Introduction to the eco Blockchain Governance Framework

Governance for decentralised systems

Governance models describe systems of control and regulation for political and social entities as well as organisations. Companies and corporations define a governance for their IT systems. This governance is used to manage risks, maintain security and quality of the systems, and improve the performance of the systems and organisations, alike.

For corporate IT, governance models have been formalized and standardized in frameworks such as ISO/IEC 38500:2015, ISO/IEC 20000, ISO/IEC 27001, ISO/IEC 27017 or Trusted Cloud Data Protection Profile (TCDP), each capturing different aspects of IT governance. But while traditional IT systems can be controlled and governed by one or more individual organisations, decentralized systems, such as blockchain networks or other distributed ledger technologies (DLT), require a special kind of understanding, agreement or consensus among multiple participants to achieve coordination and collaboration for a specific purpose in order to achieve a common goal. A novel technology like blockchain or DLT creates new challenges to established governance frameworks, but it also allows to apply known solutions to new regulatory requirements.

Overview of the eBGF

Depending on the principle set-up of a blockchain network – whether we are speaking of public-permissionless, private-permissioned, or public-permissioned, consortial blockchain networks – different topics of blockchain governance may come into play and interact with each other quite distinctively on different layers or influence other topics and sections on other layers.

The eBGF aims to provide a comprehensive overview about different topics and their relationship, which may help organisations to get familiar with the various aspects of the matter.

Different reasons exist for organisations to set up a blockchain network. This motivation needs to be clear and transparent in order to align current and future members to a mission statement, goals and values as well as the scope of the activity.

A governance also describes which members may join the consortium – or why they can’t or shouldn’t. Members can participate in the network in different roles. The processes for the on- and off--boarding of members need to be defined by the community, and for decisions to be made, a reliable communication and electoral system must be established that offers members the opportunity for participation and co-determination.

A blockchain can support different use cases that address and target different user groups. For them, it needs to be easy to use the technology, which implies that the tools and services need to be well documented and provided with simple terms of use.

Most relevant is the selection of the network protocol, which include decisions on the consensus algorithm, scalability, security and interoperabiliy of the blockchain. This choice should depend on the use cases and relate to public standards and the best practice activities of the different sectors.

In case that a blockchain network is dedicated to a specific purpose or serves a certain use case in a specific industry, the community might have very different requirements for a blockchain network and the way how users of applications based on the network can interact with applications that connect to the network.

The economic models of fees and incentives create a token economy which is another fundamental and highly sensitive component of any blockchain governance. The way how the consortium will issue and utilise tokens may touch financial regulation and have a significant impact on the perception of integrity and trust of the whole network. Token economics have to be done right! No other aspect of a blockchain network will face more severe consequences for members of a consortium if done wrong, and the regulation of crypto assets in an international settings is only one of the issues to be taken into account. Token economics require transparency as the guiding principle!

Many other components of a blockchain governance refer to a very heterogeneous and rapidly evolving landscape of international regulation, laws, policies, and the liabilities that can be encountered in this landscape can be challenging for organisations to oversee.

Regulatory issues need to be openly and transparently addressed in order not to transition projects into a legal grey area. Consortium blockchains are operated by publicly identifiable legal entities. Ignoring regulatory issues at stake is not an option for public-permissioned blockchain networks, that are operated by a consortium of possibly known and established organizations.

Different paths to create a governance whitepaper

The eBGF will support the process of finding the right approach for each individual network – in technical and social regards – to create their specific governance whitepaper. However, there are a number of possible paths, deriving from different perspectives, that can direct the creation and writing process of a specific governance whitepaper from different angles of the framework.

1) Use cases --> Users --> Ecosystem --> Maintenance --> ...

2) Motivation --> Organisation --> Membership --> Economics --> ...

3) Standards --> Protocol --> Maintenance --> ...

4) Protocol --> Economics --> ...

5) Regulation --> Use Cases --> ... 6) Regulation --> Ecosystem, Maintenance --> Membership --> Economics --> Collaboration

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Contributing authors: Sebastian Posth
Status of this document: work in progress
Last day modified: 2021-04-13