{"id":224274,"date":"2021-04-11T16:13:00","date_gmt":"2021-04-11T13:13:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/"},"modified":"2021-04-11T16:13:00","modified_gmt":"2021-04-11T13:13:00","slug":"anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/","title":{"rendered":"# Anchoring the worlds with flexible and high-performance on-chain governance"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a35ffcca5e3f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a35ffcca5e3f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/#Todays_on-_and_off-chain_governance_paradigms\" >Today\u2019s on- and off-chain governance paradigms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/#Structuring_on-chain_governance_to_drive_sustainability_and_adoption\" >Structuring on-chain governance to drive sustainability and adoption<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/#Driving_flexible_dynamic_and_sustainable_governance_to_win_the_future\" >Driving flexible, dynamic and sustainable governance to win the future<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\/#Added_value_through_dynamic_elections\" >Added value through dynamic elections<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Anchoring the worlds with flexible and high-performance on-chain governance <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDQvOTk1MjIzMjUtNmE1MC00YjkzLTk4MWYtMzUzMjMxMTI1NmRmLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>With adoption accelerating, blockchain\u2019s potential to transform life in every way \u2014 from how business is conducted to labor division, operating systems and methods of collaboration \u2014 comes closer to fruition every day. If blockchain is the foundation to a truly digital model, then governance is the key to linking together the on and off-chain worlds. Governance itself encompasses and dictates the functionality of blockchain, from its organization structure to workflow execution, voting and incentives.\u00a0<\/p>\n<p>Conceptually, governance can be understood as on and off-chain; the former being divided into protocol and contract levels. With the blockchain space rapidly diversifying, governance is also rapidly evolving to drive new and novel forms of collaboration, interaction, profit distribution and risk structure, based on each chain\u2019s unique profit value. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Todays_on-_and_off-chain_governance_paradigms\"><\/span>Today\u2019s on- and off-chain governance paradigms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Moving forward, I believe there are several premises that must be accounted for when building governance frameworks.<\/p>\n<p>First, the digital world cannot be separated from reality. Like the off-chain world, on-chain governance also includes a two-tier structure, under which governing units serve as capital for users to engage in various democratic processes. Moreover, external on-chain governance components such as, server clusters, nodes and other infrastructures, dictate how capital rights and interests are addressed. On-chain governance dictates the usage of external funds, energy and human resources. It is also constructing new identities, ways of participating and power relations. In short, on-chain governance is both a reflection of today\u2019s paradigm and a looking glass into the future.<\/p>\n<p>Secondly, the on and off-chain worlds are merging as the boundaries between <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social<\/a> and corporate governance become increasingly blurred. While blockchain started off as more focused on economic governance, this focus has shifted in recent years with institutions and enterprises experimenting with blockchain to achieve more efficient social governance. As the line between corporate and economic governance thins out, each chain\u2019s future will slowly but surely hinge on the interests and will of their user base, thus significantly bolstering the pressing need for next generation governance at the protocol level.<\/p>\n<p>Thirdly, the market is currently dominated by stake-weighted voting, which gravitates towards greater centralization, dynamic adjustments and third-party proxy agents. Given blockchain\u2019s fundamentally decentralized nature, on-chain governance depends heavily upon a network\u2019s consensus mechanism of choice \u2014 which can be understood as the negotiation method by which the interests and rights of community developers, miners and token holders. Within the context of proof-of-work, or PoW, consensus, the emphasis is on workload. It would require a high level of centralized authority and responsibility to validate parties\u2019 work, rather than relying on the code to autonomously validate miners\u2019 work. In that way, PoW is essentially the same as traditional decision-making. <\/p>\n<p>However, under proof-of-stake voting, the following scenarios will enable greater democracy and decentralization:<\/p>\n<ul>\n<li>One person, one vote based on identity.<\/li>\n<li>Secondary voting based on identity.<\/li>\n<li>Hashing power voting.<\/li>\n<li>Voting for transaction fees at the account level.<\/li>\n<li>Voting of transaction fees at the contract layer.<\/li>\n<li>Election Committee.<\/li>\n<li>Relative majority voting method.<\/li>\n<li>Other pledge-related indicators, including long-term node maintenance, long-term binding validators, long-term coin holders, oracles and clients.<\/li>\n<li>Any combination of the above modes.<\/li>\n<\/ul>\n<p>Fourth, there are still various design issues related to on-chain governance. Under today\u2019s governance systems, power tends to be concentrated in the hands of a few. Moreover, low-voting rates also negatively impact the effectiveness of governance and network security. Thus, future innovations in governance must also address the aforementioned concerns from a design level by offering voting stronger incentives for stakeholders, while also introducing loosely coupled voting to ensure more representative governance.<\/p>\n<p>Overall, the current paradigm illustrates that on-chain governance represents the transformation of the digital world\u2019s economic and social organization. With the advent of the digital age, people\u2019s identities have been increasingly split between various governance entities, rather than resting in the hands of a single one. By introducing new organizational structures and concepts, we can pioneer a completely new incentive mechanism to optimize on- and off-chain governance, beyond what simple corporate structuring can achieve.<\/p>\n<p>Based on these premises, sustainable and effective governance must satisfy the following requirements:<\/p>\n<ul>\n<li>A two-way mechanism to interact with the real world.<\/li>\n<li>Comprehensive social governance.<\/li>\n<li>Movement towards achieving the community\u2019s vision.<\/li>\n<li>Effective incentives and punishments through comprehensive mechanisms.<\/li>\n<li>Clearly delineated responsibilities and powers for on-chain governance.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Structuring_on-chain_governance_to_drive_sustainability_and_adoption\"><\/span>Structuring on-chain governance to drive sustainability and adoption <span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If we understand governance as a key driver for blockchain adoption, networks must <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roach decisions, such as consensus mechanisms, various participants\u2019 roles \u2014 and more \u2014 with great care and deliberation. Moreover, to bring together the on and off-chain worlds, on-chain governance must evolve to enable the following: <\/p>\n<ul>\n<li>The mapping of real-world legal units or jurisdictions to the chain.<\/li>\n<li>A comprehensive identity system which ties network participants\u2019 identity to their social identity.<\/li>\n<li>Participation in governance via greater rights with the caveat that such rights can be revoked in.<\/li>\n<\/ul>\n<p>By leveraging code, on-chain governance enables the elimination of uncertainties to create binding agreements, ensuring that any approved network changes will be implemented. Moreover, on-chain governance also incentivizes greater responsibility, due to blockchain\u2019s inherently transparent nature, thus ensuring a decision-making trail. On top of bolstering community trust and fairness, this transparency also empowers users to make informed choices regarding which platforms they join. <\/p>\n<p>However, as previously mentioned, today\u2019s governance systems still face design issues \u2014 namely low turnout rates and the manipulation of voters by powerful token holders. Regarding the latter, there is still the concern that governance systems favor powerful token holders. This results in greater emphasis on profit generation, rather than achieving a public blockchain\u2019s vision.<\/p>\n<p>Thus, I propose the key components for effective governance, namely:<\/p>\n<p><strong>Coordination mechanisms:<\/strong> To ensure sustainability, transaction costs and user usage must be coordinated to minimize conflicts between users and stakeholders. As transaction fees heavily influence a user\u2019s ability to participate in a network, maintaining low and stable costs incentivize their participation, which is key for representative governance and network security. In short, the aforementioned mechanism would allow users \u2014 the true holders of the network \u2014 to be able to participate.<\/p>\n<p><strong>Coordination between currency holders and governance participants:<\/strong> To realize effective governance and ensure that the chain\u2019s interests are represented, there must be significant overlap. Such measures like economic incentives and elections, or the decoupling of governance rights from tokens, are necessary to create more overlap between these groups.<\/p>\n<p><strong>Coordination of candidates and selected candidates:<\/strong> To ensure network efficiency, elections must also implement screening mechanisms to secure the right number of candidates to meet platform needs. Moreover, platforms must provide a proper balance of economic incentives, powers and responsibilities for long-term and stable governance.<\/p>\n<p><strong>Incentive measures:<\/strong> To reward participation, the following incentives should be provided:<\/p>\n<ul>\n<li>User: Ability to use DApp; low-cost network service.<\/li>\n<li>Token Holders: GAS or token issuance via voting.<\/li>\n<li>Nodes: Receive transaction fees for packaged transactions or network fees for winning elections.<\/li>\n<\/ul>\n<p>Consequences:<\/p>\n<ul>\n<li>Token Holders: Opportunity costs.<\/li>\n<li>Nodes: Fines for misbehavior.<\/li>\n<\/ul>\n<p>Overall, effective governance must fulfill the following conditions \u2014 first, decision-making that is based on complete and symmetrical information. Second, there is a cost associated with making and changing choices. Finally, governance must be flexible enough to drive forward organization interest while accounting for individual choice.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Driving_flexible_dynamic_and_sustainable_governance_to_win_the_future\"><\/span>Driving flexible, dynamic and sustainable governance to win the future<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Based on the aforementioned points, I believe that \u201celastic manageability\u201d, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/neonewstoday.com\/general\/da-hongfei-neos-new-governance-mechanism-the-most-important-and-sophisticated-change-in-neo3\/\">defined<\/a> as \u201can ability to adapt to various social jurisdictions,\u201d is the governance solution for both now and the future. Through elastic manageability, we can coordinate the interests of various parties, balance decentralization and centralization, and establish an effective incentives and consequences system. Through an on-chain identity system and node verification, we can connect the on-chain and off-chain world for true integration.<\/p>\n<p>Under this system, I believe the two key mechanisms are as follows:<\/p>\n<ul>\n<li>Coordination mechanisms.<\/li>\n<li>Dual-track election mechanisms.<\/li>\n<\/ul>\n<p>Token holders can vote on the direction for a community-based organization, which is entrusted to act in the platform&#8217;s best interests. To incentivize participation and ensure representational change, direct incentives, such as tokens, should be issued based on the token holders\u2019 degree of participation. From my perspective, enabling users to vote for representational institutions and consensus nodes enables a platform to dynamically adjust based on changing community and industry needs.<\/p>\n<p>Moreover, an on-chain identity system is also crucial. As previously noted, the on-chain world cannot be disconnected from the off-chain world. Rather, the sovereign states and legal jurisdictions of the real world must be mapped onto the chain. Governance mechanisms should reflect this through an on-chain social identity system, which reflects users\u2019 on-chain address and transaction records, decentralized identifier documents, and registration jurisdiction. Based on these aspects, users\u2019 off-chain regulations will provide soft guidance for on-chain activity by jurisdiction. <\/p>\n<p>The types of services provided on the public chain could be affected by local regulations. This real world identity mapping, along with dynamic elections, means that token holders are empowered to make decisions and adjust accordingly for future transactions. When processing transactions, different nodes will react differently to different types of transactions, which will affect the types of services processed on the public blockchain to varying degrees. <\/p>\n<p>For example, for a certain type of specific transaction, consensus nodes that exceed the fault tolerance rate cannot pass this type of transaction, due to the influence of the local judicial system. At this time, the judicial influence on this type of specific transaction is reflected in the public chain. Under the framework of dynamic elections, token holders will then make a decision whether to continue to vote for the affected nodes in the next term. Node candidates can also make adjustments according to the voter&#8217;s strategy.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Added_value_through_dynamic_elections\"><\/span>Added value through dynamic elections<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Through this flexible and dynamic management system, I believe we can fully understand decentralized on-chain business management, node operation management and on-chain voting governance. Local regulations affect the voters\u2019 strategic choices and indirectly affect the behavior of network participants. <\/p>\n<p>Through repeated governance cycles, blockchains eventually move towards developing a balance, which incorporates the interest of all \u2014 including real world concerns. This opens up the path for sustainable and responsible growth both in the on- and off-chain world.<\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Da Hongfei<\/strong> is best known for co-founding the blockchain-based \u201cSmart Economy\u201d network Neo with Erick Zhang in 2014. Da received his education at the South China University of <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">Technology<\/a>, receiving degrees in technology and English. He worked at a consulting firm until 2013, after which he learned how to code before founding Neo. Along with Zhang, Da also founded OnChain \u2014 a commercial blockchain firm that provides services to private companies.<\/div>\n<\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/anchoring-the-worlds-with-flexible-and-high-performance-on-chain-governance\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Anchoring the worlds with flexible and high-performance on-chain governance &#8221; With adoption accelerating, blockchain\u2019s potential to transform life in every way \u2014 from how business is conducted to labor division, operating systems and methods of collaboration \u2014 comes closer to fruition every day. If blockchain is the foundation to a truly digital model, then&#8230;<\/p>\n","protected":false},"author":1,"featured_media":224275,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDQvOTk1MjIzMjUtNmE1MC00YjkzLTk4MWYtMzUzMjMxMTI1NmRmLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,74983,75239,74868,74891,74876,75578,4965],"class_list":["post-224274","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-decentralization","tag-decentralized-finance","tag-defi","tag-ethereum","tag-proof-of-stake","tag-proof-of-work","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/224274","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=224274"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/224274\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/224275"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=224274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=224274"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=224274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}