A Brief Discussion on the Governance of Public Blockchains

Written by: Liu Jiao Lian

During the weekend meeting for the community chain project, I discussed my thoughts on the governance issues of public chains.

First of all, let's talk about why the so-called public chain governance issue arises.

BTC is also a public chain, but there are no so-called governance issues. Why? Because BTC has no governance, at least not the on-chain voting governance mechanism that people typically think of.

It is generally believed that within the entire BTC ecosystem, there are three forces that compete and achieve balance with each other, thereby restraining and checking one another. These three forces are: the maintainers who have the authority to modify the client code; the miners who hold the power to produce blocks on the blockchain; and the holders who possess BTC ownership and can vote with their feet.

If code maintainers arbitrarily merge and release rule code without broad consensus, they will face resistance from miners who do not adopt that version of the software. In severe cases, they may encounter sell-offs from holders and ultimately be rejected by those fleeing the project. In addition to resistance and fleeing, miners and holders can also choose to support software versions released by other maintainers, leading to the abandonment of a particular maintainer team and its products by the market.

If miners violate the consensus and attempt to seize control of the code, they will face unanimous opposition and condemnation from the developer community and token holders. The developer community and token holders can abandon the chain hijacked by a minority of miners and continue to operate the original chain that aligns with the community consensus. However, the dark forest law tells us that this only applies when the total computing power controlled by the usurping miners is less than the total computing power of the miners supporting the original chain; otherwise, the usurping miners can use overwhelming computing power to launch an attack on the original chain and completely destroy it.

This shows us the dialectical relationship between the barrel of a gun and the barrel of a pen. The barrel of a gun is material power, which plays a decisive role. But who commands the barrel of a gun? The barrel of a pen. The barrel of a pen is not just a passive implementation of code, but it actively shapes the consensus of the community. Therefore, all struggles ultimately boil down to ideological struggles. How can the barrel of a pen command the barrel of a gun? The key lies in the fact that the barrel of a pen represents the will of the people, the broadest consensus, and the ideals of the vast majority of the community.

Who are the people of the community? Are they the holders? Not entirely. Supporters of BTC who are holders are the people of the community; holders who oppose BTC are traitors and the targets of struggle; non-holders who support BTC are friends and part of the united front; non-holders who oppose BTC are enemies and competitors.

Among the people, there are different proposals regarding the technical route. As long as everyone supports BTC, this is an internal contradiction among the people, which can be negotiated and reconciled. However, if someone aims to oppose BTC or even overthrow BTC, then they become the target of the people's resolute struggle and dictatorship. For these objects of dictatorship, it is necessary to decisively suppress them, deprive them of their freedom of speech, and expel them from the community. In simple terms, the constitution only protects the rights of the people, while a traitor is not qualified to enjoy the rights that only the people deserve.

Therefore, it is obvious that any ideology will firmly reject those who do not agree with or oppose it. The most important thing for the pen is to figure out how to unite the largest number of people, gain their support, and let the community obtain the most people, thereby gaining the greatest power.

The internet platform is a combination of a pen and a gun, leading users to choose between enduring or angrily fleeing. Satoshi Nakamoto's clever design separates network operation from code development, allowing them to mutually constrain and balance each other. More importantly, it prevents either from forming a monopoly: open-source code gives anyone the opportunity to establish new codebases and divert broader consensus; the joining and exiting of the computing power network is completely anonymous and does not require permission, coupled with the randomness of the PoW block generation mechanism, making it difficult for network nodes to operate and blockchain generation to be monopolized.

However, when we discuss non-PoW public chains, it becomes very difficult to fully adopt BTC's governance-free model.

In simple terms, PoW is the only solution to the Byzantine problem. Once we remove PoW, we can only introduce certain governance mechanisms to compensate for the issues arising from the absence of PoW.

For example, for the PoA (Proof-of-authority) used by the Jouleverse chain, it is necessary to conduct authenticity and independence audits on the accounting nodes to avoid the classic Sybil attack problem.

The qualification review will inevitably raise the entry threshold, and it cannot allow for completely permissionless access like PoW. It can only be said that in order to ensure the highest possible degree of decentralization, the threshold for this qualification review must be low enough, but it cannot be lower than the minimum limit required to maintain security.

Whether such a chain can still be called a public chain is purely a matter of conceptual definition. There is no intention to engage in this purely conceptual debate here, as it is of little significance.

Back to the substance. There's another issue regarding incentives. PoW not only ensures a very low barrier to entry without permission (the only requirement is having money to buy equipment, plus a bit of technical know-how), but also takes on the task of distributing BTC as incentives to miners. PoA lacks this automatic incentive distribution capability, so governance work is also needed here to regularly evaluate, count, and distribute incentives based on contributions.

Company management, in a sense, is about assessment, statistics, and motivation. How to approach this in the context of blockchain has become a new topic.

If you directly adopt a corporate system, it may lead to centralization, and centralization can result in corruption and dysfunction, which in turn can encounter single point failure issues. Completely decentralizing relies on community awareness and initiative, which is particularly inefficient, to the point of completely losing timeliness, falling far short of the real-time incentives of PoW.

Many successful blockchain projects have also adopted a combination of companies (financing and management entities) and DAOs (token holder communities), such as Uniswap and Aave. Even Ethereum, with its main driving organization, the Ethereum Foundation, is essentially a centralized company. However, this may not be suitable for public chain projects that require a higher degree of decentralization.

Perhaps it is necessary to combine decentralized top-level governance with organizational management borrowed from corporate systems. For example, a board of directors is established at the top level, but the board does not have decision-making power based on investment amounts and share ratios like in corporate systems; instead, it is elected by community voting. Below the board, the CEO and other executives appointed by the board still use corporate organizational management methods, setting positions and assigning people, and assessing incentives. After all, such a structure is the easiest for the majority of workers trained in modern corporate systems to understand, avoiding the confusion of not knowing who they are, what they should do, or what results they can achieve after their actions.

Perhaps such on-chain companies can be called DAOs or something else. However, practice always precedes theory. The governance forms suitable for blockchain are still on the exploration path, with a long way to go.