Explore the “Blockchain in Government Tracker – Database” view on Airtable.
You actually see it over and over again. Blockchain systems are supposed to be more trustworthy, but in fact they are the least trustworthy systems in the world. Today, in less than a decade, three successive top bitcoin exchanges have been hacked, another is accused of insider trading, the demonstration-project DAO smart contract got drained, crypto price swings are ten times those of the world’s most mismanaged currencies, and bitcoin, the “killer app” of crypto transparency, is almost certainly artificially propped up by fake transactions involving billions of literally imaginary dollars.
On Wednesday, art investment startup Maecenas opened online registration to participate in an event it is billing as “the world’s first ever blockchain-based auction of fine art.” But in my opinion, slicing into the details lays bare a number of deficiencies that also apply to much of the overheated art and blockchain space. (If you’re not familiar with that space yet, check out my primer from earlier this year.)
De muziekindustrie staat bekend als een harde wereld. Het is niet vanzelfsprekend dat je je brood kunt verdienen met muziek maken en helemaal niet voor jonge artiesten. De industrie wordt gekenmerkt door haar ingewikkelde, bureaucratische structuur. Een structuur waarin artiesten maanden moeten wachten op uitbetaling van royalty’s, waarin complexe contracten onvermijdelijk lijken en transparantie niet lijkt te bestaan. Dat moet toch anders? Volgens de initiatiefnemers van IBT Music kan dat. Teun van Eil, projectleider van het initiatief, legt uit hoe hun geautomatiseerde blockchain-systeem het verschil kan maken en transparantie brengt in de muziekindustrie.
Blockchains are unique because they 1) allow thousands of governance systems and monetary policies to be tried at the speed of software with 2) in some cases, much lower consequences of failure. As a result, there will be a Cambrian explosion of economic and governance designs where many approaches will be tried in parallel at hyperspeed. To be clear, I am including economic design and monetary policy (said another way, incentive structure) in governance because, like other aspects of the system, they can be modified as time passes.
But on-chain governance is dangerous, and I worry it will lead to disastrous outcomes. Blockchains should not be democracies, and the reasons why are subtle and counterintuitive.
Unless there are governance processes that get Sybil-resistant input from node operators, on-chain governance therefore has always has the potential to disenfranchise node operators (and users) of the blockchain. If you are a blockchain node operator (or user), or if you care about blockchain node operators (or users), then I hope you will learn to regard on-chain governance proposals with extreme apprehension.
Governance is hard, especially for decentralized protocols. Allowing a community to govern a protocol does not make it any easier. On the contrary, it makes it exponentially harder and far more dangerous. The challenge is amplified when teams decide that the 1 token = 1 vote model is the best way to distribute power, and that all forms of hierarchies should be eliminated.One of the most important things to realize when creating governance models for decentralized protocols is that the model must be designed for the user, not for the token holder. This is where I believe a lot of broken models originate, when designing something that token holders will like, and not something that protects the actual users of a protocol. It is evident that there are a lot of projects who do not consider this, the opt-out model which some protocols implement are a clear indicator of this.1 token = 1 vote systems create terrible plutocracies, especially when considering who holds tokens.
Coin holder voting, both for governance of technical features, and for more extensive use cases like deciding who runs validator nodes and who receives money from development bounty funds, is unfortunately continuing to be popular, and so it seems worthwhile for me to write another post explaining why I (and Vlad Zamfir and others) do not consider it wise for Ethereum (or really, any base-layer blockchain) to start adopting these kinds of mechanisms in a tightly coupled form in any significant way.I wrote about the issues with tightly coupled voting in a blog post last year, that focused on theoretical issues as well as focusing on some practical issues experienced by voting systems over the previous two years. Now, the latest scandal in DPOS land seems to be substantially worse. Because the delegate rewards in EOS are now so high (5% annual inflation, about $400m per year), the competition on who gets to run nodes has essentially become yet another frontier of US-China geopolitical economic warfare.