A Brief Discussion on the Governance of Public Blockchains

BTC is also a public chain, but there is no so-called governance issue.

Author: Liu Jiaolian

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

First, I want to talk about why the so-called public chain governance issue arises.

BTC is also a public chain, but there is no so-called governance issue. Why? Because BTC has no governance, at least there is no on-chain voting governance mechanism as people usually think.

It is generally believed that there are three forces in the entire BTC ecosystem that compete with each other and achieve balance, thus mutually restraining and constraining each other. These three forces are: the maintainers who hold the permissions to modify the client code; the miners who hold the power to produce blocks on the blockchain; and the holders who own BTC and can vote with their feet.

If code maintainers arbitrarily merge and release rule code that has not obtained widespread consensus, they will be boycotted by miners who refuse to adopt that version of the software. In severe cases, they may face sell-offs from token holders and ultimately be rejected by the project. In addition to boycotting and fleeing, miners and token holders can also choose to support software versions released by other maintainers, thereby allowing a certain maintainer team and its products to be abandoned by the market.

If miners violate 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 that has been hijacked by a minority of miners and continue to operate the original chain that aligns with community consensus. However, the dark forest principle tells us that this only applies when the total hash power controlled by the usurping miners is less than the total hash power of the miners supporting the original chain; otherwise, the usurping miners can use overwhelming hash power to launch attacks on the original chain and completely destroy it.

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

Who are the people of the community? Are they the holders? Not entirely. Those who support BTC are the people of the community; those 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, it is an internal contradiction among the people, which can be negotiated and reconciled. However, if someone opposes BTC or even aims to overthrow BTC, then they become the target of resolute struggle and dictatorship by the people. For those under dictatorship, they must be firmly suppressed, deprived of their freedom of speech, and expelled from the community. In simple terms, the constitution only protects the rights of the people, while traitors have no right to enjoy the rights that only the people are entitled to.

Therefore, it is obvious that any ideology will resolutely reject those who do not agree with or oppose it. The most important thing for the writer is to understand how to unite the greatest number of people, gain their support, and allow the community to gather the most people, thus gaining the greatest strength.

The internet platform is a combination of a pen and a gun, which leads users to choose between enduring it or fleeing in anger. Satoshi Nakamoto's clever design separates network operation from code development, allowing the two to constrain and balance each other. More importantly, it prevents either from forming a monopoly: open source code gives anyone the opportunity to create new codebases, diversifying consensus; the entry and exit of the computing power network are completely anonymous and do not require permission, along with the randomness of the PoW block generation mechanism, making it difficult for network nodes to monopolize operations and blockchain generation.

However, when we discuss non-PoW public chains, it is difficult to completely adopt the governance-free model of BTC.

Simply put, PoW is the only solution to the Byzantine problem. When we remove PoW, we can only introduce certain governance mechanisms to compensate for the issues caused by 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 reviews of accounting nodes to avoid the classic Sybil attack problem.

Qualification review will inevitably raise the entry threshold, and it cannot be completely permissionless like PoW. It can only be said that to ensure the highest possible degree of decentralization, the threshold for this qualification review must be low enough, but it should not be lower than the minimum security maintenance limit.

As for whether such a chain can still be called a public chain, this is purely a matter of conceptual definition. There is no intention to engage in such purely conceptual debates here, as it is not very meaningful.

Back to the substance. Another issue is incentives. PoW not only ensures a very low barrier to entry without permission (the only barrier is having money to buy equipment, plus a bit of technical skill), 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, tally, and distribute incentives for contributions.

Company management, in a sense, involves evaluation, statistics, and motivation. When this is applied in the context of blockchain, it becomes a new topic of discussion.

If we completely replicate the corporate system, it may lead to centralization, and centralization can result in corruption and failures, ultimately facing the issue of single point of failure. If we go for complete decentralization, relying on community awareness and self-motivation, the efficiency will be particularly low, to the extent that it completely loses timeliness, which is much worse than the real-time incentives of PoW.

Many successful blockchain projects have also adopted a combination of a company (financing and management entity) and DAO (token holder community), such as Uniswap, Aave, etc. Even Ethereum, the main driving organization behind it, 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 could be established at the top level, but the board would not have decision-making power based on capital contributions and share ratios like in corporate systems; instead, it would be elected by community votes. Below the board, starting from the CEO and senior executives appointed by the board, the organizational management methods of corporate systems would still be used, with defined roles and responsibilities, performance assessments, and incentives. After all, such a structure is easier for most employees, who have been trained in modern corporate systems, to understand, preventing them from falling into confusion about who they are, what they should do, and what results they can expect from their efforts.

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.