On-chain governance: The greatest virtue of Polkadot
Polkadot is an open-source meta-protocol for Web3 applications founded by the Web3 Foundation Team. Polkadot differs from traditional blockchain 2.0 protocols and smart contract platforms by its multichain architecture based on the parachain structure.
Polkadot is the next evolution step from the world of siloed, independent blockchains because its main function is the interoperability of parachains/blockchains in the Polkadot ecosystem and even beyond.
In comparison to some other platforms, which put governance aside as their last step of development, Polkadot decided to enable public governance from literally day one.
The Polkadot community together with the council governs the network as it sees fit, in a completely decentralized and transparent fashion. This allows the network to upgrade itself, propose new features and schedule the next important events (like the next batch of parachain auctions). And not only for Polkadot, but the governance module is also available to all parachains thanks to the modularity of the Substrate framework!
Polkadot governance explained
The on-chain governance in Polkadot is a sophisticated mechanism that enables DOT holders to participate in the governing process which can modify protocols code, system parameters, update balances or the entire runtime, or even manage parachains.
To make some changes in the network, active token holders and the council participate in the voting and election process. This usually leads to a public referendum where DOT holders can cast their vote which is weighted by the amount of the tokens there locking in (more on this later on).
The protocol itself also evolves over time through forkless runtime upgrades, which are an innovative way of upgrading the blockchain without any hard forks —thus removing any risks of creating spin-off networks like Bitcoin Cash.
On-chain governance together with forkless upgrades is a perfect combination of decentralized management and smooth upgrades of the network itself.
There are three main governance roles, which we will describe below
- DOT holders (community)
- Technical committee
All the owners of DOT tokens have the right to participate in the on-chain governance and decide which changes are being applied to the blockchain. Think of them as shareholders in the joint-stock company. As protection against Sybil attacks, Polkadot has a stake-weighted voting system. This means that the owner of 1000 DOT tokens has a 10x stronger vote than the owner of 100 DOTs.
DOT holders' rights:
- submit a public proposal
- vote council members
- vote in referendums
- submit a tip
Council represents passive stakeholders, so think of it as elected members of parliament in the parliamentary democracy. At this moment, there are 13 council members, but in the future, the number can be extended up to 23. In the council, 1 member equals 1 vote, co that's quite a difference from the DOT holders' voting system. Any DOT holder can become a councilor but only the most-backed councilors are selected (in the same manner as validators are elected to the active set by the Phragmen algorithm). Council seats also rotate to prevent a long-term concentration of power.
- propose a referendum
- cancels dangerous referendum (only once, their veto can be canceled by the community in another referendum)
- manage the treasury
- elect the Technical Committee members
The Technical Committee is composed of the teams that have successfully implemented either a Polkadot runtime or a Polkadot Host (and thus proved a deep technical knowledge of the ecosystem). Technical Committee is the last line of defense against unwanted software errors. At this moment, it contains only 3 members.
Technical committee rights:
- fast-track the proposal to reduce the time being voted on the referendum queue
The role of the committee is basically to allow the network to react quickly in case of an emergency without circumventing the governance process.
The governance process
Okay, now that we know about the three main roles of the governance roles, let's move on to the more interesting part — the governance process itself. As described in the scheme above, Council and DOT Holders can submit proposals, which are then turned into referendums where DOT Holders vote for their confirmation (AYE) or rejection (NAY).
Proposals & Motions
Both Council and DOT Holders can submit an on-chain proposal that can turn into a referendum later on. The proposal can be basically anything, from a simple transfer of funds from the treasury up to the full-fledged runtime upgrade of the entire Polkadot codebase.
Besides the code and system upgrade proposal, council members or DOT holders can submit a treasury proposal that includes
- spending of the treasury
- tips: rewards for the community members for acting that benefits the network — tutorials, translations
Every change to Polkadot takes the form of a referendum which is simply an accepted proposal that went through public voting by all DOT holders. Voters can even increase their voting power by committing to locking their tokens for longer periods of time — this is an important feature to mitigate the power of whales.
How to propose a referendum?
There are a few different ways how a referendum can be proposed
- Publicly submitted proposals
- Council submitted proposals — those can pass unanimously or through a majority
- Proposals submitted as part of the enactment of a prior referendum
- Emergency proposals submitted by the Technical Committee and approved by the Council
There is a shifting rule that once a community proposal is turned into a referendum, the next time the council proposal is on the turn and again.
Once the proposal passes and is transferred to the referendum, there is a 28-day voting period on Polkadot. Just don't forget that Kusama is 4x faster than Polkadot so things get approved much faster.
Proposals must be supported by an absolute majority of votes, and Polkadot uses the Adaptive Quorum Bias methodology to set parameters to achieve an absolute majority. Adaptive Quorum Bias is a mechanism that variably changes the majority needed to hold a referendum based on turnout.
Simply put, there are three ways how to collect votes for a referendum:
Positive Turnout Bias
- used for public proposals
- the more people vote in the referendum, the easier it gets to pass
Neutral Turnout Bias
- used for proposals with 60% support from the Council
- a simple majority is necessary for passing the referendum
Negative Turnout Bias
- used for proposals with unanimous support from the Council
- fewer people to vote in the referendum, the easier it gets to pass it
There are various governance tools, let us mention here the three most common — Polkassembly, Subsquare and Commonwealth.
Polkassembly is a Web3-type governance explorer and engagement tool. The voting is tight to your Web3 digital identity and your DOT account through the Polkadot JS extension.
To this date, you can contribute and discuss on-chain governance of both relay chains Polkadot and Kusama as well as from a few different parachains, namely Moonriver, Moonbeam, Kilt and Bifrost. Expect more to join.
SubSquare is another governance explorer for substrate-based blockchains aka parachains. Similarly like other platforms, SubSquare also enables community members to propose, discuss and vote on governance proposals. Actually, there are 6 projects that use SubSquare and namely they are Acala, Karura, Khala, Bifrost, Kintsugi, Interlay and Kabocha.
Commonwealth is a governance interface for on-chain communities that allows voting, discussing, proposing changes, funding projects and also validators overview. Commonwealth is for every possible project, so even those that are Substrate-based such as HydraDX, Bifrost, Crust Network, Edgeware, or Darwinia.
What's next? The governance news!
What does it mean for Polkadot to have a clear on-chain governance? To transparently hand over the voting system to the true owners of the chain? Simply everything — the spirit of the project and maintenance of the decentralization idea.
We think that the governance in Polkadot is such a virtue of this amazing network that it deserves more attraction. And that's also why we are preparing the most important and the most discussed governance news in our medium channel, so be ready and look for ↓this↓ layout!
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