Outlier Ventures Weekly Brief Issue #14  View Online
 No such thing as decentralised governance
Earlier this week, a new era was marked as Aragon’s blockchain was used to issue legal shares in an organisation. An era in which corporate governance, asset ownership and blockchains converge to create a new type of organisation that were previously impossible. Between security token offerings (STOs) and the rise of new Moloch DAOs, decentralised governance or more specifically decision-making is becoming increasingly important in the space. But at this early stage, there are more questions than answers. What decisions are appropriate for “on-chain” governance? All decisions? Just budgetary decisions? Or just network upgrade decisions? Do we follow traditional principles of community building or stick to how things are handled in software development? Our head of research Lawrence Lundy-Bryan, explored some of these questions in his latest piece arguing that “separation of powers” offers a powerful constitutional model for crypto networks. We take a look at how the model could be implemented in token networks in today's issue of the newsletter.

The Executive
A network executive would be responsible for the deployment, maintenance and upgrade of networks. Currently, these responsibilities fall upon a core development team as a function of the fact the team generally seeded the idea and early builds. Community proposals are a part of the process but proposals are complicated, time-consuming, and despite best efforts tend to consolidate around a few key individuals. Also, we lack a constructive mechanism for executive change. Although forks are commonly used, which is voting by another name. There is a risk that continued forks reduce overall trust and understanding in crypto-networks by average users and application developers. For crypto-networks to have billions of users, there needs to be stable networks that can be trusted to deliver on a roadmap.

The Legislative
Crypto networks cannot rely on a development team alone. They need a legislative equivalent. A parliament or Congress to hold the executive to account and limit the consolidation of power. Foundation models used by Ethereum, Tezos and others are an early variant of this, and Sovrin and the Trust Framework gets even closer. This would be a body that would represent the needs of network stakeholders and would be a solution to the vote fatigue and policy understanding that comes from a more direct democracy/liquid democracy. DAOs and tools by Aragon could offer some solutions here. But by appointing domain experts to legislative functions, a network could benefit from the expertise provided by them instead of relying on the so-called “wisdom of the crowds”.

The Judiciary
Although code has at times been considered law, as crypto networks scale, they will have to effectively manage conflict-resolution between stakeholders. Some of this might be able to managed completely in the digital realm with incentives and reputation, in many cases there will need to a real-world system to tap into. Systems like Aragon, Kleros and Mattereum are exploring what a conflict-resolution system might look like with differing degrees of automation. Courts are used there will always be an interpretive aspect of law and contracts. Language is an inherently loose form of communication. The idea that code can be law is a nice one, and maybe one day with AI lawyers facing off against AI lawyers that might be the case. But for the moment, some basic form of conflict-resolution to resolve network conflicts will be valuable to provide the necessary trust to onboard billions and user and dollars.

We aren’t building businesses so corporate governance won't work. We aren’t just building economies so economics alone won’t work. We are building global communities... I’m afraid we are going to need politics. Blockchains have given us the tools to improve governance and fix many of the misaligned incentives in national governance systems. But we still need the robust separation of powers model to provide checks and balances as we experiment with different levels of automation and decentralised decision-making. We need a crypto trias politica.
Interesting Reads For The Weekend
1. Datascience is different now -  Github

2. The decade we almost stopped climate change  - New York Times

3. Hormones United - Aeon

4. Breaking The Unicorn Myth - Medium
Regulating ‘machine learning’ always seems to me like regulating databases. It’s the wrong layer of abstraction. We don’t regulate databases. We regulate the use cases - we regulate credit card companies and insurance companies.​
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