Introduction
Blockchain technology was designed to operate in a decentralized manner, removing the need for intermediaries and centralized control. However, as the ecosystem has evolved, the question of governance—how decisions are made regarding protocol upgrades, funding, and community direction—has become increasingly important.
While some blockchains embrace formal governance structures, others deliberately reject them, relying instead on informal, decentralized decision-making. This article explores why certain blockchain projects avoid formal governance, examining the benefits, drawbacks, and real-world implications of this approach.
The Concept of Blockchain Governance
Governance in blockchain refers to the mechanisms by which stakeholders (developers, miners, node operators, and users) make decisions about the network. There are two primary models:
- Formal Governance – Structured, on-chain voting systems where token holders or delegates propose and approve changes (e.g., Ethereum’s EIP process, Tezos’ on-chain governance).
- Informal Governance – Decentralized, off-chain coordination where decisions emerge through rough consensus (e.g., Bitcoin’s BIP process, Monero’s community-driven development).
Some blockchains reject formal governance to preserve decentralization, avoid political capture, and maintain ideological purity.
Why Some Blockchains Avoid Formal Governance
1. Preserving Decentralization
Formal governance can lead to centralization if a small group of stakeholders (e.g., large token holders) dominates decision-making. Bitcoin, for example, avoids formal governance to prevent any single entity from controlling the protocol.
2. Resistance to Political Capture
On-chain governance can be manipulated by wealthy stakeholders or institutional investors. Projects like Monero and Zcash rely on community consensus to prevent governance attacks.
3. Ideological Commitment to "Code is Law"
Some blockchains, particularly those inspired by Bitcoin, believe that rules should be enforced by code rather than human governance. Changes must be widely accepted by the network, not dictated by a voting system.
4. Avoiding Hard Forks and Community Splits
Formal governance can lead to contentious hard forks if decisions are forced on the community. Bitcoin Cash’s multiple splits demonstrate the risks of governance disputes.
Case Studies: Blockchains Without Formal Governance
Bitcoin – The Gold Standard of Informal Governance
Bitcoin has no formal governance structure. Instead, changes are proposed via Bitcoin Improvement Proposals (BIPs) and adopted only if miners, node operators, and users agree. This ensures that no single entity can impose changes unilaterally.
Monero – Community-Driven Development
Monero’s development is funded by community donations, and decisions are made through open discussions. This prevents corporate or institutional influence, keeping the project aligned with its privacy-focused mission.
Dogecoin – Meme Culture Over Governance
Dogecoin operates without a strict governance model, relying on its community’s whims. While this has led to inconsistencies, it has also kept the project resilient against corporate takeovers.
The Risks of Rejecting Formal Governance
While informal governance has advantages, it also presents challenges:
- Slower Decision-Making – Without structured voting, reaching consensus can take years (e.g., Bitcoin’s SegWit activation).
- Lack of Funding Mechanisms – Projects without governance tokens struggle to fund development (e.g., Bitcoin Core relies on donations).
- Potential for Developer Centralization – Informal governance can lead to a small group of core developers wielding disproportionate influence.
The Future of Blockchain Governance
As blockchain matures, hybrid models may emerge, combining the best aspects of formal and informal governance. Some trends to watch:
- DAO-Based Governance – Decentralized Autonomous Organizations (DAOs) allow for more fluid, community-driven decision-making.
- Layer 2 Governance Solutions – Sidechains and rollups may adopt different governance models than their parent chains.
- Regulatory Influence – Governments may push for more formalized governance to ensure compliance.
Conclusion
The rejection of formal governance in some blockchains is not a flaw but a deliberate choice to preserve decentralization, resist political capture, and uphold ideological principles. While this approach has drawbacks, it remains a defining feature of many leading cryptocurrencies.
As the blockchain space evolves, the debate between formal and informal governance will continue, shaping the future of decentralized systems. Whether through DAOs, hybrid models, or entirely new mechanisms, governance will remain a critical factor in blockchain’s long-term success.
Would you prefer a blockchain with strict governance or one that operates purely by community consensus? The answer may depend on how much you value decentralization versus efficiency.
