On-Chain Governance Definition
On-Chain Governance is a system for managing and implementing changes to cryptocurrency blockchains. In this system, rules for instituting changes are encoded into the blockchain protocol. Developers propose changes through code updates and each node in the network votes on whether to accept or reject the proposed change.
On-Chain Governance Key Points
- On-Chain Governance refers to rules encoded directly into the blockchain, allowing the network to be modified based on predefined rules.
- Changes are proposed via code updates and voted on by nodes in the network.
- It aims to be transparent and democratic by distributing decision-making power to all participants.
- However, it may be contentious as decisions could potentially be controlled by those with more computational power or coin holdings.
What is On-Chain Governance?
On-Chain Governance is a model that proposes a built-in, automated, self-modifying decentralized way to manage a blockchain network. It hands over the power of making significant decisions to the network participants. The rules are not established by any single party, but rather determined by the network as a collective.
Why is On-Chain Governance important?
On-chain governance is revolutionary because it shifts the way decisions about the blockchain are made. Traditional decision-making processes in most blockchain networks are often centralized with core developers holding substantial power. With on-chain governance, democracy is fostered through decentralization and participation.
Who benefits from On-Chain Governance?
All blockchain participants can potentially benefit from on-chain governance as it provides an opportunity for every participant, regardless of their role, to influence the protocol. However, the extent of their influence often depends on their stake or resources within the network.
When is On-Chain Governance used?
On-Chain Governance is used when a change or upgrade to the blockchain protocol is required. This could be anything from minor adjustments and bug fixes to major system overhauls. The votes are then cast to accept or reject the proposed changes.
How does On-Chain Governance work?
The operation of on-chain governance begins with a proposal for change. This is usually done by developers who suggest updates to the code. The suggestion is then voted upon by nodes in the network. The proposition that receives the majority vote is then implemented, modifying the network in accordance with the proposed change.
Where can On-Chain Governance be applied?
On-chain governance is applicable in any blockchain network. It is especially prevalent in newer blockchain platforms that aim for a more decentralized decision-making process. Some existing projects like Tezos and Decred have already implemented this governance model.
