Trust and Governance in Collective Blockchain Treasuries

Blockchain treasuries are pools of collectively owned cryptocurrency earmarked for the purpose of funding ‘local public goods’ (e.g., protocol fixes, research, bridging infrastrastructure). Ecosystem participants face a trust problem in ensuring that the treasury is robust to opportunism (e.g., theft, hacking, misappropriation). Governance mechanisms (e.g., non-profit foundations, expert committees, voting systems) help to mitigate opportunism and bolster trust in the treasury, but they do so in different ways. In this paper we apply a framework from new comparative economics (the Institutional Possibility Frontier) to compare those governance mechanisms in how they minimise the costs of dictatorship and disorder. We provide case studies of innovative treasury governance mechanisms and interpret them within this framework. We find that the social costs of treasury governance shift throughout the lifecycle of a blockchain ecosystem (suggesting that the optimum governance structure also shifts) and that those costs can be revealed through crisis, leading communities to choose different governance mechanisms.