Types of Governance

Web 3.0 is evolving at the speed of light and one of the few challenges it solves are that of social dilemma and trust we have had with centralised systems. However, its important to take cognisance that while it might be possible to put the entire governance on chain, experts and experiences of protocols advise the right mix of off-chain and on-chain based on their trade offs.

Some of the important aspects of these two methods are mentioned below:

On-chain governance - As the name suggests, on-chain governance takes place directly on the blockchain protocol. All the proposed changes and decision-making outcome is embedded into the network code leaving a trail of all the transactions in the network. On-chain governance empowers developers (or node controllers) and community members to be the main force behind network decisions as they are able to submit their vote on any new developments or changes to the network. Following are some of the reasons protocols often consider the on-chain governance mechanism:

• Voice of the Community

• Decisions that needs to be taken quicker

• Decentralisation

• Traceability of decision and votes

Off-chain governance - Off-chain governance, on the other hand, takes place similar to traditional governance structure where the decisions are taken in a private set up with access to a limited number of network members (investors, founders, board members ) and often community leaders. As mentioned earlier, off-chain governance provides its own benefits and often the below aspects influence the decisions to take the path of off-chain governance:

• Making decisions for new partnerships

• Releasing a new strategic feature

• Partnership decisions

• Legal decisions

In the forth-coming chapters, we will cover the process of Governance more from an on-chain perspective and capture core topics like the process, smart contracts , voting and a few important concepts.