Governance

It’s probably the least sexy word in the blockchain word stack, but gosh. Even wildly successful blockchain projects address governance in a couple of cursory White Paper sentences. This is typical:

“By 2020 the implementation of a decentralized governance system for the *** Network is completed and governance is transitioned to the *** Foundation and governance decisions made by a quorum of token holders.”

Apparently that takes care of it.

The truth is, for blockchains and for projects, the best governance eventually wins. So Ethereum governance is better than Bitcoin governance. There’s no cap on the total production of tokens and there’s provision to vary the amount produced each year. And Tezos governance is better than Ethereum governance, because there is a clear mechanism (staked voting) for upgrading the protocol itself.

New governance systems are here. Their roots are mostly in DAOs; Decentralized Autonomous Organizations that allow voting based on your token ownership and/or the reputation you have earned within the ecosystem.

Once a DAO is set up, it runs itself. Proposals can be put to the DAO by interested parties, are voted on by those who have a stake, and are automatically implemented if passed. If you put a successful proposal your reputation score is adjusted upwards. And if a DAO is properly conceived, it includes the rules for evolving the governance of the DAO itself, i.e. there are rules about how you can change the rules.

This is an important time in the evolution of management, because it holds out the prospect of a system that works better than hierachical, top-down management. In fact, fully implemented, you won’t need management. Now there’s an idea.

For me, the project that looks most advanced in this space is DAOstack. That’s because it specifically addresses the issue of how decentralized decision-making can be effectively scaled. The relatively poor profit growth of large organizations compared to startups is (I believe) largely a result of the inability to effectively scale decision-making. That is now a solvable problem.

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