Why Governance Matters (Part One)

There’s a crisis in Bitcoin.

Or you could say there’ve been a series of crises in Bitcoin over the last several years, many of them stemming from the same root cause. Either way, there’s a mountain to climb when it comes to getting consensus in the BTC community.

We know why: There’s no governance mechanism for final solutions to problems. This makes it so there’s simply no last word or final arbiter on concerns facing the Bitcoin community. There’s no Supreme Court to appeal to, no binding judgment by anyone whose decision must be respected.

Look at scalability: this captures all the intense debate, disagreement, and deadlock you could want in an example of how decision-making works in the Bitcoin world.

Now, when disagreement arises and tensions rise, they can just keep rising. There’s nowhere for all the hot air to go but up.

Forks have often resulted from this lack of a clear and binding governance process. And some say that’s the point, as many Bitcoin maximalists like Jimmy Song hold this view and consider it a sign of a healthy ecosystem permitting adaptation.

Simply let market forces do what they do; that’s a means of governing in itself. So what if many forks happen and lots of different coins sprout up? Let a thousand flowers bloom, they say. Not all will live but all are welcome in the struggle to survive.

Others disagree, believing a clear and binding governance mechanism is essential for a crypto project to survive and for the world to increasingly accept crypto assets as valid and useful. They seem to hold social mechanisms on par with technical choices.

This is where projects like Decred enter the picture.

Compare this to Bitcoin. Decred is an Austin-based project allowing groups to shift from one playbook for group consensus to another set of rules without friction. This is different than how things work in the Bitcoin community, to put it mildly. Governance is built in.

Decred actually began life as a very conscious next-iteration version of cryptocurrency. The model is meant to correct imbalances of power in Bitcoin, adjusting for what was seen as an alarming concentration of control in the hands of a few. It’s also meant to account for the practical implications of ideas that haven’t made it from white paper to real world as smoothly as was imagined.

Simply put, Decred’s team saw too much power accrued by PoW miners and far too much influence in the hands of the Bitcoin core development team--whose lack of interest in a given course of action basically meant it could not happen.

As a result, Decred runs on a hybrid system that allows for checks and balances among groups. More technically, it relies on a hybrid system of proof-of-work (PoW) and proof-of-stake (PoS), which is a rather big step away from the pure proof-of-work approach of Bitcoin.

Miners, developers, and other stakeholders are all encouraged to play their part. And 10% of every block’s reward is set aside for the funding of future development to maintain the project, unlike the vast majority of open-source software projects, which stay afloat through donations and unpaid labor (a key difference).

So what?

Why are people debating this issue?

For those who take the second view, along the lines of Decred’s team, community consensus and clear governance mechanisms are fundamental to a blockchain network’s surviving and thriving. A token will wither and die without these. A lack of transparent and distributed control is a flaw, not a feature.

And they’re right.

If crypto tokens and assets are ever going to become mainstream, if some of the projects that have sprung up are going to succeed on a large scale, they’ll need to be managed according to far more predictable rules and processes than currently exist for Bitcoin.

Communities must set up rules for themselves; arguably, a group of people who congregate together but lack rule-making processes they’ve agreed upon should not be called a community at all.

Creating and sustaining a community is harder than writing the code of the project that underlies it. Human variables are always more variable than software.

The good people of CryptoLand must turn their attention to this issue before Bitcoin (or the larger crypto ecosystem) can really mature into the leap forward it was meant to be.

(See Part Two to come.)