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

Abstract

One of the distinguishing features of blockchain-based Distributed Autonomous Organizations(DAO) is lack of a central authority. Changes to blockchain data is achieved through consensus amongst blockchain network participants, rather than through a central node’s authoritative decision. Similarly, governance, i.e., changes to features and underlying source code, is achieved through a decentralized mechanism. As adoption of blockchain has increased, the need to evolve and adopt new features has grown. These changes highlight the mechanism by which the network, rather than a central node, makes decisions. One change in particular, proposed increases to the block size to address scalability limitations, has been particularly demonstrative of the governance mechanisms employed by disparate blockchains. For example, two digital currency projects, Bitcoin and Dash, employ significantly different governance mechanisms: the Dash Decentralized Governance By Blockchain (DGBB) process, and the Bitcoin Improvement Proposal (BIP) process, to decide what changes to make to their blockchains. Dash governance was able to decide to alter the block size in a matter of hours, while Bitcoin governance took several years to make the same decision. This paper evaluates the governance mechanisms of blockchain projects using the change in block size as an exemplar. Two prominent governance mechanisms are described, compared, and assessed based upon how effective they came to consensus and made the decision to change to support the disparate needs of stakeholders.