Deep dive: does blockchain hold key to decentralized governance?

5 July, 2018

One way to understand the invention of blockchain technology is as a reaction against the shortcomings of traditional world governance. Federal bodies maintain unpredictable monetary policies, issue capital controls that restrict access to markets, and keep their citizens dependent on their currencies.

Government spending is also difficult to rein in. The system is replete with untenable debt relationships, and big banks place risky bets knowing they may simply get a bailout if they lose. And this is to say nothing of the risks of individual market participation, like identity theft, which affected over 16 million Americans in 2017.

Such elements have become the status quo of many capitalist and social democracies, which are commonly considered to be the most effective political economies of our time but are nonetheless imperfect.

In theory, cryptographically secured and decentralized public ledgers are a breath of fresh air, which makes blockchain governance an attractive alternative to the nation-state. It offers transparency and immutability, and is free of much of the bureaucracy and corruption that plagues central governments.

As the technology develops, we may soon find ourselves living in a world operating under a very different set of political assumptions than those of today. Here we take a deep dive into blockchain governance, how it might work, and consider some possible applications.

Voice and exit

As subjects of any organization, we generally have two ways of responding to dissatisfaction with its governance. Our first option is to use our “voice.” Ideally, by communicating dissatisfaction through the appropriate channels, we should be able to solve the problem. If we’re getting bad service at a restaurant we can ask to speak with a manager. We can appeal to Human Resources to resolve a workplace conflict. We have regular opportunities to vote during elections, and if all else fails, we can take to the streets in protest.

Voicing dissent is fundamental to democracy, and if people feel that they’re not being heard, they will be forced to pursue another option.

That option is to “exit,” effectively severing ties with the organization, extricating ourselves from rules that we don’t want to live by. This is easy to do in some cases, but much harder in others. It’s no trouble for the customer who’s getting bad service to go eat somewhere else. A disgruntled employee can quit her job and find a new one, which carries a greater cost but is manageable under most circumstances.

But for someone who wishes to emigrate, the task of obtaining new citizenship can be enormously difficult. The United States doesn’t keep good records on this population, but there are an estimated 2 to 4 million Americans living abroad. While they are able to expatriate, they aren’t immediately granted the new country’s governance protections, which can put them in a sort of legal limbo.

In a digital context, however, exiting has very low costs. At the far end of the governance spectrum is open-source software, which is technocratically managed by what the Internet Engineering Task Force (IETF) calls “rough consensus and running code.” This framework allows for organizations to establish a dominant view that guides the decision-making process.

Most notably, open-source software is public and is not centrally controlled, so anyone can access it, submit changes, or take it in an independent direction. In blockchain parlance, such a reconstitution is known as a “fork.” It is here we find the greatest potential for innovation from decentralized governance.

Blockchain revolutions

Revolutions tend not to come from nowhere but instead build up over the years. The people involved recognize injustice or a need that must be filled, petition the government, and if the problem persists, they revolt. This buildup is true for technology revolutions as well, but in hyper-speed.

Today when we want to incite change, we don’t have to wait around for a private or government entity to take care of it for us. Blockchain allows for the community to quickly identify a problem and go from voice to exit in record time. In the same way that biodiversity keeps an ecosystem healthy, a lively propagation of blockchain forks allows developers to discover the best forms of governance.

If a blockchain isn’t servicing the needs of its community—such as when there’s a dispute over block size or consensus mechanisms—disgruntled parties can simply fork the network and the two projects will compete on the open market. Sometimes the two will be diametrically opposed, like Bitcoin and Bitcoin Cash, and others will be more or less symbiotic, like Bitcoin and Litecoin. In both cases, however, various factions within the network decided that a change was necessary, and the only way to resolve the issue was to exit.

Writing for CoinDesk, Taylor Pearson says, “You have very low exit costs and so you can get the efficiencies of a technocratic system without the threat of revolution. The revolutionaries can just start their own competitor.”

Governance with blockchain

Extrapolated out to the level of world governance, blockchain-based social organizations could compete for a person’s “citizenship” on the promise of greater efficiency and stability. Rather than depending on state and federal services and paying the relevant taxes, citizens could seek market solutions hosted on a blockchain using its native token as a utility or medium of exchange.

There’s relatively little bureaucracy here—no centralized equivalent of Congress or Parliament gumming things up—as decisions are either written directly onto smart contracts or determined by a small group of stakeholders like developers, miners, and exchanges.

Whether “on-chain” or “off-chain,” blockchain governance lives and dies on the strength of its code and the community’s trust in that strength. This incentivizes good governance by rewarding high levels of trust in the community and punishing breaches.

If members don’t like the project’s direction, they can sell off their tokens and purchase those of a promising competitor, simultaneously affirming the competitor’s value and leaving the abandoned blockchain to disappear into obscurity. To imagine forking the United States government is to imagine a second Civil War. Decentralized blockchain governance offers the possibility of a bloodless revolution.

In theory and in practice

We’re still a long way from mass adoption of blockchain governance, but the new revolution has already lent itself to several problems. A growing number of states and municipalities have turned to blockchain to streamline operations, secure data, and manage accurate record-keeping. Smart contracts are also being deployed in the fields of Intellectual Property and Contract law, where they improve data portability and the licensing and distribution of digital properties.

With our own ambition to shift the paradigm toward good governance, VeriToken is committed to developing a layer of trust and transparency that will help people leverage their strong reputations. A community is only as good as its members, and data fidelity is an important place to start building.

Whether it’s for purposes of recruiting qualified job candidates, tracking the supply chain and provenance of market goods, or improving identity verification, decentralized blockchains are capable of ushering in a diverse technological ecosystem that can lead to an exciting future.

Coinbase co-founder Fred Ehrsam sums it up nicely: “We are birthing into existence systems that transcend us. In the same way democracy and capitalism determine so much of the emergent behavior around us, blockchains will do the same with even greater reach.”






Image via MaxPixel.

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