Democracy has Failed Will Decentralized Governance Succeed?
“It may not be called a health pandemic yet, but it is an economic pandemic.” Says Diane Swonk, Chief economist at Grant Thornton.
As the number of infected patients outside China increases, so does the risk of the global economy. In the face of this unpredictable crisis, the performance of governments is not that satisfying. What happened in Wuhan, one of China ’s largest transport hub, was that the government officials covering the truth of epidemic information, the local Red Cross Association and medical and health centers bribing others with medical supplies, and residents lacking attention to the virus because of information asymmetry, and eventually causing the virus soon radiated across the country.
Now China’s situation has improved, while similar dramas are just beginning in other countries. Looking at the governance performance of Japan, South Korea and Iran, everything is so obvious.
Poor State Governance
According to a research by Daniel Kaufmann and Aart Kraay, countries including Yemen and Venezuela saw sharp declines in both Government Effectiveness and Voice and Accountability. And this trend hasn’t changed much.
In return, the citizens in Venezuela and Turkey may have realized this earlier than we did, or more directly experienced the problems under poor state governance. Therefore, they adopted a more positive attitude towards a brand-new transformational governance approach — decentralized governance. 45% of Turks believe that digital currencies such as Bitcoin (BTC) are the future of online consumption, far exceeding the European average of 28%. In Venezuela, the inflation rate has already exceeded 100,000%, and millions of people struggle to feed themselves. From December last year to mid this month, Venezuela’s cryptocurrency trading activity has reached a new peak, almost to $400,000 million.
“Democracy is the worst form of government except for all those others that have been tried.” Mr Churchill proposed his insightful vision decades ago.
Political civil unrest, strict foreign exchange controls, and alarming inflation rates, all those indicates that the current governance model needs to be changed. More people have developed a keen interest in the social experiments of crypto communities and believe that the continuous improvement of the decentralized governance model will be a huge social progress.
Exploring New Governance Models
The governance of Bitcoin and Ethereum is the early off-chain governance, that is, a small group of people in the community make decisions. Bitcoin’s governance is basically based on a set of validation rules designed by Satoshi Nakamoto. These rules were later partially modified to correct errors or solve some other problems. Due to the personal influence and appeal of its founder, Vitalik Buterin, Ethereum’s proposal passes more efficiently than Bitcoin.
Apparently, we need a better approach than existing state governance models, however, at present, the governance of Ethereum follows the principle of separation of powers, that is, the core developers, full nodes, and foundations balance each other.
Many DAO projects on Ethereum adopt a voting mechanism to build a more engaged community. For example, Colony scores users by comparing their reputation with others, and weights their contributions based on the value added by users. Meanwhile, Colony distributes equity fairly according to the tasks accomplished by members, and these equities can be traded in open markets, or they can be weighted beyond their authority in the organization.
Aragon launched Aragon Court on the 10th of this month, a key step towards decentralized governance. They use the Aragon Agreement (AA) for Aragon organizations to benefit from a wealth of subjective terms and conditions through Aragon courts, which are either not reflected in smart contracts or if written in Smart contracts will cause organizations to become bloated and slow, thereby making up for the “deficiencies” of smart contracts, or operations that cannot be achieved. The threshold and implementation difficulty of this new experiment are unknown yet, but it will be a meaningful attempt.
Conclusion
Decentralized governance is difficult, but we have witnessed many beneficial attempts. Although a perfect governance model has not yet been seen, the governance of the crypto community will undoubtedly continue to iterate in the future. The crypto community itself is a borderless, real-time and complex organization, which makes the exploration of its governance methods exerts meaningful reference value for national and international governance among governments.
