Outlier Ventures Weekly Brief Issue #42 View Online

Join us at Diffusion in Berlin to create on over 20+ protocols with a combined 50 million lines of open-source code. 

This week I was at Ethereal Tel Aviv 2019 speaking on a panel on The Balance of Decentralisation and Governance with Gustav Arentoft, Business Development for Europe at MakerDAO; Tegan Kline, International BD at Orchid; Ido Sadeh Man, Founder & Foundation Council President at Saga Foundation; and Igor Lilic, Principal Technical Lead at ConsenSys. It was a fascinating debate and governance, or “how to make decisions” is an area which I believe is far too narrowly defined in the crypto space today. I thought I would share some of my notes for the panel in today’s newsletter and encourage anyone thinking through governance in the space to get in touch. Also we will be having some workshops related to governance at Diffusion on 19th and 20th of October in Berlin so if you are interested in these issues do sign up.

1. What are the virtues of blockchain governance?
The virtues of any decision-making structure are transparency, accountability, and participatory. Blockchains offer a tool to make decision-making more transparent and accountable but they don’t inherently improve participation in decision-making. In fact, upgrading of software is inherently complex and likely to lead to a decrease in participation in decision-making rather than an increase. 

2. What are the negatives of blockchain governance?
It depends on the implementation. Governance models that ask for every decision to be voted on will have very different issues than a model dominated by a small group of core devs that make decisions on closed calls and mailing lists. Both are ends of a spectrum between fully participatory (decentralised, liquid democracy) which prioritise inclusive, broad-based, and slow decision-making. And limited participation which priorities exclusive, technocratic, narrow-based, fast decision-making. Blockchain governance models will always need to balance between the two. Corporate governance optimises for fast, exclusive decisions, while national governance broadly optimises for slow, inclusion decision-making. The challenge for digital public utilities is where the balance sits on the spectrum.  

3. Do whales / project leadership simply rubber stamp governance procedures?
They shouldn’t. We need to separate people that propose and vote on laws/policies (legislative) and those that execute on those laws/policies (executive). The executive should never have unlimited power to determine which laws are executed. (e.g. see current battle between UK parliament and UK government on execution of a law, in this case, leaving the EU without a deal). There must be rules under which the executive/large stakeholders (whales) can execute laws and a check from a separate entity.

4. Are blockchain systems inherently plutocratic? 
No, as with any decision-making process, it depends on the rules. There is no reason that the richest in society/network should capture the economy. In fact, we should create policies which explicitly limit this capture. E.g. cap the amount that can be spent on elections. In the case of decentralized networks, we can think about how that can be manifested in voting structures like quadratic voting. But we need to be careful. Voting isn’t the only part of governance. Voting is the final step. We need to make sure all the communication around votes are not manipulated too. 

5. Does everyone WANT to have a say and participate in governance? How do we include the perspectives of those who choose to opt out?
As digital public utilities scale the vast majority of participants will not participate. Especially as we onboard users that are more interested in the functionality rather than the design/governance of the network itself. We need to build in education and participatory mechanisms to inform participants but expect that they will not vote or engage in the process. As long as there is usefulness in the network and the participants feel like they “could” engage if they choose to then the governance structure has some form of legitimacy. I would personally advocate for a network constitution akin to some sort of social contact that outlines the values of the networks. This way, as long as values are maintained, decisions can be made in a way that achieves legitimacy from those not directly involved.

Reading: How Much is Your Privacy Really Worth?
Watching: Dark Season 2 on Netflix
Using: Open Banking API Tracker

Yours truly,


From The Stack

  • Who said the efficient market hypothesis is not applicable to data sets?. We have released a new tool to exploit arbitrage opportunities across data-marketplaces. - Link
  • Agoric is hiring a new product manager to the team. Think you are the right person to coordinate teams working on the future of smart contracts? Apply today! - Link 
  • Seed has released a sneak peek video of how their wallet would look like in the future. It is an interesting look at how transactions in conversational interfaces would occur - Link
  • Wondering what to build for Ocean's on-going hackathon? Trent's latest blogpost looks at some concepts that could be built for the wildcard track - Link
  • Aragon has set the standard once again for teams looking to ship in the industry. A whole new design standard has been released alongside last week's Camino release.- Link
  • Chainlink continues to expand on its existing data sources with a new integration for Coingecko's market data API into their network - Link

What The Team Is Reading

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