. They worked together to maximize resources in accordance with governance rules. Global computer network.
Today, even the best organizational governance models still do not address the issues of balanced interests, rent-seeking behavior, and oligopoly. In this article, we will discuss how to evolve into a more perfect decentralized governance, and how to achieve it through blockchain governance "Ant and elephant" dance together, I believe this global social experiment will bring lessons for future social governance.
Can we find a corresponding organization model in reality that can help us better understand the governance of Bitcoin network? Understand that the most appropriate governance model is the US federal system. For example, when the Senate needs to pass a new bill, it must first be submitted by lawmakers. When the Department of Justice receives a request, it can choose whether to pass it. The state federal can choose not to exercise it. Your own veto. In the Bitcoin network, when someone proposes BIP, developers need to submit a merger request. Miners can receive development requests and choose to pass before they can develop. Nodes also have the right to choose asynchronous execution to express their veto power. Community currency holders Objections can also be made. Finally, Bitcoin's economic incentives require maintaining trust in the system, and that trust must be in the best interest of everyone and it will automatically reach a balance.
Under such a rule, miners, nodes, and investors become the key factors of governance. The purpose of the Bitcoin governance process is to maintain a set of verification rules. This set of verification rules covers syntax, data structure, resource use restrictions, integrity checks, and time locks. , Memory pool, and block header verification.
What happens to ordinary users or developers if they stick to it? If miners alienate all holders of Bitcoin, the value of Bitcoin will fall, and miners will have no incentive to continue working. If a reference implementation is not endorsed by the Bitcoin protocol developer or other members of the Bitcoin community, the maintainer of the reference implementation will not incorporate it into the real software implementation. If you want to bypass the maintainer of the reference implementation, To get rid of the influence of social consensus, you have to copy the code base from the original chain and publish it after modification according to the improvement proposal. For example, the BIP-148 user activated soft fork (UASF) is like this.
Therefore, Bitcoin's off-chain governance model is relatively single. It helps developers, miners, users, etc. to continuously increase the value of token holdings through incentives. In general, the miner support rate replaces the entire community support rate to determine whether Adopt a proposal. As the cycle becomes longer and longer, many governance issues are exposed, mining continues to be centralized, and there is a conflict of interest between miners and users, resulting in Bitcoin governance not solving the problem through a decentralized organizational form.
In April 2019, Lane Rettig, EWASM's core developer EWASM team, posted a Tweet, "Ethereum governance has failed, we are actually ruled by technical experts: core developers have the final decision on protocol updates." discuss.
* Image from twitter.com
Similarly, the separation of three powers also inevitably leads to the centralization of Ethereum governance issues. One of the governance issues is over-reliance on the creator Vitalik, and the other is limited incentives for developers, forcing more developers to work on projects themselves. Create tokens to support yourself.
In this regard, Ethereum star developer Vlad Zamfir believes that "Code is law" is very dangerous, and opposes complete on-chain governance, because everyone only sees insufficiently optimized governance and decision-making but does not see the true internal decision-making operation. On-chain governance can always only represent the interests of a few people, which is also contrary to the public spirit of blockchain.
Ethereum founder Vitalik has since responded and supported this claim. He believes that voting on the chain of governance is overestimated, and the status of "informal governance" implemented by similar systems like Bitcoin is far worse than people think. . If the blockchain is completely algorithmic, it is crazy. So, on-chain governance makes minority divisions easier? The split will continue to destroy the network effect. In the case of only governance but not multi-equilibrium games, such complete on-chain governance is meaningless. Therefore, the blockchain governance method advocated by Vitalik is "multi-factor consensus". In some special cases, tightly coupled voting is also necessary. For example, the ability of miners to vote on Gas is a feature that has proven to be very useful in many situations.
As the Ethereum upgrade is about to shift to PoS to help shorten the difference between users and miners, the risk of centralized trends such as Bitcoin will be largely avoided, but the governance process will be longer than before. Ethereum ecological members are also constantly exploring to find a better decentralized governance model. MakerDAO, as the DeFi market on Ethereum, has more than 50% market share, and uses polls and limited on-chain voting to manage the stable currency DAI.
Opinion polls started in the 19th century in the United States. In the latest general election, Trump must mention his high approval rate in each speech. Hillary was questioned because of polls and Jeb Bush simply supported. With a sluggish rate to withdraw from the campaign, George Gallup once called polls the finger of the pulse of "democracy." What does a poll become when it becomes a rule running on the blockchain? MakerDAO governance treats the proposal as a public official participating in the election. Community members can choose to vote or not. The foundation uses voting as a reference for community members. In administrative voting, the ordinary referendum process will continue until the number of votes exceeds Until the last administrative vote. The number of votes for MakerDAO is directly proportional to the amount of Stake. When a poll or administrative vote is turned on, users pledge their MKR to participate in voting. After the voting period ends, the party with the highest number of MKR pledges wins. Therefore, the Maker Foundation uses opinion polls to measure the community's views on different issues, such as adjusting the stable rate of the stablecoin DAI. At the same time, MakerDAO also has Executive Votes. Once the voting is over, the winning option will take effect.
In December, a new round of community voting for MakerDAO revolved around the decision of "whether to adjust the DAI debt ceiling and the SAI stabilization rate", and finally won a total of 51910 MKR support votes and passed. According to data from mkrgov.science, two of these addresses accounted for 66% of total MKR pledges. In several other votes, the weight of a single address exceeded 90%, including a vote in October, and the number of votes contributed by a single address exceeded 94%.
Although it seems to be very democratic governance, it appears that the vast majority of votes are still concentrated, and as the supply of MKR continues to increase, the trend will become more and more obvious, and the number of addresses holding a small amount of MKR has been steadily increasing. . However, the number of addresses holding at least one hundred thousandth of the total MKR supply (at least 6.44 MKR) has remained relatively stable.
According to coinmetrics.substack.com statistics, in the MakerDAO voting history, most voting rights are concentrated on relatively few addresses, with 219296 and 137084 MKR in the Maker MultiSig and Maker Governance contracts, respectively. When these two addresses were removed for analysis, the adjusted total supply of MKR decreased from 999999 to 643609.
The following table shows the statistics of an address holding at least 1 / X of the total MKR supply according to CM statistics, where X ranges from one thousand to one billion. Among them, 102 addresses hold at least one thousandth of the total MKR (ie 643.61 MKR). These 102 addresses accounted for only 0.58% of the total number of addresses, but held a total of 509991 MKR, accounting for 79% of the total supply. Given that the latest round of voting requires 51910 MKR, if these top 0.58% of the sites cooperate, they are fully capable of controlling MakerDAO voting.
* This data excludes Maker MultiSig and Maker Governance contract holdings
* Data source: coinmetrics.substack.com
Whether it is Bitcoin or Ethereum, or the design of MakerDAO blockchain governance, the problem of obvious centralization over time has not been avoided.How can we design a relatively complete design that can achieve relative democratic decentralization? Community governance? Substrate seems to give the best solution in the current market, and has become the master of governance on the chain.
* Image source from network 2018
At the Web3 Summit, former Ethereum co-founder Gavin Wood, the current founder of the Polkadot chain, developed a brand new blockchain in just 15 minutes. It was amazing and used Substrate.
Why is Substrate a master of on-chain governance?
The current Web application implements the HTTP protocol again. Development based on Substrate only needs to implement a small number of function callbacks in the code. Substrate provides a high degree of freedom in the technical framework, which can be customized and highly available. At the same time, Substrate has also created a new governance model. The on-chain voting process is completely transparent and traceable, and fast and effective community activity is achieved through rotation, and a new decentralized governance is realized, to the greatest extent, achieving democracy and maximizing the interests of each party.
Substrate runs most of the on-chain logic as a runtime. When upgrading, all Runtime module modifications can be written into the transaction, and a referendum is initiated in the form of a proposal. After the referendum, all nodes will be synchronized to the Runtime update. And complete the runtime update at the specified height, the entire process does not need to suspend the node to upgrade the client, it is a true on-chain governance seamless upgrade.
Innovation comes from Substrate governance introduces the concept of an "on-chain parliament" that consists of a fixed number of stakeholders (6-24 members). Each parliamentary member is elected through a staggered community approval vote (similar to a vote in favor), members participate in representative democracy, and rotate continuously as their electoral term expires. Moreover, when the number of members is small, the rotation period is shortened, and disguise is guaranteed to be sufficiently decentralized.
From the perspective of Polkadot's governance process, it is mainly divided into three stages: first is the national proposal stage, everyone can pledge DOT to make proposals, proposals with a high number of votes can enter the referendum stage, and everyone can choose to support or oppose the proposal. Proposals with enough support will be implemented, but a parliamentary system is also added, which can initiate a referendum or cancel the existing referendum. The parliament also directly addresses the potential for low voting rates through adaptive group bias.
* Image source from the Internet
The general idea behind the adaptive quorum bias is that if the parliament proposes a vote and the turnout participation rate is low, then the proposal in question will need more negative votes than negative votes to reject the referendum. However, at the same low turnout rate, if an ordinary token holder proposes to vote, then the proposal requires more votes than votes.
* Image source from the Internet
Adaptive quorum biases provide flexibility in low turnout situations through voting majority requirements based on turnout, making it easier or more difficult to pass a proposal without a clear majority vote support or opposition.
For example, a miner may be willing to take more risk and voluntarily lock up the DOT for the longest time when voting for a referendum to change their bottom line. If Referenda passes, the DOT of the miners will be locked and they will face a certain risk of economic loss. If Referenda fails, the miners' tokens will not be locked, and if they feel unacceptable, they can sell or exit the system.
* Image source from the Internet
Therefore, unlike previous Bitcoin and MakerDAO voting, Substrate's core voting principle is equity weighting. If DOT holders use their rights to vote in community elections, all amendments in the Polkadot ecosystem require the majority of votes to be approved before they can be approved, and those with more votes will have more Internet voice With the development of ecology, it will continue to optimize.
If a single Bitcoin network governance is compared to governance within a certain community, then Substrate governance is more like inclusive and cross-region governance. It is worth mentioning in particular that in order to prevent the risk of centralized voting and oligopoly, Substrate has specially designed a proposal pool, and regularly selects a proposal from it for the public to vote without the need for parliamentary intervention. The implementation will begin, which guarantees that the parliamentary system cannot completely monopolize the direction of all proposals and weaken the control of the chaebol.
If some irrational proposals still pass the referendum, this proposal will cause a lot of malicious harm to the community, and a new round of voting can be passed through the parliamentary system during the cooling off period. If all members oppose it, the proposal will be put on hold . The vacancy period and the parliament have a protective effect on the ecology of the entire community, forming a closed loop of governance.
Even so, the introduction to Substrate governance is not complete here. You can view the complete governance model through WiKi or Github. Polkadot, as a relay system, not only considers the development of a separate ecology in terms of governance, but also gives a complete governance model of the Substrate chain, achieving ecological efficiency and democracy.
Building the future of DeFi based on Substrate
At present, once the design of a decentralized governance model is completed, it is difficult to trial and error and iterate like traditional products, but the governance of Substrate also allows us to see the possibility of evolution. In the future, the DeFi industry will have many small and high-frequency transactions. Building DeFi based on Substrate will not only improve scalability, but multi-chain interoperability will also bring better scalability and throughput, and achieve a better DeFi user experience. Substrate's on-chain governance can carry out deterministic weighted voting for some ambiguous business parameters, and the voting results are directly executed in accordance with the rules. To achieve the hot update of business logic, compared to the traditional lending market, decentralized lending has realized the opportunity of " ant" and "elephant" to dance together . Good governance is needed to help everyone maximize their benefits in the market. Finding a balance of interests in the established speculative market is one of the reasons why Acala chose to develop with Substrate.
Paul Mason said in his "Postcapitalism" book that eventually humans will move towards a society with free machine productivity, zero-cost basic necessities, and minimal man-hours. No matter how the economic system evolves, most of the economic activities and values of mankind must be presented in the form of information. In the future, we will all become members of the giant network, with unique digital identities and digital banks, so these governance evolutions are actually closely related to our future, helping to maximize the existing human wealth and achieve true decentralized finance The market and blockchain governance will no longer be a network experiment but a path that must be followed by real world evolution.
* Cloud Investment-Daniel Garcia
3. "Coin Metrics' State of the Network: Issue 29"
4.Blockchain Governance: Programming Our Future
5. A Walkthrough of Polkadot's Governance
6. "Token Economic Paradox-Incentive Mechanism, Social Production, Post-Capitalism"
7.Blockchain Voter Apathy