This post describes why blockchain governance design is one of the most important problems out there, its critical components, current approaches, potential future approaches, and concludes with suggestions for the community.
Why Blockchain Governance Matters
As with organisms, the most successful blockchains will be those that can best adapt to their environments. Assuming these systems need to evolve to survive, initial design is important, but over a long enough timeline, the mechanisms for change are most important.
As a result, I believe governance is the most vital problem in the space. Other fundamental problems like scalability are arguably best approached by using governance to set the right incentives for people to solve them. Yet little research has gone into governance and it feels poorly understood.
Satoshi showed us the immense power of releasing a blockchain-based incentive structure into the world. A 9 page whitepaper spawned a $150bn cryptocurrency, a computer network bigger than the top 500 supercomputers by 10,000x, and a diverse ecosystem of developers, users, and companies. This was arguably one of the highest leverage actions in human history. It showed the power of blockchains as networks that can connect everyone and bootstrap themselves into existence if well constructed.
We are increasingly living in digital networks, spending an average of 11 hours a day on screens in the US with over half of that on internet connected devices, growing 11% each year. However, these networks are highly centralized (Facebook, Google, Apple, Twitter) and continue to consolidate. In the current model, all of the profit and power of a network is within one company, and you’re either inside or you’re outside. It’s important the networks we live in serve our best interests. With blockchains emerging as the new global infrastructure, we have the opportunity to create vastly different power structures and program the future we want for ourselves.
For these reasons, I believe blockchain governance system design is one of the highest leverage activities known.
A Cambrian Explosion
It’s rare a new government or central bank gets created, and even more rare to see experimentation with a new form of governance when it does.
Blockchains are unique because they 1) allow thousands of governance systems and monetary policies to be tried at the speed of software with 2) in some cases, much lower consequences of failure. As a result, there will be a Cambrian explosion of economic and governance designs where many approaches will be tried in parallel at hyperspeed. To be clear, I am including economic design and monetary policy (said another way, incentive structure) in governance because, like other aspects of the system, they can be modified as time passes.
Many of these attempts will be spectacular failures. With millions of algorithmic central banks we will have millions of crypto George Soroses trying to break the Bank of England. Through this process, blockchains may teach us more about governance in the next 10 years than we have learned from the “real world” in the last 100 years.