Critical Components of Blockchain Governance

Published by Mario Oettler on

In this topic, we talk about components that contribute to a smooth governance process.


With each blockchain, there are different groups of stakeholders. Typically, these are miners, full nodes, developers, investors, users, governments, etc. They all can influence the fate and development of a blockchain. And not surprisingly, their incentives and motivations don’t always align 100 %. Sometimes they are even contradicting. This makes an effective coordination mechanism necessary to find meaningful consensus.

Coordination Mechanisms

Due to the diverging incentives and motives and the considerable number of contributors, a feasible coordination mechanism must be in place. A coordination mechanism:

  1. provides a way of publishing ideas,
  2. enables collecting feedback for ideas,
  3. allows selecting ideas to be implemented,
  4. assigns implementation tasks of accepted ideas,
  5. gives the starting signal to going live.

If everybody agrees, the situation is trivial. But in most cases, parties will have different opinions on what is the best solution. That’s why an important question is what happens if the community doesn’t agree. The answer depends on the discussed issue.

If the issue affects the block validation rules, a fork occurs. If it affects the interoperability, it could lead to a network split, or some applications might not work correctly anymore. This should create enough economic pressure to agree on a standard. Forks, however, are undesirable because they weaken the network. With PoW, the hashing power is split among both branches making it easier for attackers to obtain 51% of the hashing power of one or even both branches. Besides a weaker network, it is for users and contributors like wallets, full-nodes, exchanges, etc. difficult to decide which branch is the correct one.