Governance is a part of all of our daily lives. Within our families, our social groups, our workplace, or of course, our interaction with the State, the process of organizing interactions, and decision-making boils down to the art of politics. Humans have tried many forms of governance as a state, and seem to agree for the time being that democracy is the worst bad.

As the world continues down its entropic path of power distribution, things like DeFi will require governance as clear and transparent as the code which dictates the specific properties of a cryptocurrency. While bitcoin enabled anyone with internet to hold and transact a digital value not reliant on a centralized institution, DeFi has the potential to offer far more sophisticated services that compete more closely with the services provided by a sophisticated financial institution. While these institutions may be “antiquated”, they do have formal governance in place designed to coordinate tens of thousands of people effectively.

Bitcoin does not. There are no formal documents that describe a decision-making process for participants to follow in order to govern the bitcoin protocol. It is this lack of governance that, depending on where your opinion lies, is one of its greatest, or weakest, traits. While bitcoin is unable to progress on a formal plan efficiently, one knows what its code will look like in the future: pretty close to what it is today. The predictability contributes to the safe-haven use case many proponents believe in, simply because it’s unlikely substantial changes will occur.

When Vitalik created Etheruem, he added functionality to enable the ability to have Touring-complete smart-contracts, however no on-chain mechanism for governance. Ethereum has thus far progressed quite rapidly with Vitalik as a benevolent dictator who’s able to rally the stakeholders and coordinate the distributed protocol by leveraging his status in the Ethereum community. The creation of Ethereum Classic exhibits that not everyone agrees with all of his decisions.

Edgeware, Tezos, Polkadot, Cosmos, and other new chains are incorporating governance directly on-chain, codifying law. Amendments and governance becomes more transparent, and each project has a clear set of rules dictate the series of events required to amend the chain in any way. Tezos’ governance has already proved itself multiple times and has been enabled to evolve to include modifications desired by the general community. With such governance in place, projects like Tezos hope to evolve the Tezos blockchain as people discover new technologies and better methodologies to increase the performance of the protocol.

Governance is hard, and it’s arguably impossible to have any form or perfect governance. While democracy appears to be a leading system, it is highly influenced by external actors without decision-making power. More apparent than ever, political parties, lobbyists, media, and foreign governments can manipulate the actions of enough constituents to have a considerable impact.

I believe the biggest threat to good democratic governance is a lack of informed and participatory constituents. If people aren’t informed, the decisions they make are likely to be influenced greatly by outside parties rather than personal due diligence. In Tezos, each token holder can’t participate in on-chain governance, but instead only those with a minimum amount of XTZ who are currently running validation software for the network. With this additional hurdle, I speculate a lot of holders of XTZ who would prefer short-term price jumps are excluded from the decision-making process, while those who actively operate software on the network are more likely to spend the time to understand the short and long term implications of a proposed amendment. Tezos is just one of a handful of projects experimenting with the intricacies of on-chain governance, and we are likely to see many more projects look to incorporate governance to ensure the long-term sustainability of their technologies. While ensuring participation in governance is difficult enough, distributed projects also need to figure out how to attract the right constituents to participate at all.

A breakdown of Edgeware’s lockdrop token allocations

Edgeware is a community governed smart contract platform that is built on Substrate and will launch on Polkadot in the hands of its community, who hold 90% of the tokens and resulting governing influence. Edgeware enables the holder of its native token to influence not only how the platform will evolve, but how an on-chain treasury will be spent. In order to bootstrap a constituency, Edgeware launched its token through a process it has neologized a “lockdrop”. Rather than attract short term speculators as were typical in ICOs, Commonwealth Labs, who are the initial creators of Edgeware, wanted to bootstrap a community who would stay interested in its governance for as long as possible. While projects like Stellar try to increase adoption by raining money via airdrops, the productivity of such tactics is questionable as people have little incentive to stick around.

A lockdrop, however, allows people to use their existing ether holdings to signal interest in acquiring Edgeware tokens. Each participant can signal their interest (lock no ETH up), or lock ETH in a smart contract that will be returned at the end of a pre-defined period (the longer they lock their ETH, the higher the bonus received). Commonwealth Labs believes that having some “skin in the game” enables them to bootstrap a valuable constituency who aren’t just there for a quick profit.

On-chain governance is a very new concept, in a very new industry. It’s going to take a lot of experimentation to figure out the intricacies of governing distributed projects. On-chain governance offers great potential to ensure distributed projects remain viable in a quickly evolving space. In addition to being an operational smart-contract platform, Edgeware is a testing ground of governance for Commonwealth Labs, who aim to provide a full stack of governance services to projects both inside and out of the cryptocurrency space.