Validators and their governance participation
Identifying development paths for proof-of-stake blockchains with on-chain governance
Ellie Rennie, Joshua Watts, Daniel Hwang, Sandra Ro, Park Feierbach & Matthew Green
September 2023
Executive Summary
On July 6–7, 2023, a governance break-out group was held during the Blockchain Infrastructure Forum (BIF) to discuss issues and potential solutions to governance in Proof-of-Stake blockchains. Contributors to the break-out out session came from a variety of backgrounds including validator service providers (referred to here as ‘validators’), infrastructure providers, foundations, and experts in blockchain regulation. Collectively, the group agreed that validators wield significant power in the ecosystems in which they participate and that the time is right for validators and foundations to assess current governance processes. Following the BIF, RMIT University developed a short questionnaire to further explore whether attitudes to governance differ across validator types.
This report draws on the BIF governance discussion and the survey to describe the state of play and options for ensuring that validators are aligned with the long-term success of the protocols in which they participate. The report is centered on the Cosmos ecosystem, with reference to other PoS blockchains and their governance design. We identify three approaches to improving governance processes for chains where token holders delegate to validators: Validator governance standards and tools; foundation incentives for governance participation among validators, and; evolution in the design of chains (i.e. the rules enshrined in code that determine governance processes). The suitability of each approach may depend on the particular chain’s status on the path to decentralization.
Our conclusion is that validators are committed to the continued development of decentralized blockchains and the applications they enable. However, the diversity of validator roles combined with regulatory uncertainty in many jurisdictions means that certain validators cannot operate as governing stewards. Governance by validators should therefore be opt-in for some types of decisions, but chains would benefit from effective and clear options for validators to assign governance duties to those with the willingness and expertise to take it on. Governor roles (‘governators’) could help maintain technology stability, audit code upgrades, and represent the technology to other stack elements.
Clarifying the characteristics of validator governance participation is vital as deficiencies in PoS on-chain governance may attract attention from authorities, some of whom lack the technical expertise to understand how resilience is maintained in these protocols (such as the importance of validator diversity and sybil resistance). An industry-led, well-managed development path is crucial to ensuring that blockchains gain legitimacy in the eyes of regulators.
You can download the full report here.
I am a Professor at RMIT University in Melbourne, working across the RMIT Blockchain Innovation Hub and the Digital Ethnography Research Centre. I am also an Associate Investigator (AI 🤖) of the ARC Centre of Excellence for Automated Decision-Making and Society. I acknowledge the support of the Australian Research Council, FT19010372. I use this Medium blog for work-in-progress ideas and reflections.
