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Cardano's future depends on governance

Published 21.2.2023

The Cardano community should be proud of the debate around Contingent Staking (CS). Whatever your opinion on this functionality, the important thing is that it is openly debated by such a large number of people. The debate has its problems and the arguments are not always based on facts. Many opinions are driven by fear or lack of technical knowledge about how blockchain works. You can't say that anyone is moderating the debate, although Charles Hoskinson is setting the main tone. The community is divided. One part defends CS, and the other sees it as a road to hell. At the moment, there is not even a CIP on CS and yet the debate is happening, which we consider a great success. It reminds me of the times when the Bitcoin community was debating block size, or the OP_Return wars were going on. We believe that the future of the Cardano project will depend mainly on the quality of decentralized governance. Let's take a step back and think about what decentralization is really about.

TLDR

  • People mistakenly consider the immutability of protocol rules to be the point of decentralization.
  • A decentralized system must be capable of change through democratic voting.
  • The ability to vote in a decentralized way is perhaps more important than network consensus.
  • What should be immutable is the mission of the project. Specific protocol rules can be modified if it helps achieve the mission.
  • Conflict of views is a perfectly natural manifestation in a democratic society. Why should it be different in the context of blockchain?
  • More important than the specific principles of blockchain technology is trust in the system.
  • Voting is a way to keep the community together and overcome disputes.

Ability to evolve

People sometimes think that all the rules about how a distributed network works can be put into the source code. They then consider these rules to be immutable, i.e. forever given or binding. People tend to protect these rules and insist on their immutability. They believe that this will ensure the long-term existence of the project. They see this as the point of decentralization. It is a perfectly logical attitude. But I'm afraid it doesn't necessarily work well in a dynamic world that is full of change. In nature, the individuals that survive longest are those that can adapt to new conditions as quickly and efficiently as possible. I believe that this principle is ubiquitous and applies to the functioning of society and, by extension, to technology.

How to combine the need to ensure the immutability of the rules with the need to evolve? Evolving requires the ability to change, modify, extend, or even delete rules, at least in part. The answer presents itself. Decentralized governance must emerge.

To survive, the system must be able to make vital decisions and then apply them. In the context of Cardano, or decentralized networks in general, this means that no central authority can make decisions. The decision must be made collectively in such a way that the majority agrees with it. This is important because it is the only system that people can continue to trust.

Blockchain is a political thing. Users essentially form a community that shares common interests and ideals. In the context of blockchain, one of the main principles is decentralization. People don't trust authorities, they trust the rules that are written in the protocol. We can say that a new kind of democracy is emerging. Every democracy is based on elections. In order for a system to be considered free, there must be democratic elections and the majority must be able to assert its opinion.

The same principles apply to blockchain networks as to democratic societies. A protocol cannot remain rigid and unable to respond to events in its environment. Decentralized governance is as important as network consensus. Perhaps it is even more important. The majority can defend the rules and insist on the immutability of all existing rules. It's only OK on the condition that the possibility of voting exists. After all, if it is vital to change something, the community must have the processes to make it happen. Otherwise, the system (protocol) may cease to exist.

Some people believe that if the system does not allow any form of voting, it is more resistant to change. They consider this a better option, as they see immutability as the most important feature of the system.

I believe that this misconception was born in the minds of the people who started to consider the first successful cryptocurrency, Bitcoin, as digital gold. Gold is a physical resource that is older than the solar system. Humans cannot change the laws of physics. A network protocol is a human artifact and will never have the same properties as a commodity.

Of course, Bitcoin also allows some form of voting. The protocol can be updated and improved. It's always a good idea to examine each system carefully and know who has what powers, what form the voting takes, who can participate, how binding (and enforceable) the outcome of the vote is, etc.

Trust is more than the basic principles of blockchain technology

The adoption of blockchain protocols is a long way off. In the beginning, there are a few people, and at the end, there should be a significant part of the population. When a protocol is designed, no one knows exactly what will need to be done, what events to react to, and what to adapt to in order to achieve the original mission of the project.

What should be constant is the mission of the project. Specific protocol rules can be modified. What should be immutable is the mission of the project. Specific protocol rules can be modified if it helps achieve the mission.

Everyone has joined the community for different reasons, and it is logical that they have different views on the development of the protocol. Each change to the protocol logically represents a clash of opinions between members. Some may see the proposed change as beneficial in the context of achieving their needs, others the opposite. Conflict of views is a perfectly natural manifestation in a democratic society. Why should it be different in the context of blockchain?

As long as the protocol will serve the majority to achieve a goal that is ideally the same as the original mission, development is moving in the right direction.

As the number of users who have some idea of how to use the protocol grows, the requirements for technological capabilities may change. I believe it is beneficial to the protocol to make changes if the majority agrees. It may be that older users will have a different opinion and be in the minority. In that case, they could be outvoted. They may feel it is unfair, as they have defended the original ideals and the change may violate them in part. However, from the point of view of democracy, everything is fine. Cardano is a decentralized, permissionless, and open ecosystem. No one can dictate who can join the community and vote. Whoever owns the ADA can vote.

If a community honors the principle of openness and permissionlessness, it must accept the majority opinion. Accepting the results of elections is also one of the manifestations of freedom.

This should, presumably, apply even if some of the key principles are (partially) violated. Why do I think so? Because I believe that the majority cannot make a stupid decision. If the majority is capable of change, it can make another decision and reverse the previous one. More important than the specific principles of blockchain technology is trust in the system.

For example, decentralization is a very important principle, but it is negligible if people do not trust the network. If people trust the protocol and respect the basic principles, they will vote to keep the network decentralized.

Trust in the system, the wisdom of the majority, and the ability to vote on changes can best protect the fundamental principles of blockchain technology. Decentralization depends on people's trust in the system.

Debate on Contingent Staking shows the importance of governance

People are having a heated debate about Contingent Staking, but they should, first of all, realize that the form in which they come to a mutual consensus is much more important. Similar energy and effort should be devoted to the CIP-1694 debate.

The community is divided and it is necessary to come to an agreement. A democratic vote on change is the only acceptable form. It is possible that some members will leave the community if they disagree with the outcome of the vote. We have to prepare for that too. In every democratic election, there is a section of the population that is not happy with the result. The question is whether Cardano will continue to be the protocol for them to use for financial and social transactions, or whether they will go elsewhere. Blockchain will bring us more freedom if each of us is able to decide what we want to do and use.

Cardano certainly needs decentralized governance, as it has been an integral part of the project's mission from the start. One of the five eras in the roadmap is dedicated to it. Cardano is supposed to be capable of evolution. It will be difficult, but I am convinced that this is the only possible way to succeed.

Contingent Staking is a feature that has many opponents in the community. Charles Hoskinson, the IOG team, the Cardano Foundation, or anyone else in a position of power cannot decide whether CS will be implemented. Voting and respecting the outcome of the vote is the only way CS can make it into the Cardano protocol. Anything else would be an act of abuse of power and would undermine people's trust in the protocol.

The community members should learn the views and arguments of experts and prominent community members. Then ADA holders should vote in the best way possible in favor of Cardano. CIP-1694 proposes a new role called Delegation Representative (DRep). Any member of the Cardano community can become a DRep. ADA holders can delegate their voting rights to the DRep, whom they will trust to make good decisions about changes.

Contingent Staking is in the design phase and there is no CIP yet. However, sometimes unexpected events occur that need to be responded to after they occur. This happened recently in the Bitcoin ecosystem. SegWit and Taproot upgrades were used (some say abused) by a single Bitcoin Core developer to enable NFT minting on Bitcoin. The community got into a heated debate about what to do about it. Part of the community claims that the NFT functionality is not in line with the project's mission. Others argue that it's fine as long as the fees are paid and that it may even at least partially solve the security budget problem.

Both camps have relevant arguments. NFT fans are excited while others are furious. Can the team prevent NFT minting through technological change? Should pool operators censor NFT transactions? Should the retention of this functionality be put to a vote? Or should it not be voted on? Is a fork the solution? Think for yourself about what would be the best solution for the future of Bitcoin.

I give the Bitcoin example so that you can see for yourself that there can be an unexpected problem with a protocol whose development was supposed to be conservative. Changes were supposed to happen slowly and after careful analysis and research. Yet the Ordinals project emerged and changed Bitcoin, maybe forever.

This is why I think decentralized governance is more important than the current protocol rules in the source code. There may be circumstances where the rules do not serve the purpose for which the project was created. It's also important in the context of keeping the core principles of blockchain at a high-quality level. Security, decentralization, openness, and other principles can erode over time. It may be necessary to change the rules to remedy the situation.

As I have already outlined, any potential change can start a debate about whether it should be made at all and, if so, how. The community may split into multiple camps. Voting is a way to keep the community together and not let it split (along with the blockchain fork). Because that automatically means weakening the whole ecosystem.

It is always best to resolve disputes in a way that strengthens the ecosystem and keeps individual members united and committed to continue building.

Conclusion

The topic of decentralized governance is often overlooked, misunderstood, or undervalued. Yet it is perhaps more important than the current implementation of protocols. The debate on Contingent Staking is beneficial for us as people realize how important governance is to the future direction of Cardano. Every ADA holder should feel that they can contribute to the debate and influence the future direction of the project through voting. This is what a truly decentralized system is supposed to look like. There is no substitute for trust in the system and collective wisdom. If we want to collectively protect all the key principles of the blockchain, we must have the right tools to do so.

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