Year of publication

Source/database

Paper type

Affiliation

Does the study identify a main research purpose?

Does the study clearly define the concept of blockchain governance?

Does the study describe the methodology clearly?

Does the study conduct an evaluation?

Does the study discuss any limitations?

total score

What is blockchain governance?

Why is blockchain governance adopted?

Where is blockchain governance enforced?

When is blockchain governance applied?

Who is involved in blockchain governance?

How is blockchain governance designed?

An Auditable and Secure Model for Permissioned Blockchain

2019 International Electronics Communication Conference

Zhenshan Bao, Kaixuan Wang, Wenbo Zhang

Faculty of Information Technology, Beijing University of Technology Beijing, China

By auditing the information entered into the blockchain, we can ensure that the system works properly based on real and legitimate data sources. But at the same time, an over-centralized auditing authority will bring many information security threats. As a result, the permissioned blockchain system urgently needs a secure audit scheme as a support. (Page 1, right column, paragraph 2, line 17-22)

In terms of system architecture, blockchain system is a novel distributed system, which relies on consensus algorithm to ensure the consistency and correctness of transaction stored in different nodes. However, in most cases, correctness involves human subjective value judgment, which requires not only the objective consistency, but also the authenticity and legitimacy. This subjective judgment is not possessed by distributed nodes because it cannot be implemented by consensus algorithm. Even the Byzantine fault-tolerant consensus algorithm is essentially a machine consensus rather than a human consensus. For this reason, the nodes in blockchain network cannot judge the authenticity and legitimacy of transaction information only by consensus algorithm. (Page 1, right column, paragraph 1, line 4-15)

1. The system's supervisors periodically audit transaction information through SN to detect illegal acts committed by malicious users.
2. When a new user applies to participate in the blockchain network, SN is also takes charge of the generation of the required certificates and keys.
3. In the case of consortium blockchain, the allocation of SN should be determined by the member organizations of the consortium through consultation. In the private blockchain scenario, the establishment of SN depends on the top management.
(Page 4, left column, paragraph 3, line 2-10)

(1) system initialization, (2) transaction submission and (3) information audit. (Page 4, left column, paragraph 4, line 1-2)

ordinary node (ON) and supervisory node (SN) (Page 4, left column, paragraph 1, line 2-3)

1. the allocation of SN should be determined by the member organizations of the consortium through consultation (Page 4, left column, paragraph 3, line 7-9)
2. First of all, each supervisor generates a self-signed certificate through SN and sends it to other nodes. Subsequently, all supervisors collaborate to create the certificates and keys for ordinary users by performing DKGP (Page 4, left column, paragraph 5, line 3-6)
DKPG (Distributed Key Generation Protocol): in a t-out-of-n threshold cryptosystem, denoted (t, n), any t or more out of n total parties can cooperate to reconstruct the original information and decryption will be totally impossible in the circumstance where less than t parties are present. (Page 2, right column, paragraph 5, line 5-9)
3. if a supervisor wants to audit a user's the supervisor must get the support of at least (t - 1) other supervisors and obtain their partial decryption to reconstruct the information (Page 4, right column, paragraph 9, line 4-7)

The Best of Both Worlds: A New Composite Framework Leveraging PoS and PoW for Blockchain Security and Governance

IEEE Xplore

2020 2nd Conference on Blockchain Research & Applications for Innovative Networks and Services (BRAINS)

Matthias BAUDLET, Doudou FALL, Yuzo TAENAKA, Youki KADOBAYASHI

Laboratory for Cyber Resilience, Nara Institute of Science and Technology, Japan

In practice, blockchain governance is based around two critical components: Incentive and Coordination mechanisms [15]. Incentive ensures that actors with power over the blockchain and its maintenance act with the best interests of the organization and the network as a whole. (Page 2, left column, paragraph 5, line 1-5)
Coordination Mechanisms are the protocols and processes designed to reach consensus over the state of the blockchain without a central authority. These include both mechanisms for individuals to check and validate incoming information and for the network as a whole to decide on a chain when a fork occurs. (Page 2, right column, paragraph 1, line 5-10)

there is supposedly no entity with enough authority to unilaterally take decisions, and there should be no way for it to enforce these decisions on the rest of the network. However, blockchain projects still need to take decisions on their priorities, make changes to the protocol, and adopt new practices and behaviors. Page 2, right column, paragraph 1, line 5-10)

new policy and new block (Fig. 1 on page 5 and Fig. 2 on page 6)

Initial PoW phase (Page 5, left column, paragraph 3)
Final PoS Phase (Page 5, right column, paragraph 5)
new policy and new block (Fig. 1 on page 5 and Fig. 2 on page 6)

users, DAO owners, masternodes, miners (Fig. 1 on page 5 and Fig. 2 on page 6)

1. Masternodes as main actors of the networking and governance of the blockchain. Any user can become a Masternode by locking an amount of cryptocurrency for a variable length of time. (Page 4, left column, paragraph 5, line 2-5)
2. any individual can make new proposals and describe their idea on how to spend the common pool for the improvement of the project. During every voting period of 30 days, Masternodes are able to vote for or against each proposal by interacting with the DAO’s smart contract. At the end of the voting period, the DAO grants the demanded budget to the address stored in the voted proposals, until there is no validated proposal left or no funds left. If there are remaining funds in the common pool at the end, they are burned. (Page 4, right column, paragraph 4, line 2-10)
3. Inbound transactions contribute to the Importance Score in a decaying fashion over time, meaning that this metric highlights addresses with a regular flow of net-positive transactions and high interaction with the rest of the network. The addresses with the highest score are given a temporary “Honorary Masternode” status for the next voting period of the DAO governance system (Page 4, right column, paragraph 6, line 9-14)
4. Masternodes regularly reach consensus between themselves on the state of the blockchain and “lock” it up to that point. If at the point of a scheduled lock more than 75% of the currently active Masternodes agree on the last block of the blockchain, this block and every preceding one, as a result, are locked and shared with the network in a special block sharing message that overrides the “longest chain wins” rule (Page 5, left column, paragraph 2, line 3-10)
5. We choose to add another verification by Masternodes: when a miner finds a new block, he must include a number X of Masternode IDs before sharing it with the network. The new block is not accepted until half or more of these Masternodes have validated the block. Once a Masternode has validated a block, he cannot validate another for a fixed number P of blocks. X and P are variables that must be chosen accordingly with the number of active Masternodes on the network. Every 24 hours, the validating Masternodes for the next day’s worth of blocks are randomly chosen based on the currently active Masternodes and using the previous block’s hash as randomized number. (Page 5, left column, paragraph 4, line 5-16)
6. Once the blockchain has managed to start its base governance processes and develop its initial user base, Masternode network and cryptocurrency value, the implementation of a PoS-based consensus model can be done in order to avoid the future power and scalability issues of PoW. (Page 5, right column, paragraph 5, line 1-5)
7. If a user receives two different blocks competing for the same blockchain height coming from the same block creator, they dispense a slashing transaction that burns part of the UTXO used to create these blocks. (Page 6, left column, paragraph 4, line 7-11)
8. With every new block that gets added to the blockchain, a cryptocurrency reward is created and divided into three parts: 40% for the block creator, 40% for the Masternodes of the network and 20% sent to a common pool. (Page 4, right column, paragraph 3, line 1-5)

Bitcoin Governance as a Decentralized Financial Market Infrastructure

Google Scholar / snowballing / SSRN

Hossein Nabilou

Universite du Luxembourg - Faculty of Law, Economics and Finance; University College London Center for Blockchain Technologies, Luxembourg

1. Therefore, Bitcoin governance, including the processes through which Bitcoin governance crises have been resolved and the standards against which the Bitcoin Improvement Proposals (BIPs) are examined, should be analyzed in light of the prevailing narrative of Bitcoin as a censorship-resistant store of value and payment infrastructure. (Page 1, abstract, paragraph 2, line 5-8)
2. Although censorship resistance in Bitcoin has been achieved through a combination of technological innovations hardcoded in the Bitcoin network, preserving and maintaining such properties ultimately depend on the participants’ consensus (i.e., judgment and discretion) in the Bitcoin network. In other words, preserving and enhancing or otherwise dispensing and undermining the censorship-resistant property of Bitcoin relies on its governance, which encompasses the processes and procedures for effecting changes in the rules governing the Bitcoin network.14 (Page 4, paragraph 2, line 2-7)
3. Governance is a system that shapes coordination between various participants.16 As such, it refers to the processes that enable an organization to set its objectives, identify the means of achieving them, and monitor the performance of the organization against those objectives.17 (Page 5, paragraph 2, line 1-3)

1. To be a reliable asset class as well as a dFMI, however, Bitcoin needs to have robust governance arrangements; whether such arrangements are built into the protocol (i.e., on-chain governance mechanisms) or relegated to the participants in the Bitcoin network (i.e., off-chain governance mechanisms), or are composed of a combination of both mechanisms (i.e., a hybrid form of governance). (Page 1, abstract, paragraph 1, line 5-9)
2. Although censorship resistance in Bitcoin has been achieved through a combination of technological innovations hardcoded in the Bitcoin network, preserving and maintaining such properties ultimately depend on the participants’ consensus (i.e., judgment and discretion) in the Bitcoin network. In other words, preserving and enhancing or otherwise dispensing and undermining the censorship-resistant property of Bitcoin relies on its governance, which encompasses the processes and procedures for effecting changes in the rules governing the Bitcoin network.14 (Page 4, paragraph 2, line 2-7)
3. It is asserted that the Bitcoin blockchain by design is a technology that embeds governance and makes the rules-based economic order possible. (Page 7, paragraph 3, line 1-2)
4. However, as the above-mentioned instances of Bitcoin crises demonstrate, on-chain governance mechanisms have proved to be insufficient for its long-term viability. In addition to a need for constant intervention for protocol maintenance and improvements by developers, human intervention in the Bitcoin’s open or permissionless blockchain has proved that Bitcoin governance is not immune to human discretion30 and that the code-as-law narrative, put forward by the early proponents of such innovations, is far from accurate. (Page 7, paragraph 3, line 5-10)
5. Having said so, the ultimate goal of Bitcoin governance should be retaining its censorship-resistant property through boosting its decentralization. (Page 15, paragraph 1, line 8-9)

1. Information asymmetry could give rise to either coordination problems that might hinder effective governance and maintenance of Bitcoin or to opportunistic behavior, including adverse selection (such as the classic Lemons problem à l’Akerlof) that might hinder bitcoin adoption.58 (Page 17, paragraph 2, line 1-3)
2. the governance of the network, as it is indirect and is exercised at a different level (off-chain), remains to be subject to coordination problems, especially where there would be a need for maintenance, upgrade or otherwise making changes to the protocol, or when there is an urgent need to effectively respond to an attack on the network in a timely manner. (Page 20, paragraph 2, line 4-8)

1. To this end, the PoW security and consensus mechanism and various other incentive mechanisms are embedded to align the often varied and divergent interests of network participants and discourage uncooperative behavior that could result in attacks on the network.53 (Page 14, paragraph 3, line 5-7)
2. The theory of market failure suggests that markets fail due to externalities, imperfect competition, and imperfect information which gives rise to agency costs and coordination problems. The rest of this paper is to identify the potential market failures in Bitcoin governance by reference to its four major governance crises. These crises include the value overflow incident (2010), the erroneous upgrade and double spend in Bitcoin network (2013), the discovery of an inflation bug (2018), and the Bitcoin scalability debate (20152017). (Page 16, paragraph 4, line 1-6)
3. Unlike the market for corporate control for certain institutions (e.g., banks) in certain jurisdictions (e.g., Europe) that are somewhat paralyzed by extensive regulatory requirements,50 Bitcoin faces cut-throat competition in a market for cryptocurrencies without any entry or exit restrictions and no regulatory barriers to competition. 51 (Page 22, paragraph 2, line 8-9)

1. In this respect, it is not clear how such fiduciary duties are to be designed if the developers do not have the authority or power to implement and impose that implementation on other network participants. In this sense, the developers are said to be one of the least powerful of major Bitcoin stakeholders. (Page 10, paragraph 1, line 6-9)
2. In the Bitcoin ecosystem, various actors such as mining pools, node operators, users, developers, exchanges, custodians and wallet providers, and eventually the media and advocacy groups have their say and they ultimately decide over critical governance issues either by reaching a consensus or by forking. (Page 12, paragraph 1, line 8-11)
3. Although information asymmetries might exist outside the technical environment of the Bitcoin network and in the allegedly closed circles of a few prominent participants such as miners, developers and investors (Page 19, paragraph 2, line 7-9)

1. To further reduce coordination problems, various channels of communication such as BitcoinTalk Forum and Bitcoin Core GitHub repository are set up and relatively informal processes for upgrading Bitcoin’s protocol, such BIP, which is a standardized process for proposing, testing and peer review of the new proposals for effecting changes to the protocol, are established. (Page 20, paragraph 3, line 3-7)
2. The most important governance mechanism in Bitcoin is provided by its open-source software that can be tweaked and forked. One method of making a change in Bitcoin is through hard forks. A hard fork is a backward-incompatible change to the rules of the consensus. (Page 23, paragraph 2, line1-3)
3. Various incentive mechanisms embedded in the Bitcoin network have incentivized participants to contribute to Bitcoin governance and to the maintenance of the code. For example, using bitcoin for payments involves fees that discourage spamming and the overuse of the network. (Page 26, paragraph 2, line 6-9)
4. Ultimately, the key takeaway in Bitcoin governance is that users are not bound to follow the miners or developers if a majority of the users do not share the same ideas about the future path of the network. In addition, if there is a disagreement over how to maximize network utility, users can suspend Nakamoto consensus and disempower miners.110 (Page 29, paragraph 3, line 1-4)

Blockchain as a confidence machine: The problem of trust & challenges of governance

ScienceDirect

Technology in Society

Primavera De Filippi, Morshed Mannan, Wessel Reijers

CERSA (Centre d’Etudes et de Recherches de Sciences Administratives et Politiques), Paris, France

Blockchain governance is, therefore, essentially driven by the economic and game-theoretic incentives coded into the protocol, as well as the social norms and community rules that bring all network participants to converge towards a particular “schelling point” (the choice that everyone thinks everyone else will make) (Page 9, right column, paragraph 3, line 1-5)

while blockchain-based systems replace trust with confidence, this confidence is predicated on trusting a variety of actors that are associated with the system. Governance becomes a crucial issue as good governance practices need to be adopted in order to prevent these actors from operating in an untrustworthy manner, thereby undermining confidence in the system as a whole. (Page 8, right column, paragraph 1, line 1-7)

1. In short, interactional or customary law fails when the conditions for confidence no longer subsist. This becomes particularly apparent in moments when (implicit) shared values are called into question, as illustrated by ‘states of exception’ (Page 10, left column, paragraph 2, line 1-4)
2. The governance of most blockchain-based systems has been constructed in such a way as to distribute trust over a large number of actors, with different interests and preferences, so that no single actor has the capacity to unilaterally affect or influence the operations of the overall network. Problems emerge, however, when standard governance practices are threatened in the case of an emergency that calls for decision-making beyond the scope of ordinary procedures (Page 11, right column, paragraph 5, line 1-7)
3. While the protocol rules will be enforced by the miners maintaining the network, anyone is free to exit the system or even fork it into a separate system, operated by a different protocol. (Page 5, right column, paragraph 2, line 5-8)

1. blockchain-based systems are socio-technological assemblages [72] which are made up not only of code, but also of a large variety of actors, including miners, validators, programmers, cryptocurrency and token holders, end-users, and, to a lesser extent, regulators. (Page 7, right column, paragraph 3, line 1-5)
2. These includes miners and mining-pools, responsible for processing and validating transactions, but also large commercial operators, such as cryptocurrency exchanges or custodian wallet providers, who can leverage their market power to unilaterally impose their decisions onto their user-base, as well as core developers and social media influencers, whose voice can contribute to shifting the schelling point. Regulators and policy makers also have a role to play in the governance of blockchain-based systems, to the extent that they can introduce legal restrictions and constraints in order—albeit indirectly—influence the decisions taken by any of these actors. (Page 11, right column, paragraph 4, line 13-23)

1. While the protocol rules will be enforced by the miners maintaining the network, anyone is free to exit the system or even fork it into a separate system, operated by a different protocol (Page 9, right column, paragraph 2, line 5-8)
2. any technological constraints that would affect the governance of a particular blockchainbased system will have to be agreed upon by all (or a sizable majority) of participants in the network. (Page 9, right column, paragraph 2, line 12-15)
3.
3.1 governance processes that subsist outside of the technological infrastructure (a.k.a “off-chain” governance) are often driven by actors with higher social capital or better technical skills, who can therefore exercise a higher degree of influence on decisions that generally require consensus by distributed actors (e.g. whether or not to implement a hard fork). (Page 10 left column, paragraph 1 ,line 2-7)
3.2 in order to ensure a proper level of confidence in such blockchain-based systems, it may be necessary to introduce a series of procedural and substantive constraints related to off-chain governance, addressing both situations of normalcy and states of exception (Page 12, left column, paragraph 1, line 9-12)
4. most of the procedural safeguards (such as transparency, representativeness, direct accountability, separation of powers and avoidance of conflicts of interest), as well as substantive safeguards (such as the protection of vulnerable actors, defining the rights, duties and attributes for politically influential roles) have been defined for traditional institutions with a centralized governing body. In the context of a blockchain-based system, where there is no centralized coordinating authority nor coercive force that can impose a particular constitution onto the various network participants from above, it may be necessary to adapt these constitutional safeguards so that they can be more easily applicable—and, ideally, enforceable—in a governance system that is decentralized and polycentric. (Page 11, left column, paragraph 3, line 5-16)

Blockchain governance

Google Scholar / Inderscience Online

International Journal of Critical Infrastructures

Polinpapilinho F. Katina, Charles B. Keating, Joseph A. Sisti and Adrian V. Gheorghe

University of South Carolina Upstate, USA

In the context of blockchain, governance must involve sustaining a coherent identity and vision that supports consistent decision, action, interpretation and strategic priorities – in effect providing coherence in direction. In execution, governance for blockchain must, therefore, involve provision for control, communication and integration of system and their parts/entities – this is the essence of the oversight aspects of governance. Finally, blockchain governance must involve accountability for system development. In this case, accountability is focused on ensuring efficient utilisation of resources, monitoring performance and exploration of deviation conditions. Together, this triad of direction, oversight and accountability underpins the concept of blockchain governance.(Page 7, paragraph 4, line 3-12)

Development and integration of ‘governance’ within the pragmatic grounding of the blockchain landscape provides a potential path forward to:
1. Alleviate several of the developmental issues currently impacting blockchain technology acceptance and deployment.
2. Widening the aperture of the application field for blockchain technology.
3. Providing a richer (and higher critical thinking) grounding upon which to anchor and further blockchain field development.
(Page 8, paragraph 1)

Opening the consideration of the ‘governance’ to address complexes of the human, social, organisational, managerial, policy and political dimensions for blockchain technology is an important step forward. (Page 12, paragraph 6, line 1-3)

Additionally, development across the holistic spectrum of theoretical, philosophical, axiomatic, axiological, methodological, method and application is essential to accelerate blockchain development. (Page 12, paragraph 6, line 3-5)

1. Perspectives on governance (governance type): Process-centric, Structure-centric, State-centric, Hybrid, Corporate governance, New public management, Public policy, International security, Social and political, Earth (Page 9, Table 3)
2. proposing an organising framework with seven interrelated elements (Page 8, paragraph 2, line 2-3): philosophy, theory, axiology, methodology, axiomatic, method and applications (Page 11, paragraph 1, line 2)

Blockchain Governance and The Role of Trust Service Providers: The TrustedChain® Network

Google Scholar / The British Blockchain Association

The Journal of British Blockchain Association

Marcella Atzori

University College of London, Centre for Blockchain Technologies, UK

Depending on the context of use, design and implementation, the advantages of a blockchain-based governance have been recognised as being significant for many classes of services (Blockchain Technologies, 2016; Boucher, 2017; Government Office for Science, 2016; Swan, 2015), in terms of:
1. Decentralisation and reduced reliance of processes on trusted authorities and third parties;
2. Improved time- and cost- effectiveness of data management and workflows, leading to greater productivity;
3. Tamper-resistance, verifiability and auditability of digital transactions, with consequent reduction of possible accidental errors, corruption, or fraud;
4. Improved data security and digital infrastructure resilience;
5. Enhanced privacy and protection of citizens’ fundamental rights;
6. Opportunities for value exchange and data sharing between unknown or untrusted Participants, reducing counterpart risk;
7. Tracking of digitalized assets, protection and enforcement of associated rights;
8. Greater competitiveness, also through the adoption of new business models and applications, such as smart contracts and digital signatures.
(Page 1, left column, paragraph 2, line 7-13)

1. Even the European Parliament Resolution (2016/2007 INI) has emphasized the potential of Distributed Ledgers Technology “to contribute positively to citizens’ welfare and economic development” (Art. 1). While the Resolution is not binding for Member States or European citizens, it represents nonetheless an important recognition of this technology at institutional level: it established a first conceptual framework for distributed ledger technologies, calling for an adequate regulatory supervision and the development of technical expertise, so to keep up with innovation and ensure timely response to the new challenges at stake (Art. 3). (Page 2, left column, paragraph 1, line 1-12)
2. the adoption of blockchain-based services still appears to be slow and a critical mass of users has not been reached yet. This is surely caused by many hurdles and trade-offs still existing at the technical, regulatory and governance level, but it is also due to the way the implementation of the blockchain technology is often devised. (Page 2, left column, paragraph 4, line 2-6)

2. high technical performance
3. consumer protection
4. confidentiality of transactions
5. business continuity
6. long-term preservation of data
7. green data
(Page 7, right column, figure 2)

only accepts TSP as verifiers of transactions and it leverages their high technical standards required by the law, in order to provide a trustworthy and reliable blockchain-based ecosystem, which ensures long-term preservation of data, along with adequate security, scalability, reliability, continuity of service and law compliance. (Page 6, left column, paragraph 4, line 6-12)

the role Trust Service Providers may play in permissioned blockchains, providing a reliable ecosystem in which services can be safely developed and preserved in the long run (Page 1, abstract, line 3-5)
appointed by European governmental agenciesafter a strict conformity assessment, in compliance with Regulation EU No. 910/2014 -eIDAS. (Page 5, right column, paragraph 1, line 1-4)

only accepts TSP as verifiers of transactions and it leverages their high technical standards required by the law, in order to provide a trustworthy and reliable blockchain-based ecosystem, which ensures long-term preservation of data, along with adequate security, scalability, reliability, continuity of service and law compliance. (Page 6, left column, paragraph 4, line 6-12)

Blockchain Governance: What we can learn from the economics of corporate governance

Google Scholar / The British Blockchain Association

The Journal of British Blockchain Association

Darcy W. E. Allen and Chris Berg

RMIT Blockchain Innovation Hub, RMIT University, Australia

1. Blockchains are decentralised digital network protocols whose governance is characterised by a complex interplay between stakeholders. (Page 1, left column, paragraph 1, line 1-3)
2. Governance describes the processes by which individuals and groups with ongoing relationships bargain about how to adapt to changes within an institutional environment—such as a firm, a political or community organisation, or in market contracting [3–6]. (Page 1, right column, paragraph 1, line 1-4)
3. Blockchains can be thought of as competing constitutional rule sets, where they compete on rules for making rules [8]. In this way, blockchain governance relates to the way decisions are made, not the decisions themselves—who chooses and how choices are made, rather than what is chosen [9, 10]. (Page 1, right column, paragraph 2, line 5-9)
4. Blockchain governance is the process by which stakeholders—all those that are affected by and can affect the network—exercise bargaining power over the network itself. This includes token holders, miners, and founders. (Page 2, right column, paragraph 4, line 2-6)

1. Whether the institutions of governance have been designed explicitly or not, all blockchains have governance. While those governance systems vary in their effectiveness [7], governance itself is a descriptive, rather than a normative, attribute. (Page 1, right column, paragraph 2, line 1-4)
2. So, what are the ends of blockchain governance? An implicit end common to the blockchain community is that the network survives—that is, it maintains its immutability through distributed consensus while accepting new transactions—and is adopted more widely. (Page 6, right column, paragraph 3, line 1-5)

1. On-chain governance describes the project of explicitly building governance arrangements within the protocol itself, such as the implementations of EOS, Tezos, and Dash that allow certain categories of stakeholders to vote on modification proposals. Off-chain governance typically describes governance structures external to the protocol, particularly the role and management of foundations or firms funded by token sales or other token distributions (for example, Zcash’s Electric Coin Company and Zcash Foundation), or community meeting places such as Reddit, Telegram, Slack, dedicated forums, and Twitter. (Page 2, left column, paragraph 2, line 6-17)
2. Blockchains have endogenous governance systems that create the relative bargaining power instrumentally determined by the consensus mechanism. We argue that the initial design of a blockchain consensus protocol maps to a different distribution of bargaining power over the network itself. Furthermore, blockchains also have exogenous governance systems that are the formal and informal governance processes that exist outside of the instrumental needs of distributed consensus over the state of the ledger. (Page 4, right column, paragraph 2, line 4-13)

1. Particular on-chain exogenous governance systems that provide a formal mechanism for token holders (weighted by token holdings) to vote on protocol-level changes elide these complex multi-party negotiations by identifying a singular distinct category of stakeholders whose preferences are most convenient to collate. (Page 5, right column, paragraph 1, line 1-4)
2. The distribution of bargaining power of endogenous governance is set instrumentally by the consensus mechanism. The domains of exogenous governance, on the other hand, is more diverse. Exogenous governance can be built into the protocol as a referendum process (as in EOS and Tezos) or revolve around over the norms and cultural structures of the community of users. (Page 5, right column, paragraph 2, line 1-7)
3. For blockchain networks, these two stages—the proto-entrepreneurial and the organisational—leave their mark on the later governance and shape the distribution of bargaining power by later stakeholders. (Page 5, right column, paragraph 5, line 15-18)

1. Governance analysis might distinguish between token holders who intend to use their holdings primarily as a medium of exchange, and those who are holding them as speculative assets (HODLers). Founders and founding foundations can affect the decisions of the protocol. Developers can be divided into core developers (with or without repo access) and developers who are building applications that use the protocol as an infrastructure layer. Economic full nodes, such as large, over-the-counter traders, token holders, and miners can have distinct stakeholder interests. The producers of hardware that support the chain (ASIC or GPU producers, cold storage wallets, etc.) are also stakeholders. (Page 3, right column, paragraph 3, line 3-14)
2. We can expand the stakeholder groups further when considering individuals or groups who are affected by the blockchain but do not directly interact with it. Bitcoin provides a medium of exchange and unit of account for holders of other cryptocurrency tokens. (Page 3, right column, paragraph 4, line 1-5)
3. Bitcoin and Ethereum stakeholders can be said to have the power to affect holders of other cryptocurrencies. In this sense, the financial system itself can affect cryptocurrencies through its interaction with blockchain on-ramps (exchanges, payment networks, etc.) or through competition or even simply through the price level. Furthermore, industries which are disrupted by specific blockchain (supply chains, logistics, data science, health, etc.) might also be said to be stakeholders. Government authorities that have regulatory responsibility for fields in which blockchain applications operate are also stakeholders. In some circumstances, social groups can be described as stakeholders. The significant electricity use of proof-of-work consensus mechanisms, and its potential impact on the global energy use, means that environmentalists, of their representative nongovernment organisations, could be stakeholders, insofar as they are affected by the operation of the protocol. (Page 3, right column, paragraph 4, line 8-21)
4. The dominant players are economic full nodes—those who keep a complete copy of the chain, broadcast transactions, and validate the shared ledger [57, 58]. Their decision of whether to adopt software amendments produced by core developers depends on whether they believe that other economic full nodes will accept new blocks produced by the software. (Page 4, right column, paragraph 3, line 4-10)

1. In this paper we aim to provide a descriptive framework for understanding blockchain governance, from which we draw some normative implications. (Page 2, left column, paragraph 3, line 1-3)
2. The distribution of bargaining power over blockchain governance, at the first instance, is endogenously governed by the consensus mechanism. (Page 4, right column, paragraph 3, line 1-3)
3. The dominant players are economic full nodes—those who keep a complete copy of the chain, broadcast transactions, and validate the shared ledger [57, 58]. Their decision of whether to adopt software amendments produced by core developers depends on whether they believe that other economic full nodes will accept new blocks produced by the software. (Page 4, right column, paragraph 3, line 4-10)
4. Endogenous governance can be intentionally designed. While Bitcoin was built without governance in mind, in EOS a “governance” system has been built into the consensus mechanism which allows token holders to vote for block validators (Page 5, left column, paragraph 1, line 2-6)
5. The exogenous governance mechanism here is provided by the opportunity for coordination presented by the Consensus conference itself. (Page 5, left column, paragraph 2, line 12-15)
6. In the wake of the hack of The DAO, a voting mechanism was created to vote on whether to hard fork Ethereum to reverse the hack. (Page 5, left column, paragraph 2, line 16-18)
7. For blockchain networks, these two stages—the proto-entrepreneurial and the organisational—leave their mark on the later governance and shape the distribution of bargaining power by later stakeholders. (Page 5, right column, paragraph 5, line 16-18)
8. In EOS, the delegated proof-of-stake consensus mechanism allows token holders to vote for validators (block producers), and also to vote on decisions about the protocol (referendum proposals). (Page 5, left column, paragraph 3, line 8-11)
9. Rather, we emphasise that the structure of the consensus protocol determines the bargaining power. Stakeholders in endogenous governance have been given formal bargaining power over the network by the design of the consensus protocol. (Page 4, right column, paragraph 4, line 3-7)
10. The process of bootstrapping exerts an influence on the norms around governance and the implicit contracts that are negotiated long after an initial bootstrapping phase. (Page 6, left column, paragraph 2, line 1-3)
11. These founders and organisations do not have any endogenous role in blockchain governance as determined by the consensus mechanism. But their role as exogenously determined stakeholders and the implicit contracts that support that role create a dilemma for blockchain governance, given political beliefs about decentralisation within many blockchain communities. (Page 6, left column, paragraph 3, line 18-22)
12. As an institutional innovation, stakeholders in blockchains lack these legal constraints. Neither token holders, miners, nor full economic nodes are required to act in others’ interests. To the extent that they do, it is because the consensus mechanism and native token coordinate self-interested behaviour to maintain and protect the network. (Page 7, left column, paragraph 4, line 11-17)

Blockchain Governance

Google Scholar / book chapter

Blockchain Regulation and Governance in Europe

Michèle Finck

Max-Planck-Institut für Innovation und Wettbewerb, Munich, Germany

In the blockchain context, ‘governance’ refers to the processes, rules and procedures relied on to maintain the protocol.7 This encompasses actual protocol modification as well as the deliberation and decision-making processes that precede and inform that act. Blockchain systems are often portrayed as pure technical artefacts free from the untidiness of human existence, but the governance perspective displays the human and institutional processes behind these ledgers. (Page 2, paragraph 4, line 1-6)

1. Vili Lehdonvirta has highlighted blockchains’ governance paradox in stressing that, on the one hand, the perceived absence of a need for governance seems to be DLT’s main value proposition while, on the other, a governance-free blockchain is doomed to fail as software bugs cannot be remedied and the protocol can never be upgraded.8 Functional blockchain governance processes are in fact unavoidable, so as to allow these systems to efficiently react to unexpected real-world events and become more sophisticated over time (Page 3, paragraph 1, line 2-8)
2. Indeed, when governance processes are absent, the technology can never improve or react to the unexpected circumstances that inevitably arise. Determining suitable governance norms therefore emerges as one of the key challenges that DLTs’ future depends upon. (Page 3, paragraph 2, line 6-9)
3. Two prominent occurrences unfolding in relation to the Ethereum and Bitcoin projects over the past few years have underlined the inevitability of software maintenance (Page 5, paragraph 5, line 1-2)
4. Lacking or inadequate governance principles limit the technology’s usefulness. (Page 28, paragraph 2, line 9-10)

1. These include the network layer itself, sometimes intermediate levels such as decentralized application platforms and the application layer. (Page 4, paragraph 3, line 2-4)
2. the infrastructure layer. (Page 14, paragraph 1, line 1)

1. These encompass rules that were explicitly agreed upon, such as when principles are devised at the outset of the project. Relevant rules and principles can also be explicitly endorsed after having been informally followed for a while. In addition, governance is informed by more subtle and implicit propositions. These can range from a community norm that discussions should at all times be well mannered to decisions that the minutes of certain stakeholder meetings be recorded and publicly released or that core developers consult the most important miners before a code change is proposed (Page 4, paragraph 4, line 2-9)
2. There is an ongoing discussion regarding whether related principles can be externally imposed on these technological systems or whether they need to develop incrementally from within. (Page 10, paragraph 2, line 4-6)
3. governed by a technical steering committee. Contributors (anyone who contributes code, documentation or technical artefacts to the codebase) and maintainers (contributors with the ability to commit code) can be elected to the committee, the functions of which include making decisions on the technical direction of the Hyperledger project and approving proposals, as well as communication with external and industry organizations. (Page 15, paragraph 2, line 3-8)
4. 'exit, voice and loyalty’, which lays out that members of an organization, whether a firm, state or other form of human grouping, have two possible responses when they are less satisfied with their membership: exit (leave the organization) or voice (actively try to repair shortcomings). (Page 17, paragraph 6, line 4-5)

1. Usually protocol maintenance is formed by core software developers, miners, node operators, users and token holders in public and permissionless systems. In private and permissioned systems, the vendor and consortium providing the system play a pivotal function. (Page 4, paragraph 2, line 4-7)
2. In permissionless systems various stakeholder groups matter for governance purposes: core software developers, miners, nodes, coin holders and other stakeholders. (Page 17, paragraph 3, line 1-2)
3. Whereas anyone can suggest changes to the protocol ofa public and permissionless ledger (such as through the BIP and EIP processes), only core developers have the commit key through which these changes can be implemented. (Page 19, paragraph 1, line 2-5)
4. In order for a protocol update to be successful, a majority of miners (measured in computing power) need to install the modifications put forward by the core developers. They vote on proposals in deciding which version of the software to rely on to add new blocks. (Page 20, paragraph 2, line 2-5)
5. While token holders bear enormous power in on-chain governance, they can play a more subtle complementary governance role in off-chain governance, illustrated by the carbonvote on the hard fork in the aftermath of the The DAO hack. (Page 23, paragraph 1, line 3-6)
6. First, the press and prominent voices in this space can exercise influence on those actively participating. Second, users indirectly contribute to governance. For example, when a hard fork occurs and a project splits into two, users must determine which network to use. Third, exchanges play an important role in a hard fork scenario in deciding which coins or tokens to list. (Page 23, paragraph 5, line 3-8)
7. governed by a technical steering committee. Contributors (anyone who contributes code, documentation or technical artefacts to the codebase) and maintainers (contributors with the ability to commit code) can be elected to the committee, the functions of which include making decisions on the technical direction of the Hyperledger project and approving proposals, as well as communication with external and industry organizations. (Page 15, paragraph 2, line 3-8)

1. The issue was ultimately put to a vote – a carbonvote, to be more specific.25 A carbonvote is a mechanism whereby coin holders can pronounce their views on a proposal by sending tokens to addresses that represent their views (Page 7, paragraph 4, line 1-3)
2. In on-chain governance, a decision is reached on the blockchain, and the protocol adapts automatically as a consequence thereof. Coin holders vote on-chain, and as a consequence of that vote nodes automatically install the endorsed update. In such circumstances miners exercise no agency, as they are not required to decide whether or not to install the update, which, rather, executes automatically. (Page 11, paragraph 4, line 1-5)
3. The so-called improvement proposals are an important element of off-chain governance in public and permissionless systems. (Page 12, paragraph 4, line 1-2)
4. governed by a technical steering committee. Contributors (anyone who contributes code, documentation or technical artefacts to the codebase) and maintainers (contributors with the ability to commit code) can be elected to the committee, the functions of which include making decisions on the technical direction of the Hyperledger project and approving proposals, as well as communication with external and industry organizations. (Page 15, paragraph 2, line 3-8)
5. They also benefit from a flexibility analogous to cloud computing, of being able to access computational load when required (i.e. when transactions fluctuate). In turn, the BaaS provider leverages economies of scale to provide such infrastructure. (Page 15, paragraph 3, line 4-7)
6. ‘exit, voice and loyalty’, which lays out that members of an organization, whether a firm, state or other form of human grouping, have two possible responses when they are less satisfied with their membership: exit (leave the organization) or voice (actively try to repair shortcomings). (Page 17, paragraph 6, line 4-5)
7. polycentricity nonetheless provides a useful frame of thinking, as it highlights that systems can be shaped through the influence of multiple governing authorities (as is the case in respect of blockchains) and, further, that these can be shaped by the interplay of public and private norms (a point I further elaborate on below when considering the status of law as an exogenous governance factor). (Page 18, paragraph 4, line 2-7)
8. Soft forks are backward-compatible (they can be reversed) protocol changes are that implemented by voluntary software updates. They are suggested and adopted by a minority ofminers (Page 21, paragraph 3, line 1-3)
9. Hard forks are not backward-compatible (they cannot be reversed) and require all miners to update their clients, making them more democratic. (Page 21, paragraph 3, line 5-7)
10. The ability to fork underlines that nodes have two options in participating in blockchain governance: exercising voice (participating in governance deliberations) or exiting the system by creating an alternative system through a hard fork (Page 22, paragraph 1, line 6-9)
11. It is conceivable that in the years to come protocols will (at least in part) abandon the ‘immutability’ proposition to embrace legally mandated mutability, such as when a ledger hosts illicit content or when data must be modified in light of court decisions or legislation. (Page 26, paragraph 3, line 5-8)

Comparison and Analysis of Governance Mechanisms Employed by Blockchain-Based Distributed Autonomous Organizations

IEEE Xplore

2018 13th Annual Conference on System of Systems Engineering (SoSE)

Stephen DiRose, Dr. Mo Mansouri

Stevens Institute of Technology, USA

Governance is the process by which new features are proposed, designed, agreed upon and implemented. Features are not limited to technical details of the blockchain source code, such as the maximum number of transactions that can be put into a single block in the chain, but also other important considerations such as marketing and education. (Page 2, left column, paragraph 4, line 4-9)

As load increases and approaches pre-defined limits, demand for transaction confirmation increases to the point that the miner can increase the fees charged. The increased fee causes demand to decrease, whilst simultaneously causing more supply (compute resources) to be expended for confirmation. In an ideal market, supply and demand are free to find a balancing point. However, in this case, a technical limitation, i.e., block size, prevents this balancing point from being found, and leads to the need for a governance decision to address the limitation. (Page 3, left column, paragraph 4, line 15-22)

1. First level norms are the rules of the game, while second level norms involve meta-governance, i.e., the rules that determine how the rules of the game are established [18]. In this scenario, first level norms involve scalability rules, one of which is block size. These rules are manifested and enforced in the blockchain’s source code. The second level norms fall into Hufty’s category of constitutive norms, or the “institutional mechanism related to the operations of the issue under analysis”. In this case, second level norms describe how the decision to change the block size is made, i.e., governance. (Page 3, right column, paragraph 3, line 1-11)
2. The places where the governance process and actors interact are known as nodal points. In the Blockchain DAO, the primary nodal point is the network itself, which is primarily located on the internet (although it could be a private network as well). Quite often, interaction at the nodal point can be completely anonymous. Two other nodal points of significance are the transaction, and the BIP/DGBB processes. (Page 4, left column, paragraph 6, line 1-7)

1. When Bitcoin was first invented, its meta-governance resembled what is commonly described as the “benevolent dictator”. (Page 3, right column, paragraph 4, line 1-4)
2. In an ideal market, supply and demand are free to find a balancing point. However, in this case, a technical limitation, i.e., block size, prevents this balancing point from being found, and leads to the need for a governance decision to address the limitation. (Page 3, left column, paragraph 4, line 20-22)
3. Quite often, interaction at the nodal point can be completely anonymous. Two other nodal points of significance are the transaction, and the BIP/DGBB processes. (Page 4, left column, paragraph 6, line 5-7)
4. Interaction at this nodal point however, is not directly related to governance, but rather, affected by governance decisions made in the BIP and Decentralized Governance by Blockchain (DGBB) processes. (Page 4, right column, paragraph 1, line 6-9)

1. the actors are the user, who is requesting confirmation of the transaction, and the miner. Both actors are motivated by financial considerations. The user wants speed and low transaction fees, while the miner wants high transaction fees. (Page 3, rightcolumn, paragraph 2, line 1-5)
2. Bitcoin has evolved to the point where an organization known as the “Core Team” has taken on implementation responsibilities for all approved BIPs. But ultimately, users of Bitcoin may reject those changes by either not accepting/using those changes, or by creating their own “hard fork” of Bitcoin.
3. Dash adds a third actor called Masternodes, and instead of giving all mining rewards to miners, splits those rewards to “three distinct parties: 45% of all new coins go to miners. 45% of all new coins go to ‘Masternode’ owners. 10% of all new coins are distributed through the Dash Budget System” (DBS) [29]. (Page 4, left column, paragraph 2, line 6-11)
4. When Bitcoin was first invented, its meta-governance resembled what is commonly described as the “benevolent dictator”. When the number of users, miners, and philosophers was low, and there were no real scalability concerns, Satoshi Nakamoto generally decided all changes to Bitcoin with no real opposition [19]. (Page 3, right column, paragraph 4, line 1-6)

1. When Bitcoin was first invented, its meta-governance resembled what is commonly described as the “benevolent dictator”. When the number of users, miners, and philosophers was low, and there were no real scalability concerns, Satoshi Nakamoto generally decided all changes to Bitcoin with no real opposition [19]. (Page 3, right column, paragraph 4, line 1-6)
2. Bitcoin improvements are known as BIPs and follow a welldefined workflow that is itself defined in BIPs 0001 [22] and 0002 [23]. BIPs transition through several statuses, starting in “Draft” and continue until a successful BIP moves into the “Final” state. (Page 3, right column, paragraph 5, line 1-5)
3. A hard fork is a full copy of a blockchain with one or more changes in it which render it incompatible with the blockchain from which it was forked. Hard forks are usually used to create new versions of Bitcoin when a major, incompatible change is needed, with the network agreeing to discard the older version. (Page 4, left column, paragraph 1, line 10-15)
4. Dash adds a third actor called Masternodes, and instead of giving all mining rewards to miners, splits those rewards to “three distinct parties: 45% of all new coins go to miners. 45% of all new coins go to ‘Masternode’ owners. 10% of all new coins are distributed through the Dash Budget System” (DBS) [29]. (Page 4, left column, paragraph 2, line 6-11)
5. Masternodes participate in governance and budget decisions through the DBS, voting on how the 10% is spent. “The DBS will accept a Proposal from anyone willing to spend the 5 Dash it costs to submit one. The 5 Dash are ‘burnt’ (destroyed) on submission. Once the Proposal has been submitted, all Masternode owners can vote on it, one vote per Masternode” [29]. In order for a proposal to pass “yes” votes must exceed “no” votes by 10% of the total number of masternodes. (Page 4, left column, paragraph 3, line 1-8)
6. Because Masternodes are required to put up 1000 Dash coins as collateral, they “... collectively have a stake in the chain that not only keeps them honest, but also causes them to seek to better the protocol. In so doing, the collective brain behind the blockchain is aligned with the interest of its own survival and worth. (Page 5, right column, paragraph 2, line 4-9)
7. In both Bitcoin and Dash, a benevolent dictator had the original vision and led the initial implementation of the blockchain. (Page 5, right column, paragraph 6, line 4-6)

Complex Adaptive Blockchain Governance

Google Scholar

MATEC Web Conf. Volume 223, 2018, The 12th International Conference on Axiomatic Design (ICAD 2018)

Thomas John, Mantri Pam

Cognitive Tools Ltd, USA

1. Governance in a knowledge-economy implies the establishment of appropriate regulatory nodes that help keep open the flow of information and knowledge with proper regard for privacy and property-right concerns. (Page 2, right column, paragraph 2, line 7-11)
2. Good governance, therefore, involves creating adequate channels of information flow for timely decision-making for all parties to participate in sufficient amount of openness while also allowing specific strategic/proprietary information to remain hidden and off the grid (either permanently, or at least for a while). (Page 19, right column, paragraph 2, line 11-17)

1. Issues of governance rise up when blockchain systems (especially those that have embedded smart contracts) are forced to operate increasingly away from their original intent. Smart contracts need governance when beset with the problem of the unknown-unknowns. (Page 1, abstract, line 4-7)
2. knowledge asymmetries create governance issues. (Page 19, right column, paragraph 2, line 1-2)

1. Governance operates at two levels: the agent and the institutional. Governance at the agent level primarily needs to safeguard against bounded rationality; governance at the institutional level needs to safeguard against institutionalized injustice. (Page 2, left column, paragraph 3, line 1-5)
2. While the CGR could be codified into the on-chain governance modules, the PGR would be administered in pre-agreed, human-centered, arbitrationlike off-chain governance setups. (Page 19, right column, paragraph 3, line 8-11)
3. off-chain/on-chain code/principle, smart contract (structure auto-execution contracts), oracle (contract verification), tokens (allow discreet agent stigmergy), hashing (transaction verifiability), merkle tree (lightweight transaction-set), consensus model (trustless trust), blockchain ledger (immutable transaction, distributed resilence)

1. the PGR would be administered in pre-agreed, human-centered, arbitrationlike off-chain governance setups. (Page 19, right column, paragraph 3, line 9-11)
2. it is incumbent on the designers of blockchain based smart contracts to get the governance aspect done right (Page 19, left column, paragraph 2, line 6-7)

The design of the blockchain governance kernel as helping decide between on-chain vs. off-chain governance. (Page 21, paragraph 12, line 1-3)

The DAO: A Million Dollar Lesson in Blockchain Governance

Google Scholar

School of Business and Governance, Ragnar Nurkse Department of Innovation and Governance

Francisco Santos, Vasileios Kostakis

TALLINN UNIVERSITY OF TECHNOLOGY

At its current stageits current stage, studying blockchain governance is better suited under , studying blockchain governance is better suited under internet governance`s blind nternet governance`s blind spots of “environments with low formalization, heterogeneous environments with low formalization, heterogeneous organizational forms, large number of actors and massively distributed authority and decision-making power” (page 6, paragraph 1, line 1-3)

Blockchain governance presents a new set of challenges informed by different sets of protocols, actors, and ecosystems which will define the way this this technology develops. (page 5, paragraph 1, line 2-4)

Laying on line of code 666, was what made The DAO hack possible . The attacker was able to exploit this line of code, finding it a feature. The devised hack used on the 17/06/16 has been attributed not to a lone wolf, but to a group (Leising 2017) due to the high level of expertise required to understand the problem in the code. (page 37, paragraph 2)

The DAO has shown how hard it is to develop an autonomous application and the risks associated. Sole reliance on code first needs the development of a cohesive and participant community capable of intcommunity capable of interacting with the eracting with the blockchain atat different capacities and facilitate differendifferent capacities and facilitate different roles. Token utility and uset roles. (page 51, paragraph 1, line 6-9)

To the dismay of decentralised digital governance proponents, the mechanisms and procedures for solving a crisis did not appear to have been in place at the time of Th e DAO. According to Green, 1- 2 hours after it was found, the plan for a soft fork and a hard fork was made. (page 37, paragraph 5, line 1-3)

developer (page 21, table 2)
exchanges (page 35, table 3)
However, it`s founder`s role, Vitalik Buterin, much like Linux`s Linus Torvalds, can be ascribed to that of a benevolent dictatorat of a benevolent dictator along with “(...) early projecalong with “(...) early project adopters t adopters create an essential social fabric by establishing and asserting project mores, protocol and ethos (page 38, paragraph 2, line 8-10)
foundation (page 39, table 4)
miner (page 46, table 5)

To the dismay of decentralised digital governance proponents, the mechanisms and procedures for solving a crisis did not appear to have been in place at the time of Th e DAO. According to Green, 1- 2 hours after it was found, the plan for a soft fork and a hard fork was made. (page 37, paragraph 5, line 1-3)
consensus, fork, changes to protocol (page 46, table 5)
improvement proposal (page 21, table 2)

Defining Blockchain Governance: A Framework for Analysis and Comparison

Google Scholar / Taylor & Francis Online

Information Systems Management

Rowan van Pelt, Slinger Jansen, Djuri Baars, and Sietse Overbeek

Utrecht University, Utrecht, The Netherlands

In this article, the definition of OSS governance by Markus (2007) is adapted to define blockchain governance as: The means of achieving the direction, control and coordination of stakeholders within the context of a given blockchain project to which they jointly contribute. (Page 8, left column, paragraph 5, line 1-3)
1. Formation and context: relevant background information of a blockchain
2. Roles: different roles and observable hierarchical structures between them
3. Incentives: motivational factors
4. Membership: the way participation and membership are managed for the available roles
5. Communication: formal and informal ways of communication between the stakeholders of a blockchain
6. Decision making: how decisions are made, monitored and agreed upon on the three layers of governance
(Page 10, Table 2)

1. People involved in a blockchain project need to determine how updates to the software protocol are made. These updates must be coordinated, and this is where governance comes in (van Deventer, Brewster, & Everts, 2017). (Page 2, right column, paragraph 2, line 11-14)
2. The governance of a blockchain project is crucial for its sustainability as it enables stakeholders to discuss and make decisions on how the blockchain should evolve (Filippi & Loveluck, 2016;Garagol&Nilsson, 2018). Effective blockchain governance is also essential in the successful implementation of blockchains and for their ability to adapt, change and interact (Tasca & Tessone, 2018). Due to the large size of blockchain projects, governance is especially relevant in order to manage and coordinate an entire community toward the same goal (Garagol & Nilsson, 2018). (Page 3, left column, paragraph 2, line 1-11)
3. The importance of blockchain governance is further highlighted in the governance problems that public blockchains have recently experienced. In 2016, The Ethereum blockchain suffered a governance crisis, when an exploited vulnerability in the source code of ‘the DAO’, an application built on top of the Ethereum blockchain, led to a theft of Ether equivalent to 50 million dollars (Finck, 2019;Hacker, 2017). (Page 3, left column, paragraph 3, line 1-8)

1. Off-chain community: the governance matters taking place in the real world with a focus on the wider community of a project
2. Off-chain development: the governance matters taking place in the real world with an explicit focus on the software development process.
3. On-chain protocol: all the governance matters taking place on the blockchain through its underlying protocol.
(Page 11, Table 3)

(1) As a starting point for discussion in new blockchain projects. For example, when they have to think about how to set up the governance of a project.
(2) As a testing framework to analyze the governance of an already set up blockchain. For example, to compare the governance of Bitcoin to that of Ethereum.
(3) As a checklist at the end of a situation in which they are dealing with something blockchain governance-related. For example, to check whether an aspect of governance has not been forgotten.
(Page 14, right column, paragraph 3, line 1-2)

1. As previously mentioned these include developers, researchers, business stakeholders, and legal professionals in the blockchain ecosystem. (Page 12, left column, paragraph 1, line 3-6)
2. the development of a framework that supports blockchain stakeholders with understanding and analyzing the governance of blockchains. (Page 17, left column, paragraph 17, line 1-4)

(1) As a starting point for discussion in new blockchain projects. For example, when they have to think about how to set up the governance of a project.
(2) As a testing framework to analyze the governance of an already set up blockchain. For example, to compare the governance of Bitcoin to that of Ethereum.
(3) As a checklist at the end of a situation in which they are dealing with something blockchain governance-related. For example, to check whether an aspect of governance has not been forgotten.
(Page 14, right column, paragraph 3, line 1-2)

what are the associated incentives for the available network participants
what is the process to enable new members to participate in the network
is there a structure or voting mechanism to control the addition of nodes
are there any signalling systems such as voting mechanisms for the community
are there processes for coordinating a hard fork
what is the consensus mechanism being used
(page 12, figure 1)

Distributed Governance in Multi-sided Platforms: A Conceptual Framework from Case: Bitcoin

Springerlink

Collaborative Value Co-creation in the Platform Economy

Juri Mattila, Timo Seppälä

The Research Institute of the Finnish Economy (ETLA), Helsinki, Finland

1. On a general level, the prevalent definitions of platform governance refer to the interaction between the platform provider and any agents who contribute to the service offering of the platform externally, from outside of the platform itself. While such external governance remains very relevant for research, in order to fully describe blockchain-enabled distributed platforms, the definition of platform governance must be expanded to include the mechanisms of internal governance; these are the mechanisms through which the providers of a multi-provider platform exert influence over other providers participating in the provision of the same platform (Schilling 2005; Tiwana et al. 2010; Tiwana 2014). (Page 3, paragraph 5, line 1-9)
2. Tiwana (2014) distinguishes three dimensions of platform governance: decision rights, control, and pricing policies. Decision rights pertain to setting goals for what the participants should be able to achieve and how. These rights are divided into two dimensions, with two categories each: (1) platform decision rights vs. application decision rights and (2) strategic decision rights vs. implementation decision rights. Control is used to ensure that the behavior of all the different participants is in line with those goals. Tiwana (2014) lists four different categories of control: input control, output control, process control, and relational control. Pricing policies dictate how the value created by this aligned collaboration will be shared. They describe the incentives that are used to attract all the different markets sides and to encourage them to participate in the platform ecosystem.3 (Page 5, paragraph 3, line 1-11)
3. Tiwana (2014) divides decision rights into two dimensions, with two categories each: (1) platform decision rights vs. application decision rights and (2) strategic decision rights vs. implementation decision rights. Platform decision rights pertain to decisions relating to the platform, whereas application decision rights pertain to decisions relating to the complementary assets of the platform. Strategic decision rights refer to the right to determine what the platform or a complementary asset should be able to achieve, while implementation decision rights are related to determining how those goals should be accomplished. (Page 10, paragraph 2, line 1-8)
4. Output control, or metrics, refers to the mechanisms of rewarding or penalizing the platform participants on the basis of their performance against some pre-defined target performance metrics (Ouchi 1979; Tiwana 2014). (Page 11, paragraph 6, line 1-3)
5. Input control, or gate-keeping, is the enforcement of some pre-defined, objective criteria as a prerequisite for granting entry into the platform ecosystem. (Page 13, paragraph 3, line 1-2)
6. Process control pertains to rewarding and/or penalizing application developers for following prescribed methods and procedures of development. (Page 13, paragraph 7, line 1-2)
7. Relational control or clan control manifests itself in the shared norms and values held by the platform participants (Ouchi 1979; Kirsch 1997; Tiwana 2014). (Page 15, paragraph 2, line 1-2)

In recent years, blockchain technology has facilitated a method by which a network of equipotent and equally privileged peers can jointly maintain and edit databases in an entirely decentralized manner, without any kind of an intermediary exhibiting unilateral control. As a consequence, blockchain technology has enabled the creation of a new type of platform architecture with distributed governance. Rather than a single intermediary constructing and governing the platform, these blockchain- enabled distributed platforms utilize internal joint revenue models to incentivize open participation in all the different platform provision functions. (Page 1, paragraph 1, line 1-3)

1. Platform decision rights pertain to decisions relating to the platform, whereas application decision rights pertain to decisions relating to the complementary assets of the platform. (Page 10, paragraph 2, line 3-5)

1. In the Bitcoin platform, five market sides can be distinguished: the users, the application providers, the miners, the nodes, and the platform developers. (Page 7, paragraph 3, line 4-6)
2. Users are the actors whose main motive for participating in the distributed platform is to make use of its practical functionality. (Page 7, paragraph 4, line 1-2)
3. Application providers participate in the distributed platform by building products and services on top of it which extend the functionality and the usability of the underlying platform. (Page 7, paragraph 5, line 1-3)
4. Miners are essential to the operation of the network. They handle the data entries and the transactions between the users of the platform and provide security by partaking in the consensus-forming process of the network. (Page 7, paragraph 6, line 1-3)
5. Nodes are the computers/software clients which form the actual blockchain network. (Page 7, paragraph 7, line 1-2)
6. Platform developers work on the technical design of the Bitcoin protocol. (Page 8, paragraph 2, line 1)

1. The governance mechanisms are delineated by using the classification of Tiwana (2014) on platform governance as a framework. (Page 5, paragraph 2, line 10-11)
2. Technical boundary resources govern the technical interactions between platform participants. In distributed platforms they manifest themselves in the operational principles of the distributed consensus network which underlies the platform. These boundary resources define operational features, such as how the nodes of the network connect and communicate to one another, what kind of a consensus protocol is employed by the network, and what are the prerequisites for partaking in the platform provision functions (Nakamoto 2008). (Page 9, paragraph 3, line 1-7)
3. The social boundary resources of blockchain-enabled distributed platforms also outline the joint monetization models, e.g., how the mining rewards are added to the total money supply of the platform. (Page 9, paragraph 4, line 1-3)
4. For example, miners and nodes can signal their support by running different client versions, and developers can signal their support by committing to different development projects (Gasser et al. 2015; Srinivasan and Leland 2017). (Page 11, paragraph 2, line 5-8)
5. for example, anonymous cryptocurrencybased voting mechanisms may be considered for measuring how much support different planned strategies have in the platform ecosystem (Consensus 2017). (Page 11, paragraph 3, line 2-4)
6. It is mainly up to the miners and the nodes to decide which proposals are accepted—other parties’ decision rights in this respect are mostly manifested in their ability to affect the decisionmaking of the aforementioned two market sides (Kroll et al. 2013; Atzori 2015; Filippi and Loveluck 2016). (Page 11, paragraph 4, line 4-8)
7. When the platform developers write new versions of the network’s client software, they can propose three kinds of alterations: ones that add new consensus rules to the network (soft forks), ones that remove or replace old consensus rules from the network (hard forks), and ones that do not affect the consensus protocols one way or the other. (Page 12, paragraph 3, line 1-3)
8. As miners and nodes are free to decide which versions of the platform software they want to use, they are very influential as groups in determining what development features are accepted as a part of the platform and which ones are not (Kroll et al. 2013; Atzori 2015; Filippi and Loveluck 2016). (Page 13, paragraph 4, line 3-6)
9. The miners also have input control toward users in the sense that they have the power to decide which pending transactions are entered into the blockchain and which ones are not (Dimitri 2017). (Page 13, paragraph 5, line 1-3)
10. As the nodes are effectively in charge of enforcing the consensus protocol of the network, they as a group have the power to decide which blocks proposed by the miners are accepted as a new part of the blockchain and which ones are rejected. (Page 13, paragraph 6, line 2-4)
11. The platform developer community receives funding for their work from the application providers who have built their businesses on top of the Bitcoin platform and therefore depend on its development. This gives application providers some leverage over platform developers in determining what kinds of features should be incorporated into the source code and how the development should take place. (Page 13, paragraph 9, line 1-3)
12. The rules and restrictions on minting new cryptocurrency tokens are governed by the source code of the client software on which the blockchain network operates. (Page 16, paragraph 3, line 1-2)

Egalitarian Society or Benevolent Dictatorship: The State of Cryptocurrency Governance

springerlink

International Conference on Financial Cryptography and Data Security

Sarah Azouvi, Mary Maller, and Sarah Meiklejohn

University College London, London, UK

there is a governance structure underlying all blockchains, and these governance structures have a seemingly inherent degree of centralization. (page 2, paragraph 2, line 6-7)

1. No system is perfect, and cryptocurrency protocols sometimes need updating due to flaws or vulnerabilities. (page 4, paragraph 2, line 1-2)
2. there is a governance structure underlying all blockchains, and these governance structures have a seemingly inherent degree of centralization. (page 2, paragraph 2, line 6-7)

1. The founders of a cryptocurrency necessarily make numerous decisions regarding both its design and its implementation. For example, they decide on the interval between the generation of blocks, the reward for generating a block, and the size of the blocks. (page 2, paragraph 2, line 2-6)
2. When disagreements occur in cryptocurrency communities, the only way to resolve them might be for the communities to split. Anyone disagreeing with the current core developers can fork the code and create their own currency. (page 4, paragraph 3, line 1-3)

1. The founders of a cryptocurrency necessarily make numerous decisions regarding both its design and its implementation. (page 2, paragraph 2, line 2-4)
2. When disagreements occur in cryptocurrency communities, the only way to resolve them might be for the communities to split. Anyone disagreeing with the current core developers can fork the code and create their own currency. (page 4, paragraph 3, line 1-3)
3. To keep the improvement decision process open and fair, most cryptocurrencies have an Improvement Proposal system, where anyone can propose changes to the protocol and discuss existing proposals. (page 4, paragraph 2, line 3-5)
4. There are usually many people contributing to the discussion for every proposal, so we measured the level of centrality in terms of the number of comments in pull requests for each user in the BIPS and EIPS repositories. (page 11, paragraph 1, line 1-3)
5. When disagreements occur in cryptocurrency communities, the only way to resolve them might be for the communities to split. Anyone disagreeing with the current core developers can fork the code and create their own currency. (page 4, paragraph 3, line 1-3)

1. The founders of a cryptocurrency necessarily make numerous decisions regarding both its design and its implementation. (page 2, paragraph 2, line 2-4)
2. In theory, each peer in the network has a “vote” proportional to their computational power, which is used to seal transactions into the ledger. (page 1, paragraph 2, line 4-6)
3. When disagreements occur in cryptocurrency communities, the only way to resolve them might be for the communities to split. Anyone disagreeing with the current core developers can fork the code and create their own currency. (page 4, paragraph 3, line 1-3)

1. Many cryptocurrencies address this by open-sourcing their code and opening their protocols to so-called “improvement proposals,” in which anyone can propose changes to the high-level protocol. These improvement proposals serve not only to reduce the degree of centralization in the maintenance of the platform, but also can provide a significant degree of transparency into the decision-making process. (page 2, paragraph 2, line 8-13)
2. The Improvement Proposals process happens mainly on GitHub, but there are many other places for discussion, such as mailing lists, forums and IRC channels. (page 4, paragraph 2, line 7-9)
3. When disagreements occur in cryptocurrency communities, the only way to resolve them might be for the communities to split. Anyone disagreeing with the current core developers can fork the code and create their own currency. (page 4, paragraph 3, line 1-3)
4. Generally this confirms that a handful of people (less than 10) contribute to most of the comments. As this is true for all the repositories, we conclude that this is potentially a common (and somewhat natural) feature in open-source systems. (Page 9, paragraph 4, line 8-10)
5. In Fig. 4, we notice that only a handful of people are contributing to Bitcoin improvement proposals (BIPS). In Fig. 5, there is mostly just one person, Vitalik Buterin, that is contributing to Ethereum improvement proposals (EIPS). (Page 10, paragraph 2, line 5-8)

Governance challenges of blockchain and decentralized autonomous organizations

Google Scholar

Information Polity

Olivier Rikken, Marijn Janssen and Zenlin Kwee

Faculty ofTechnology, Policy and Management, Delft University ofTechnology, Delft, The Netherlands

Governance represents the framework for decision rights, incentives and accountabilities to encourage desirable behavior in the use of resources (Weill, 2004). Governance mechanisms determine how communication, responsibilities and decision-making structures are formalized (Weill & Ross, 2005). Governance should define decision-making authorities and accountabilities in a decentralized network consisting of several parties. (Ølnes et al., 2017). (Page 2, paragraph 4, line 1-6)

1. In particular, various of these accidents resulted in the need for arranging crisis governance. Three most debated incidents with regards to governance are the DAO incident (Falkon, 2017), Parity multisig wallet hack (Palladino, 2017) and Parity II or token and cryptocurrency freezing incident (Akentiev, 2017), leading to a loss of several $100 million. Due to entanglement ofapplication and infrastructure the solving of these issues was dependent on governance of the infrastructure. (Page 2, paragraph 3, line 1-5)
2. As there was no TTP anymore to (un)do actions or could stop ongoing actions, it triggered discussions around various regulatory and governance questions. (Page 2, paragraph 3, line 9-11)
3. Often blockchain is associated with automated self-governance, i.e. the governance is embedded in the system, through consensus mechanisms. However, this concerns only the governance of the exploitation or “block-to-block” operation (governance by blockchain) and does not contain the governance about development, updates or dealing with failures (governance of blockchain) (Ølnes et al., 2017). (Page 2, paragraph 4, line 6-10)
4. The need for new governance models are even presented as one of the main barriers to adoption of the technology (Batubara et al., 2018). (Page 2, paragraph 4, line 12-13)

1. Infrastructure layer Embedded in the blockchain protocol. What makes the blockchain infrastructure unique is that it withholds both the protocol (rules) and the (immutable) data layer and is decentralized. (Page 9, paragraph 5, line 1)
2. The blockchain also contains the data layer. The data is stored in the blockchain. Once submitted, the data is extremely hard to alter, undo or delete, only by consensus of the nodes. (Page 10, paragraph 1, line 8-10)
3. This can be a mix between traditional applications (centralized websites and apps) and embedded characteristics like native cryptocurrencies of a blockchain, or decentralized applications (dApps) where the majority of the application is built on a blockchain, by making use of smart contracts. (Page 10, paragraph 3, line 1-3)
4. Company layer: Behind most blockchain applications are individuals using the applications and formal organizations or independent projects building/running the application. (Page 11, paragraph 5, line 1-2)

1. Design: Design of the solution – company – project, Non time critical – except in business continuity, Process/cooperation of an individual or group
2. Operation: Daily operation – decisions and actions – going concern, Time constraint restricted to rules, protocol and/or business rules of the solution, Executed by the nodes through the consensus mechanism
3. Evolvement/ Crisis: Update process, Time criticality depends on kind of update, Crisis implicates high time pressure Through (hard/soft) fork software updates of the infrastructure or code of applications through various mechanisms (Page 9, table 2)

1. Process/cooperation of an individual or group, Executed by the nodes through the consensus mechanism, Crisis implicates high time pressure Through (hard/soft) fork software updates of the infrastructure or code of applications through various mechanisms (Page 9, table 2)
2. This because distinction between users, developers and infrastructure running base becomes fuzzy and as there isn’t necessarily an organization anymore. (Page 18, paragraph 7, line 1-2)

1. Governance in the operate stage, governance by the infrastructure, is arranged through the consensus mechanisms. Here the execution of the protocol itself is arranged fully autonomous. The execution is performed by the infrastructure, the nodes, using the specific consensus mechanism for that blockchain. (Page 10, paragraph 1, line 3-6)
2. A way to arrange governance responsibilities and process is by employing smart contracts where parameters in the code set up as variables that can be updated. Of utmost importance is that access to functions is properly arranged, e.g. in Ethereum possible through “modifiers”, arranging access on function level. Upcoming solutions are “proxy functions” referencing to future deployable smart contracts adding functionality. (Page 10, paragraph 5, line 7-11)
3. Conditional transaction, multi smart contract – Governance possibilities of these type of applications largely overlap with governance of single smart contract. A difference is that one can replace modules, in this case individual smart contracts, without replacing the whole application. (Page 11, paragraph 1, line 1-3)
4. DAO – DAOs are technically and governance wise much like conditional transaction applications, build in single or series of smart contracts, operating, once deployed, exactly as programmed in the business rules of the smart contracts. Possibilities for interference by humans in theory little to non and no formal company structure is behind it. (Page 11, paragraph 2, line 1-4)
5. open source developments where people work together via e.g. GitHub without any formal organization behind it, but also not identifiable to (a group of) individual(s). Most public permissioned blockchains are, in theory, developed in this way as anyone can anonymously propose software updates. (Page 12, paragraph 4, line 1-4)
6. This regulatory quadrant example reflects Initial Coin Offering (ICO) regulation, seen as one of the straighter forward products and services. Regulations becomes even more complex and much less debated with more complex structures like new ecosystem set ups especially in the case of DAOs. (Page 12, paragraph 8, line 1-3)
7. In off-chain governance, more traditional processes on voting and stakeholder management are set up in decision making of protocol updates or data changes, through traditional voting mechanisms. (Page 14, paragraph 7, line 1-3)
8. In on-chain governance, through smart contracts or DAOs votes are open to all users of that particular blockchain. After a threshold is met, the update is pushed through (Curran, 2018; Qureshi, 2018). The challenge here is that people without proper knowledge regarding the impact can vote as well (Qureshi, 2018). (Page 15, paragraph 1, line 1-4)
9. Using a framework consisting of different layers (infrastructure, application, company and institution/country) and stages (design, operate, evolve/crisis) is useful to analyze potential governance challenges in blockchain implementations. (Page 1, Key points for practitioners, line 1-2)

Governance in the Blockchain Economy: A Framework and Research Agenda

Google Scholar / AIS

Journal of the Association for Information Systems

Roman Beck , Christoph Müller-Bloch, John Leslie King

IT University of Copenhagen, Denmark

We use the theoretical perspective of IT governance, which has been a topic of interest for several decades (see Brown & Grant, According to Weill 2005, for an overview). (2004, p. 3), “IT governance
represents the framework for decision rights and accountabilities to encourage desirable behavior in the use of IT.” Weill’s definition invokes three key dimensions of IT governance: decision rights, accountability, and incentives. (Page 3, right column, paragraph 3, line 1-9)
1. Decision rights, in general, determine the degree of centralization; that is, whether decision-making power is concentrated in a single person or small group (centralized), or dispersed (decentralized) (King, 1983; Sambamurthy & Zmud, 1999). (Page 3, right column, paragraph 4, line 9-13)
2. Accountability is enacted, specified and enforced through contracts and legal frameworks governed by institutions, but it can also be enacted through IT infrastructures (Weitzner et al., 2008)—an important consideration for blockchain. (Page 4, left column, paragraph 1, line 4-8)
3. A system with aligned incentives allows agents to freely choose their own behaviors, but uses incentives to make them inclined to choose actions that coincide with goals of the system’s design. (Page 4, left column, paragraph 2, line 13-17)

The blockchain economy could enable new organizational designs in the form of DAOs—autonomous entities using governance rules that conform to the business logic of the blockchain (Jentzsch, n.d.)—challenging established notions of governance (Page 2, left column, paragraph 3, line 13-18)

Blockchain economy
1. The specification of decision rights needs to be organized in a decentralized environment. Implicit and explicit contracts are either not available or are solely managed by blockchain, making technology the foundation of the network, instead of written agreements.
2. Records are decided upon decentrally through consensus.
3. Forking is a novel mode of decentrally resolving disagreement about decisionmaking.
4. Transaction parameters are primarily defined decentrally.
5. Initial high degrees of centralized decision rights will enable decentralized control later on.
6. Network as “nexus of smart contracts.”
7. Accountability specified in the network, delegated to and by the blockchain.
8. Digital processes in peer-to-peer exchanges for value creation of blockchain-based digital goods.
9. Incentives to create private goods, club goods, and public goods.
10. New networkbased processes which incentivize the peer-to-peer nodes to reach consensus.
(Page 8, Table 3)

1. (overcoming acute emergency situations, system design)
2. (setting transaction parameters, voting on proposals)
3. (forking, voicing disagreement)
4. Identity (technical origin, institutional verification, reputation, liability)
(Page 8, Table 3)

1. business leader, principal cofounder, cofounder, system architect, software engineer, liaison officer, communication officer, member of advisory board (Page 5, Table 2)
2. Swarm City developers did express some concern about the allocation of decision rights. In the future, token owners might make joint management decisions (e.g., concerning new features or whether to offer certain services), but this joint decision-making may not always be feasible. (Page 5, right column, paragraph 3, line 1-6)
3. In Swarm City, identity is granted to users based on their public address in the blockchain network. The user needs this identity to engage in transactions. (Page 6, right column, paragraph 2, line 1-3)
4. Benevolent dictatorship (overcoming acute emergency situations, system design)

1. Benevolent dictatorship (overcoming acute emergency situations, system design)
2. Decentralized decision-making (setting transaction parameters, voting on proposals)
3. Hybrid (centralized decision management rights and decentralized decision control rights)
4. Resolving disagreement about decisionmaking (forking, voicing disagreement)
5. Identity (technical origin, institutional verification, reputation, liability)
6. Transaction enforcement (smart-contractbased escrow, institutional involvement)
7. Incentives for technical consensus, system development and maintenance, users, token holders
(Page 8, Table 3)
8. we provide a research framework and agenda for governance for the blockchain economy by comparing the blockchain economy to the digital economy. (Page 2, left column, paragraph 3, line 18-21)

Governance of Blockchain and Distributed Ledger Technology Projects

Google Scholar

2nd Europe - Middle East - North African Regional Conference of the International

Howell, Bronwyn E.; Potgieter, Petrus H.; Sadowski, Bert M.

School of Management, Victoria University of Wellington, New Zealand

1. While some of the governance rules are embedded in system software, and may be costly and difficult to change, leading to stable ledger content, other rules are embedded in the institutional arrangements linking system participants (club members) outside of the software, and may not be so costly to change, depending upon how key decision-making rights are distributed across them. (Page 3, paragraph 6, line 1-5)
2. Although the components of a blockchain are “owned by no-one”, it cannot be said that a blockchain system is “governed by no-one”. All systems operate within a framework of rules, either derived implicitly from the norms and cultures of the participants or explicitly articulated in formal agreements (such as constitutions and contracts) (Williamson, 1999; 2000). Collectively, these rules comprise the governance arrangements under which systemic interaction takes place. Within them, in order to co-ordinate participants and streamline decision-making, selected groups of individuals are granted superior decision-making rights by assuming those ceded to them by specific subsets of system users. Governance arrangements can emerge endogenously over time (bottom-up) (for example, as has occurred with the constitutional arrangements of nation states), or be imposed from the outset (top-down)(for example, following military conquest, or in the Constitutions and Articles of Incorporation of firms, marketplaces (e.g. stock exchanges, clubs and trusts) (Ostrom, 1990; 2005). (Page 4, paragraph 3, line 1-12)
3. As with any club, there may be many different states of membership, defined in the rules. The rules will specify their relationships with each other, along with the various powers each class of member may exercise in both regular operation and in club governance. (Page 9, paragraph 2, line 2-5)
4. In particular, the allocation of important decision-making powers, processes of appointments to decision-making bodies, the relationships between different member categories and expectations and obligations of the relevant members should be made explicit in order to allow members to make appropriate decisions and enabling them to expect consistent predictable outcomes when interacting with the club. (Page 13, paragraph 1, line 6-10)

1. Comparatively little has however been documented so far about the governance of blockchain systems and the commercial activities they support, beyond the algorithmic voting processes via which the nodes agree on the authoritative version of the DL. (Page 3, paragraph 4, line 1-3)
2. Neither the data in the ledgers nor the software governing blockchain operations is claimed to be owned by anyone in particular. Nonetheless ongoing responsibility for the rules governing their ongoing operation must be assumed by someone if they are to be created and operated successfully for commercial endeavours. (Page 3, paragraph 5, line 2-5)
3. The stability of a given DL system will depend upon the interaction of the decision rights allocated and exercised within the software with rights allocated and exercised outside of it. (Page 3, paragraph 6, line 5-6)

1. The over-arching institutional arrangements under which the DLS operates – including the allocation to membership status and associated decision-making rights – must be decided first by founding members in order for the system to be created. The founding members will determine the original governance rules – both those coded into the software and other non-coded arrangements. (Page 5, paragraph 4, line 3-7)
2. However, to the extent that many of the governance arrangements must be coded into the software in advance of the system beginning operation, DLS design is subject to the bounded rationality of human designers. (Page 7, paragraph 2, line 1-3)
3. as the DLS matures, and especially as it increase its scale of operations, the roles would be expected to gradually separate out (i.e. specialisation, as per Williamson, 1986 emerges). The nature of the separation will now be governed by the rules implicitly embedded in the DLS software and explicitly articulated in its “offline” rules. (Page 11, paragraph 2, line 4-7)
4. The governance of the Blockchain ledger is therefore mechanically implied by the protocol, which is the genial invention that engenders great robustness and stability. Nevertheless, this does not exclude the use of explicit agreements among participating nodes (or, indeed natural or juristic persons). (Page 16, paragraph 4, line 1-2)

1. The over-arching institutional arrangements under which the DLS operates – including the allocation to membership status and associated decision-making rights – must be decided first by founding members in order for the system to be created. The founding members will determine the original governance rules – both those coded into the software and other non-coded arrangements. (Page 5, paragraph 4, line 3-7)
2. However, to the extent that many of the governance arrangements must be coded into the software in advance of the system beginning operation, DLS design is subject to the bounded rationality of human designers. (Page 7, paragraph 2, line 1-3)
3. Unless nearly all operators are equally affected by the exogenous change in circumstances or an internally-agreed rule change, then even if the high co-ordination costs could be overcome, the proportion of defections to a forked variant will be small and it will be unlikely to appeal to a significant number of end-users. (Page 8, paragraph 4, line 5-7)
4. • node members are the miners, who can freely enter and exit of their own accord. There is no explicit relationship between them and any other members;
• transaction members and end user members can freely enter and exit of their own accord
(Page 16, paragraph 5, line 7-9)

1. The over-arching institutional arrangements under which the DLS operates – including the allocation to membership status and associated decision-making rights – must be decided first by founding members in order for the system to be created. The founding members will determine the original governance rules – both those coded into the software and other non-coded arrangements. (Page 5, paragraph 4, line 3-7)
2. The human actor makes the decision to join the club, and in doing so agrees to abide by the club rules. Human node operators will subsequently be termed node-members of the DLS club. (Page 9, paragraph 3, line 3-5)
3. Software-members play a vital role as they have the knowledge and skills necessary to evaluate the effectiveness of the existing software and implement changes to it – such as those necessary to generate a fork. Members of the software subcommittee therefore exert significant power (control) over the software content and hence the likelihood of forking or changes to the existing software occurring. (Page 9, paragraph 4, line 11-15)
4. Node-members are typically remunerated for holding ledger copies and processing transactions via a combination of payments from the DLS (in redeemable tokens - system currency) upon becoming the ‘winner’ who first posts the ultimately-agreed block, and from the entities who requested the transaction in the first place. (Page 9, paragraph 5, line 1-4)
5. the DLS may have members who support the club’s activities with explicit financial contributions. Members acting in this capacity will subsequently be termed donor-members. (Page 10, paragraph 1, line 5-7)
6. For a DLS to be operational, it requires two other classes of member. These are • end user-members, who wish to use the system to undertake transactions with other end users or request information held in the DL, and • transaction-members, who manage the interfaces via which end-users participate. (Page 10, paragraph 2, line 1-4)
7. These transaction-members may generate their own bespoke code and applications (e.g. web pages) that build on code supplied by the DLS, but once again, unless they engage separately as software-members, they exert no influence on the DLS code per se. An example is a currency exchange, which may interact with many different cryptocurrency DLs in addition to banks handing traditional fiat currencies and payment mechanisms. (Page 10, paragraph 5, line 3-8)
8. In addition to the large miners, “a small core of highly skilled developers” (De Filippi and Loveluck, 2016) for Bitcoin Core, the most widely used Bitcoin client, have an outsize influence in practice on the arrangements for this DL. (Page 17, paragraph 2, line 1-3)"

1. we develop a framework for examining a given blockchain DL system to identify and evaluate the effectiveness of its governance arrangements given its specific commercial application. (Page 3, paragraph 7, line 1-3)
2. there is a movement from the concept of Proof ofWork (PoW) towards the Proof of Stake (PoS) that tries to address this problem by giving greater voting power to those who have a stake in the venture. (Page 6, paragraph 2, line 5-7)
3. As long the original (or extant) arrangements suit the (ever-changing) membership, a DLS will survive – albeit in a dynamically-adapting form as constitutionally defined. However, when an issue arises which cannot be agreed using the current rules, a fork may occur (a ‘break-away club’ forms). (Page 6, paragraph 6, line 1-4)
4. End-user members and transaction-members can exert very little formal power via the governance and decision-making processes, as they must ‘take as given’ the package offered by node members. Their power is confined to ‘voting with their feet’ and either choosing not to patronise the DLS, or (to the extent possible given the costs), co-ordinating a successful fork. (Page 11, paragraph 3, line 3-5)
5. Node-members are pivotal, as the DLS cannot operate without them, but equally, they too may have little choice but to accept a ‘take it or leave it’ package offered by the founder-members. Once again, they can opt not to join in the first place, or like transaction members, co-ordinate to instigate a successful fork. (Page 12, paragraph 3, line 1-4)
6. In order to motivate their participation, it would be expected they anticipate remuneration from either their node operation activities, or some other arrangement such as an honorarium paid from DLS funds held off the ledger – for example, financial or in-kind contributions (e.g. time, computing resources) made by donor-members. Donor-members without other membership stakes are unlikely to make substantial contributions of this kind unless they too exercise some influence over DLS governance and management – for example, having some powers to appoint or veto candidates to the club committee, or specifying in advance how their donations are to be managed and/or applied – in the same manner as expected by donors to clubs. (Page 12, paragraph 4, line 3-11)
7. The governance rules must contain provisions that make forking costly (e.g. very large membership fees, forfeited on forking). (Page 14, paragraph 2, line 19-20)
8. In addition to the large miners, “a small core of highly skilled developers” (De Filippi and Loveluck, 2016) for Bitcoin Core, the most widely used Bitcoin client, have an outsize influence in practice on the arrangements for this DL. (Page 17, paragraph 2, line 1-3)

The Governance of Blockchain Financial Networks

Google Scholar / Wiley

The Modern Law Review

Philipp Paech

London School of Economics and Political Science, UK

1. The internal governance of Bitcoin is, however, different from the internal governance of future blockchain financial networks set up by for-profit organisations such as banks, other financial institutions or Fintech companies. These networks will be set up either in a spirit of mutuality, assisting market participants to pursue common interests (in particular higher efficiency),107 or as services provided to wholesale or retail customers. (Page 19, paragraph 3, line 1-6)
2. In this article, I will explore the regulatory and private law issues arising from the use of blockchain networks in financial markets, including relevant issues pertaining to the control of such networks and to the influence of the market on their development. I refer to the entirety of these aspects as ‘governance’, intentionally adopting a broad understanding of this term.1 The analysis establishes whether and to what extent blockchain-based business models can exist outside the regulatory and supervisory perimeter that generally applies to financial institutions. It further investigates the role ofprivate law within these networks, notably in ensuring the smooth functioning ofrisk-based regulation and in avoiding a risk-shift towards non-adjusting third parties. (Page 1, paragraph 1, line 1-10)

1. The disruptive potential ofblockchain technology applies not only to existing business models but also threatens the effectiveness of the existing governance framework for financial markets, depending on how the technology is deployed. It is important, therefore, to set the axioms of a governance framework for blockchain financial networks at an early stage in order to further a potentially beneficial market development and avoid the cost of adjusting market practice to new rules at a later stage.22 (Page 4, paragraph 2, line 1-7)
2. blockchain financial networks may create risks that might have an impact on the wider market, notably by transmitting systemic risk, discriminating between market actors and facilitating illegal activity. Hence, blockchain financial networks cannot remain outside the regulatory perimeter. (Page 4, paragraph 4, line 5-8)
3. For the nodes to be able to rely on their network’s software, they must be convinced of its soundness, ie they must be confident that it allocates rights according to internal rules to which they agreed upon joining the network. At the same time, this principle entails that the process, once initiated, must be resistant to alteration and beyond human control. Otherwise, again, parties would need to trust the person controlling the process. As a logical consequence, the allocation of rights in blockchain financial networks must be unstoppable and irreversible. (Page 23, paragraph 1, line 6-13)

1. since blockchain-based virtual currencies provide individuals with a means ofpayment and an easy and nearanonymous method of transferring value, states are considering relevant regulation, mainly targeting money laundering and terrorist financing (Page 12, paragraph 4, line 6-9)
2. Indeed, the technology could be used to make all kinds of payment,14 and central banks could issue fiat money in this way.15 Likewise, derivative contracts could be concluded, administered and settled within blockchain networks.16 In this article, I refer to these and similar emerging structures (to the exclusion of virtual currencies) as ‘blockchain financial networks’. (Page 3, paragraph 1, line 4-9)
3. The first concern is about the operational soundness and continuity of the relevant processes. Uncertainty as to the accuracy or availability of records or the correct execution of smart contracts could have significant repercussions for financial stability.77 (Page 14, paragraph 4, line 1-4)
4. Two characteristics inherent in blockchain technology considerably facilitate illegal activity. The first, and most obvious, is the possibility of transacting with a higher degree of anonymity than is afforded by accountbased transfers,116 with the instantaneous character ofinternational transactions making it impossible to know who sends and who receives, for instance, a payment in bitcoins.117 Secondly, even if blockchain-based networks were not generally anonymous, there would be no-one on hand to perform the functions that lie at the core of anti-money-laundering and related regimes.118 (Page 21, paragraph 2, line 4-11)

1. Potential negative externalities rooted in the operation of the relevant blockchain network, as discussed in the following section, will immediately impact on those financial institutions and their clients. (Page 13, paragraph 3, line 10-13)
2. In order to maintain the effectiveness of this administrative supervisory stay, the relevant authority would need to be provided with an ‘emergency stop’ function, enabling them to halt the automatic termination of contracts recorded in a blockchain financial network. (Page 18, paragraph 1, line 1-5)

1. since blockchain-based virtual currencies provide individuals with a means ofpayment and an easy and nearanonymous method of transferring value, states are considering relevant regulation, mainly targeting money laundering and terrorist financing (Page 12, paragraph 4, line 6-9)
2. Regulators could therefore attempt to regulate these networks by forcing local Internet providers to block the relevant data traffic. (Page 13, paragraph 2, line 6-8)
3. Against this background, regulatory initiatives at present target the intermediaries at the intersection between the virtual currency and the financial market, in particular the socalled virtual currency exchanges, ie those entities exchanging fiat money for virtual currency (Page 13, paragraph 2, line 10-14)
4. currently incumbent market participants, ie banks and other financial institutions, are likely to become nodes in blockchain financial networks and to administer their and their clients’ financial assets on them (Page 13, Paragraph 3, line 8-10)
5. The programmers of Ethereum, to the surprise of many, were able to ‘reset’ past transactions and undo the abusive transfers.84 This approach obviously contradicts the original concept of immutable outcomes of blockchain-based transactions; however, as Ethereum has shown, it is necessary to protect the market at large from becoming hostage to a programming bug or loophole. (Page 15, paragraph 2, line 15-19)
6. Still, once blockchain technology finds its way into financial assets and services, users may play different functional roles in the relevant networks, such as ‘passive’ nodes that do not contribute to the functioning of the network, or as ‘active’ nodes contributing resources such as computing power,108 giving them less or more formal or informal influence on the relevant governance decisions. (Page 20, paragraph 1, line 1-5)
7. As the virtual currency blockchain networks themselves are difficult to regulate, to date the exchanges are the most suitable entry points for regimes such as anti-money-laundering and counter-terrorist-financing laws,123 even though this approach would leave out any part of blockchain activity that did not involve an exchange of currency, such as, for example, activities where virtual currency is spent directly on goods and services.124 (Page 21, paragraph 3, line 5-9)

1. Regulators could therefore attempt to regulate these networks by forcing local Internet providers to block the relevant data traffic. However, this approach is only partly effective and politically and legally difficult to justify in a democratic setting as long as equally efficient, less intrusive means are at the regulators’ disposal. (Page 13, paragraph 2, line 6-10)
2. Ex ante regulatory measures to avoid such loopholes or bugs are important also to ensure the transparency of the internal rules.83 However, loopholes and bugs can never be entirely avoided and they might affect all or significant parts of the assets held in the network. Therefore, systemic stability requires that ‘incorrect’ results in a blockchain financial network be prevented before they materialise or that there is at least a possibility to reverse such results. The programmers of Ethereum, to the surprise of many, were able to ‘reset’ past transactions and undo the abusive transfers.84 This approach obviously contradicts the original concept of immutable outcomes of blockchain-based transactions; however, as Ethereum has shown, it is necessary to protect the market at large from becoming hostage to a programming bug or loophole. (Page 15, paragraph 2, line 9-19)
3. In order to maintain the effectiveness of this administrative supervisory stay, the relevant authority would need to be provided with an ‘emergency stop’ function, enabling them to halt the automatic termination of contracts recorded in a blockchain financial network. Such functionality would need to be built into the smart contract itself, making the stay dependent on data input triggered by the relevant administrative decision. (Page 18, paragraph 1, line 1-7)
4. Hence, transfers of money and other assets through blockchain financial networks need to be subject to functionally equivalent rules preventing money laundering and other illegal activities. (Page 22, paragraph 2, line 7-10)
5. these issues could be addressed by leaving certain parts of the agreement outside the blockchain record as a ‘non-smart’ and thus modifiable contract, whereas other parts might ‘go smart’ and be self-executory and immutable, thereby building some flexibility into the relevant agreement. Alternatively, the code of the smart contract could become more granular, in an attempt to address all potential future circumstances that may have an impact on the contractual duties—an approach which, of course, may come close to, but ultimately will never achieve, perfection. (Page 25, paragraph 3, line 7-14)
6. ‘structure’ as the first determinant refers to who the nodes of a network are and what services it provides. As a rule of thumb, the application of regulatory and private law rules to blockchain financial networks requires less adaptation ofexisting rules to the extent that such networks are homogeneous as regards their circle of nodes and the services provided. (Page 31, paragraph 1, line 1-5)
7. Therefore, the effective governance of blockchain financial networks requires a strategy explaining how the regulatory and legal solutions, which are limited in their territorial reach, can be applied to networks that are potentially spread across several countries. This paper has already shown that issues of regulation and private law are inextricably linked in some respects.175 This linkage is also an important element in overcoming the discrepancy in terms of the reach of a blockchain network and the means ofgovernance. (Page 31, paragraph 2, line 6-13)
8. The best solution in terms of supporting changes to statutory laws is to agree among jurisdictions that assets and contracts recorded in a blockchain financial network are enforceable also in insolvency, and that this is subject to the limitations set by the law governing the network, rather than by the limitations set by each lex fori concursus. Thus, nodes would not need to worry about the specificities of the insolvency laws in all jurisdictions where fellow nodes are located, but only about the limits imposed by the law that governs the network and its internal rules. (Page 36, paragraph 2, line 1-8)
9. By contrast, governments would be well advised to cooperate in creating a supportive governance framework for regulated networks to ensure that blockchain technology can be used for the benefit of the market as a whole. (Page 38, paragraph 3, line 7-9)

The governance of blockchain systems from an institutional perspective, a matter of trust or control?

Proceedings of the 19th Annual International Conference on Digital Government Research: Governance in the Data Age

David Meijer, Jolien Ubacht

oneUp.company, Netherlands

1.Davidson, De Filippi and Potts [22] argue that blockchain technology is “better understood as a revolutionary new institutional technology for economic coordination” (p.2) and thus, that blockchain is “an institutional technology of governance that competes with other economic institutions of capitalism, namely firms, markets, networks, and even governments”(p.1). (Page 1, right column, paragraph 2, line 14-19)
2. First, we look at the decision-making structure in blockchain ecosystems, which is concerned with decisions that define the rules by which the blockchain system validates transactions. These can be seen as the internal governing structures of the blockchain system. These rules are ultimately not decided by developers, or a centralized entity, but by the users that are responsible for maintaining the Blockchain. (Page 5, right column, paragraph 2, line 1-7)
3. In contrast to the internal institutional governance of blockchains, the external institutional governance consists of legal- or institutional frameworks that govern these systems. Examples include laws, regulations and governments. (Page 6, left column, paragraph 3, line 9-13)

These are important because blockchain based applications raise uncertainties for adoption by business, governments and citizens alike. And thus, uncertainties for the governance of blockchain systems and applications from a regulatory perspective. (Page 6, left column, paragraph 3, line 13-16)

1. (1) to provide a theoretical conceptualization ofblockchain technology consequences from an institutional perspective,
(2) to use this conceptualization to provide insights into the changing institutional arrangements and governance ofblockchain systems
(Page 2, left column, paragraph 3, line 1-5)
2. New rules, or adaptations to existing rules are only implemented if more than 50% of the end-users agree. (Page 5, left column, paragraph 3, line 6-7)
3. In contrast to the internal institutional governance of blockchains, the external institutional governance consists of legal- or institutional frameworks that govern these systems. Examples include laws, regulations and governments. (Page 6, left column, paragraph 3, line 9-13)
4. Governments or other institutions facing difficulty to govern or regulate a technological innovation is not new. However, the specific shift in institutional arrangement caused by blockchain technology is special because blockchain systems are able to encapsulate institutional arrangements into their technical design, instead of into their governing ecosystem. (Page 6, left column, paragraph 5, line 1-6)

1. First, we look at the decision-making structure in blockchain ecosystems, which is concerned with decisions that define the rules by which the blockchain system validates transactions. These can be seen as the internal governing structures of the blockchain system. These rules are ultimately not decided by developers, or a centralized entity, but by the users that are responsible for maintaining the Blockchain. (Page 5, right column, paragraph 2, line 1-7)

1. Furthermore, with the high number of actors involved in these discussions, such as governments, corporates, new entrants and software developers, and the high technological complexities of blockchain technology, blockchain has become a complex multiactor socio-technical system [66]. (Page 2, left column, paragraph 2, line 1-5)
2. Blockchain systems are governed by all end-users (referred to as nodes in the system). (Page 5, left column, paragraph 3, line 4-5)
3. These users, called validators or miners, use computing power to validate transactions. Only if more than half of these users agree with a rule change, they all update the rules for validation, and this new rule is implemented. (Page 5, right column, paragraph 2, line 7-10)
4. regulators are by definition not part ofa blockchain system, and therefore have no power to change the rules that are set inside the blockchain system. Therefore, external control of a blockchain system decreases (Page 6, left column, paragraph 4, line 3-6)
5. Governments or other institutions facing difficulty to govern or regulate a technological innovation is not new. However, the specific shift in institutional arrangement caused by blockchain technology is special because blockchain systems are able to encapsulate institutional arrangements into their technical design, instead of into their governing ecosystem. (Page 6, left column, paragraph 5, line 1-6)
6. Governments should realize that existing governing institutions can be challenged as they can be engrained into technological systems. (Page 6, right column, paragraph 5, line 1-3)
7. Private parties, in this case incumbents, should also realize that their existing governing structures are being challenged, and, as a consequence, their own roles in these structures are under pressure. (Page 7, left column, paragraph 2, line 1-4)

1. New rules, or adaptations to existing rules are only implemented if more than 50% of the end-users agree. (Page 5, left column, paragraph 3, line 6-7)
2. First, we look at the decision-making structure in blockchain ecosystems, which is concerned with decisions that define the rules by which the blockchain system validates transactions. These can be seen as the internal governing structures of the blockchain system. These rules are ultimately not decided by developers, or a centralized entity, but by the users that are responsible for maintaining the Blockchain. (Page 5, right column, paragraph 2, line 1-7)
3. Governments should therefore consider new modes of governance that address this challenge and include these technologically engrained controlling institutions into their governing frameworks (Page 7, left column, paragraph 1, line 1-3)

Governing the Use of Blockchain and Distributed Ledger Technologies: Not One-Size-Fits-All

IEEE Xplore

IEEE ENGINEERING MANAGEMENT REVIEW

BENJAMIN D. TRUMP, MARIE-VALENTINE FLORIN, H. SCOTT MATTHEWS, DOUGLAS SICKER, IGOR LINKOV

US Army Corps of Engineers, Concord MA 01742, USA

Though many such issues will be uncovered as the technology becomes more widespread in its use and development, we identify two key governing questions that each institution must address prior to the development of its own DLT/blockchain, including (a) the varying need for centralized control over the ledger operation and reform process, and (b) the degree to which information on the ledger may be made public. (Page 1, right column, paragraph 2, line 5-11)

DLT/blockchain will be deployed in a variety of operating circumstances and environments in the coming years, and will be adapted for use given the specific needs and restrictions of actors in the public and private sectors, respectively. Each of these organizations retains unique governance structures, where institutional arrangements, decisionmaking protocols, and stakeholder engagement requirements shape and limit the types of activities that are acceptable and useful. As such, the DLT/blockchain deployed by each of these stakeholders would likely be heavily modified from the approach currently utilized by many cryptocurrencies. (Page 4, middle column, paragraph 1, line 19)

how DLT/ blockchain may be used to account for the unique political and institutional preconditions for its operating users. (Page 4, left column, paragraph 2, line 23-27)
A core technological challenge for any organization seeking to store and secure information within a DLT/ blockchain further includes whether their software should include the capacity to edit information within a ledger after it has gone through validation and consensus (Page 5, middle column, paragraph 2, line 1-8)

each institution must address prior to the development of its own DLT/blockchain (paragraph 1, right column, paragraph 2, line 8-11)

To highlight the governance intricacies across stakeholder group (Page 4, middle column, paragraph 2, line 1-2)
DLT/blockchain will be deployed in a variety of operating circumstances and environments in the coming years, and will be adapted for use given the specific needs and restrictions of actors in the public and private sectors, respectively. (Page 4, middle column, paragraph 1, line 1-7)

1. These organizations in-turn would need to develop blockchain/DLT systems that, while respecting the need for public access to large organization datasets, prevent public manipulation of data in favor of more limited access to data curation and reform. This may be accomplished through some PoS protocol within a core user group that is less concerned with a concentration of power over an information system, yet such governance structures are potentially more susceptible to cyber intrusion and attack than those with a more distributed institutional structure. (Page 4, right column, paragraph 2, line 14-31)
2. to comply with national and international law, companies and government agencies may need to both construct and secure options for blockchain editing under certain conditions—a task that is fraught with the risk of potential misuse or inappropriate modification of ledger information. (Page 5, right column, paragraph 1, line 3-11)

The internal and external governance of blockchain-based organizations: Evidence from cryptocurrencies

Google Scholar / book chapter

Bitcoin and Beyond

Ying- Ying Hsieh, Jean- Philippe (JP) Vergne, and Sha Wang

Ivey Business School (Canada)

1. Blockchain governance is about determining who has authority (internal and external actors); how these actors are endowed (e.g., ownership rights vs. decision authority), in what form (formal and informal governance forms/structures), and at which level (Narayanan et al., 2016). (Page 64, paragraph 3, line 1-4)
2. Therefore, the main objective for governance is to design contracts with incentive mechanisms that optimally allocate ownership rights, design ownership structures, and define control such that interests are aligned between owners (principals) and managers (agents) (Connelly et al., 2010; Fama and Jensen, 1983; Jensen and Meckling, 1976; Walsh and Seward, 1990). (Page 65, paragraph 2, line 16-21)

While the changes that would result from implementing large- scale blockchain solutions are worth studying in themselves, we also need to gain a deeper understanding of how these blockchain solutions would be operated and by whom. Put simply, we need to ask: How does blockchain governance work, and what are the implications? (Page 63, paragraph 2, line 1-5)

1. In line with corporate governance research (Hambrick et al., 2008; Yermack, 2017), we look at several internal governance design choices: at the blockchain level, direct control by cryptocurrency owners over the consensus schemes; at the protocol level, the existence of formal voting mechanisms for miners to participate in decision- making; at the organizational level, the existence of centralized funding backing the cryptocurrency creators. In addition, in line with the idea that the media act as agents of external governance for corporations (Aguilera et al., 2015; Walsh and Seward, 1990), we also study the effects of both social (e.g., Reddit, Twitter, and Facebook) and traditional media (i.e., mainstream newspapers) governance on cryptocurrency returns, after controlling for a number of factors such as cryptocurrency supply and liquidity. (Page 64, paragraph 4, line 4-14)
2. Considering how cryptocurrencies are structured, we distinguish, internally, between the blockchain, the protocol, and the organizational levels, and externally between the community, media, and social levels. (Page 67, paragraph 3, line 7-10)

1. Not unlike open source software projects, blockchain- based organizations can also be governed by decentralized communities, by centralized corporations, or jointly by both as hybrids. (Page 65, paragraph 1, line 11-14)
2. While internal actors include owners, shareholders, and managers, external actors include customers, the media, government, and the broader community. (Page 66, paragraph 1, line 2-4)
3. Instead of CEOs or top managers, it is core developers who write the organizational rulebook of cryptocurrencies in the software code, in a decentralized fashion. It is miners (or validators), rather than employees, who verify the validity of economic transactions and maintain a digitally shared, distributed ledger recording their history. (Page 66, paragraph 2, line 9-13)
4. At the blockchain level, miners (or validators in general), whose behavior is guided by the rules and incentives encoded in the cryptocurrency’s software, constitute the key stakeholder group. (Page 68, paragraph 2, line 1-3)
5. Developers who specialize in programming blockchain applications constitute the key stakeholder at the protocol level as they are the people who “write the rulebook” (Narayanan et al., 2016: 173). (Page 68, paragraph 3, line 1-3)
6. While the Ripple blockchain is decentralized across approved nodes, like any other centralized company, it has top managers who make decisions on resource allocation and control the direction for code development. Developers are hired as formal employees; “trusted nodes” are selected into the network based on approval, along with other business functions such as product design, marketing, and business development. (Page 69, paragraph 2, line 8-13)
7. However, compared with open- source software communities, cryptocurrency communities generally consist of a much more diverse base of stakeholders, including: developers, miners, start- ups, enthusiasts, and users. (Page 70, paragraph 2, line 5-8)
8. Similar to the way market stakeholders (i.e., suppliers, customers, and shareholders) can exert pressure to corporate decision- making (Stevens et al., 2005), for cryptocurrencies, social pressure comes from a broader range of external stakeholder groups such as merchants, regulators, and service providers. (Page 71, paragraph 1, line 5-8)

internal governance
1. In sum, there are three governance design features at the blockchain level associated with more centralization: the use of PoS, the use of pre- mining, and the use of nomination. (Page 68, paragraph 2, line 20-23)
2. A cryptocurrency with a formal voting procedure in place is considered more decentralized in terms of the governance of its protocol, since developers are then unable to unilaterally impose code changes to the rest of the organizational stakeholders. (Page 68, paragraph 3, line 16-17)
3. Under this more centralized model, management strategies not only are prevalent but necessary for the cryptocurrency- as-company to attract external funding and grow. The presence of such centralized funding reflects a more centralized form of governance. (Page 69, paragraph 2, line 13-16)

external governance
4. Community governance involves forum discussions and sometimes informal online voting over decisions. (Page 70, paragraph 2, line 8-9)
5. Different from controlling through ownership and decision rights, the media can influence key stakeholders of an organization by serving as an information intermediary that plays a governance role through informing, monitoring, and reputation effects (Bushee et al., 2010; Dyck and Zingales, 2002). In particular, scholars have demonstrated that negative publicity conveyed in the media is especially effective in influencing organizations. (Page 70, paragraph 3, line 3-9)
6. Arguably, cryptocurrencies that receive greater public interest are also subject to more decentralized monitoring and scrutiny regardless of the nature of search and intention. (Page 71 ,paragraph 1, line 2-5)

7. Some are permissioned, such as Ripple (founded in 2013), whose membership is set by a central authority. Ripple took on a distinct governance approach not only for the cryptographic consensus, but also regarding how participants need to be approved before joining the network. (Page 72, paragraph 3, line 3-7)

The invisible politics of bitcoin: governance crisis of a decentralized infrastructure

Google Scholar / snowballing

Internet Policy Review

Primavera De Filippi, Benjamin Loveluck

CERSA/CNRS/Université Paris II & Berkman-Klein Center for Internet & Society at Harvard, France

1. definition and protection of community borders;
2. establishment of incentives for participation and acknowledgment of the status of contributors;
3. and, finally, pacification of conflicts.
(Page 10, paragraph 3, line 1-4)

1. Recently, the community of developers, investors and users of Bitcoin has experienced what can be regarded as an important governance crisis – a situation whereby diverging interests have run the risk of putting the whole project in jeopardy. This governance crisis is revealing of the limitations of excessive reliance on technological tools to solve issues of social coordination and economic exchange. (Page 2, paragraph 2, line 1-5)
2. One thing is sure though: regardless of the robustness and technical viability of the Bitcoin protocol, this governance crisis and failure in conflict resolution has highlighted the fragility of the current decision-making mechanisms within the Bitcoin project. It has also emphasised the tension between the (theoretically) decentralised nature of the Bitcoin network and the highly centralised governance model that has emerged around it, which ultimately relied on the goodwill and aligned interests of only a handful of people. (Page 9, paragraph 4, line 5-11)
3. Governance structures are set up in order to adequately pursue collective goals, maintain social order, channel interests and keep power relations under check, while ensuring the legitimacy of actions taken collectively. (Page 9, paragraph 5, line 1-3)

1. governance structure of Bitcoin, which can be understood as a two-layered construct: an infrastructure seeking to govern user behaviour via a decentralised, peer-to-peer network on the one hand, and an open source community of developers designing and architecting this infrastructure on the other. (Page 2, paragraph 3, line 3-6)
2. On the one hand, there is the infrastructural layer: a decentralised payment system based on a global “trustless” peer-to-peer network which operates according to a specific set of protocols. On the other hand, there is the layer of the architects: a small group of developers and software engineers who have been entrusted with key roles for the development of this technology. (Page 10, paragraph 4, line 3-7)

Recently, the community of developers, investors and users of Bitcoin has experienced what can be regarded as an important governance crisis – a situation whereby diverging interests have run the risk of putting the whole project in jeopardy. This governance crisis is revealing of the limitations of excessive reliance on technological tools to solve issues of social coordination and economic exchange. (Page 2, paragraph 2, line 1-5)

1. The Bitcoin project can thus be said to comprise at least two different types of communities – each with their own boundaries and protection mechanisms, rewards or incentive systems, and mechanisms for conflict resolution. One is the community of nodes within the network, which includes both passive users merely using the network to transfer money around, and “active” users (or miners) contributing their own computational resources to the networks in order to support its operations. The other is the community of developers, who are contributing code to the Bitcoin project with a view to maintain or improve its functionalities. (Page 10, paragraph 5, line 1-7)
2. there exists a dividing line between the community of users and developers at large, who can provide input and suggest modifications to the code (by making a pull-request, for instance), and the core developers who are in charge of preserving the quality and the functionality of the code, and who are the only ones with the power to accept (or refuse) the proposed modifications (e.g. by merging pull-requests into the main branch of the code). (Page 13, paragraph 4, line 7-12)

1. Given the open and decentralised nature of the Bitcoin network, its community borders are extremely flexible and dynamic, in that everyone is free to participate and contribute to the network – either as a passive user or as an active miner. (Page 10, paragraph 8, line 1-3)
2. With regard to status recognition, the Bitcoin protocol eliminates the problem at the root by creating a trustless infrastructure where the identity of the participant nodes is entirely irrelevant. In Bitcoin, there is no centralised authority in charge of assigning a network identifier (or account) to each individual node. (Page 11, paragraph 2, line 1-4)
3. Conversely, the reward system represents one of the constitutive elements of the Bitcoin network. The challenge has been resolved in a purely technical manner by the Bitcoin protocol, through the notion of mining. In addition to providing a protection mechanism, the Proof-ofWork algorithm introduces a series of economic incentives to reward those who are contributing to maintaining and securing the network with their computational resources (or hashing power). (Page 11, paragraph 3, line 1-6)
4. Given that there is no way of deciding objectively which blockchain should be favoured over the other, the Bitcoin protocol implements a specific fork-choice strategy stipulating that, if there is a conflict somewhere on the network, the longest chain shall win. 25 Again, as with the former two mechanisms, the longest-chain rule is a simple and straightforward mechanism to resolve the emergence of conflicts within the Bitcoin network by relying – solely and exclusively – on technological means. (Page 11, paragraph 4, line 7-13)
5. there exists a dividing line between the community of users and developers at large, who can provide input and suggest modifications to the code (by making a pull-request, for instance), and the core developers who are in charge of preserving the quality and the functionality of the code, and who are the only ones with the power to accept (or refuse) the proposed modifications (e.g. by merging pull-requests into the main branch of the code). (Page 13, paragraph 4, line 7-12)
6. The BIP process requires that all source code and documentation be released and made available to anyone, so that a multiplicity of individuals can contribute to discuss and improve them. Yet, the final call as to whether a change will be implemented ultimately relies on the core developers assessing the degree of public support which a proposal has built, and finding a consensus among themselves: (Page 13, paragraph 5, line 7-11)
7. If the core developers were to make a modification to the code that the community disagrees with (the miners, in particular), the community might simply refuse to run the new code. This can be regarded as a form of “vetoing power’ 32 or “market-based governance’ 33 which guarantees that legitimacy of the code ultimately rests with the users. (Page 14, paragraph 3, line 6-9)
8. In the case of Bitcoin, some measure of reputation can be derived from the platform used to manage the versioning of the software – Github – which includes metrics for users" activities (such as number of contributions, number of followers, etc.). (Page 14, paragraph 4, line 8-10) (acknowledgment of status)
9. Forking is a process whereby two (or more) software alternatives are provided to the user base, who will therefore need to make a choice: the adoption rate will ultimately determine which branch of the project will win the competition, or whether they will both evolve as two separate branches of the same software. Forking is standard practice in free/libre and open source software development, and although it can be seen as a last resort solution which can sometimes put the survival of a project at risk (Robles & González-Barahona, 2012), it can also be considered a key feature of its governance mechanisms. (Page 15, paragraph 1, line 1-7)
10. The solutions found by modern day liberal democracies involve strong elements of publicity and debate. The underlying assumption is that the only way to ensure the legitimacy of collective decisions is by making conflicts apparent and by discussing and challenging ideas within the public sphere (Habermas, 1989). (Page 17, paragraph 2, line 4-7)
11. In order to ensure the long-term sustainability of these organisations, it is necessary to incorporate, on top of the technical framework, a specific governance structure that enables people to discuss and coordinate themselves in an authentically democratic way, but also – and perhaps more importantly – to engage and come up with decisions as to how the technology should evolve. In that regard, one should always be wary that the decision-making process involve not only those who are building the technology (i.e. developers and software engineers) but also all those who will ultimately be affected by these decisions (i.e. the users of that technology).(Page 17, paragraph 4, line 5-12)

MULTAV: A Multi-chain Token Backed Voting Framework for Decentralized Blockchain Governance

Springerlink

International Conference on Blockchain, ICBC 2020: Blockchain – ICBC 2020

Xinxin Fan, Qi Chai, Zhi Zhong

IoTeX, Menlo Park, CA 94025, USA

1. How various entities come together to achieve longterm sustainability of the blockchain system as a whole has raised the question of governance in the cryptocurrency space. (Page 1, paragraph 1, line 5-7)
2. At a high level, blockchain governance refers to the mechanisms that enable the decentralized systems to adapt and change over time [1]. It is a rapidly evolving topic covering a wide spectrum of activities, including but not limited to changing protocol parameters, electing block producers, distributing subsidies, etc. (Page 1, paragraph 1, line 9-11)
3. In onchain governance, token holders vote on whether a governance proposal encoded on the blockchain is accepted or rejected. The off-chain governance, on the other hand, requires informal coordination among stakeholders to decide whether certain changes on the blockchain should be made. (Page 2, paragraph 2, line 2-6)

1. Governance is a critical component in cryptocurrency systems for their sustainable development and evolution. In particular, onchaingovernancehas attractedalotofattentionincryptocurrencycommunities after the hard forks of Bitcoin and Ethereum. (Page 1, abstract, line 1-4)
2. How various entities come together to achieve longterm sustainability of the blockchain system as a whole has raised the question of governance in the cryptocurrency space. (Page 1, paragraph 1, line 5-7)

1. At a high level, blockchain governance refers to the mechanisms that enable the decentralized systems to adapt and change over time [1]. It is a rapidly evolving topic covering a wide spectrum of activities, including but not limited to changing protocol parameters, electing block producers, distributing subsidies, etc. (Page 1, paragraph 1, line 9-11)
2. In onchain governance, token holders vote on whether a governance proposal encoded on the blockchain is accepted or rejected. The off-chain governance, on the other hand, requires informal coordination among stakeholders to decide whether certain changes on the blockchain should be made. (Page 2, paragraph 2, line 2-6)
3. In Phase 2, any token holder who wishes to submit a governance proposal GPj,j ∈{1,...,m} needs to deploy a governance smart contract GCj on CSUG for acting on the voting results as well as a pair of smart contracts RCi,j and VCi,j on CSi,i =1,...,n for registering voting choices and managing votes, respectively (Page 7, paragraph 1, line 1-5)

1. At a high level, blockchain governance refers to the mechanisms that enable the decentralized systems to adapt and change over time [1]. It is a rapidly evolving topic covering a wide spectrum of activities, including but not limited to changing protocol parameters, electing block producers, distributing subsidies, etc. (Page 1, paragraph 1, line 9-11)
2. In onchain governance, token holders vote on whether a governance proposal encoded on the blockchain is accepted or rejected. The off-chain governance, on the other hand, requires informal coordination among stakeholders to decide whether certain changes on the blockchain should be made. (Page 2, paragraph 2, line 2-6)
3. The project team will initially choose n well-established cryptocurrency systems and determine the corresponding token distribution on those blockchain platforms. (Page 6, paragraph 2, line 3-5)
4. In Phase 2, any token holder who wishes to submit a governance proposal GPj,j ∈{1,...,m} needs to deploy a governance smart contract GCj on CSUG for acting on the voting results as well as a pair of smart contracts RCi,j and VCi,j on CSi,i =1,...,n for registering voting choices and managing votes, respectively (Page 7, paragraph 1, line 1-5)

1. token holders of CSUG are widely distributed across n established cryptocurrency systems CSi,i =1,...,n and those token holders can cast votes for one or multiple governance proposals through the smart contracts RCi,j and VCi,j,i ∈{1,...,n},j ∈{1,...,m}. (Page 5, paragraph 2, line 1-4)
2. Based on the predefined rule in the governance proposals as well as the corresponding governance smart contract GCj,j ∈{1,...,m}, the nodes in CG fetch the states of the voting smart contracts VCi,j,i ∈{1,...,n},j ∈{1,...,m} with the light clients CSCi,i =1,...,n, respectively. (Page 5, paragraph 2, line 5-6)
3. The project team will initially choose n well-established cryptocurrency systems and determine the corresponding token distribution on those blockchain platforms. (Page 6, paragraph 2, line 3-5)

1. token holders of CSUG are widely distributed across n established cryptocurrency systems CSi,i =1,...,n and those token holders can cast votes for one or multiple governance proposals through the smart contracts RCi,j and VCi,j,i ∈{1,...,n},j ∈{1,...,m}. Based on the predefined rule in the governance proposals as well as the corresponding governance smart contract GCj,j ∈{1,...,m}, the nodes in CG fetch the states of the voting smart contracts VCi,j,i ∈{1,...,n},j ∈{1,...,m} with the light clients CSCi,i =1,...,n, respectively. (Page 5, paragraph 2, line 1-6)
2. The project team will initially choose n well-established cryptocurrency systems and determine the corresponding token distribution on those blockchain platforms. (Page 6, paragraph 2, line 3-5)
3. In Phase 2, any token holder who wishes to submit a governance proposal GPj,j ∈{1,...,m} needs to deploy a governance smart contract GCj on CSUG for acting on the voting results as well as a pair of smart contracts RCi,j and VCi,j on CSi,i =1,...,n for registering voting choices and managing votes, respectively (Page 7, paragraph 1, line 1-5)
4. To prevent malicious token holders from abusing the MULTAV framework, an on-chain pre-voting phase has been introduced, which requires a governance proposal to collect a certain number of votes (e.g., 50% of the total votes) within a system-defined pre-voting period (e.g., one month from deployment of the governance contract). This pre-voting mechanism guarantees that only important governance proposal which has received significant attention will be further considered by the community. (Page 8, paragraph 2, line 1-7)

Now the Code Runs Itself: On-Chain and Off-Chain Governance of Blockchain Technologies

Springerlink

Wessel Reijers, Iris Wuisman, Morshed Mannan, Primavera De Filippi, Christopher Wray, Vienna Rae‑Looi, Angela Cubillos Vélez, Liav Orgad

European University Institute, Robert Schuman Centre, Italy

1. The governance of blockchain-based systems usually incorporates a variety of rules and procedures that may be implemented both ‘on-chain’ and ‘off-chain’. On-chain governance refers to rules and decision-making processes that have been encoded directly into the underlying infrastructure of a blockchain-based system. This type of governance defines the rules of interactions between participants through the infrastructure within which these interactions take place; these interactions are solely determined by rules embedded within the underlying blockchain code—the so-called rule of code (De Filippi and Wright 2018). (Page 2, left column, paragraph 2, line 1-11)
2. Off-chain governance comprises all other (i.e. non-onchain) rules and decision-making processes that might affect the operations and the future development of blockchainbased systems. Off-chain governance includes both endogenous and exogenous rules. The former category refers to the rules adopted by a reference community to ensure the proper functioning and ongoing development of a blockchainbased system (including procedures to implement protocol changes). The latter category includes all rules imposed by a third-party onto the reference community, e.g. national laws and regulations, contractual agreements, technology standards, and so forth. (Page 2, left column, paragraph 2, line 20-31)

In particular, the topic of blockchain governance has become central in the blockchain community, notably in the aftermath of the attack on ‘The DAO’—a decentralized venture capital fund that was meant to be the world’s first fully functioning decentralized autonomous organization (Page 2, left column, paragraph 1, line 2-7)

1. Off-chain governance and on-chain governance fundamentally differ along similar lines: off-chain governance allows for interventions into the blockchain protocol that are not prescribed by the protocol itself, by outside authorities. In other words, with off-chain governance people are in charge of the code, without their actions being determined by it. (Page 3, left column, paragraph 2, line 6-12)
2. not only are the rules of interaction between participants dictated by the blockchain protocol, but so are the rules defining the operation of the infrastructure within which these interactions take place. (Page 4, left column, paragraph 2, line 3-6)
3. any violation of the on-chain governance structure could create crises and conflicts in the realm of off-chain governance (e.g., threats between participants, physical violence). (Page 10, left column, paragraph 1, line 6-9)

1. A striking commonality between Kelsen’s legal theory and the way in which blockchain technologies function is that the validity of transactions in a blockchain-based system is not determined by the content of these transactions, but by their conformity with the consensus protocol, which is determined by a factual and objective mathematical process of verification. (Page 3, right column, paragraph 3, line 2-8)
2. This examination will lead us to an interpretation of the DAO attack as a state of exception in the context of on-chain governance. (Page 5, right column, paragraph 2, line 12-14)
3. What made this hard fork exceptional was that it was unplanned, in response to a contentious political and moral issue, rather than a previously acknowledged technical issue. (Page 7, left column, paragraph 1, line 4-7)
4. What currently sets blockchain-based systems apart from nation states is their much more radically voluntary character: all participants are free to leave or to implement a hard fork in order to establish a new voluntary community. (Page 9, right column, paragraph 2, line 3-7)"

1. Some blockchain-based systems realize this form of positivist on-chain governance by relying on code-based structures not only for the regulation of participants’ behavior, but also for the introduction of changes to the infrastructure within which participants operate. (Page 4, left column, paragraph 2, line 7-11)
2. In the case of the DAO attack, the development team, the Ethereum Foundation and the supernodes that were heavily invested in the DAO had a significant influence in the discussions regarding the response to the attack. (Page 9, left column, paragraph 1, line9-13)
3. individual participants that upgraded their client, far from exercising their sovereign will, were legitimizing the decision that had been made on their behalf during the state of exception. (Page 9, right column, paragraph 1, line 2-5)

1. Therefore, it is presumed that the consensus protocol of a blockchain-based system represents a shared concept of authority amongst participants. As such, Kelsen’s argument that “by presupposing the basic norm (…) one ought to behave as the constitution prescribes” (Kelsen 2005, p. 202), can be reinterpreted in relation to on-chain blockchain governance: by presupposing the basic norm, one ought to behave as the consensus protocol prescribes. (Page 4, left column, paragraph 1, line 5-13)
2. A hard fork is a change in the blockchain protocol that is not backward compatible with the previous protocol—thus creating a separate blockchain that people have to voluntarily switch to.11 Hard forks occur repeatedly in the Ethereum network in order to fix bugs, improve the scalability of the network, or more generally, transition to a superior consensus protocol. (Page 6, right column, paragraph 2, line 3-9)
3. These different views were gauged through opinions expressed on online forums such as Reddit, private discussions held with large exchanges and miners, as well as through the votes cast by ether and DAO token holders. Eventually, the Ethereum core development team released new software with an upgrade of the protocol: 89% of the miners voted in favor of the hard fork, whereas 11% decided to remain on the original blockchain. (Page 7, left column, paragraph 3, line 1-8)
4. While the community could vote on what the default option should be, it was the Foundation that set the block number by which votes would be tallied. (Page 9, left column, paragraph 2, line 11-14)
5. What currently sets blockchain-based systems apart from nation states is their much more radically voluntary character: all participants are free to leave or to implement a hard fork in order to establish a new voluntary community. (Page 9, right column, paragraph 2, line 3-7)

Ping-Pong Governance: Token Locking for Enabling Blockchain Self-governance

Springerlink

Mathematical Research for Blockchain Economy

Paul Merrill, Thomas H. Austin, Justin Rietz and Jon Pearce

0Chain LLC, Cupertino, USA

Governance in the context of blockchain refers to how a blockchain’s community can make changes that involve some amount of human interaction [4]. While governance protocols cannot guarantee that the blockchain will not fork over a particularly contentious issue like theDAO debacle, they can provide an authoritative community decision that automates much of the process in order to minimize the work requiring human intervention. (Page 2, paragraph 3, line 1-6)

But blockchain-based protocols are difficult to update once launched. Upgrading requires participants to explicitly opt-in to the new protocol by installing new versions of the software. These hard forks are undesirable, since they can require significant manual involvement. (Page 2, paragraph 2, line 1-4)

1. Our protocol can be used to govern three broad areas: configuration, to adjust the settings of the chain; moderation, to punish bad service providers; and feature proposal, to gauge community interest in deeper revisions to the protocol. (Page 6, paragraph 4, line 1-3)
2. Configuration The community can vote to adjust a number of parameters of the blockchain. (Page 6, paragraph 5, line 1-2)
3. Decentralized Application Changes Individual decentralized applications (DApps) will require the same types of changes (configuration, moderation, feature requests) as the blockchain protocol itself. However, since there may be substantially fewer interested parties, each DApp may specify its own threshold settings. The design and challenges are otherwise identical. (Page 7, paragraph 5, line 1-5)

Any client with tokens may make a proposal by writing a transaction to the blockchain. (Page 7, paragraph 6, line 2-3)

1. Configuration The community can vote to adjust a number of parameters of the blockchain. (Page 6, paragraph 5, line 1-2)
2. Moderation Moderation allows the community to police itself. In some proof-ofstake systems, a miner or other entity may stake tokens to ensure good behavior. For instance, miners in Tendermint [9] can lose their stake if they sign multiple blocks at the same height. Our protocol could be used in this manner. For instance, if a service provider is not living up to their terms of service, the community could vote to burn or seize the provider’s staked tokens. (Page 6, paragraph 7, line 1-6)
3. Any client with tokens may make a proposal by writing a transaction to the blockchain. (Page 7, paragraph 6, line 2-3)

1. Token rewards are treated as votes; by locking more tokens, clients may dedicate more votes to a proposal that they favor. (Page 2, paragraph 7, line 2-3)
2. If a proposal passes, it is followed by a review period where the community may veto the proposal. If a proposal if vetoed, the community may vote to override the veto. The override itself may be vetoed, which may also be overridden, and so on. (Page 3, paragraph 2, line 5-8)
3. Configuration The community can vote to adjust a number of parameters of the blockchain. (Page 6, paragraph 5, line 1-2)
4. Moderation Moderation allows the community to police itself. In some proof-ofstake systems, a miner or other entity may stake tokens to ensure good behavior. For instance, miners in Tendermint [9] can lose their stake if they sign multiple blocks at the same height. Our protocol could be used in this manner. For instance, if a service provider is not living up to their terms of service, the community could vote to burn or seize the provider’s staked tokens. (Page 6, paragraph 7, line 1-6)
5. If the proposal is accepted by the community, it will be deployed to testnet to run for 30 days. (Page 7, paragraph 3, line 4-5)
6. Any client with tokens may make a proposal by writing a transaction to the blockchain. (Page 7, paragraph 6, line 2-3)
7. All tokens transferred to the accept and reject pools are unspendable, and can be considered burned.We expect that most clients will vote by locking tokens. However, clients who feel particularly passionate about a change might elect to spend their tokens instead. This design favors themajor stake holders (who hold the most tokens), but gives some recourse to the minor stake holders, albeit at a cost of losing future voting power. (Page 8, paragraph 2, line 1-6)

The Political Economy of Blockchain Governance

Google Scholar

Barton E. Lee, Daniel J. Moroz, David C. Parkes

School of Economics, UNSW Sydney, Australia, and Data61

1. Blockchain governance is the process by which the rules (that is, the software) of these systems are managed.1 In the context of cryptocurrencies, a change may affect the speed of transactions, the security of the currency, or the size of transaction fees. (Page 2, paragraph 2, line 1-3)
2. Thus, blockchain governance is a decentralized process both in terms of how proposals for change are made and also in regard to individual users’ freedom to accept or reject policy changes. (Page 3, paragraph 3, line 1-3)

Debates around proposed changes to the rules can lead to battles based on ideological preferences in addition to financial considerations, and blockchains have given rise to novel governance structures. (Page 2, paragraph 2, line 3-6)

Thus, blockchain governance is a decentralized process both in terms of how proposals for change are made and also in regard to individual users’ freedom to accept or reject policy changes. (Page 3, paragraph 3, line 1-3)

1. A proposal to change the status quo can be made by any individual, there may be no authority or government who can restrict the agenda, and users can reject policies they dislike. (Page 2, paragraph 3, line 2-4)

1. A proposal to change the status quo can be made by any individual, there may be no authority or government who can restrict the agenda, and users can reject policies they dislike. (Page 2, paragraph 3, line 2-4)
2. Once created, it is up to users to decide whether to use the forked chain. In this way, individuals can accept and reject policy changes at will and also implement any change they desire at any time. (Page 3, paragraph 2, line 7-9)
3. If a fork causes a currency to have a user base that is too small this may cause exchanges not to list the currency, rendering it much less useful and unlikely to survive. (Page 3, paragraph 3, line 9-11)

1. a user’s decision to adopt a proposed fork involves consideration of their preferences for the policy content of the fork and the (expected) network effects; a policy proposal can lead to a contentious, noncontentious or a null fork; and the distribution of user preferences has a consequential effect on the range of proposals that can survive as (non-null) forks. (Page 4, paragraph 1, line 1-5)
2. introduce a model of blockchain governance via the tools of formal political theory. (Page 3, paragraph 4, line 1-2)
3. We present a positive theory that seeks to describe and explain observed forking phenomena, such as those described in the previous paragraph, and answer questions such as ‘when and why do forks occur?’ These questions are important because forks have the potential to split a network and, in some cases, even destroy a currency via its replacement. (Page 4, paragraph 2, line 1-5)

Quadratic Voting and Blockchain Governance

Google Scholar

UMKC Law Review

Del Wright Jr.

UMKC School of Law faculty

1. Blockchain governance, as a subset of distributed governance, is the process whereby participants agree on a set of parameters for changing the protocol, resolving disputes, sanctioning rulebreakers and enforcing penalties (page 14, paragraph 3, line 1-3)
2. * Off-Chain, in which decision-making takes place first on a social level and is later encoded into the protocol by developers; and * On-Chain, in which decision-making rules are encoded into the protocol and any decision that is approved is automatically incorporated into the protocol (page 14, paragraph 4, line 1-5)

1. Both democratic governance and hierarchical governance offer, as they have developed throughout history, advantages and disadvantages. However, the needs of blockchains may not fit well into either paradigm, and existing governance mechanisms may not best serve the needs of current and future blockchain applications. (page 7, paragraph 2, line 1-5)
2. An efficient governance system should provide stakeholders transparent criteria for selecting the protocol's goals, allow changes to those goals as the protocol matures, and incentivize developers
to assist in reaching those goals. (page 9, paragraph 4, line 4-5)
3. That group is tasked with fixing bugs and security vulnerabilities, adding features and improving scalability, representing the blockchain in public discussions, and maintaining the right balance of power among users, companies, and miners 82 (page 15, paragraph 3, line 3-6)

* Off-Chain, in which decision-making takes place first on a social level and is later encoded into the protocol by developers; and * On-Chain, in which decision-making rules are encoded into the protocol and any decision that is approved is automatically incorporated into the protocol (page 14, paragraph 4, line 1-5)

1. The BIP process generally begins with a developer submitting an improvement proposal. If deemed worthy, the proposal (i) becomes a draft, (ii) is sent to the Bitcoin core developers for review, and (iii) is added to the GitHub repository for BIPs, where is discussed in the greater community (Page 11, paragraph 4, line 1-4)

1. For bitcoin holders ("hodlers" in the world crypto)" and miners, the and the primary goal may be a higher price; however, for founders, developers, broader public, the primary goal may be an increase in network utility (as a store of value and medium of exchange) and adoption. (page 9, paragraph 4, line 1-4)
2. The decision makers in Bitcoin are the developers, miners, token holders, node operators, and users. Each plays a part in managing and improving the network through the Bitcoin Improvement Proposal ("BIP"), the mechanism used to improve the Bitcoin protocol (page 11, paragraph 3, line 1-4)
3. Miners are incentivized by block rewards to both secure the network and reduce network instability (page 12, paragraph 4, line 2-3)
4. Although Bitcoin developers may not receive direct financial renumeration, they do earn experience and credentials that can be monetized, particularly with the demand for blockchain developers growing exponentially (Page 13, paragraph 2, line 6-8)
5. Bitcoin node operators are also indirectly incentivized by increases in network utility and the price of bitcoin (Page 13, paragraph 3, line 1-2)

1. The BIP process generally begins with a developer submitting an improvement proposal. If deemed worthy, the proposal (i) becomes a draft, (ii) is sent to the Bitcoin core developers for review, and (iii) is added to the GitHub repository for BIPs, where is discussed in the greater community (Page 11, paragraph 4, line 1-4)
2. Once accepted as a draft, the proposal can be either (i) deferred or withdrawn by the author, or (ii) rejected or accepted by the community of node operators. (Page 11, paragraph 5, line 1-3)
3. Miners are incentivized by block rewards to both secure the network and reduce network instability (page 12, paragraph 4, line 2-3)
4. In Decred, holders of tokens can time-lock (stake) their tokens in exchange for tickets, that allow ticker holders to participate in governance in two on-chain (and one off-chain) governance machanisms. (page 17, paragraph 3, line 3-6)
5. Tezos also incorporates an explicit improvement mechanism into the blockchain, providing developers with framework, and giving token holders the ability to a clear reward evaluate the merits of a proposal and determine whether the proposal will improve the protocol. (page 17, paragraph 4, line 6-10)
6. QV may offer "a better way to make collective decisions that avoids the tyranny of the majority by allowing people to express how strongly they feel about an issue rather than just whether they are in favor of it or opposed to it."1 07 QV achieves that by allowing voters to express how strongly they believe in a decision by acquiring more votes, thus forcing voters to weigh the cost and benefits of doing so. (page 18, paragraph 5, line 1-6)

Regulating Blockchain, DLT and Smart Contracts: a technology regulator’s perspective

Springerlink

ERA Forum

Ellul, Joshua
Galea, Jonathan
Ganado, Max
McCarthy, Stephen
Pace, Gordon J.

Inaugural Chairperson of the Malta Digital Innovation Authority and Director of the Centre for Distributed Ledger Technologies, University of Malta, Msida, Malta

governance decentralisation: governance of the content on a DLT is itself decentralised, in that no single party may impose decisions taken on the content stored, transactions processed, etc. (Page 3, paragraph 3, line 3-5)

– data violations: although peer-to-peer networks have long been known, the immutability introduced by DLTs means that data cannot be removed or changed, even if authorities require it to be. Furthermore, the decentralised governance implies that authorities cannot filter what is written on the DLT.
– anonymity violations: removing anonymity has typically been addressed through regulatory requirements on service providers, but the decentralised governance of DLTs does not give a regulatory framework a foothold it can use to remove anonymity.
– illegal actions: actions arising from executable code written to and executed on a DLT may result in breach of law. In some cases blame can be assigned to the party provoking the behaviour (e.g., a party using a smart contract to perform a transaction in return for an illegal service), although there still lies the challenge of anonymity. However due to the decentralised nature of DLTs, it is not always clear how parties can be identified.
– violations due to inaction: due to the reactive nature of the many DLT platforms operating without permission having been given, progress may be stalled due to actions which cannot be performed unless initiated by an external party, which may lead to a breach of the law due to inaction, and with no party being obliged to trigger the smart contract.
– violations due to code errors: whilst automation can be considered an advantage, in that the code prescribes behaviour, one has to take into account errors in code, and obfuscated code which indicates one form of behaviour but stealthily performs another. Where the responsibility for causing such behaviour lies is unclear, since the code does prescribe one form of behaviour, even though the user may have expected another.
(Page 4, paragraph 1-5)
the infamous Parity bug [6] that ended up losing and locking away USD 200 million worth of Ether (the cryptocurrency provided on the Ethereum blockchain); the infamous Decentralised Autonomous Organisation (DAO) hack [4] which allowed for a malicious user to steal USD 50 million worth of Ether of other users’ funds; and more recent cases which saw a decentralized lending protocol hacked in two days6 resulting in just under USD 1 million being stolen, and a decentralised exchange bug which allowed for a hacker to get away with more than USD 250,000.7 (Page 8, paragraph 1, line 1-7)

1. It can be said that the need for regulatory frameworks was spurred by two main factors—concern over the use of cryptocurrencies for illicit purposes, and the need to protect retail, professional and enterprise users of various platforms providing services akin to financial services. (Page 4, paragraph 8, line 1-4)
2. Certification of an innovative technology arrangement can take any of the following forms (currently): for DLT alone, DLT with some smart contracts, or smart contracts on their own. The certification will state, on the face of it, what is being certified. This will enable a third party user to understand what is covered by it and what is not. (Page 10, paragraph 3, line 1-5)

1. The systems auditor has been conceived as being pre-deployment assurance, leading to certification, while the technical administrator has been conceived as playing a potential role post-deployment and certification. (Page 10, paragraph 4, line 2-4)
2. If no-one acts to address a problem of loss or breach of law, then the technical administrator, on being notified of the problem and seeing lack of action, must intervene. To be able to intervene effectively, the software must give him some powers to intervene and modify the software and perhaps, in an extreme case, a kill switch. (Page 10, paragraph 6, line 1-4)

1. It also seeks to avoid duplication and contradictory strategies, while at the same time maintaining expertise on a subject matter (e.g., financial services, health) combined with knowledge and awareness of the strengths and weaknesses of DLT and smart contracts. It allows one regulator to focus on the quality of the technology solution using DLT with the other regulator relying on the first to ensure that the goals of the second are achieved in its areas of expertise. (Page 9, paragraph 5, line 6-11)
2. System Auditors and Subject Matter Experts Systems auditors, entities that will audit the technology developed in order to determine whether the innovative technology arrangement meets the standards required, are registered with the Malta Digital Innovation Authority, following an application process involving a review and a due diligence exercise including the vetting and scrutiny of their various subject matter experts. (Page 10, paragraph 2, line 1-6)
3. Without going into too much detail, the technical administrator is a person engaged by the technology arrangement applicant, and need not necessarily be independent as long as he subscribes to duties which are of a fiduciary nature in favour of the users as a whole. Basically, the technical administrator must be the last point of recourse should there be a loss or a breach of law taking place which is not addressed through the governance structure of the arrangement. (Page 10, paragraph 5, line 1-6)
4. The forensic node is to be implemented by the operator (and not the Authority). At the same time it does not require that the operator abides by a specific specification, interface or other technology restriction.13 Systems auditors are required to ensure that all relevant information is recorded faithfully in real-time without risk of omission or corruption, thus ensuring that the means of conducting an investigation exist at a later stage when required. (Page 11, paragraph 1, line 4-9)

1. For the very same reasons, software that is used for applications that are critical or of a high risk nature, be it smart contracts, blockchain networks, other distributed ledgers, or even traditional software, should undergo independent audits to ensure that the systems are implemented correctly, so as to avoid detrimental consequences. (Page 7, paragraph 5, line 12-15)
2. Such updates could cause ‘hard forks’ in the network, whereby those nodes that do not choose to accept the update would no longer be part of the ‘new’ blockchain with the updated code, but would remain part of the ‘old’ blockchain with the original unpatched code. (Page 8, paragraph 2, line 3-6)
3. The Authority was not set up to regulate cryptocurrencies or such assets, but to address technology arrangements constituting blockchain, other DLT or smart contracts (which very well may be used within cryptocurrencies or other virtual currencies). (Page 9, paragraph 2, line 5-8)
4. What the Act seeks to do is to offer certification to a developer of an innovative technology arrangement which should provide a level of trust in the market. It is voluntary and one can apply for it if one wishes to meet the standards of the law and obtain confirmation of such compliance. (Page 9, paragraph 6, line 5-8)
5. System Auditors and Subject Matter Experts Systems auditors, entities that will audit the technology developed in order to determine whether the innovative technology arrangement meets the standards required, are registered with the Malta Digital Innovation Authority, following an application process involving a review and a due diligence exercise including the vetting and scrutiny of their various subject matter experts. (Page 10, paragraph 2, line 1-6)
6. If no-one acts to address a problem of loss or breach of law, then the technical administrator, on being notified of the problem and seeing lack of action, must intervene. To be able to intervene effectively, the software must give him some powers to intervene and modify the software and perhaps, in an extreme case, a kill switch. (Page 10, paragraph 6, line 1-4)
7. Blueprint, English Description and Consumer Protection The systems auditors, in undertaking their quality and assurance checks, will use a technology blueprint to determine whether an arrangement is technically sound. In the event that a discrepancy emerges between the implementation and an obligatory (English) description displayed to users, then, according to the Innovative Technology Arrangements and Services Act, the English description will be deemed to prevail over the implementation. (Page 11, paragraph 4, line 1-7)
8. innovative technology arrangements framework which currently provides for a technology assurance regulatory environment for Blockchain, DLT and Smart Contracts. (Page 12, paragraph 1, line 3-5)

Regulatory issues in blockchain technology

Google Scholar / snowballing

Journal of Financial Regulation and Compliance

Peter Yeoh

School of Law, Social Sciences and Communications, University of Wolverhampton, Wolverhampton, UK

1. In contrast, the open source software in bitcoin is governed by an ad hoc process comprising a handful of informal institutions and power holders. With the emergence of difficult decisions over which stakeholders’ interests to prioritize, the community involved now has to struggle with how a formal governance mechanism is to be designed especially when bitcoin was launched on an ethos of anti-institutionalism. (Page 6, paragraph 2, line 1-5)
2. Further, as blockchain applications span regulatory jurisdictions, a considerable amount of coordination among regulators would be required to effectively identify and address risks involved. (Page 8, paragraph 5, line 1-3)

1. As blockchains mature and disrupt how data are conceived and stored, there could arise unintended consequences prompting regulatory authorities to mull over the need for intervention (Page 2, paragraph 2, line 7-9)
2. Blockchain’s wider and deeper application applications are potentially constrained by limitations posed by technical/scalability challenges, business model challenges, scandals and public perception, government rules and privacy challenges for personal records (Harwood-Jones, 2016; Swan, 2015a, 2015b). (Page 5, paragraph 3, line 1-4)
3. Decentralized ledgers and blockchains rely on collaborative governance to provide trust in the financial markets to ensure that all play by agreed rules. It has been argued that the primary reason blockchains are associated with cybercrime is the absence of strategic governance to set up agreed rules and to ensure compliance. The moment such governance with policies, procedures and mechanisms and enforcement are in place, the real societal benefits of blockchains could be achieved. (Page 5, paragraph 4, line 1-6)
4. In contrast, the open source software in bitcoin is governed by an ad hoc process comprising a handful of informal institutions and power holders. With the emergence of difficult decisions over which stakeholders’ interests to prioritize, the community involved now has to struggle with how a formal governance mechanism is to be designed especially when bitcoin was launched on an ethos of anti-institutionalism. (Page 6, paragraph 2, line 1-5)

1. Beyond stakeholder’s interests, there might be wider social interests involved in how distributed legers function, as, for instance, when regulators seek to limit the use of distributed ledgers for criminal activities or when pondering over tax matters. (Page 6, paragraph 3, line 1-3)
2. The further implication is that when used to distributed ledger systems, this could cover instituting formal multi-stakeholder processes for maintaining the technical codes to the development of public standards for the code. (Page 6, paragraph 5, line 1-3)
3. Blockchain-widening applications could continue to require thoughtful employment of existing legal frameworks combined with new legal solutions. (Page 7, paragraph 3, line 1-2)
Blockchain’s wider and deeper application applications are potentially constrained by limitations posed by technical/scalability challenges, business model challenges, scandals and public perception, government rules and privacy challenges for personal records (Harwood-Jones, 2016; Swan, 2015a, 2015b). (Page 5, paragraph 3, line 1-4)

1. In contrast, the open source software in bitcoin is governed by an ad hoc process comprising a handful of informal institutions and power holders. With the emergence of difficult decisions over which stakeholders’ interests to prioritize, the community involved now has to struggle with how a formal governance mechanism is to be designed especially when bitcoin was launched on an ethos of anti-institutionalism. (Page 6, paragraph 2, line 1-5)
2. Beyond stakeholder’s interests, there might be wider social interests involved in how distributed legers function, as, for instance, when regulators seek to limit the use of distributed ledgers for criminal activities or when pondering over tax matters. (Page 6, paragraph 3, line 1-3)
3. Further, as blockchain applications span regulatory jurisdictions, a considerable amount of coordination among regulators would be required to effectively identify and address risks involved. (Page 8, paragraph 5, line 1-3)

1. For permissioned distributed ledger systems, this might merely involve imposing legal obligations on its proprietor, whereas regulating un-permissioned systems, such as bitcoins through legal codes, have proven to be more complicated with current attention now turning to the regulating of businesses dealing with bitcoin-like exchanges and wallet providers (Albert, 2016). (Page 6, paragraph 4, line 2-6)
2. Alternatively, a permissioned system could be built by the public sector that enables public regulatory influence to flow through the combination of legal and technical codes rather than by legal codes alone, as is pursued currently (Thwaites, 2016; Walport, 2016). (Page 6, paragraph 5, line 5-8)
3. The European Parliament voted to adopt a smart regulatory hands-off approach to regulating blockchain technology (Prisco, 2016; European Parliament, 2014). The EU Parliament’s initiative combines two different initiatives: the creation of a Virtual Currency Task Force and the inclusion of virtual currency exchanges within the ambit of the European Anti-Money Laundering Directive. (Page 8, paragraph 2, line 1-5)
4. Some individual states though, such as California, have released a draft for a new digital currency bill with serious implications for blockchain technology, as permission is required to innovate, develop, code or network (Valkenburg and Brito, 2016). (Page 8, paragraph 7, line 4-5)

Sandbox for Minimal Viable Governance of Blockchain Services and DAOs: CLAUDIA

springerlink

Blockchain and Applications

Ismael Arribas, David Arroyo, and Denisa Reshef Kera

Kunfud (CCO at CLAUDIA), Parque Científico de la Universidad de Valladolid, Paseo de Belén 9A, 47011 Valladolid, Spain

1. There is a tension between the on-chain and off-chain governance of blockchain services, between the ideal of a trustless and anonymous network fully managed by an algorithm (consensus mechanism, hashgraph) and a need for maintenance, management, and upgrade of the actual software and infrastructure [6, 7, 14, 15]. (Page 1, paragraph 1, line 1-4)
2. Governance then becomes a matter of actionable pragmatic choices, on which the community can cooperate without excluding stakeholders that do not program or do not have access to the core developers’ team. (Page 2, paragraph 4, line 1-3)

There is a tension between the on-chain and off-chain governance of blockchain services, between the ideal of a trustless and anonymous network fully managed by an algorithm (consensus mechanism, hashgraph) and a need for maintenance, management, and upgrade of the actual software and infrastructure [6, 7, 14, 15]. (Page 1, paragraph 1, line 1-4)

1. The hybrid, on-chain and off-chain CLAUDIA governance platform enables the various stakeholders to interact over code, but also off-chain contracts and codes of conduct and identify changes needed to prevent unintended consequences, security flaws, and other risks. (Page 2, paragraph 5, line 1-4)
2. Client Layer: includes the Usership Layer, full interoperability, collective intelligence data belongs to the Client and it is provoked for client’s purposes. Who is a user in CLAUDIA? Anyone who can have access to the participation by Client´s choice. Who is stakeholder of CLAUDIA? Anyone who proof DAO participation. (Page 3, paragraph 5, line 1-4)
3. Strategic Layer: CLAUDIA is allocated on wudder, a layer 2.0 on Ethereum main-net with functionalities for the client, it is case by case dealt, with three minimal automated resources thru a GraphQL API to interact with HTTP API and a variety of SDKs (Page 3, paragraph 6, line 1-2)

CLAUDIA categorizes three main areas of incident monitoring:
1. Irregular processing. 2. Fraudulent processing. 3. Irresponsible processing.
(Page 4, paragraph 4, line 1-4)

1. The hybrid, on-chain and off-chain CLAUDIA governance platform enables the various stakeholders to interact over code, but also off-chain contracts and codes of conduct and identify changes needed to prevent unintended consequences, security flaws, and other risks. (Page 2, paragraph 5, line 1-4)
2. On one side, the various testnet, such as Ethereum’s Rinkeby4 or Ropsten5, support the developers and miners to test the changes and applications on the blockchain or decentralized ledger and identify flaws or incompatibilities. On the other side, regulatory sandboxes commonly used for FinTech and RegTech solutions, work with “offchain” regulations and include the users and stakeholders in the testing that improves both the technology and, to various degrees, the regulations. (Page 3, paragraph 1, line 1-6)
3. Client Layer: includes the Usership Layer, full interoperability, collective intelligence data belongs to the Client and it is provoked for client’s purposes. Who is a user in CLAUDIA? Anyone who can have access to the participation by Client´s choice. Who is stakeholder of CLAUDIA? Anyone who proof DAO participation. (Page 3, paragraph 5, line 1-4)

1. The solutions combines the two testing models and environments currently in use in blockchain development: testnets [8, 10] and sandboxes [3]. (Page 2, paragraph 5, line 4-5)
2. CLAUDIA represents a hybrid type of sandbox and testnet that engages all stakeholders that use, design, but also care about the codes of conduct related to the project’s infrastructure. It includes a reporting mechanism which is off-chain and serves to improve the actual code and technology based on the codes of conduct set up together with the platform. (Page 3, paragraph 2, line 1-5)

Sandboxes and Testnets as “Trading Zones” for Blockchain Governance

Springerlink

International Congress on Blockchain and Applications

Denisa Reshef Kera

BISITE, University of Salamanca, Edificio I+D+i - C/Espejo s/n, 37007 Salamanca, Spain

Bitcoin cryptocurrency, self-regulating and anonymous DAOs (Decentralized Autonomous Organizations), and smart contracts promise a more efficient, transparent, and decentralized governance reduced to algorithms. They claim to embody various libertarian [4], but also communitarian values and aspirations [1], such as “credible neutrality” [3]or “Ostrom’s eight principles for commons stewardship” [11], but it remains unclear who decides on the values and how exact should be their mapping to the algorithms and code which are prone to changes. (Page 1, paragraph 1, line 3-9)

1. They claim to embody various libertarian [4], but also communitarian values and aspirations [1], such as “credible neutrality” [3]or “Ostrom’s eight principles for commons stewardship” [11], but it remains unclear who decides on the values and how exact should be their mapping to the algorithms and code which are prone to changes. (Page 1, paragraph 1, line 5-9)
2. the technology that is supposed to disrupt all governance has severe governance deficit when it comes to responding to the everyday challenges (common in every infrastructure) of maintenance, scaling or security flaws. (Page 2, paragraph 1, line 1-3)

1. The value of a sandbox for a blockchain governance depends directly on how visible and negotiable it makes the four forces (regulation, market, technology, or culture) to the various stakeholders. (Page 4, paragraph 1, line 1-2)

1. the technology that is supposed to disrupt all governance has severe governance deficit when it comes to responding to the everyday challenges (common in every infrastructure) of maintenance, scaling or security flaws. (Page 2, paragraph 1, line 1-3)
2. The regulatory sandboxes simply extended the concept of a testing environment commonly used in software development and computer security to explore the interaction between emerging technology and society, regulations and code. (Page 2, papragraph 6, line 1-3)

In the case of a regulatory sandbox, multiple regulators set up an environment by “relaxing” the rules to “live-test” the emerging technologies on a limited sample of users. (Page 3, paragraph 1, line 1-2)

1. Instead of insisting that code is an absolute law or that sacred laws should manage innovation by blocking certain code and making it compliant “by design,” the purpose of a sandbox for blockchain governance is to support participatory experiments leading to integration and transformation of all four domains and forces of change. (Page 4, paragraph 3, line 1-4)
2. To respond to these doubts, we are proposing a more inclusive criteria of success that relate to all four regulatory forces rather than two (technology and markets). The criteria include values such as visibility of the four forces shaping the future services, but also visibility and empowerment of the stakeholders by giving them a voice in the future development of the service. (Page 4, paragraph 6, line 3-8)
3. The function of a hybrid sandbox for blockchain governance is to serve as a trading zone for various stakeholders to make decisions that influence their common future. (Page 9, paragraph 6, line 1-2)

Strategic Alliance for Blockchain Governance Game

Google Scholar

Probability in the Engineering and Informational Sciences

Song-Kyoo (Amang) Kim

Computing Programme, School ofApplied Sciences, Macao Polytechnic Institute, R. de Luis Gonzaga Gomes, Macao SAR

Game theoretic approaches have been widely applied to analyze the interactions within the Blockchain network [3,11], and the stochastic game executes stochastic transitions among the states of the game. Players in a stochastic game could change their strategies based on the past actions and randomness of behaviors of the other players. (Page 2, paragraph 2, line 1-4)

The security of a Blockchain network is achieved through the distributed consensus of miners. This consensus is only reliable with the assumption that no single miner can hold more than 50 percent of the computational power in the network and more than half of the miners are not aligned under a single control [11]. To gain its profit, an attacker either invests more than 50 percent of the computational power or governs more than half of the total nodes. (Page 1, paragraph 1, line 7-12)

First strategy of player G is (1) DoNothing—doing nothing, which implicates that the Blockchain networks are running as usual. The other strategy is (2) Action—taking the preliminary action for avoiding attacks by adding genuine nodes from the allies. The responding strategies of player C would be either (1) Not burst—the system is defended or (2) Burst—the system is burst (i.e., an attacker is succeeded to generate alternative chains with false information).. (Page 8, paragraph 1, line 4-9)

Instead of keeping genuine nodes, the defender (or the controller) in a Blockchain network makes an agreement with other genuine miners as strategic allies and the defender requests an alliance action prior to when an attack happens. (Page 3, paragraph 1, line 2-4)

Player G (a defender) keeps genuine nodes and executes preliminary actions at the observation moment one step prior to the generation of alternative corrupted chains by an attacker (player C). Each player could have two strategic choices. First strategy of player G is (1) DoNothing—doing nothing, which implicates that the Blockchain networks are running as usual. The other strategy is (2) Action—taking the preliminary action for avoiding attacks by adding genuine nodes from the allies. The responding strategies of player C would be either (1) Not burst—the system is defended or (2) Burst—the system is burst (i.e., an attacker is succeeded to generate alternative chains with false information).. (Page 8, paragraph 1, line 1-9)

The probability of defending operations is determined by the cost of adding genuine nodes, the number of nodes added actively to a Blockchain network and the total mining power that an attacker has. Otherwise, a defender has no incentive to avoid attacks. Although the BGG is an innovative idea to protect the decentralized network from a majority attack, it requires the reservation of a certain amount of genuine nodes in order to operate. (Page 2, paragraph 2, line 24-29)

Towards a Systematic Understanding of Blockchain Governance in Proposal Voting: A Dash Case Study

Google Scholar

Information Processing & Management

Lawrence Mosley, Hieu Pham, Xiaoshi Guo, Yogesh Bansal, Eric Hare, Nadia Antony

Omni Analytics Group, Ames, Iowa 50014, USA

Succinctly, governance is the process for which members of an organization establish a set of underlying rules for the execution of executive decisions [11]. (Page 2, paragraph 4, line 1-2)

For the cryptocurrencies that leverage this digitized voting ledger, the motivation is to coordinate decision making across multiple entities, ensuring all aspects of network sustainability are being addressed. (Page 3, paragraph 1, line 11-14)

1. Words: time, transaction, team, business (Marketing)
2. Words: conference, event, community, events (Conferences and Events)
3. Words: funding, budget, proposals, compensation (Development and Budget)
4. Words: payment, integration, support, team (Projects)
5. Words: support, users, merchants, media (Third World Adoption)
6. Words: video, media, youtube, news (Cryptocommunity Outreach)
(Page 12, paragraph 1, line 1-5)

Monthly, a request for proposal process is initiated where potential projects are submitted the network via API commands sent directly to the blockchain from a wallet address containing at least 5 Dash. (Page 4, paragraph 3, line 6-8)

1. The governance of Dash can be seen as a departure from Bitcoin since users can only vote if they own at least 1000 Dash. In principle, the threshold of owning 1000 dash ensures only members who are committed about the future direction of Dash have a voice. (Page 5, paragraph 2, line 11-13)
2. To receive this distinction, a potential masternode operator must configure a remote cloud server with a standardized IP address to connect with the Dash blockchain using to most recent version of the Dash Core wallet software. Through a series of synchronization commands, the remote server downloads the Dash blockchain and forms a link with the other full nodes on the network. A wallet address is then created on the full node, funded with 1000 Dash by the potential masternode operator (as of 2020-05-30, 1 Dash = 78.78 USD) and the final authentication commands are sent to the blockchain [24]. Once completed, the masternode operator is now able to participate in the governing activities within the Dash ecosystem. (Page 5, paragraph 2, line 2-10)

1. This 5 Dash acts to thwart network abuse by those who wish to spam or perform grieving actions against the community. Upon submission, the 5 Dash fee is collected, then destroyed, and the proposal is included on the next available voting block to be mined. (Page 5, paragraph 1, line 1-2)
2. Monthly, a request for proposal process is initiated where potential projects are submitted the network via API commands sent directly to the blockchain from a wallet address containing at least 5 Dash. (Page 4, paragraph 3, line 6-8)
3. To receive this distinction, a potential masternode operator must configure a remote cloud server with a standardized IP address to connect with the Dash blockchain using to most recent version of the Dash Core wallet software. Through a series of synchronization commands, the remote server downloads the Dash blockchain and forms a link with the other full nodes on the network. A wallet address is then created on the full node, funded with 1000 Dash by the potential masternode operator (as of 2020-05-30, 1 Dash = 78.78 USD) and the final authentication commands are sent to the blockchain [24]. Once completed, the masternode operator is now able to participate in the governing activities within the Dash ecosystem. (Page 5, paragraph 2, line 2-10)
4. Once a proposal is formally submitted and its record etched as a governance object on Dash’s blockchain, the voting procedure requires a net total of yes votes must be greater than 10% of the total masternode population at the time votes are counted, with masternodes given the full option set to vote “Yes”, “No”, or “Abstain”. (Page 6, paragraph 1, line 4-8)
5. Nevertheless, to preserve the integrity of implementing and utilizing an on-chain voting system, some system should be in-place to restrict IP spoofing to honor one vote per masternode. (Page 19, paragraph 2, line 8-10)

Towards a Taxonomy for Governance Mechanisms of Blockchain-based Platforms

Google Scholar

Twenty-Eighth European Conference on Information Systems (ECIS2020)

Johannes Werner, Sebastian Frost, Rüdiger Zarnekow

Technische Universität Berlin, Berlin, Germany

1. Governance Structure: The governance structure indicates the structure of the company promoting a platform and the distribution of authorities and responsibilities of decisions between the company and the corresponding community. First, the funding of a company can be private (e.g., investors) or public (e.g., IPO, crowdfunding) (Hahn and Wons, 2018), which can have an impact on the governance structure. Second, the decision rights describes the distribution of authority between the company and the community, which includes the future of the company and the ability to make decisions (Hsieh et al., 2018). The dimension centralization describes the type of the offered services, which can be centralized, semi-centralized or decentralized (Xu et al., 2017). (Page 9, paragraph 1, line 1-18)
2. Resources: The dimension boundary resources describes the software tools offered for the interaction with the platform, like APIs or SDKs. Additionally, we add data as a characteristic, which means the offered information is raw and not aggregated or prepared. The code transparency describes the public availability of the program code. (Page 9, paragraph 2, line 1-4)
3. Accessibility & control: As already mentioned in the section related work the type of blockchain can be classified according to its restriction of reading access into public and private (Peters and Panayi, 2016; Fridgen et al., 2018), from which the characteristics of the dimension read accessibility were derived. This can be used in a sanction mechanism to punish dishonest or malicious behavior. As mentioned by Hsieh et al. (2018) the governance can be influenced by using different consensus algorithms. Furthermore, tokens have mining properties, which define how transactions are validated and incentives are designed. (Page 9, paragraph 3, line 1-12)
4. Trust & perceived risk: The characteristics of the dimension verification accessibility depend on the permission to participate in the verification process in permissioned and permissionedless blockchains (Peters and Panayi, 2016; Fridgen et al., 2018). Furthermore, a platform can use bug bounty programs to reduce programming errors. These programs gives rewards to developers for discovering and reporting bugs. (Page 10, paragraph 2, line 1-4)
5. Dependencies: We determine two utility-token and the asset-token as types of token. The dimension codebase describes the origin of the used code. (Page 10, paragraph 3, line 2-9)
6. Pricing: The dimension pricing describes how the price for the offered services is determined. The dimension price stability describes whether tokens are burned for the stability of pricing. (Page 10, paragraph 4, line 1-3)
7. External relationships: The external relationships describe whether a platform provides a service on its own or can be supported by an external contributor (Armstrong, 2006). Additionally, we add the dimension services. In contrast to the dimension above it does not take into account whether the service is provided by the platform but describes the calculation or storage. (Page 10, paragraph 5, line 1-5)

However, if the use of blockchain technology means that an intermediary is no longer required, how is a platform using this technology coordinated and governed? Subsequently, there must also be platform governance that is appropriate to the specifics of blockchain technology, which may differ from traditional platform governance due to technological characteristics of blockchain technology. (Page 3, paragraph 2, line 4-8)

Funding
Decision rights
Corporate structure
Centralization
Boundary Resources
Code transparency
Openness
Sanctions Consensus
Mining
Verification
Bug-Bounty-Program
Codebase
Type of token
Pricing
Price stability
External relationships
Services
(Page 8, Table 2)

1. First, the funding of a company can be private (e.g., investors) or public (e.g., IPO, crowdfunding) (Hahn and Wons, 2018), which can have an impact on the governance structure. If the funding is private, there is often a centralized structure, including a few people defining the strategy. (Page 9, paragraph 1, line 4-7)
2. (pre-)minable describes the creation of a token by a mining process. The amount of tokens can be limited and participants receive compensation in the form of transaction fees or newly created tokens (Antonopoulos, 2014). In contrast to minable tokens, platforms create pre-minable tokens itself and then hands them over to the users. With a non-mineable token, the maximum number of tokens is created from the beginning and distributed. Because of it, the only incentives are transaction fees. (Page 9, paragraph 3, line 14-16)
3. We determine two utility-token and the asset-token as types of token. A utility token is required for the use of a platform and thus regulates access to a platform, since the owner of the token can only use the service. It is required to use the platform’s service and to execute transactions. In addition, it can grant its owner decision-making rights. In contrast, the asset token serves to regulate the ownership of an object. This can be a physical or digital object, which is linked to the asset token. Each item is uniquely assigned to one asset token, which makes confusion impossible. An asset token is unique and cannot be replicated or destroyed (Hahn and Wons, 2018). (Page 10, paragraph 3, line 2-9)

1. The platforms of the first cluster all have a hierarchical structure, use mainly company-based decision rights and use an altered codebase. Additionally, their services are realized outside the blockchain. (Page 10, paragraph 7, line 1-2)
2. In the second cluster, platforms are decentralized and are mainly structured in form of a DAO. Consequently, they have a flat corporate structure and mining is used in this cluster as an incentive system for controlling the input. The services offered by this cluster are completely on the company’s own blockchain, so they usually do not use further technologies from other companies. (Page 12, paragraph 1, line 1-4)
3. In this cluster, mainly public funding is used, and a hierarchical structure can be found. The platforms’ services are internally developed and they usually use the existing infrastructures and adapt the underlying consensus mechanism so a dependency on the underlying technologies occurs. For their services, they use off-chain technologies. (Page 12, paragraph 2, line 1-4)
4. A large part of the platforms is organized as DAOs, like the ones in the second cluster. They offer software tools and thus open their platform for complementors’ services. Furthermore, they use public blockchains without restrictions and develop their services internal. Technologies outside the blockchain are used without the services of other companies. Its codebase is publicly available and instead of storing all information on a blockchain, they just store final states there. For intermediate states an own utility token is used. (Page 12, paragraph 3, line 1-8)
5. The last cluster is strongly influenced by community-based decision rights, e.g., for the corporate strategy. They use public blockchains as underlying technology; their pricing is variable and depends on the used services. To improve their technology and ensure quality they use bug bounty programs. (Page 12, paragragh 4, line 1-3)
6. Most of the platforms use public funding, are decentralized, use public and permissionless blockchains, with a transparent code, and provide their services internal. However, it can also be seen that a flat company structure does not appear in most cases and half of them have community-based decision rights. (Page 13, paragraph 3, line 2-5)

Towards Governance and Dispute Resolution for DLT and Smart Contracts

IEEE Xplore

2018 IEEE 9th International Conference on Software Engineering and Service Science (ICSESS)

Jorn Erbguth, Jean-Henry Morin

Institute ofInformation Service Science - CUI Geneva School of Social Sciences, University of Geneva, Route de Drize 7, /227 Carouge , Switzerland

1. The physical layer is the basic layer of DLT governance. Whoever controls the hardware has the power to install whatever software version on a node. If participants want to, they can always install different software and thereby overturn any other governance decisions [5]. (Page 1, right column, paragraoh 4, line 1-6)
2. To avoid a split of the system, governance on the second level is coordinated through institutions or software. Collecting votes off-chain helps to predict the behavior of participants and reduces surprises regarding the adoption of updated versions ofthe software ofthe DLT system. (Page 2, left column, paragraph 1, line 1-4)

However, absolute immutability seems not to be desirable. Software needs to be updated, bugs need to be fixed. (Page 1, right columnm, paragraph 3, line 3-5)

1) Justification. Why should someone have the right to decide on issues that affect others? Why should someone have such power over others? We know models ranging from democracy (one person, one vote) to shareholders (vote dependent on the economic share somebody has in an activity) to stakeholders (votes depending on who is affected by a decision).
2) Recognition ofdecisions. Will a decision be recognized by the courts? A court that will not recognize a governance decision might force node operators and other actors to violate the rules ofthe DLT system. Although the distributed nature of a public blockchain renders it very difficult to completely enforce a decision, court cases overruling blockchain governance decisions can have a severe impact on the trust and value of tokens on a blockchain, and on local ventures using that blockchain.
3) Liability. Currently node operators - although without influence on the content of a blockchain might be legally liable for illegal content stored on the blockchain. Possible issues range from data protection [11], [41], antitrust violations [26] to child pornography allegedly stored on blockchains [27]. Single node operators have no influence on the content stored in their node. They only have the choice to run a node or to shut it down. Should we have a blockchain node operator liability privilege that is comparable to the communication provider privilege we already know?
4) Liability for decisions. Node operators should not be liable because they have no choice regarding the content they store. However, with DLT governance, participants in that governance have a choice. Unlike the single node operator, participants have a choice to vote aligned with the law. German law limits the civil liability ofjudges to cases where their decisions are considered criminal acts (§ 839 Abs. 2 S. 1 BGB [16]). The German Bundesgerichtshofhas also applied this privilege to private judges in arbitration courts [4]. On the other hand, supervisory board members of stock corporations are liable for illegal decisions they take [37]. Do participants in DLT governance equally need assurance that a decision they take in good faith will not lead to legal prosecution or should we impose a liability for negligent governance decisions?
(Page 2, right column, paragraph 1-3)
2. Data stored on DLT might infringe on the rights of other people, like copyright or trademark owners. The execution of some smart contracts might contravene criminal law. The failure to address these interests will generate increasing court and government intervention with blockchains. Node operators, miners and other participants might be prosecuted for the mere fact of participating in a DLT system. (Page 2, right column, paragraph 4, line 5-13)

3) Dispute Resolution vs. Governance. Governance ofa DLT system concerns some part or the entire DLT system. Governance of a smart contract concerns updates and modification of a single smart contract that might be used in different contexts by different people. Dispute resolution resolves single disputes ofa smart contract. (Page 8, right column, paragraph 7, line 1-7)

1. Actors who are free to decide, should be fully responsible. Arbitrators who are bound by the rules of the system should only be liable if they act in gross negligence or purpose against the rules. Node operators or verifiers should only be responsible for performing the tasks in question but not the content it concerns. (Page 8, left column, paragraph 1, line 3-10)
2. 4) Interests of Third Parties and Governments . Anybody who feels that a DLT system infringes upon their rights should be able to start a dispute resolution procedure. Governments and courts should also have the ability to start a procedure when they observe criminal behavior. (Page 9, left column, paragraph 2, line 1-6)
3. In order to avoid a recentralization of DLT systems, these reviews should be conducted in a decentralized way. Governments and COutts could participate in this review, (Page 9, left column, paragraph 3, line 3-7)

The design of a DLT and Smart Contract governance framework should be a combination of a model law with technical architecture. (Page 7, right column, paragraph 4, line 1-3)
1) Decision-finding Module . The decision finding module is connected via a decision API to the system where the dispute occurred. (Page 8, left column, paragraph 6, line 1-3)
2) Decision Execution Module . Decisions can be enforced either by the module where the conflict has originated in or by additional modules that can transfer assets for compensation. (Page 8, right column, paragraph 6, line 1-4)
3) Dispute Resolution vs. Governance. Governance ofa DLT system concerns some part or the entire DLT system. Governance of a smart contract concerns updates and modification of a single smart contract that might be used in different contexts by different people. Dispute resolution resolves single disputes ofa smart contract. (Page 8, right column, paragraph 7, line 1-7)
4) Interests of Third Parties and Governments . Anybody who feels that a DLT system infringes upon their rights should be able to start a dispute resolution procedure. Governments and courts should also have the ability to start a procedure when they observe criminal behavior. (Page 9, left column, paragraph 2, line 1-6)
5) Appeal. There needs to exist the possibility to ask for a review of decisions by governance and dispute resolution bodies. (Page 9, left column, paragraph 3, line 1-3)

Why blockchains need the law Secondary rules as the missing piece of blockchain governance

Proceedings of the Seventeenth International Conference on Artificial Intelligence and Law

Marco Crepaldi

University of Luxembourg, Luxembourg

In this study, governance of blockchains is defined as the formal or informal processes that determine changes to the software protocol and/or to the legal entities which manage each system. (Page 2, left column, paragraph 6, line 1-3)
In general, the governance of blockchains unfolds in the following fashion:
1. A proposal is presented, or an unexpected event occurs.
2. Some stakeholders coordinate through community channels5.
3. The development team implements the proposed changes/fixes.
4. Nodes operators signal support or lack thereof.
5. Miners decide to support the changes, or not.
(Page 2, right column, paragraph 1, line 1-9)

It seems that the governance structures of blockchains determined both their successes and failures. (Page 1, right column, paragraph 4, line 1-3)
5.1 Bitcoin software update from 0.7 to 0.8
5.2 The Bitcoin block-size debate
5.3 The DAO
(Page 3, right column)

In general, the governance of blockchains unfolds in the following fashion:
1. A proposal is presented, or an unexpected event occurs.
2. Some stakeholders coordinate through community channels5.
3. The development team implements the proposed changes/fixes.
4. Nodes operators signal support or lack thereof.
5. Miners decide to support the changes, or not.
(Page 2, right column, paragraph 1, line 1-9)
Blockchains that lack meta-rules on how to make on/off chain rules (a) do not escape the blockchain governance paradox (b) remain a pre-political tool, (c) make complying with judicial decisions and new regulation a daunting task, and (d) fail to deliver on the old promise of the P2P movement by fostering an opaque, techno-hierarchical governance structure. (Page 4, right column, paragraph 2, line 1-6)

A proposal is presented, or an unexpected event occurs. (Page 2, right column, paragraph 1, line 3)

2. Some stakeholders coordinate through community channels5.
3. The development team implements the proposed changes/fixes.
4. Nodes operators signal support or lack thereof.
5. Miners decide to support the changes, or not.
(Page 2, right column, paragraph 1, line 4-9)

In general, the governance of blockchains unfolds in the following fashion:
1. A proposal is presented, or an unexpected event occurs.
2. Some stakeholders coordinate through community channels5.
3. The development team implements the proposed changes/fixes.
4. Nodes operators signal support or lack thereof.
5. Miners decide to support the changes, or not.
(Page 2, right column, paragraph 1, line 1-9)
Chiefly, secondary off-chain rules do not restrict the ability of blockchains to experiment with governance models. (Page 4, right column, paragraph 3, line 1-2)

Why do Public Blockchains Need Formal and Effective Internal Governance Mechanisms?

Google Scholar

European Journal of Risk Regulation,

Karen YEUNG and David GALINDO

Law School and School of Computer Science, the University ofBirmingham, UK, and Distinguished Visiting Fellow atMelbourne Law School,Melbourne, Australia.

1. Yet when commentators speak of “blockchain governance” or “blockchain regulation”, they may be referring to one or more of the following: (a) blockchain as a technology for social coordination3 (regulation by blockchain); (b) the internal governance of the blockchain community itself that comprises the decisionmaking apparatus that determines how the blockchain system operates (internal governance of blockchain); or (c) the legal regulation of blockchain systems (external regulation over blockchain by conventional law).4 (Page 2, paragraph 1, line 2-8)
2. Although both these terms are used in discussions about blockchain, the concept of governance, for the purposes of this paper, refers to a community’s mechanisms and procedures for collective decision-making that enable ordered self-rule and is therefore a prerequisite for peaceful social cooperation.8 (Page 2, paragraph 2, line 7-10)

1. This dependency is a matter of considerable importance, given that it is a widely accepted tenet of software engineering that software is inevitably prone to “bugs” and is never perfect nor finished. (Page 6, paragraph 5, line 3-5)
2. Similarly, following the infamous DAO hack, a handful of miners refused, for ideological reasons, to upgrade their software along the lines proposed and advocated by Ethereum’s core developers in order to reverse the effects of the hack, resulting in the continuation of the original blockchain (known as “Ethereum Classic”). (Page 7, paragraph 1, line 10-14)
3. Both these incidents demonstrate the extent to which reliance on human decision-making and influence is involved in Bitcoin governance and operation, as well as the absence of any formal internal mechanism for resolving conflict concerning the network’s operation (Page 7, paragraph 1, line 14-18)
4. Rather, their operation and continued viability inevitably and unavoidably relies on social mechanisms that entail reliance upon and engagement with the messy and complex realities and variety of human motivations, behaviour, and decision-making in order to ensure their continued operation and their capacity to adapt to the changing needs of their communities and their dynamic external environment. (Page 16, paragraph 2, line 10-15)

Within the technicaldeveloper community, a lively debate has emerged in the blogosphere concerning the desirability of “on-chain governance”– that is, encoding internal governance mechanisms into the blockchain protocol, primarily in the design and operation of various approaches to initiating and “voting” on specific proposals which are then automatically implemented once the nominated threshold for approval has been reached. (Page 3, paragraph 2, line 2-8)

Thus not only are there no individuals with formal responsibility for maintaining the software and addressing any “bugs” identified in the code, but if some kind of “crisis” occurs (such as the DAO hack, for example) which may require the implementation of alterations, no-one within the network has the formal responsibility to respond. (Page 15, paragraph 2, line 7-11)

1. Firstly, Bitcoin relies on the leadership and decisions of a small, elite group of core developers who function, in effect, as an informal “executive”. In open source software projects (including public blockchain projects), there is typically a group of “core developers” who are more powerful and influential than rank-and-file developers. (Page 5, paragraph 4, line 2-6)
2. Secondly, the effective operation of the Bitcoin network is significantly influenced by the actions and decisions of individual “miners” (the community of nodes within the network) who direct and operate the mining pools through which multiple miners pool their computational power to undertake the mining process required to append transactions to the Bitcoin blockchain. (Page 6, paragraph 2, line 1-5)
3. Instead, most public (permissionless) blockchains rely upon economic incentives (encoded into the software protocols) that are designed, based on game theoretic insights, to motivate nodes to utilise the version used to produce and validate the longest chain, otherwise they risk a rejection of their attempts at validation, and will not earn rewards for mining. (Page 11, paragraph 3, line 8-12)
4. The absence of any rule of recognition (or “secondary rules”) which authoritatively identifies the primary rules of public blockchain systems, fundamentally precludes these systems from operating as a unified system of governance, with the risk of forking ever-present, in which forks may be proposed by any node/user/developer. (Page 14, paragraph 2, line 1-4)