With the advent of cryptocurrencies, their fans have raised the issue of sufficient or weak control. Many ICO metrics by the DAO venture capital fund seemed successful. A number of experts have already proclaimed the project the largest in the field of co-financing, since its organizers managed to collect $ 100 million in Ethereum coins in two days, which at that time was an unattainable record.

The DAO Foundation received decentralized governance, excluding the influence of the state, as well as a simple organization structure. Therefore, his work was not associated with a specific geographic region or jurisdiction. The owners of digital coins of a blockchain startup could independently vote in favor of one or another idea that needed investment. The relationship between the organization and the token holders was built using smart contracts based on Ethereum.

The big plans of the Titanic, named DAO, crashed into an iceberg in an instant in the form of a hacker attack. As a result of the hacking of the platform, about $ 55 million fell into the hands of cybercriminals. The question immediately arose about the future fate of such funds, because the implementation of the idea depended on this. A number of large investors wanted to carry out a hard fork that would allow the return of funds to their owners. But the developers of the platform decided to make a soft branch, which blocked the withdrawal of funds and did not allow scammers to monetize the stolen goods. Thus, the founders started with the idea of code rule, whereby any change to the original distributed ledger would result in complete failure.

The influence of large investors turned out to be decisive, because of which the new Ethereum cryptocurrency appeared, and the original blockchain was named Ethereum Classic. To date, the fork is in second position in the virtual money capitalization rating, while the classic version is in 16th line at the time of this writing. DAO tokens have not been traded since last year, and despite the final of this situation, the cryptocurrency community has seriously thought about the problem of governance. After all, no one wants to repeat the fate of Ethereum Classic.

Why altcoins are so sensitive about the question

Stock trading platforms use governance systems that can protect shareholder positions and prevent attackers from acting in their own interests. There are no such tools in the cryptocurrency space, and the fall of the DAO has shown how painful the consequences of being hacked by scammers can be. During the existence of altcoins, such cases have occurred dozens of times, and no one is surprised anymore.

Bitcoin investors experienced a similar situation when another fork emerged as a result of a fierce struggle between two opposing camps. In the case of the altcoin Tezos, which was originally created for a universal solution to problems with voting control, it was forced to seriously slow down in development due to litigation between the founders and a large investor.

It is possible to enumerate for a long time the problems that arise in the management of various cryptocurrencies. For example, due to the lack of a tool that prevents replay, there may be duplicate transfers in two blockchains at the same time. Today, too much money is at stake, according to Philip Hacker, an expert in corporate governance of virtual payment systems, so investors are worried about unsecured payments. Large owners of digital money, like shareholders of companies, have similar rights, since a change in the protocol on the blockchain can seriously affect the value of their assets.

For example, as a result of a hard fork, the users investment portfolio actually doubles. Therefore, court decisions like Tezos could slow down the overall development of the protocol and freeze investor funds. According to Mr. Hacker, by giving users the right to vote, network developers are significantly limited in their capabilities. For this reason, an entire community can be harmed by the actions of a particular person or group of people, and ultimately the founders of the system are to blame.

The statement should be taken with one exception. Small cryptocurrencies that are not yet listed will not yet be able to demonstrate the effect of the integration of modern management systems. Previously, the implementation of changes to the blockchain was carried out by small groups. For example, at the time of the appearance of Ethereum, investors won, on whose initiative the fork was created. Due to the opposition of the developers of the main cryptocurrency, the Bitcoin Cash network arose. By implementing management systems, an effective way of analyzing the voting process can be obtained, in which all stakeholders will participate.

Applied control systems

In the networks of two giants - Bitcoin and Ethereum, decentralized governance is implemented in two ways. They are based on proposals for modernizing the payment system, the goal of which is to improve the efficiency and functionality of the distributed ledger. According to Mr. Hacker, an effective management system has not yet been implemented in the Bitcoin network, capable of correctly balancing the voices of developers and other members of the community at critical moments.

An example is the mechanism by which the Bitcoin Core team previously managed to avoid block size expansion. Mr. Hacker suggests that proposals for improving the protocol are emerging as a signaling tool that can increase the weight of miners votes, while the users opinion remains unheard. Every owner of a cryptocurrency has the right to make decisions, especially in situations when the fate of the payment system is being decided.

In a kind of game of democracy, Ethereum wins, head and shoulders above Bitcoin. The developers have successfully tested a number of solutions on the blockchain with the second largest cryptocurrency by capitalization. For example, the Carbon mechanism was used to vote on the DAOs prospects. To express a point of view, the client needed to make a transfer of up to 0.08 ETH. But it is worth noting the weak interest of the community in the plebiscite.

In the case of the Dash payment system, voting is carried out using masternodes. The Dash Core team, which includes the first members of the network, reports to the "voters" on the work done. Ryan Taylor, CEO of cryptocurrency Dash, calls the current situation a democracy, because the community owns the developers, and not vice versa.