A recent investigation into ‘voter turnout’ as an indicator of community participation in decentralized-governance tokens, throws up some interesting results. Despite the assumption that token-holders would participate purely through the passive incentive of ownership, most prefer more tangible benefits.
Off-Chain Vs. On-Chain Governance
Who governs Bitcoin? While nobody owns the network, somebody must be in charge of parameters such as block size and adding capabilities like SegWit. In truth, Bitcoin governance occurs off-chain. Any proposal for the protocol must be formalised, tested and discussed among the users, until it gains a significant majority support. Once accepted, node operators update their software to include the new proposal.
In contrast, on-chain governance gives token holders the chance to directly affect the protocol, with on-chain voting on major decisions. But do such mechanisms give a truly democratic outcome, and do the majority of token holders even care?
Encouraging Token-Holders To Vote