"Governance" is a term frequently mentioned in the decentralized industry. For many Builders and Contributors, it is relatively unfamiliar. So, what is a layman's definition of it? Evidently, governance refers to an interactive process conducted for a social organization based on certain rules. Three key points can be discerned:
Governance is the process of interactions through the laws, norms, power or language of an organized society[1] over a social system (family, tribe, formal or informal organization, a territory or across territories). It is done by the government of a state, by a market, or by a network. It is the decision-making among the actors involved in a collective problem that leads to the creation, reinforcement, or reproduction of social norms and institutions".[2] In lay terms, it could be described as the political processes that exist in and between formal institutions.
- It's a process, an interactive one, and not the outcome.
- Rules are pivotal. Whether customary, legal, power-related, or in computer language, they must be adhered to.
- Typically, governance is exerted by one organization upon another with clear boundaries.
One can start understanding this from the crucial interactive process, highlighting that governance is a broader concept than what we typically understand.
Based on interaction types, there's a simple bifurcation: unilateral and bilateral interactions. In the Crypto world, by extracting common attributes from all roles, they are simply Contributors. If everyone governs together from day one, then the interaction is unilateral. Conversely, the more common bilateral form involves distinct roles for the governor and the governed. A more complex multilateral interaction seeks balance among well-defined roles. This is evident in traditional companies where shareholders, boards, and management partake in multilateral governance.
The type of interaction is often determined by the equality of roles. For instance, democracy is about encouraging more people to participate, based on numerical proportion. There's direct and indirect democracy, where participation can be immediate or via representation. In Crypto, governance often involves holding tokens and voting. This system can easily foster collusion where economic costs make individuals more cautious and rational in participation, but it may also favor certain groups. Non-token governance might be just as effective, ensuring participants' earnestness and rationality without necessarily considering token quantity.
How then do we assess the quality of this interaction? It's not solely about results or participant numbers but rather the legitimacy of the interactive process. No universal standard for legitimacy exists yet. It might emerge from market competition, external equilibrium, and technological evolution. Some aspects of the interaction process include:
- Simplicity often means safety. For example, the Bitcoin community's consensus is strong due to its longevity and the inherent equality of participants. There's no "other side." When the community identifies on one level, conventional and unconventional event resolutions are viewed as neutral. If there's a governing body, like a foundation, and it changes its decisions due to external shifts, the community might blame the foundation, not the circumstances. Additional roles can complicate the interaction process, bringing uncertainties that the community may perceive as risks.
- Unilateralism often emerges from foundational respect for equality among community members. The challenge in Crypto is reconciling objective differences in individual contributions and subjective desires for equal participation. Can decentralized theories genuinely support unilateral governance? Also, those with significant technical and knowledge skills are likely to contribute more and be more eager to govern. And during initial exploration phases, those lacking basic understanding can complicate governance. Challenges from collusion, diverse ideologies, and governance habits in the Crypto community persist. Yet, governance that respects both fairness and equality might offer a more stable solution.
- The complexities of bridging cultures and ideologies influence the expansiveness of governance. Recognizing that governance of diverse cultures, ideologies, cognition levels, and even age groups might require flexibility ensures consistency when confronting genuine conflicts, fostering a more inclusive community. This challenge might be underestimated. Decentralized identity systems that surpass traditional centralized identity biases can break cultural barriers. Thus, exploring decentralized societies can expand governance, potentially leading to paradigmatic reforms.
In essence, we anticipate the emergence of a simple, humane, decentralized governance model that transcends cultural and ideological barriers. While challenging, it's a worthy endeavor for everyone.
Regarding rules, they're evidently complex and systematic. Our concerns revolve around meta-governance, simple standards, and rules or laws. In Crypto, the emphasis is often on the latter, epitomized by the saying "code is law." Decentralized technology has clarified legal documentation. With DeFi protocols, foundational rules and laws are coded, and the community operates accordingly. However, this "Code Law" is insufficient since the future is unpredictable, and the complexity of community events means it can solve only some issues. Several critical questions arise:
For the first question, we can seek to improve the code. But who exactly can improve such code? At this point, we need "governance of governance", meaning a clear foundation organization and the distribution of development authority becomes crucial. At present, the entire industry is still in its infancy, meaning we haven't yet seen any outstanding examples in "governance of governance". Of course, the fundamental technological reforms of DAOs might have a disruptive effect on the governance within the crypto realm.
The second question is about how we ensure, in the face of uncertainty, that we still proceed in the direction or purpose we initially hoped for with efficiency. This means we might need certain simple standards to limit the diversity of problem-solving methods. Especially after some foundations or founders distance themselves from decentralized communities, we've seen many real-world cases. Even in the Bitcoin community, key events arise where when the code needs to be modified, those with the authority to do so often need to adhere to some commonly accepted simple standards. These standards are likely a consensus reached by the entire community.
The third issue is about the relationship between governance entities and the external traditional regulatory environment. Once we possess a governance entity, its relationship with the external environment becomes complex. How to deal with the relationships with the external traditional society and legal systems becomes tricky. This point, in terms of the technological evolution of decentralized IP, might bring significant improvements to our standards for governing entities. Of course, the real-world traditional society will also further strengthen its oversight of foundations and DAO organizations.
For a long time, governance almost always involved human participation. The emergence of higher-dimensional governance theories or ideas might be something we look forward to, besides the ongoing governance methodologies through tokens or non-token technologies.
Then, let's consider the subject of governance, which is the organization. Of course, in the crypto world, we have more reason to anticipate DAOs, the fundamental units of decentralized society mentioned in the previous piece. From a governance perspective, a DAO isn't a company; it's ours from day one. If we look back at the early days of capitalism when the corporate system was established, it's hard to imagine that the East India Company would still have its influence felt in the shopping malls of the Marina Bay Sands in Singapore centuries later, with such a profound and vast impact on human society. A DAO initiates governance but is also the object of governance. We can't predict how governance relationships will evolve, but clearly, for DAOs, governance is a fundamental reform. Only when decentralized governance achieves real success can a DAO genuinely attain consensus. This governance of DAOs must transcend traditional societal governance in every dimension. We need to pay a lot of attention to these three directions of reform: breakthroughs in basic governance theory, reforms in the foundational architecture of governance from a norm or linguistic perspective, and experiments with new DAO governance methods. Simply put, governance is the core of a DAO. Without a strong core, a DAO is just a framework, easily swayed by the slightest breeze.
In summary, in a decentralized world, governance remains a very open concept. Its systematic definitions, methodologies, theoretical frameworks, and tools are all in their early stages. They will clash and evolve with the technological and non-technological progression of decentralized societies and DAOs, birthing more complex governance systems. While reading the I Ching, I stumbled upon this passage, "In ancient times, they used knotted ropes to govern, and later sages used books and contracts." Can you see the shadow of blockchain? Can you see the pages of the information age? No matter how chaotic the real world is, it seems we're following a giant wheel, believing we're progressing forward, yet continually catching glimpses of an ancient figure. May we have more brilliant ideas to perhaps illuminate this chaotic and dull night.