With more emphasis on decentralization and distribution within blockchain networks and decentralized applications (dApps), governance has become an important topic of discussion.
More users of blockchain ecosystems and their dApps want to learn how decisions are made that can impact their sustainability and governance.
The Cardano blockchain aims to become the first truly decentralized and distributed blockchain with a community-run governance model.
To achieve this, the Cardano community has been working out the details of CIP-1694 to implement a distributed on-chain governance model maintained and updated by the community.
In addition, a member-based organization, Intersect, has been launched with Committees and Special Interests or Working Groups to support the implementation of CIP-1694. Discussions have also been held on the Cardano Constitution, the test network for governance (SanchoNet), and relevant tooling features to use on SanchoNet (GovTool), among other things.
This blog will further discuss the importance of decentralized governance and its importance to the future sustainability of a blockchain such as Cardano.
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Decentralized governance is a style of decision-making and administration in which division and dissemination of central authority, activities, rights, and responsibilities are spread around several institutions or members within an organization, network, or group.
Decentralization can happen at several levels of governance.
Sometimes, local governments can be decentralized under a centralized national body or vice versa.
In any case, there are different models of decentralization.
In most cases, however, decentralized governance is applied to support democratic state-run, municipal governments, grassroots governance, or public services.
Decentralized governance ensures the delegation of power and authority. It helps to empower local-level administrative wings by incentivizing active public participation in shaping decision-making for their community.
Compared to centralized companies, organizations, or applications administered and run by a few core stakeholders or developers, a blockchain network run by its community can have several advantages that bring more transparency, democracy, and accountability to the entire network.
In a decentralized governance framework, the people or the users will have decision-making power through open proposals, collective voting, access to essential records, and more.
If this is applied to a blockchain network, important proposals, votes, and other records can be stored transparently on-chain.
The developers and users that make up the community will be devising and deciding on how to sustain the network over time, as opposed to a centralized model in which a few core insiders may be incentivized to act in their interest without thorough accountability. It’s a natural way for a system of checks and balances.
Now, through open-source blockchain technology such as Cardano, users on a global scale can vote, store records, propose ideas, tokenize assets, transact, and a whole lot more instantly.
This empowers and enables the community of users to grow together and truly decide on what is best for the network.
Cardano’s model for decentralized governance is different from other networks because it uses different governance institutions and a form of liquid democracy. There are three main bodies:
- DReps (Delegated Representatives): These are the representatives of the community. They aggregate the voting power of the regular ADA holder and represent the broadest part of the Cardano network.
- SPOs (Stake Pool Operators): They maintain the Cardano blockchain ledger. They have voting power based on the stake delegated to their respective pools.
- Constitutional Committee: it’s a control body that ensures new proposals do not contradict the rules and principles laid out in the Cardano Constitution.
In a liquid democracy, members or users can share their votes and support specific policies rather than relying on representatives who may be subject to other interests. In this type of system, delegates are repositories of voting power. The moment they cast their vote, they do it with the assigned voting power on a case-by-case basis. With this system, the Principal-Agent Problem is reduced since, at any point, a delegate can lose all of their voting power if the users perceive their voices aren’t being reflected.
Cardano also has a separate off-chain member organization, Intersect, to support decentralized governance initiatives for its sustainability. Intersect organizes committees and groups to work on certain tasks related to Cardano’s evolution and decentralization. Anyone can join Intersect by registering on its website.
Intersect is the main anchor for participation.
People can join in on the different aspects of shaping Cardano governance via this organization.
Additionally, Intersect will help to lead the drafting of the Cardano Constitution through its committees and groups.
A Cardano Constitutional Convention will also be held to present the draft of the Cardano Constitution for community ratification.
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