Protocol Governance

Feb 21, 2023 • 13 Min Read

What is [Crypto] Governance?

Strong governance models have been catalysts for the golden ages of progress, while poor governance models have propelled humanity into the dark ages of regression. Governance models establish formal procedures for conducting the policy, actions, and affairs of a state, organization, or people. They enable systematic decision-making to move groups with shared interests forward.

Governance and power are closely related. The decision-making implications given to those that govern empower them to set rules for individuals in their system.

In traditional corporations, governance tends to be hierarchical. Decision-making is concentrated in c-suite executives, chosen by a board of directors, which shareholders elect. Thus shareholders with the most extensive holdings have more influence over a corporation’s strategic direction. While this correlation of holdings and power is certainly present in crypto, governance and control are less clear-cut than in traditional businesses.

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Directionally, it would be fitting to assume that controlling a larger share of a token's supply leads to more influence over that protocol's future direction. But the nature of crypto introduces new variables that determ...

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