When Satoshi Nakamoto published the now legendary Bitcoin whitepaper, he gave us the recipe to create a blockchain network and a cryptocurrency. However, he said nothing about how to keep them going.
Any blockchain network is, at its core, an organization. The software that sustains it needs maintenance, as does the system. Improving the technology’s performance requires research and development. It’s mostly not different from any enterprise you know. In short, blockchains need governance, and so far, it’s unclear what’s the best way to implement it.
Private companies, such as Ripple govern some blockchains and digital assets. Some others are backed up by non-profit organizations such as Bitcoin, LiteCoin and many others.
Cardano is proposing to solve this puzzle through something called “Cardano’s Treasury System.” The project’s development is in charge of Dr. Binshang Zhang, of the University of Lancaster. Cardano’s governance option seeks to solve two problems t the same time.
First, it provides a sustainable system to fund research, development, and maintenance, and other unavoidable expenses. Currently, organizations such as the Bitcoin Foundation do have research and development that keep improving the project. But they rely on sponsorships and donations to get the money they need to pay their developers, marketing, and other expenses related to the project’s administration.
While this is working fine at present, one has to wonder (as Cardano did) what happens in the long run? What if sponsors are not so generous in the future and the money to keep maintenance and developing going on dries up? The Cardano Treasury System is designed to avoid this problem and guarantee sustainability in the long term.
Second is the problem of governance. The project’s leadership, of course, must have a say in the decision-making process. But shouldn’t all those who keep the network going have a say as well? For instance, what would happen if the Bitcoin Foundation suddenly decides that SHA256 is not the best option for BTC anymore and it moves to another hash function, say SHA3, or any other?
That would put all the BTC miners of the world out of business overnight, and it would slow the network down considerably until the new mining process becomes as widespread as the old one. Such a radical scenario is highly unlikely, but it illustrates the need for a more democratic approach.
The Cardano governance model seeks to prevent authoritarian impositions from the leadership by introducing a form of democracy that’s neither direct nor representative. It’s called “liquid democracy.” In this scheme, actors with a right to vote have the right to either cast their vote directly or to delegate it to somebody else. The idea is to facilitate a process in which those who vote will always (or, at least, as often as possible) experts who understand the technology and the consequences of any decision.
As usual, Cardano is a force for innovation in the crypto verse. Its prospective governance and funding system is indeed very interesting, and it could become the rule for blockchain projects in the future. We’ll have to wait and see if other organizations in the blockchain community choose to adopt Cardano’s model and implement it in their respective organizations.
Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.