Who Wields the Power to Change a Public Blockchain

A way to part with the old code hassle-free has not yet been invented. And, although soft forks and velvet forks represent a more gentle alternative to a hard fork, which means a complete breakdown of relations with the previous blockchain, important changes in the code are most often accompanied by a split of the community and a conflict among the developers. One of the latest large-scale criticisms was the proposal of Ethereum on the return of lost funds (EIP 867), involving the implementation of the “rescue hard fork” in case hacker attacks or blocking of funds, as in the case of Parity. The idea was supported by Vitalik Buterin, while one of the leading Bitcoin Core developers Gregory Maxwell sided with opponents, who said that “No one should have such power,” meaning that no one should, at their discretion and in pursuit of personal goals, change the whole blockchain. And after EIP 867 code editor Yoichi Hirai resigned, Vitalik Buterin held a meeting to discuss the management of Ethereum. In the course of it, he noted the intricacies of the process, which goes through proposals for improving Ethereum before being embedded in the real code of the platform. Greg Colvin, one of the leading developers of Ethereum, said that team members need to work harder so that the community correctly understands the essence of the new proposals.

A radical solution was offered in the form of the Polkadot compatibility protocol, which seizes the leading role of developers and transfers power over the blockchain to holders of tokens. “This initial proposal for Polkadot governance definitely tries to address the shortcomings of many existing chains, which ended up with community deadlock or continuous splits,” Peter Czaban, director of the Web3 foundation, which sponsors the research and development of Polkadot, said. The work on the protocol is headed by the co-founder of Ethereum and Parity Technologies Gavin Wood. The Polkadot ICO, which raised $140 million in October, became one of the largest in 2017, but after accidental freezing of funds on November 6, Parity suffered along with the project’s wallet. Despite the fact that in early December, Parity CEO Jutta Steiner promised that access to funds would be opened after a planned upgrade in 4–6 months, attempts to restore and reallocate funds have practically ceased. According to Wood, one of the main reasons for this downtime is the lack of a transparent mechanism for taking into account all the pros and cons. “Recent challenges in Ethereum governance have made it clear that regardless of the specific feelings of community members, it is extremely important to have a clear process for making any irregular protocol changes, be they feature additions or bug fixes,” Wood said.

The need for formalization partly led to the concept of management of Polkadot. In the “blockchain for blockchains” every change in the protocol, even the most insignificant, will be accompanied by a referendum. The platform’s internal token DOT, issued during the ICO, allows the holders to vote on each piece of code that must be embedded in the blockchain. “This will remove any sort of ambiguity in terms of what the change will actually imply,” Czaban said. Along with the voting procedure, a special consultation will be in effect, which can block the suggestions of intruders or recognize the voting invalid if a significant part of DOT holders is not involved in it.

In part, this formalized approach was necessary for Polkadot because of its differences from “traditional” blockchains. Instead of nodes, the Polkadot network consists of various elements called “validators,” “nominators,” “collators,” and “fishermen,” each of which, at their own level, provides network security. And although some of them perform the functions of a blockchain node, they are not responsible for making changes. “Validators are powerless to block a change that they personally don’t agree with,” Wood explains. According to Czaban, the inclusion of token holders in the voting process was, for the most part, a practical choice: “There are many different potentially parties that might be involved in the ecosystem; however, the stakeholders are really the only well quantifiable party that we have at our disposal,” Czaban says, noting that in the future the number of participants involved in the adoption of changes in the parties may increase.

During the ICO, half of the total amount of DOTs was sold. 30% of the tokens went to the Web3 Foundation, and 20% was left in reserve. Thus, network control depends on the distribution of tokens and the designated consultation, which can veto certain changes. Under such a scheme, the developers are deprived of a monopoly on network management, and the developer of Ethereum Vlad Zamfir has already expressed doubts about this proposal. “I’m not an expert on their governance model, but I’ve had enough of a look to definitively disapprove,” said Zamfir. Last week, during a conference of the Ethereum community EthCC, he presented his own not yet completed study on management. Being an opponent of “on-chain control,” Zamfir writes that automated decision-making methods take the leading role of node operators and therefore “contradict the essence of public blockchains.”

“I do not trust token holders, and I do not think they should have stronger leverage than other members of the community,” said Zamfir.

According to Wood, it is beneficial for token holders to act for the benefit of the network. “Stakeholders have a very clear and broad incentive to do what’s right for the network, which essentially means driving the price up. It’s also unreasonable to believe that node operators are somehow experts on protocol changes,” Wood said.

In addition, the Polkadot protocol was designed to be easy to implement, and this, in the opinion of its creators, will be the main advantage. “This is a very pragmatic proposal. Something that we can do, we can implement, using what we have right now,” Czaban says.

The Web3 Foundation will also support the next Ethereum Magicians developers meeting, which will be held in Berlin in July with the participation of Greg Colvin and Ethereum Foundation member Jamie Pitts and explore new ways of introducing changes in the Ethereum platform. “We are definitely very interested in trying to drill more deeply into the topic of governance,” Czaban said.

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