How can you create a blockchain governance policy?

1 What is blockchain governance?

Blockchain governance is the set of mechanisms and procedures that regulate how a blockchain network functions and changes over time. Depending on the design and goals of the network, it can be formal or informal, on-chain or off-chain, centralized or decentralized. This governance can cover various aspects, such as the protocol and code of the network, including its consensus algorithm, transaction validation rules, smart contract functionality, and upgrade process. Additionally, it can include the network participants and their rights and responsibilities, such as validators, miners, developers, users, and investors. Furthermore, blockchain governance can encompass incentives and penalties for network participants, including token distribution, transaction fees, rewards, and sanctions. Finally, it can involve dispute resolution and arbitration methods like voting systems, forums, committees, and courts.

2 Why is blockchain governance important?

Blockchain governance is important for several reasons. First, it ensures the security and reliability of the network by preventing attacks, fraud, corruption, and errors. Second, it enables the network to adapt and innovate by allowing for improvements, enhancements, and new features. Third, it fosters the trust and collaboration among the network participants by aligning their interests, values, and expectations. Fourth, it enhances the legitimacy and reputation of the network by demonstrating transparency, accountability, and fairness.

3 How to create a blockchain governance policy?

Creating a blockchain governance policy is not a one-size-fits-all process, and is dependent on the characteristics, objectives, and challenges of your blockchain project. To begin, define the vision and mission of your blockchain project. Then identify the stakeholders and their needs. After that, design the governance structure and mechanisms. Subsequently, test and evaluate the governance policy. Finally, review and update the governance policy in order to monitor and respond to changes in the network and environment. This process includes defining your problem statement, value proposition, principles, roles of participants, rules for decision-making and conflict resolution, indicators for success or failure, feedback collection and analysis, communication with stakeholders, and modifications or improvements.

4 What are some best practices for blockchain governance?

When crafting a governance policy for a blockchain project, there is no one-size-fits-all solution. However, some key best practices to consider are aligning the policy with the vision and mission of the project, striking a balance between efficiency and inclusiveness, incorporating feedback and learning loops, and fostering transparency and accountability. The policy should reflect and support the core purpose and values of the project, enable the network to make timely decisions while inviting participation from stakeholders, allow for regular evaluation and improvement based on evidence and experience, and make information and actions of the network accessible and verifiable while holding participants responsible for their behavior.

5 What are some examples of blockchain governance?

Blockchain governance is not a static or uniform concept, but rather varies across different blockchain networks based on their design and goals. For instance, Bitcoin has a decentralized and informal governance model, where network participants communicate and coordinate through online forums, mailing lists, and social media. Protocol and code changes are proposed by developers and adopted by miners and nodes through a process of signaling and activation, while incentives and penalties are determined by market forces and game theory. Ethereum's hybrid governance model involves interaction and collaboration through various channels and platforms, such as the Ethereum Improvement Proposals (EIPs) and the Ethereum Community Fund. Protocols and code changes are initiated by developers and approved by miners and nodes through hard forks or soft forks, while incentives and penalties are influenced by token economics and social norms. Tezos has a self-amending on-chain governance model, wherein network participants vote on protocol or code changes via the blockchain itself. Developers submit protocol or code changes, which are endorsed by bakers (validators) through a process of testing, voting, and activation. Incentives and penalties are regulated by token allocation and delegation systems.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?