On-chain Governance: How do we map Political Science to blockchains? with Drew Roberson

foreign extremely simple but uh I'm going to talk about these agenda items so our objective here is we're going to try to tease out how unchain governance as a form of like extra protocol consensus uh and then we're just going to go and Define kind of what on-chain governance is uh synchrony synchronous versus partially synchronous systems the quantitative and qualitative impacts and what I see is possible solutions all right so the rules of on-chain governance are pretty simple uh it's you submit a deposit of usually a couple of thousand of dollars to begin a proposal that you make to ask for a change or submit code directly uh on like a tinderman protocol uh it's in a wallet uh one token one vote very simple yes no abstain or no with veto with all of these contributing to a quorum uh and for a proposal to pass it has to meet Quorum and pass by at least 51 percent okay so then this is like the next layer deep is uh for instance we're going to use Cosmos SDK as the example uh uh on top of all of those rules that we have we also have these modules most notably the X gov module which talks about voter inheritance so uh basically how it works is if you delegate to a validator and you don't vote whatever that validator votes is your vote um if you're validator votes and then you vote then you override them so I mean a way that you could think about it is looking at this graph on the right this is like a picture of block Damon's validator statistics um on minskin so for our example osmosis block demon is more or less shepherding the flock of 11 219 different wallets not necessarily different users um but that's significant um on top of this we also have uh the X auth module which grants any sort of arbitrary authorizations to perform actions on behalf of one account or another that's a mouthful what does that mean who cares uh so when you think about participation uh the only person that can vote on a node before was the validator which is a bit of a problem which means you have to have access to the validator which means you have access indirectly to mess things up with user funds uh and so with the X alts module you're able to specify another account to vote on your behalf so that's significant because when you have a company where you have people working 80 hours a week it's better to push this responsibility down to people who can spend more time on the governance proposals and figuring out the best way to handle it all right and then this is the deepest that will go and then it's all very surface level from here um so this is where we're going to talk about synchronous versus partially synchronous consensus trade-offs so one thing that needs to be made very clear like why people care about on-chain governance is because submitted proposals can be hard-coded into the protocol the decisions are executed automatically in code um and so the example tenement or Comet bft can enter an asynchronous phase so what that means is uh tendermint is naturally going to be a partially synchronous protocol it is synchronous most of the time and it can enter an asynchronous phase where it can actually halt but that's not a big deal it's supposed to do that if ethereum halts Well it can't because ethereum always favors liveness over safety tendermen always favors safety over liveness and that's okay so putting all of this together so what the chain can stop we can vote on chain who cares well basically if you actually read the documentation of Cosmos SDK they tell you that you have to use governance to restart the chain and find consensus so a committee gets together we all do a vote and then that's what kicks us off to the next phase so ipso facto governance is part of the consensus it's part of the security and if you attack the governance the rest of it doesn't really matter um and honestly for chains like this with on-chain governance if governance things are not built out then most likely this will happen so uh let's go to the quantitative we got some hot drama from Juno where basically a whale received they have they had 52 wallets with 50 000 atom Juno did an airdrop where they gave away their whole Supply um to people and you were supposed to only get fifty thousand per entity um soon after this happened 52 wallets of 50 000 atom fifty thousand Juno combined into one so the problem with that is that at the end of the day this one centralized person that was custodian custodying other people's funds I'm not saying whether it's right or wrong uh ended up with 7.5 percent of the network people didn't like this surprise uh and then obviously we have the risks of well on-chain governance they can almost have a quorum on their own uh they have the potential of delegating to validators which may have happened uh to buy votes um and then the whale gamer also could unbond all of his tokens and just completely wipe out all of the liquidity so what happened is we had everyone get together they did a vote everyone hated it and then we have a story and a graph so I'm not going to say that governance is the reason that Juno is doing this but I would be hard-pressed to say that it's there's no correlation uh that was the price Peak that was when voting ended everyone hated it um that more or less speaks for itself so here's the other qualitative part of it is that with uh needing to build out these governance mechanisms we have to think about things that aren't necessarily New Concepts like voter fatigue voter anxiety you don't want to disenfranchise the voter you want to incentivize people to participate but then you run into this problem of like do we want the most high quality voters or do we want it to be decentralized and you know that's a thread within itself which we can't really get into um but regardless today the responsibility falls on the validator because of ex-gov because of inheritance so another problem that we had was also setting like an economic precedent to go back to this flood I mean a big reason that like an Institutional person wouldn't want to touch something like this is you know what's the chance of them now nationalizing your assets it's it's not an appealing asset class anymore when governance can completely change the rules of the game um yep so finishing this off currently in the in the way that it works is it's kind of a direct democracy which was historically a terrible way to do anything with politics like even in Athens they didn't do it because they thought it was dumb like even at the most basic democracy was represented representational uh but here's a couple of examples of things that we see currently is like with uh proposal Pork barreling we have uh like people will put in three things that are everyone really wants and then one thing that no one wants uh and then also just generally fighting people on Twitter so to go back to the Juno thing uh this was how all the chips landed it was a pretty split vote and you know there was basically three classes of people there was the uninformed the strict and the loose sounds a little bit like a constitution we know um so a lot of like the seed phrases that we would get would be for the strict people they would say code is law learn to code better write a better proposal do a better airdrop y but also there's loose and there's the people that would say yeah well it's the intention behind the airdrop is to distribute in or the good of the chain is to not have such a huge centralizing Force um but yeah so basically the takeaway here this is where we get to Concrete Solutions Constitutions are necessary they are just we need to understand the rules of the game that we're playing by Otherwise you have a Juno incident where the chain doesn't quite know really what it's about until something happens and then a goodbye asset I mean to take this back all the way to James Madison and The Federalist Papers uh it's the entire point of a representational democracy is to protect the minority of the opulent against the majority and that the unchecked Democratic communities were subject to the turbulency and weakness of unruly Passions and that's honestly what happened with Juno 16 people got very passionate facts started flying around across like 10 different platforms and everyone was unhappy at the end and then uh for the proposals now we also have you set a precedent that direct democracy can be used for anything and then now we have certain validators uh asking for a lot of money in a bear Market with no one to hold them accountable um I don't think this is a great way to fund a chain um and as an ecosystem fund is also not an excuse for not developing your own business model but yeah so kind of what I'm going to guess is that as the total value locked of these governance uh on-chain governance protocols goes up then people will gain more interest in employing or valuing people that understand governance and understand how to write proposals in a way that they will get passed very easily but if you wait to do this during a bull market good luck the opportunity is now and then second to last slide uh presentation presenting to our own bias so basically what I want to get across with this is that how the information is presented to you and who it is presented to will directly impact how the vote goes you know if if the output is only going to be as good as the input of the information and the medium is the message so to make a concrete I guess submission I would say Commonwealth currently um should pay me because I love their platform so much I'm Shilling them to everyone love them um and I think that their approach to integrating everything in one place uh is pretty straightforward I mean it's I think we should do all of this and have all of these discussions in the same place in front of everyone and yeah so to go back and kind of book in this um hopefully you guys can kind of understand the Strategic significance of uh on-chain governance and uh hopefully you either learned something or had a nice nap cheese [Music]