Babbitt Column | Blockchain Project Governance, Rules and Influence

I. Constantly mentioned governance issues

Today, I read Yang Haipo's article "Bitcoin's Bifurcation" . He mentioned in his article that decentralized governance has gone bankrupt under the POW consensus mechanism. He said this:

In the entire Bitcoin expansion and fork event, it was also revealed that Bitcoin was actually mastered by developers, not miners. Although the operation of Bitcoin is decentralized, governance is heavily dependent on the centralization of decision-making. The same is true for Bitcoin Cash, where miners’ decisions have never really taken effect. Although the Bitcoin ABC team strongly denied it, they were the de facto leader of Bitcoin Cash, and they began to dominate Bitcoin Cash's hard fork upgrade every six months. Decentralized governance has gone bankrupt under the POW consensus mechanism, and may be able to be achieved to some extent under the POS consensus mechanism.

Just right, there was a news about EOS in the first two days. Larry Sanger, chief information officer of the decentralized Wikipedia Everipedia, said that EOS would give up developing DAPP if it was controlled by the Chinese consortium.

A careful analysis of these two news is actually related to governance.

• "The Eye of the Government" Chainalysis: Most Bitcoin mixed currency transactions are legal transactions
• The so-called "Defi", how much do you go to the center?
• Programmer Xiao Ge told: What is the experience of all the wages only bitcoin?

Of course, the second news said that if EOS is controlled by the Chinese consortium, he refuses to continue to develop. This is of course a bit of a slap, so that some people joked that the project has the suspicion of running around with money. This is used as an excuse.

But it is undeniable that the word governance is very hot in the blockchain industry and has been mentioned many times, as if each project has governance issues.

Second, there is no governance problem

But is this the case? In my opinion, only Bitcoin does have governance problems because it is the most decentralized, and the founder has disappeared, which means that the core of power has disappeared. Although the founder has disappeared, Bitcoin has to keep up with the times, the development task has to continue, the computing power has to continue to improve, and it is necessary to continue to develop new functions to meet the needs of the market. Who will come to these improvements? do? How to do it? Who is listening to? These all involve governance issues.

I think before we discuss it, we have to define the next rule:

The governance I personally understand is the question of how to make decisions in the absence of a decentralized power center without a clear power center.

From this definition point of view, except for Bitcoin, most of the projects have no governance problems at all . When they discuss how they will solve the governance problems, most of them are disease-free.

For example, do you have the most common content platforms and major media issues? No! Completely determined by the project side, it is a complete centralization project. The project party said that it needs to be changed here, and it will be changed here tomorrow; the project side said that the incentive mechanism needs to be adjusted, then the incentive mechanism will be adjusted tomorrow; the project party said that it cannot be cashed out in time, and the withdrawal date must be changed to one month later. Then your withdrawal will only be available after one month. What does it have to do with governance? It doesn't matter!

For example, what exchanges do you often use, and what does it have to do with governance? It doesn't matter! When the transaction says to adjust the handling fee, he can adjust the handling fee; if the transaction says to suspend the withdrawal, it will have to suspend the withdrawal; what function is limited by the transaction, what function is limited; If you want to put the coin on it, you have to remove the coin; what is the relationship with governance? It doesn't matter!

Some people say that these are purely centralized projects. You can take a look at a few decentralized projects. Yes, in addition to Bitcoin, decentralization should be considered Ethereum and EOS, which is the most contacted project.

Although Ethereum intends to turn to POS, it still uses the POW workload proof mechanism, and it has had a hard fork in history, which is considered to be a decentralized project. But when he promotes fragmentation technology, do you have any say? When he changed the consensus mechanism, when I turned the POW to POS, would you ask for your opinion? When he modified the incentive mechanism and modified the block reward, did he vote? nothing.

As for EOS, it doesn't even belong to the blockchain in the true sense, it is essentially a distributed database. It has been said in the EOS white paper that its fork is extremely low, because these 21 nodes are cooperative accounting rather than competitive accounting. And EOS also has an arbitration committee. A project that does not fork, a project that all things are ultimately decided by the Arbitration Commission, is there really a so-called governance problem?

My personal point of view is that, with the exception of a few projects such as Bitcoin, most projects have no governance problems at all.

Third, voting does not change this.

Some people say that there are voting mechanisms in EOS and similar projects. Ordinary people can participate in project decision-making through voting. This kind of ordinary people's participation in decision-making is also a reflection of governance.

However, what needs to be explained here is that everyone usually thinks that POS is one person and one vote. In fact, POS is a technical definition. It is essentially a form of election, in which any node is randomly selected to verify the next block, the share of equity. The size determines the chances of being selected as a verifier, which allows the creation of the next block. It is rare to see examples of POS direct voting to determine the company's direction. Usually everyone thinks that DPOS voting is one person, one vote, but in fact, in DPOS, your ticket can only be used to elect super nodes, and can not affect other decisions of the project.

Moreover, the participation rate of the public is not high when it comes to voting on blockchain projects. On the one hand, voting itself is not very closely tied to the interests of the public. On the other hand, voting on the blockchain is too complicated, such as EOS, the earliest mapping, and later account registration, wallet usage, etc. Complex, many people will not operate, more importantly, there are many things that need to be decided by voting. Ordinary people do not have such professional qualities at all, and they cannot understand the meaning of what is being voted behind.

Moreover, in the traditional financial field, for example, in the current listed companies, there is a similar voting system. The highest decision-making authority of a listed company is the shareholders' meeting, and the shareholders' meeting is also a voting mechanism. In the end, it is also a lot of votes. This is not a new thing.

However, listed companies are still the world of major shareholders and management. Although ordinary people have a small number of votes, these votes are simply meaningless. Ordinary people have no chance to participate in corporate governance.

Putting it into real life is the same. American democracy is the most proud point. They often claim that they are one person, one vote, but even if they are one person, one vote, they still have to choose a president to represent them, such as election. A president like Trump. Although it is one person, one vote, the impact of ordinary people on things is extremely limited, and ultimately it is still the people with great influence.

The reason why the United States is still the world hegemon today is that the economic strength, political strength, and military strength are leading in the world, and they are inseparable from their political system. The United States is the most democratic country, and they face the problem of governance. The governance problems faced by the blockchain are much more complicated, but in the end they have very cleverly set up a system of separation of powers, mutual restraint and mutual supervision. This system guarantees that the selected decision makers can represent the vast majority. At the same time, people's opinions can't decide everything, and it is this system that guarantees the development and leadership of the United States for hundreds of years.

Fourth, governance, rules and influence

In fact, the real problem is that people's expectations for governance are too high.

People hope that blockchain projects, including Bitcoin, are best for everyone to express their opinions. At the same time, they must be highly efficient, and the project must develop in the right direction.

But like the impossible triangle in the field of blockchain technology, this can basically be called the impossible triangle of governance : there is no such governance mechanism, which respects the opportunity for everyone to express their opinions, and the efficiency of governance is high. At the same time, it can ensure that the project does not go in the wrong direction.

The real governance is essentially a set of rules! A set of mutually restrictive power rules!

The reason why bitcoin is said to have governance problems, because other project parties are all in one sentence, have a clear power center, and there is no need to govern.

Bitcoin is different. If Nakamoto is still in the Bitcoin world today, then he will also play a decisive role in Bitcoin, so today's Bitcoin is probably not really decentralized. However, to say that coincidence is also good, and that it is intentional, Nakamoto has left Bitcoin, and Bitcoin has lost its absolute right to speak. Now the whole bitcoin world is a game of miners, development teams and users. The party has its own interests, but no one has the final decision and one veto. This is a set of effective power restriction rules.

Moreover, the real underlying thing of Bitcoin is not governance, but built-in game theory. If you really have a huge influence on Bitcoin, then your only option is to develop Bitcoin and do something good for Bitcoin, not to hurt Bitcoin (although everyone understands the benefits are not the same).

Of course, you may say that there are still various problems in this model, such as "code tyrants" and "mine tyrants", and still a few people have the final say.

We must know that we are not solving theoretical problems. We are here to solve real problems. In reality, one thing is quite strange. No matter what rules are adopted, no matter what mode is adopted, no matter what governance mechanism is used, no matter how they restrict each other, the final influence between people is different, and ultimately it always affects. The person with the greatest power has the final say, this is the true lowest level of governance .

Chang Hao once said: Decentralized meaning is the degree of freedom for everyone to participate in the consensus. He has the power to participate and has the power to quit. Under the premise of code open source and information symmetry, the degree of freedom of participation and decision-making means fairness. It can be seen that decentralization is not a new word. It is actually the invisible hand of Adam Smith: the free competition of the market.

Then, the so-called decentralized governance is also very simple: in the open market competition, a winner will be selected, and this winner will continue to lead us forward.

This winner will not always be correct, and occasionally make mistakes, but if it proves to be a mistake afterwards, he will be asked to leave, and other winners will come out to continue to lead the project. And everyone has the right to fork. If you are not optimistic, you will leave and vote with your feet. In this way, the progress of the project will be forced. This is the decentralized governance that really runs in reality.

V. Conclusion

If you still don't fully understand the above article, just look at the following two sentences:

What is consensus? The consensus is that the minority obeys the majority, and the weak is obedient;

What is governance? Governance is who has great influence and who has the final say.

Author: Monte Carlo

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