Decentralized Governance: How to Put Power Into the Hands of the People

Decentralized governance ensures stability, accountability, and continuity in crypto networks. It also takes power away from centralized authorities and hands it to the community.

Trust Wallet
4 min readDec 7, 2020

As the crypto-economy continues to grow and evolve, decentralized governance plays an increasingly critical role as the industry gradually shifts from centralized towards decentralized.

Decentralizing Governance

In distributed blockchain networks, decentralized governance is an essential requirement.

For a crypto network to fulfill its purpose, it requires a robust consensus protocol supported by a sufficiently large and distributed community of participants that can ensure the security and continuity of the network. This can, for example, take the form of miners in proof of work protocols or validators in proof of stake networks.

On Chain

For most serious blockchains, changes at the protocol level must be approved by network participants and go through a vetting process before implementation.

Bitcoin’s BIP process is a great example of how on-chain governance can function effectively. Proposed changes to Bitcoin’s code are thoroughly vetted and only implemented if essentially the entire community agrees to run the updated code on their Bitcoin nodes.

Off Chain

In addition to on-chain governance, decentralized governance can also be off-chain. An example of off-chain governance would be community-based voting on how a project should proceed or what developments should be prioritized.

Off-chain voting allows for more user participation and does not require anyone to pay transaction fees, as is typically the case for on-chain voting.

On and off-chain governance can also be combined by enabling off-chain voting with on-chain consequences. For example, on the off-chain voting platform, Snapshot, users of different protocols can vote on proposals that can then be executed on behalf of the community by trusted community members via multisig transactions.

We have witnessed a lot of innovation in the area of distributed governance coming out of the crypto community in the past decade. While not all forms will stand the test of time, the promising aspect of the ongoing experiments is that the ethos of cutting out the middlemen and handing power to the people remains.

An Industry-Wide Move Towards Decentralization

The majority of crypto networks and decentralized applications are still — for the most part — largely centralized affairs.

The typical blockchain project starts off centralized, often run by a VC-backed company or a token sale-funded foundation, and then gradually moves along the spectrum from centralized to more decentralized.

The overarching goal in this industry is to build distributed systems that can run autonomous protocols dictated by code and community — not by a centralized authority.

To make that a reality, decentralized governance is essential.

For decentralized applications and crypto startups, decentralized governance mainly comes in the form of a community of token holders voting on proposals.

At Trust Wallet, for example, empowers its community to vote on proposals using the Trust Wallet Token (TWT). The app’s first governance vote allowed users to choose whether we should integrate Filecoin support into the wallet or not. 96.73% of participants voted ‘Yes,’ which resulted in Trust Wallet rolling out FIL token support roughly three weeks later.

It was the largest vote on Snapshot thus far, and an indication of how enthusiastic the community is for taking part in the decision making process. This is the very beginning of what could be possible in a token-based economy powered by community-based governance.

By providing users with the ability to dictate the directions a product is taking, products are more likely to succeed as they are shaped by community needs. Growth and innovation can be propelled forward as the focus moves away from a handful of decision-makers and is handed to the people who will actually use the product or service.

While it is still early days in the crypto industry’s move from being largely centralized towards the decentralized digital economy, we are all imagining, early steps in the right direction are being made.

The Decentralized Digital Economy of the Future

Sometimes people forget how early we still are in this movement. Bitcoin is only a little over a decade old, while DApps were barely around five years ago.

We are still seeing only a glimpse of what’s possible in terms of creating a decentralized digital economy that can bring more freedom and prosperity to the world.

As the development and adoption of decentralized technologies continue, we will continue to see more innovation in the area of decentralized governance as autonomous protocols that have no “ruler” will require their communities to ensure adequate governance.

At the current rate of growth, innovation, and adoption of decentralized technologies, we can expect to see a reshaping of the digital economy towards more community-run and governed products and services and away from large centralized authorities that have dominated the global economy for so long.