From ad hoc governance to better governance

@iang wrote a nice piece on blockchain consensus mechanisms, defending, of course, delegated proof of stake. I'd like to expand a little bit one point that he makes.

Fallacy that there is no governance layer in other chains. In practice there are governance layers, but they are unwritten, denied, and inconstant or abused. In essence, we are replacing ad hoc (anarchic? captured?) governance with written, constitutional, formal and transparent governance. The question is not whether this adds governance, but whether explicit governance is better than the hidden intrigue.

First I have to say that "ad hoc governance" is a great term in this context. I try to remember to use it from now on.

Why ad hoc governance doesn't work

Many people in the blockchain world are very much in favor of decentralization. But in many cases, it's not clear why decentralization should be applied. And if it should, what's the best way to do it in a particular case.

Hierachies exist for a reason. They make decision making much more effective. When it's not necessary to have wide and long discussion with lots of equal peers to reach a consensus, the whole process is much more faster. Those who are in power just decide what to do and make it happen.

If you are familiar with Ronald Coase, you might see how this is in line with his thoughts about the nature of the firm.

According to Coase, firms exist because they lower transaction costs of cooperation. When there is a central party that hires workers and tells them what to do, shit gets done much faster compared to a situation where everybody acts as a contractor and makes individual contracts with everybody else. Transaction costs include non-monetary costs like negotiation cost: it requires time and effort to find suitable business partners and negotiate contracts with them.

This is something that decentralization fanatics don't usually understand. If there is a highly decentralized system, cooperation costs might become quite big. This is why many ad hoc governance systems will get stuck with decision making: it's just too expensive to get an agreement with everybody involved. With blockchain many of the participants are anonymous and pseudonymous, which makes it even more impossible.

The governance structure should match actual power structures

People behind Urbit are probably the best at digital community governance design stuff. For example, in Design of a digital republic: part 1, goals they write:

A republic needs a constitution — a set of formal processes that guides and shapes the real questions of governance, which are always informal.
The republic is in a healthy state if its actual power structures match this constitution.

If a blockchain (or any other virtual republic) lacks constitution or other document that defines and formalizes power structures, it doesn't necessarily mean it's decentralized. It just has ad hoc governance. Power structures pop up and change somewhat randomly.

It is also possible that a blockhain has a constitution (or something similar) but the actual power structures are something else. Rulers defined in the constitution are just puppets and the real power is elsewhere. Having a shadow government is not a good situation either.

It should be noted that young systems don't necessarily have very good governance process and the real power structure might be ambiguous. That just means that the system hasn't matured yet. People are still trying to learn how the system works and should work. That's why participants in a young community should understand the difference between unmatured power structure and a target power structure, which is a goal that the system should be going towards.

Different governance structures produce different outcomes

It's not enough to replace ad hoc governance with written, constitutional, formal and transparent governance. If the community has a clear goal, a little bit of thought should be given to the actual mechanism that governs the community. How easy it will be to achieve the goal with a particular governance mechanism?

The goal for blockchains is usually some kind of profitable business. The governance mechanism should be able to support business development in its all stages. From early technical development to gaining viral traction and finally to serve a huge base of global users.

That's why it might be even desirable to change the governance system, depending on which state the development is. A governance mechanism that is efficient at producing technological innovations that attract early adopters might not be good at preserving the market share in matured markets by producing a high-quality user experience.

If the constitution and the governance mechanism defined by it are very rigid, they should be pretty much perfect when the blockchain is launched. Because this is really hard, probably a better way is to admit that the system will need changes and think in advance what is the best way to make those changes.

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I for one am very glad to see these philosophical questions of different "governance" structures NOW being able to be practiced in Blockchain technologies. These are amazing times to be a part of indeed.
But I for one appreciate cooperation over coercion.
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errrm, blockchain is a decentralised technology i was made to believe, so the blockchain-governance is kinda tweaking my brain please.....Who are the goverment in this secenario?.....i just need a simple term explanation please

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Blockchains are decentralized in that anyone can participate in the network. How those voluntary participants interact with one another once they join a project (a specific blockchain protocol) is a problem of governance. You can think of this discussion as "How to develop a decentralized governance structure." What the author is saying is that anywhere you have people interacting with one another, governance structures will emerge. You can either consciously design them, or not.

IMO this article is addressing a larger point of "What the heck does decentralization mean?" It's often easy to fall into the trap of believing that "decentralization is always better" as if decentralization is an easy thing to pin down. The United States, for example, is decentralized in that it has individual States that have some level of autonomy. But it's obviously also highly centralized in that it has a Federal Government with a lot of compulsory power. Point being, centralization and decentralization are often in the eye of the beholder. They are more subjective terms than people often let on. The truth is that the challenge is having the right amount of decentralization/centralization. The reason it is so important that these systems be entirely voluntary is that this serves as a check on centralization (among other things). If the participants feel the system is becoming "too centralized" they can always leave, so it's always in the best interests of those involved to keep their system "only as centralized as necessary."

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Now i just got schooled. Thanks for this @andrarchy, this a question that had been in my mind since i got to know a little about Cryptos and Blockchain, it was my lucky moment to get a post where i could ask and not feel embarassed......PS- I'm in Nigeria West Africa, and we are trying to catch up on this amazing things

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It was a very good question!

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I wrote a little bit more on decentralization here: What's so great about decentralization, anyway?

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@andrarchy already gave a pretty good answer.

It depends also on what kind of system it we are discussing about. If we assume that a certain blockchain is perfect and it doesn't need ever again any kind of improvements, then it doesn't necessarily need a governance system. But so far we are very far away from perfect blockchains. There is always something that can and should be improved.

For example, Bitcoin is in trouble with the blocksize debate. They can't decide what kind of actions should be taken to move forward. Somebody might say that this is a problem of non-existent governance, but another perspective is that there is governance structure, it just doesn't work very well. Participants in Bitcoin economy are still doing decisions all the time, about what not to do. They are deciding that all improvements that are suggested so far should not be implemented. So there are people who have power – they have a power to say no.

Bitcoin governance structure is a good example of ad hoc governance which just happened to arise. Nobody designed it.

If you want to know who are the government, you have to ask who have the power to say yes or no to any proposed change to the protocol.

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Hmmm.....
That is pretty deep, now i know where to focus my findings on now.

Great post! Ya know,

This is something that decentralization fanatics don't usually understand. If there is a highly decentralized system, cooperation costs might become quite big. This is why many ad hoc governance systems will get stuck with decision making: it's just too expensive to get an agreement with everybody involved. With blockchain many of the participants are anonymous and pseudonymous, which makes it even more impossible.

that also really resonates with another post The Message is the Medium in that Coase's transaction concepts apply heavily to how we negotiate. The difference of messaging to state is maybe 100x in terms of costs when you think of anything bigger than a payment.

It's not enough to replace ad hoc governance with written, constitutional, formal and transparent governance. If the community has a clear goal, a little bit of thought should be given to the actual mechanism that governs the community. How easy it will be to achieve the goal with a particular governance mechanism?

One of the goals that I personally like to promote is to encourage a healthy and positive community. By this I mean, set it up so that unhealthy and negative behaviour are mitigated against:

Toxics not welcome!

Recognising that's controversial :-)

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Yeah, excluding toxic individuals is very important goal. That's why it's also very important to seriously think about the mechanism which is used for kicking out toxic people.

The mechanism might be too weak and not be able to help the community. Or it might be too strong and end up excluding many good individuals.

I'm in favor of trying different mechanisms in practice and watching if they work as intended. If not, then they must be adjusted before the toxicity spreads too widely.

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Human nature is to treat any attack as toxic, valid or not. Not possible to eliminate toxicity, just like not possible to eliminate common cold. As much as want to attack toxics also have to improve our own resiliance to common cold, criticism, biased and blinkered thinking.

A nice read, a lot of things to ponder... thanks for sharing!

nice...resteem and upvote for your...

Very nice one.keep continue