Who has the authority to change a public blockchain?
It's a question that has been in the minds of top cryptocurrency developers as the many available networks struggle to serve their diverse, often conflicting stakeholders. But that's not to say there aren't norms and best practices – the ability to make and enforce software changes is generally split between the developers that write the code and the computers, or nodes, that install it.
However, Gavin Wood, ethereum co-founder and one of the leaders of an upcoming blockchain interoperability protocol called Polkadot, is shaking up the status quo with a newly published playbook that designates management power directly to token holders.
Distributed in a token sale last year, DOT, the internal token of the Polkadot network, allows its holders to vote directly on a piece of code, which will then automatically upgrade across the network. A way of bypassing the relationship between developers and nodes, the method is not without its controversy, but according to advocates, it’s a step up from what is on offer in most blockchains today.
“This initial proposal for Polkadot governance definitely tries to address the shortcomings of many existing chains, which ended up with community deadlock or continuous splits,” Peter Czaban, director of the Web3 foundation, which sponsors the research and development of Polkadot, told CoinDesk.
Stepping back, the problem of governance is at the forefront of the ethereum today, as tension concerning fund recovery has raised critiques of the effectiveness of the platform’s processes.
“We might have solved consensus for what happens on the chain, but we're still woefully inadequate at solving consensus for what happens to the chain,” Gavin Wood said in an interview.
Since the Parity fund freeze in November (which froze some $176 million of the Polkadot token sale), efforts to recover and redistribute funds have largely fallen silent. According to Wood, this is due in part to the absence of a clear process for measuring the consent for, and enacting, controversial changes.
Wood told CoinDesk:
Clarity of process
And it's this need for a formality that, in part, drove the conception of the Polkadot governance method.
In the long-anticipated blockchain of blockchains, every change to the protocol, even minor changes, must undergo a voting referendum in which DOT owners vote on a piece of code.
“It’s possible to be able to vote directly on the piece of code that will replace the previous piece of code, and removes any sort of ambiguity in terms of what the change will actually imply,” Czaban explained.
These votes work in tandem with a council that can block malicious proposals, as well as leaning the vote if a larger portion of DOT holders are absent. Then, given a majority vote, the Polkadot code base will shift.
In part, the formal method was needed due to the differences between Polkadot and a more conventional blockchain. Instead of nodes, Polkadot consists of “validators,” “nominators,” “collators” and “fishermen,” each securing the network in different ways.
While some of these resemble a typical blockchain node, because of the technical nature of Polkadot - the heart of the code is self-defining - they’re not responsible for adopting changes.
“Validators are powerless to block a change that they personally don't agree with nor are they able to hold the network to ransom,” Wood said.
According to Czaban, the use of DOT token holders within this framework was largely a practical choice, and he emphasized, one that could evolve into the future.
“There are many different potentially parties that might be involved in the ecosystem, however, the stakeholders are really the only well quantifiable party that we have at our disposal,” Czaban said.
Token distribution, therefore, has emerged as a major lightning rod.
Half of all DOT tokens were sold in October, with the remaining tokens split between the Web3 Foundation and 20 percent allocated for further distributions.
Because control of the network is pegged to this distribution, as well as an elected council that has the power to veto certain changes, ethereum developer Vlad Zamfir told CoinDesk that he has his suspicions about how the idea will work in practice.
“I'm not an expert on their governance model, but I've had enough of a look to definitively disapprove," he said.
At the ethereum community conference, EthCC, last week, Zamfir presented his ongoing research on governance, a key line of inquiry alongside the construction of ethereum’s proof-of-stake protocol, Casper.
A vocal critic of what is called “on-chain governance," Zamfir has written that automated methods of decision-making deny node operators an important role, and as such are “antithetical to the ethos of public blockchains.”
In an email to CoinDesk, Zamfir explained, “I don't trust coin holders and don't think they should be more explicitly in charge than any other community members.”
However, Wood is unswayed, telling CoinDesk that token holders have an economic incentive to act in the best interests of the network.
“Stakeholders have a very clear and broad incentive to do what's right for the network, which essentially means driving the price up,” Wood argued. “It's also unreasonable to believe that node operators are somehow experts on protocol changes.”
A good start
Regardless of controversies, the Polkadot governance method has been designed so it can be easily adapted, and this is where its creators believe the key value-add will be.
“This is a very pragmatic proposal,” Czaban told CoinDesk, “Something that we can do, we can implement, using what we have right now.”
While token holders are the easiest participant to quantify, the governance process could extend to include others in the future.
“As there is more research and understanding into the different mechanisms for governance, and who are the different parties that we might be involved, those can be included,” Czaban continued.
The Web3 foundation will also be supporting the next meeting of the Ethereum Magicians in Berlin in July, which as detailed by CoinDesk, is a group of ethereum developers seeking to redefine the process of making changes to the platform.
"We are definitely very interested in trying to drill more deeply into the topic of governance," Czaban said.
For now though, Czaban told CoinDesk:
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