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Decentralized Governance: How to Put Power Into the Hands of the PeopleDecentralized governance ensures stability, accountability, and continuity in crypto networks. It also takes power away from centralized authorities and hands it to the community.As the crypto-economy continues to grow and evolve, decentralized governance plays an increasingly critical role as the industry gradually shifts from centralized towards decentralized.
Decentralized Governance: How to Put Power Into the Hands of the People
Decentralizing GovernanceIn distributed blockchain networks, decentralized governance is an essential requirement.For a crypto network to fulfill its purpose, it requires a robust consensus protocol supported by a sufficiently large and distributed community of participants that can ensure the security and continuity of the network. This can, for example, take the form of miners in proof of work protocols or validators in proof of stake networks.
On ChainFor most serious blockchains, changes at the protocol level must be approved by network participants and go through a vetting process before implementation.Bitcoin’s BIP process is a great example of how on-chain governance can function effectively. Proposed changes to Bitcoin’s code are thoroughly vetted and only implemented if essentially the entire community agrees to run the updated code on their Bitcoin nodes.
Off ChainIn addition to on-chain governance, decentralized governance can also be off-chain. An example of off-chain governance would be community-based voting on how a project should proceed or what developments should be prioritized.Off-chain voting allows for more user participation and does not require anyone to pay transaction fees, as is typically the case for on-chain voting.On and off-chain governance can also be combined by enabling off-chain voting with on-chain consequences. For example, on the off-chain voting platform, Snapshot, users of different protocols can vote on proposals that can then be executed on behalf of the community by trusted community members via multisig transactions.We have witnessed a lot of innovation in the area of distributed governance coming out of the crypto community in the past decade. While not all forms will stand the test of time, the promising aspect of the ongoing experiments is that the ethos of cutting out the middlemen and handing power to the people remains.