In this talk, I'm referring solely to Layer 1 governance unless stated otherwise. Without layer 1 governance, there is no layer 2 governance.
In any system, the key fundamental properties of layer 1 are to protect users' vital data. Vital data consists of token balances, account/community/supporter names & lists, etc. It's there to make sure you can't A. Get Justin Sun'd (token balances forked out) B. To not have your free speech censored, I consider everything from a value transfer (a BTC transfer, for ex.) to, of course, the very words I write and speak. Everything else can be pushed to layer 2's, where it takes the strain off the main chain, makes it cheaper to run and more scaleable, thus more censorship-resistant.
"Moving beyond coin voting governance" - I'll explain why skin in the game, stake based systems are the core foundation needed for any "CrGov" (censorship resistance governance.) "DeGov" is vague as decentralization in itself isn't the goal, just like fire it itself is never the goal. You only want enough decentralization to achieve censorship resistance, just as you only want enough fire to harness its warmth. You don't want decentralization to the point you're in an abyss, and nothing can get done, and you don't want fire to the point it's burning down your house. So I think the term decentralization has been misused to the point that it has no valuable meaning anymore; it's better to state the actual goal of decentralization.
CrGov requires skin in the game for a multitude of reasons that will be laid out below. That does not mean coin-voting-gov is the end-all-be-all, and there are parameters we can add such as time locks for code changes, time locks on newly staked tokens combined with long time locks to vote (to defeat exchange attacks) a combination can work. I will get into the ideas for improvement at the end of this discussion. But when it comes to achieving CrGov, there can't be any form of KYC, 1P1V, or anything of that sort- That is strictly for layer 2's. Skin in the game is the de facto go-to when aligning incentives (human greed) with network security.
Funding public goods: how do projects that are valuable to a wide and unselective group of people in the community, but often do not have a business model (e.g., layer-1 and layer-2 protocol research, client development, documentation...), get funded? - Vitalik Buterin
This was a big question on Steem if we were to fork, who would foot the bill? Would enough people be willing to run nodes and provide infrastructure with no guarantee of being compensated? Hive was not born at the time, so the unknowns were large, and Steem was no small system. Hive's technology is robust, with many moving parts and not something one person or even a small group can run sustainably in a decentralized way; it takes a incentivized community effort.
It's easy to get funding in a centralized way, via a premine token sale or raises from inside venture capitalists. However, the true magic is helping in getting started a self-sustaining network from the ground up without doing a funding raise. Here I will attempt to explain how this can theoretically be achieved and how it has played out in practice thus far.
To understand why it's so hard to get a censorship-resistant blockchain is the chicken and the egg situation. Layer 1 & 2 are very different. If we're talking layer 1 security, it's not an easy challenge, but for layer 2, it's much more plausible. Of course, you can't have layer 2 gov without CrGov on layer 1. Layer 1 must be in its own category. Who pays for it? If no one pays for it, it's never born.
Pretty much every human has the mindset of, "if I pay for something and put time and money into building it, I'm getting paid!" - And rightfully so, that is how humans are built. No one wants to work their ass off, build something open source, and give it away just so a bunch of "freeloaders" can come along and use the technology, copy fork modify, do whatever they want, all for free. Surely they will go broke quickly doing that?! What kind of psycho spends time and money and just gives it all away for free? - Web 3 breaks these old mindsets; some people have to realize things change, and just because on web 2 you could build something and hoard a bunch for yourself at the start does not mean it will be that easy forever. Life moves on you, and sometimes you'll have to do 10x the work just to get the same amount as you did in the "good old days." some haven't adapted to this, still cling to their greed, and need to retain premines. These people will eventually be surpassed by the 10x to 1'ers.
There will be a massive shift, as even the greediest of humans will eventually capitulate and act in their true best interest. Web 3 is beautiful because it changes that old mindset of thinking "I build it, pay me, or I keep a premine, etc." into, "I build this, I'm an early adopter, so I can just work and compete with everyone else to get a stake in this new network," - the 10x to 1'er. You'll still end up well if the project you build does well even though you didn't hoard a bunch at the start, just as early bitcoiners became wealthy without the need to premine Bitcoins themselves.
The very reason CrChain will be valuable is because you didn't mint a bunch of tokens for yourself at the start, creating unnecessary centralization. The premine and short time frame ICO's we have seen have not really been attacked in the way Hive was, and we will see the inherent flaws in such a token model as we become more mainstream. There is no need for a premine; it is, in fact, overkill. The creators already have a huge edge because they know their creation, know the launch date, get prepared ahead of time, just compete fairly vs. everyone else if you believe in your work. You'll create a much healthier network in the process. You'll get a smaller piece of a much bigger pie.
Web 2 & 3 collided in a big way, and we have seen the stench of web2 embedded deep into crypto thus far, the old mindsets, the old ways of doing things. What you'll find is, once you build something, compete on a level playing field with everyone else, others will get skin in the game on the system you built and treat it as if they built it - work effort-wise, moving full time into helping the project you built to succeed. There are certainly full-time "Bitcoiners" out there who did not even know Satoshi nor get an unfair incentive vs. the community to work full time. They see it the same as when a giant tree first bears fruits for all-knowing more will come later if they keep the tree nurtured. However, without first seeing the fruits, it takes the wisest of people to put in the work of planting the tree, in hunger and patiently waiting for it to grow.
In the end, you need people willing to put in more work than others without being compensated by the investor class. Just as we had the "Costco internets" of old that ultimately failed and the biggest underdog of them won, leading to the internet, we know today. You could sue Costco internet, you can't sue the internet, and this is the distinct difference that will be obvious in the years to come. -
Once you have achieved some level of CrGov onchain, the community can pick themselves up by the bootstraps by forming a DAO. In this DAO, people can vote, and the DAO pays people providing value in an autonomous way. This is how you fund work needing to be done that does not have an inherent business model to sustain itself. Developers can earn and at least be compensated for work done if the community likes it. Hive has many examples of this; our DAO has footed the bill for core developers, non-profit infrastructure, new dapps, marketing, and much more. However, layer 1 is much different as you can't pay someone if you don't have a DAO, and you need to have a CrChain first before you can have a DAO. So who is going to build the CrChain for free and provide resources at the start for infrastructure, and who will join them voluntarily?
And to ask a centralized chain with a "DAO" to vote on funding a non-profit layer 1 CrChain "competitor" that brings no power or money to any centralized actors will likely result in a vote of no-confidence. The DAO must be born inside of an existing CrChain, to begin with, or corruption will set in early and centralize the chain surely.
I talk about decentralization in blockchains more in-depth here
The gist is unless we have another satoshi-like character, IE someone who creates revolutionary software then walks away and relinquishes all control to the community, we don't even have a foundation to work with if we're talking about a creator creating a new blockchain. Of course, there are community forks, but I'll get into that later. The satoshi idea is rare and harder to pull off now than when Satoshi first created Bitcoin. The quick reason is that back then, no one knew what Bitcoin was. The investor class was not perceived as valuable and could be passed around lowkey for several years, creating a tight nite community.
While Bitcoin does not have coin voting, it's ruled by hash power; the beginning network effect laid the foundation for miners to perceive value in mining the network. A lot did it for fun, to test it out, and we're not looking to seek profit but to learn what the crazy new technology was all about.
The same is true for Hive via its Proof of Brain (PoB) token distribution; tokens were "upvoted" far and wide because people got to "earn crypto by giving away crypto" for the first time ever. It created a viral frenzy, but in a good way, not a "VC buying up all the tokens" kinda way; it attracted people of all kinds from all over the globe and created an amazing network effect. This was before large venture funds dominated crypto. The vast majority that got tokens were content creators and charities, people in need, families from all over. Everyone has a story to share; thus, everyone is a content creator. It was a novel idea at the time, still is, and over the last 5 years has to lead to one of the best networks in existence.
To do that today, if ever discovered, the project would go "viral" and quickly be eaten up by the eagerly awaiting investor class, think Bitclout, etc. This is why it is important to have large long-term stakeholders who see the vision and a robust token distribution method where no one group gets all the newly minted coins. - IE only miners get coins from inflation and no one else.
You need to have a real solid, organic community that hodls the large portion of tokens, and the best way to do that is to let the token be passed around organically, "freely," and let the barrier to entry be free, IE I can do x to earn crypto instead of buying it. I believe those days are long past; you can't even give a jpeg away for free without speculators eating it up, let alone a revolutionary new system. That's why we must protect the flames of censorship resistant community-owned technologies that exist today, born from the spark of those who believe in the potential of web 3.
The network must incentivize reputation, long term holding and give a true feeling of community ownership. Combining social, reputation, and community spirit like on Hive, we really own this network; our voices are not just "listened to"; they are heard and respected because they have to be; our stake goes a long way and matters here. That's because there is no premine or centralized controller on Hive; there is no one group you can go knock on the door and say, "Hey, pass this change on, force it to be put in" - no one has that power on Hive. When it comes down to it, that's very hard to say. How many blockchains that are coin voting have very large public doors that can be knocked on? How long until they are beaten down, and Defi becomes Cefi on most popular chains today? When the laser focus of governments is put on your chain, and they see any centralized pain points, they will be "regulated" relentlessly. The ones without pain points will be put in a different category and forge new laws.
We are far past relying on a satoshi-like figure to come out of the woodworks and save the day. We needed a scalable solution for web 3 free speech yesterday. All of the technology we could ever ask for is out there, open-sourced, and is built on. The crypto cycles have brought on an immense amount of innovation and capital; the ICO and Defi boom has led to some of the greatest technology, funded by billions of dollars going to some of the most talented developers globally.
In blockchains, the code is only as strong as the community that runs it, and the community is only as strong as its token distribution. The ultimate ace up the communities sleeve vs. centralized attacks is a community fork from a hostile money attack or premine. Virtually every layer 1 PoS network was born with a premine and ICO with quick token distribution to few people over a short period, and are all great candidates to be forked by their respective communities to remove the controlling premines. Read here for more info on community forks.
ICO's are terrible for token distribution because insiders can load up for very cheap, get "insider deals," and sit back once the competition starts with an insurmountable lead. No one knows who mines or earns what once competition begins; there are no KYC on PoS and PoW networks. So those that get a premine, plus an ICO, get such an insurmountable headstart because they also have the advantage of setting up miners/getting in PoS validators early and becoming the biggest miners of their own networks. You can't make that look good on paper, and you can't make it play out well in practice. It's good for a tokens price, sure, to have well-established people have the majority of your tokens, but it's terrible for censorship resistance. It's a game of musical chairs, and once the music stops, the only ones who won't have chairs will be those who don't have CrGov, and the market will act accordingly.
Thinking you can get the entire supply (minus small inflation) well distributed in a short period (less than a year) via ICO is where older layer 1's messed up. No one knows how long is best for a initial proper token distribution; however, I am very confident in saying it's much longer than one year. My belief is the token should start at zero supply. Everyone has a fair chance to obtain it at the start of distribution, and it's very slowly distributed over many, many years, eventually coming to either a cap or very low inflation paired with proper sinks.
Having a token sale that lasts a short period has so many downsides that stifle the ability for decentralization to flourish. First, less than 1% of the world knows about crypto now, way less know how to participate in an ICO, even less deal with the risk (both legal and potential scam) to invest. This means that the ones who buy ICO tokens are mainly insiders, people who are very deep into crypto to see potential in the underlining protocol. - The point is your distribution is going to a very, very small potential group of people if there is a short-term sale of any kind. Token distribution is in terms of decades, not months. You just can't rush how the token is released for the sake of a large capital raise if your goal is censorship resistance. Tokens distribution should be as future-proof as possible instead of being in the "right time & place" to buy tokens for dirt cheap in bulk, thus controlling most of the supply from the start. People on Hive can get Hive if they are witnesses, DAO workers, or via PoB.
With PoB, we have people on Hive who don't even know what an ICO is, have never used another crypto before, and just come here to enjoy the utility. That method of gaining tokens lasts forever on Hive, that distribution to ANYONE in the world, not just crypto-savvy insiders. - source
Having a short shotgun-style token release via sale, then allowing only one group of people to earn (miners in most cases) encourages centralized token distribution.
Those who are not afraid of the "lack of centralized funding" and brave the new world of seeking true censorship resistance will be the ones that change the world.
Hive's technology has many moving parts and can't be sustainably run in a censorship-resistant way without a community effort. One would need to sybil attack their own network to keep the "lights on" if they were to try and wield Hives tech singlehandedly. When the community forked, the weight of the impact from moving "totally" on our own was like a trampoline distributing the weight among many threads of resources; people from all over the world stepped up. This only happened due to the "attack" - all parties put disagreements aside, as the enemy of my enemy is my friend. The great alien invasion that would, in theory, unite all humans played out on a smaller scale on web 3, where an anarcho-capitalist community was attacked all on fronts by a "billionaire" yet managed to preserve its integrity.
So the "alien invasion" is the chicken before the egg, as until that happens, you'll have many smaller faction forks with various visions on how to conduct things, with very low survival rates. Under an actual attack, blindsided, people then come together and "divvy" up later. In this case, we used the ninjamined stake promised to the community as our Hive DAO, with inflation being divvied there for future, long-term sustaining decentralized funding. Since no one entity has control over the Hive DAO, the funds are only distributed to those voted in by the majority of the community. We have full-time blockchain developers who make a living off the Hive DAO; we have contractors, marketers, and ideas of all kinds being funded. We have seen amazing innovative proposals come out that have helped Hive immensely in all kinds of ways.
Security, scalability, feature-rich, and developer-friendly is all "real estate"; it's there to attract people to make apps on the protocol. This is the age-old question, without taxes, who would build the roads? Easy, private companies will do it and get paid by the people who need to use the roads. Pay for the road as you use it via a toll tax that goes to the maintainers of the road. People will pay because the road provides value for them. People will maintain the blockchain, get paid for doing so by people who want to use the blockchain.
Every protocol requires a spam filter; on Hive, that filter is resource credits. As the demand for resource credits rises, only one finite way to get them is accruing and powering up HIVE. This is the demand side and a natural sink. More sinks need to be added to any project to make sure the stock to flow is kept balance or deflationary.
Protocol maintenance and upgrades: how are upgrades to the protocol and regular maintenance and adjustment operations on parts of the protocol that are not long-term stable (e.g., lists of safe assets, price oracle sources, multi-party computation keyholders) agreed upon? - Vitalik Buterin
In an anarcho-capitalist way. There needs to be a community decision done by stakeholders in the system to agree upon the maintainers of the network and the code those maintainers run. This is why skin in the game matters. Communities of old would come together and make decisions; they had skin in the game because they lived within the community, and bad decisions would directly affect their quality of life. This means their vote could not be bought easily; they would all vote in favor of the best things for