May 04, 2017

On a Principled Approach to Blockchain Governance - 7 Requirements

Over on Steem, I've published a short 7 part cycle on a Principled Approach to Blockchain Governance:

One of the things that I learnt in the CAcert adventure was that governance was critical to the safe operation of large communities. How large is large ... is a question of much debate, but to put it bluntly, this is needed beyond say a 2 digit size, which Iíve always seen as around 30, but certainly well before Dunbarís number of 150.

Now, the problem with governance is that once itís in place, it becomes power. And power corrupts. ...

Each part lays out one principle:

  1. Open Entry
  2. Toxics not Welcome!
  3. Constitution!
  4. Arbitration
  5. Consensors are Enforcers
  6. Arms of Governance are Independent
  7. Community exercises their Democratic voice to set rules

The reason I'm using Steem as the blog rather than good ol' Financial Cryptography ... might be revealed soon enough. Watch this space. Or that space!

Posted by iang at May 4, 2017 09:40 PM

In your 2011 paper on Bitcoin mining you factor in the cost of electric power. You note that botnets operate on stolen power, and conclude that "stolen electricity will drive out honest mining." However, there is another way in which electricity is being stolen. In many areas, such as China, taxpayers are forced to pay for electric power used by other people. This gives the miners free profits at the expense of those taxpayers.

Posted by: Patrick at May 5, 2017 09:19 AM

With regards to your principle #1, there is a way to have both permissioned ledgers and open entry at the same time. Permission to write requires having liability insurance or a bond posted on the blockchain, but anybody can post a bond or buy insurance, which makes it open.

The bond or insurance is subject to arbitration claims. That solves the enforcement problem and eliminates your need for consensus to enforce arbitration in principle #5. The arbitration decision only needs one miner to include it in a block to become effective.

Posted by: Vincent Youngs at May 28, 2017 01:59 PM

Hey Vincent,
you're correct that a bond can resolve that issue. The reason that I don't like that solution is that it ties up capital, and even if the capital is available it adds a barrier of conversion from capital to bond.

Thus makes it rather hard for a large population to enter into this environment. Bonds would probably knock out all of the developing world and 90% of the OECD market as well. That's a high price to pay!

Posted by: Iang at May 29, 2017 08:33 AM


Bonds can be an option for those who don't want to obtain insurance via group membership or possibly an insurance market. Most have no problem being in a group, but some of the more individualistic, excentric, reclusive, or exceptional people do not want to be part of a group. Some of these people are on the highest end of intelligence or creativity. There needs to be a way to allow people into the system without requiring group interaction. Even if only 1% do it by posting a bond, those 1% could be some of the most valuable participants in the system.

The value of the bond need not be prohibitive. It could be variable depending on what someone wants to do in the system. Likewize, the value of insurance coverage can also be variable. It could be the measurement of trust. The single trust metric could simply be how much insurance coverage (or bond posted) does somebody have?

The blockchain protocol can use this numeric trust metric as a parameter to decide whether a paricipant is authorized to do certain actions or provide particular services to the system. Block signing is one service that could require a certain level of insurance or bond posted, but there could be many other services moderated or authorised this way. Oracle services, for instance, could require insurance or bond exceeding the finacial value of the event being oracled about. If the oracle lies, causing loss to some parties, their insurance or bond can be sued in arbitration.

- Vincent

Posted by: Vincent Youngs at May 29, 2017 10:08 AM
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