Vitalik Bituren’s Theories on Governance
Bituren defines governance as a series of input’s with a single output: f(x1, x2…xn) à y. In this system, the inputs are legitimate stakeholders and the output is the decision made. In recognizing the oversimplification of this model, he continues to state that governance operates in ‘layers’.
He recognizes a coordination model of governance, where the bottom layer is the real world. For blockchain users, this bottom layer is the individuals ability to run whatever software they want in their capacity as a user, node operator, stakeholder, etc. The bottom layer is always the ultimate deciding factor. But, Bituren argues that the peoples actions on this layer can be influenced by the layers operating above it.
The second layer exists of coordinated institutions. The purpose of these institutions is to develop standards for behaviors that the rest of the community can fall behind. This requires that there be an established culture in which everyone, typically, listens to organized institutions.
Coin Voting Mechanisms
Loosely coupled voting is coin voting at a layer two coordination institution. In this case, if X update was voted to be implemented, then users will download and update the protocol. Dissidents who do not support the update may choose to ignore it.
Tightly coupled voting is coin voting at a layer one, in-protocol feature. In this case, if X update is voted to be implemented, then the change happens automatically. If a minority dissents to the decision, they can hard fork and cancel the new protocol. Tightly coupled voting favors the majority and forces the minority to exert significant effort to hard fork the protocol.
Issues with Coin Voting
Low voter participation is a predominant criticism of coin voting. Wealth distribution is unequal which can lead to unfair advantages. In addition, it creates issues of legitimacy if only a small percentage of the community is making all of the decisions. An attacker with only a small percentage of the total coins can sway the vote significantly.
Game-theoretic attacks are also a fear in coin voting systems. When voting, he ability of one vote to make an impact is weak. Couple that with a small stake and the vote becomes even more insignificant. Buterin argues that this seeming insignificance may lead to bribery and vote-buying. He argues that while this is a problem for all coin voting systems, it is worse with tightly coupled voting systems. While the minority in a loosely coupled voting system can opt to not download the software, therefore making bribery less significant, in a tightly coupled system bribery has a much more pervasive impact on the community because it is automatically updated.
The overarching goal is to avoid centralization via the amount of coin ownership a single person has. But another downside of coin voting is that it only allows for one class of users. People who have coin as a store-of-value versus medium-of-exchange are naturally going to have interests that conflict. In addition, block producers, core developers, node operators, and coin holders will all have different interests that they are trying to protect. By only allowing coin holders to vote, many of these groups will be underrepresented.
Bituren’s Proposed Model
Bituren proposes a model he coined ‘Multifactorial Consensus’. He defines this governance model as one which pools all opinions from each group and the ultimate decision depends on the collective opinions of these groups together. He defines the following items as part of governance:
The roadmap of the project and the direction it is moving in
Consensus among the core developers and team
Coin holder votes
User votes via a sybil-resistant system
A set of established norms
He argues for cryptoeconomics: “the use of economic incentives together with cryptography to design and secure different kinds of systems and applications, including consensus protocols.”
Social trust assumptions are not universal, what one faction trusts another may not. Cryptoeconomics is about trying to reduce social trust assumptions by economically incentivizing good behavior and disincentivizing bad behavior.