A Summary of “Notes on Blockchain Governance” by Vitalik Buterin

This is my attempt to summarize an early blog post by Vitalik Buterin. This is a learning exercise for myself and critiques are welcome. If you think something can be summarized better, please comment.

Link to the article - December 17, 2017

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• At time of writing, a trend in blockchain governance was for chains with on-chain coin-holder voting as the decision mechanism
• These votes decide who operates the “super nodes” that run the network, vote on protocol parameters(like the Eth gas limit), and sometimes vote to implement protocol upgrades(like Tezos)

Advantages to on-chain governance

• Evolves rapidly and accepts needed technical improvements
• Avoids pitfalls of informal governance
• Avoids having centralized core development teams or miners

What Exactly is Blockchain Governance?

• The two informal models of governance are the “decision function” view and the “coordination” view
• Decision Function
  • Treat governance as a function. Inputs are the wishes of stakeholders and the outputs are the decisions
  • Useful as an approximation
  • Opens the possibilities of a “revolution”(not necessarily bad) and ambiguous rules
• Coordination View
  • Governance exists in layers
    • Bottom layer is the real world(each person’s ability to run whatever software they want as a user, miner, validator, etc.)
    • The bottom layer is the ultimate deciding layer(Bitcoin node runners could wake up tomorrow and change their Bitcoin clients to Eth clients, or vice versa)
    • The layers above the bottom layer influence it
    • The second layer is coordination institutions (a lot of people agree to do a thing, therefore the thing has an effect)
    • The key questions of governance

1. What should Layer 1 be?
   1. How easy should it be to make changes/how much power do we give miners, node runners, validators
2. What should Layer 2 be?
   1. How do we incentivize people to care about the right thing for the protocol

The Role of Coin Voting

• Loosely Couple Coin Voting - Voting as a coordination institution
• Tightly Coupled Coin Voting - Miner’s voting on something like the gas limit
• Disadvantages to Coin Voting
• Coin Voting tends to have very low participation
  • Hard to appear legitimate
  • Succeptible to attacks by one user with a lot of coins
• Wealth distribution is unequal
• A small bribe to each voter could go a long way
• Coin holders are one class of user: either they view the coin as a store of value or as a medium of exchange
• Ethereum holders represent both sides, but worse still is that(at time of writing) Ether was used for other things like Cryptokitties
• The conflict between coin holders leaves one or more groups at a complete loss if a change were to be implemented (say, a change that makes the coin more of a store of value would damage the medium-of-exchange believers viewpoint)

Digital Constitutions

• A proposed solution for runaway governance algorithms
  • Mathematically specify desired properties of the protocol and require any changes to come with computer-verifiable proof that they satisfy these properties.
• This should be viewed with skepticism
  • Generally having norms is good. They allow for established core principles to emerge
  • The problem is that all meaningful norms are difficult to express
  • Because they are hard to express, there is very high potential for many different interpretations to take hold

Toward A Balance

• Coin voting, digital constitutions, and other voting schemes probably have a place
• The leading alternative is core developer consensus
  • Probably bad because of centralization/”ivory tower intellectuals”
• Vitalik advocates for “multifactorial consensus”
  • Different values and different mechanisms and different groups are polled and the final decision is based on the collection of these polls
    • Values like the roadmap, core dev consensus, coin holder votes, user votes, established norms

The market from around the time this was written (height of the bull market)