What Is an Off-Chain Governance?
In a decentralized governance network, stakeholders vie for influence through various collaborative efforts. This includes engagements across social media, online forums, conferences, and other gatherings, forming the bedrock of off-chain governance practices within public blockchains.
Much like traditional politics, off-chain governance mirrors a complex interplay of interests, with different factions striving to sway support towards their agendas. Unlike on-chain systems, there are no hardcoded rules dictating actions; rather, decisions are guided by the perceived interests of stakeholders in relation to others.
Prominent public blockchains like Bitcoin and Ethereum predominantly rely on off-chain governance mechanisms. Proposed changes undergo extensive deliberations online, involving key players such as core development teams, developers, miners, researchers, and the broader user community. While anyone can participate in these discussions, there's no formal on-chain voting mechanism.
Despite the significant hash power wielded by large mining pools, it doesn't translate into governance rights within Bitcoin. Miners' sole function is to validate transactions, with no direct influence on protocol decisions.
Ethereum follows a similar governance model, with Vitalik Buterin leading the core development team. Discussions surrounding protocol upgrades follow formal channels such as Bitcoin Improvement Proposals (BIPs) and Ethereum Improvement Proposals (EIPs), with stakeholders signaling their support or dissent through various channels.
In cases of disagreement, stakeholders can either persuade others to their viewpoint or opt for a hard fork, allowing them to maintain or alter protocol aspects they deem crucial. While off-chain governance endeavors to accommodate diverse interests, decision-making power tends to gravitate towards core developers and miners due to the lack of binding agreements.