On-Chain vs. Off-Chain Governance
In previous posts, we’ve covered what blockchain governance is and why it matters. Here’s a quick recap: in the blockchain world, governance is all about deciding how rules are set, updates are made, and conflicts are resolved within a network. And it’s important because as these networks grow, governance is what keeps them moving forward.
Now, what if I told you blockchain governance comes in two flavors: on-chain and off-chain?
Let’s start with on-chain governance. This is where everything from proposals, votes, and implementations, happens directly on the blockchain. Someone submits a proposal, token holders vote, and the outcome is automatically executed through smart contracts. No middlemen, no delays. Polkadot is a great example of this. The network continuously improves itself without needing manual interference.
But what happens when governance takes a step off the blockchain?
That’s where off-chain governance comes in. Here, discussions and decision-making happen outside the blockchain, whether it’s on forums, mailing lists, or calls. Once there’s an agreement, developers implement the changes. Ethereum is a good example of this, with the Ethereum Foundation playing a big role in coordinating and managing updates.
Which model is best?
Both models have their strengths and weaknesses. On-chain governance is known for its transparency and automation, but it struggles with things like low voter turnout and the risk of power being concentrated among the wealthiest token holders. Off-chain governance, on the other hand, is more inclusive and encourages deeper discussion, but the slower pace can be a liability in a fast-moving space like blockchain.
At the end of the day, neither system is perfect. Some of the best projects out there have adopted a mix of both. And as blockchain technology evolves, I’m optimistic that the way we govern these networks will evolve too, hopefully finding the right balance between decentralization and collaboration.
Until the next hash, Abed.
