Blockchain management: how much do we need to be decentralized?

Fri, 03/29/2019 - 16:41

Our world is mired in growing inequality, nationalism, distrust of traditional state / banking institutions, global warming and, although, decentralized management is not a panacea we begin to need it more and more. The topic of management that connected with government agencies, companies, foundations, and other organizations is currently quite controversial. Depending on the project, this topic should be analyzed and studied with the understanding that various projects and organizations will be in different places on the decentralization spectrum.

Let's look at the various lessons learned from history: other disciplines and modern approaches to managing the blockchain, to illustrate that the introduction of decentralized management is not only a function of technical solutions - it's more a function of cultural adoption.

Determining the right combination of technical design and best cultural adoption practices will give us information about how decentralized our specific case should be.

To determine where we should be in the decentralized spectrum, let's first try to draw the current landscape.

You have to understand that this initial spectrum is not based on a formula supported by data to determine where a particular industry or government agency currently takes place. Understanding where we came from.


Management objective

To borrow from a comprehensive review of blockchain management, Fred Ersam joined:

“As with organisms, the most successful blockchains will be those that can best adapt to the environment. Assuming that these systems must evolve in order to survive, the initial design is important, but for a sufficiently long period of time the mechanisms of change are in priority. ”

Management should serve as a functional science in the sense that it provides a channel for creating / refining / maintaining knowledge and also acts as a mechanism for deciding the best actions, taking into account current facts and theories of our time.


Understanding the participants

In any new or existing management system, an understanding of ecosystem participants and their incentives / motivation is crucial. To dive deeper into motivation, we can turn to the study of gamification, as it seeks to understand the psychology and motivation of users with the aim of designing game ecosystems.

Ultimately, each participant or group in the system will have its own incentives, and most likely, these incentives will not be fully aligned.

Tug of war history between decentralization and centralization


Creation of the Internet 2.0

Remember that the Internet initially began as a P2P protocol with a decentralized ethos. In the decades that followed, companies such as Amazon, Google, and Facebook created tremendous value in the era of aggregating data and processes on the Internet 2.0 to provide a comfortable and exciting user experience. The reverse side of this aggregate lies in the fact that as these players became more centralized and influential, they invariably found themselves on the centralization spectrum and, as a result, began to introduce other external effects, such as invasions of privacy and monopolistic economy.


Media war

Another example of this tug of war in the entertainment industry can be seen in how technologies like torrent tried to decentralize file sharing only to be hacked by government institutions and re-centralized to the current fragmented streaming subscription economy that we have today. History shows that, depending on the industry, business and management fluctuate between these spectrums.


Why Blockchain's decentralized management is exciting

In essence, the blockchain technology is a decentralized register that is censored, unchanged, transparent, verifiable, and secure — with a different degree for each of these properties, depending on the protocol. These properties are well suited to be the main candidate for the introduction of decentralized management models, in which bottom-up innovations can be proposed, approved, tested and implemented. While control of the blockchain is still mainly connected with the following:

  • protocol changes and technical updates;
  • critical errors and vulnerability fixes;
  • using pooled research and development funds.


Models of decentralized management can also be used to solve many of the main problems affecting humanity due to misinformation (an example of global warming). More exciting and optimistic is that control of the blockchain is closer to the truth, because it acts as an infallible technical system that can be trusted, so that humanity has a basic set of postulates that we can all agree on.


Pitfalls of hype about decentralization

Although many of these future approaches are hopeful, there are many modern blockchain management models that we can pay attention to. There is a reason why bureaucratic management processes have survived for so long and until we reach a future that Isaac Asimov forecast where artificial intelligence will be able to make rational decisions for us, we must understand that in any approach to managing the blockchain people will interact and use this technology.


Voter participation

Ultimately, all the different control models of blockchain revolve around different approaches to voting.

Level of participation in the DAO Carbonvote


Lessons from Dash and other DAOs



One specific model of decentralized management is the Dash management model. For some contexts, Dash works like a bitcoin but differs largely in that it created a second consistent level, called the Masternode network, which provides secondary functions such as instasend, privasend and management. To become the Masternod, you need to put 1000 Dash (today ~ 300,000 US dollars) to reap the benefits of a vote on the proposals and receive dividends for providing additional functions. At the same time many supporters of the consensus point out that the network of 4700 Masternodes is not truly decentralized.


Other DAO implementations

Other DAO implementations include SmartCash - the model which is similar to Dash but differs in two main ways:

  • 70% of the mining rewards go to community projects, as opposed to 10% in Dash;
  • all SmartCash owners can vote, and their right to vote depends on the percentage of the coin they own, while Dash currently only has the right to vote for Masternode.

With a much larger amount of resources and a wider community, the types of offers are more diverse and are aimed to be more international, for instance, delivering SmartCash to Nigeria. Over time, local and regional communities are likely to independently organize their own DAO like does.

While we are at this stage of management experiments, it is important to establish the correct cultural norms, as people are often forced to follow traditions only for the sake of tradition. Regardless of whether you were in the Brotherhood or were one of the founders of America, traditions cover the whole spectrum of well-designed constitutions with random / silly transitions.


Balanced approach

Regardless of whether we are dealing with a potential idea to launch a blockchain or a decentralized management model, we need to evaluate the usage scenario by key criteria to determine how centralized or decentralized we are to design our system. When deciding whether to implement a blockchain solution for a supplier's network, the set of criteria includes the degree of confidence in this particular ecosystem and the speed of data updating. For networks with a very low level of trust and not needing real-time updates, the decentralized blockchain solution is ideal. In other cases, where coordination between many fragmented parties is not required and real-time processing is mandatory, a central database hosted on something like AWS is the appropriate way. Keeping in mind these criteria, here is the potential industry landscape in the future:

In the case of management you probably need a range of voting: by the chain, voting out of the chain and all kinds of hybrid combinations, depending on whichever is more acceptable at the moment.

After all, blockchain technology is an incredible tool for achieving a goal. We do not have to agree when someone declares that it wants to be a decentralized version. Instead, we must ask how far is it on the spectrum and why. Tug of war between centralization and decentralization is not something new and is the result of the character that humanity possesses for centralizing power. In many ways, we create management systems that will surpass any individual. Thus, despite the exciting technical breakthroughs in the blockchain, we must simultaneously apply best management practices and cultural traditions that history and other disciplines can offer.


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