This document explores why most governance systems fail, and it attempts to create a simple frame to spot some of the problems.

It also suggests how decentralized technologies like blockchains and smart contracts could solve some of the issues and significantly improve the results of the decision-making processes.

Redefining

Meritocracy is a political philosophy stating that power should be vested in individuals almost exclusively based on ability and talent.

Within the context of this document, I won’t be referring to political systems or governments specifically but to any decision-making process.

Also, because power is not the same as power for making decisions I'll redefine meritocracy to the following:

Meritocracy is the idea that decisions should be taken by the entities better qualified for it.

Meritocracy as a base

All governance systems are a subset of Meritocracy if you understand merit as the feature that defines the right of an entity opinion to be considered (vote).

The ideal merit

For ease of use and simplification, I narrowed down the relevant merit properties to the following

Defines what’s of value to the system in order to make decisions. Can’t be a medium of exchange Needs to be quantifiable

You can find some examples in this document.

1. Merit defines value

For the system to work, the definition of merit needs to be aligned with the system goals.

It should tell what is of value to the system in order to make decisions. In this sense, merit is used as a filter, only the entities with certain capacities can participate in the decision-making process.

If defined broadly or incorrectly the system is likely to have unintended consequences or be gamed.

I’m using capacities as opposed to skills or knowledge because it can also represent things like ideology, IQ, experience, dedication, intention…

2. Merit is not a currency

It is not a medium of exchange.

If you can trade the merit you end up with a system ruled by the entities that have more economic power and any required capacity intrinsic to the merit is gone.

In consequence, the goal of the systems is reduced to maximizing its profit and the entities that rule it don’t have the necessary capacities to do so (other than having economic power).

3. Tokenized merit

This is not a desired feature but a limitation. In order to operate in a system that can scale, we need merit in a quantifiable format.

This should be some sort of (not-exchangeable) capacity-for-decision-making token, although it may have other formats, or be the combination of several metrics.

This value will be used to decide if an entity can vote, and what’s the weight of its vote.

In the case of Bitcoin, this is how many times a miner has been the first to find the block hash within a defined amount of blocks.

In the case of nation-state elections, this your ID card.

System failure

Most (I really mean most) systems end up compromising its own interest (#1) in order to make the system usable (#3). And so many others have a direct or indirect way to exchange merit (#2) and therefore compromise its integrity.

Tokenetization problem

Tokenizing merit is very hard, and I believe it to be one of the root causes for failure.

Most governances make use of a mix of certificates, test, recommendations, reputation… to validate the capacity of an entity. Then, a special credential is given to the entity that allows for its opinion to be heard.

This is mostly a manual process, making the system slow and prone to mistakes, and on top of that, extra processes are required to periodically re-evaluate the entity capacities.

Smart meritocracy

Governance has been one of the main use-cases for smart contracts.

The transparency of the blockchain and the programmable and authentication capabilities of smart-contracts make them very suitable.

To my knowledge, though, no project has reconsidered how they approach merit.

White-listing merit

As previously described in the analog/centralized world, the voting rights are defined in the identity credentials… not for its current merit. That forces the system to constantly have to re-evaluate these credentials.

By white-listing capacities (merit) instead of entities (usual people), we can have a governance system that is identity agnostic.

This would allow for anyone/anything to be a potential participant (kids, AI, other governances, anonymous entities). And because the system is automatized, the number of participants can be huge without being a problem.

It makes the system more adaptable to the needs and circumstances (just redefine the merit equation) while adhering to the system goals, and still being compatible with old governance systems (you can always make that a required capacity is to be someone).

Accessible metrics

How do you abstract all the necessary capacities to make a specialized decision and represent them in a single number while being in a decentralized/trustless environment?

Some capacities are easy to tokenize: time spent working at X, age, IQ, ownership of Y, citizenship. The ones that really matter are too abstract: knowledge, intentions, insight, fidelity, trust… Those are relatively easy in the analog world but a little harder on a trust-less environment.

Reputation systems

Like in the analog world we can use the past as an indicator of the future. We can quantify proven capacities, and use them as merit.

Within this context, merit defines a required capacity of an entity to make decisions, while reputation is a proven record of a capacity.

This makes reputation systems very suitable for governance.

Finding consensus

Whatever metrics the system uses to define merit all the participants need to agree on the state of these metrics.

Blockchains

Blockchains are an instinctive answer. For proving identity, projects like UPort and Blockstack make it already possible.

Currently though, for most of the metrics, the data is unlikely to be available in the blockchain. Current blockchains are too expensive, and most of the decentralized platforms tend to minimize what they write in it.

Most importantly, most of the platforms are still highly centralized, and so is its data.

Trusted third parties

An alternative approach is to use a trusted third party to provide the required metric. Just by digitally signing the required data, we can have a bridge to the centralized world.

Subjective reputation

In general, when we talk about reputation, we refer to subjective reputation. How does an entity feel about something? This means that not all the entities may feel the same way.

But the fact that it is subjective doesn’t mean it can’t be useful. Like the above, participants just need to agree what entity will be used to digitally sign the reputation metric.

Tokenization solution

There is no need to explain how good smart-contracts are for creating tokens.

A smart contract can validate the necessary metrics, compute them and generate a non-exchangeable token that represents the merit of an entity.

If a system can migrate or upgrade the token, we can tweak the system goals in real time.

Now we can use this token to represent the voting rights within a system.

Conclusion

Different systems need different capacities to make decisions. Most governances are corrupted in some way due to the lack of tools to evaluate merit properly.

It is up to each system to decide what metrics to use to compute its own ‘ideal’ merit token, one that represents the system values and the required capacities to make decisions on it.

By white-listing merit instead of identities we can:

Keep the goals of the system transparent and clear

Eliminate the process of evaluating the entities capacities.

Make the system identity agnostic, making it open to anyone/anything

The system is backward compatible (the list of white-listed identities is a subset of the result of the white-merit)

Smart contracts are extremely well suited for it.

Allow the system to easily adapt to new circumstances

Keeps the system transparent

Make the process maintenance free

With the new decentralized paradigm, we can now build systems that define merit with an accuracy that we never had before. This should allow for a substantial increase in the quality of governances.