Whether you have recently ventured into the world of blockchain or have been camping around this space for a while, you would certainly agree with one thing: Ethereum is one name that simply does not need any introduction.
As a home to Ether (ETH), the second largest cryptocurrency in the world, and with the distinction of being the world’s largest public blockchain platform, Ethereum has quite a few feathers in its cap.
Of course, the introduction does not even include what has made Ethereum such a renowned household name. Blockchain enthusiasts across the world are familiar with Ethereum because of its abilities to create custom blockchains and tokens along with launching their initial coin offerings (ICOs).
However, for Ethereum, these distinctions also come with the responsibility of updating the blockchain and running it in a manner which not only improves it but keeps it functioning in a smooth manner.
Ethereum is based on a decentralized model. The platform has its key value proposition built around the notion of no centralized forms of control. As such, there is supposed to be no higher authority within the organization.
But since no formal mode of conduct exists, and with a governance system different to blockchain-based voting concepts such as EOS, Dash or Tezos in place, it makes one wonder how Ethereum improvements work, and whether it has any governance model at all.
The short answer: Ethereum does have a governance model but Ethereum does not record or conduct the process on the blockchain. Designated developers implement the necessary improvements after the decision process.
To obtain the long and more detailed answer, we will be looking at how exactly that governance model works, why it is not recorded on the blockchain, and how does it not affect the decentralization that Ethereum is so proud of.
To start, let’s go through a bit of Ethereum’s history and its consensus algorithm.
Ethereum, A Brief History and Why Does It Have the Consensus Algorithm That It Does
Vitalik Buterin put forth the idea for Ethereum in 2013. Ethereum came about in a world where Bitcoin ruled the space. The only apparent use case of blockchain seemed to be centered around cryptocurrencies and the disintermediation of financial institutions in currency.
However, Buterin, who had also co-founded cryptocurrency news site Bitcoin Magazine at the time, wanted the technology to transcend beyond that limitation. He proposed a blockchain platform that would leverage the capability of smart contracts, a lesser known possible feature of the Bitcoin platform that was hardly ever talked about.
Buterin’s idea was to improve on the functionality that Bitcoin could have made an essential offering but hadn’t, and to make it available in a manner that would allow users to create their own blockchain applications or decentralized apps (DApps). After a few discussions, Buterin along with Vitalik Buterin, Mihai Alisie, Charles Hoskinson and Anthony Di Iorio co-founded the Ethereum platform in 2015.
Since the concept was still emerging, focusing more on blockchain development more than cryptocurrency transactions, it used then-novel capabilities for blockchain development such as Turing complete smart contracts and its own programming language by the name of Solidity. Ethereum also decided to use the same consensus algorithm as Bitcoin.
The proof-of-work (PoW) consensus was known for being the most effective consensus algorithm at the time. While it did churn out proof of manual verification of transactions through time consuming and expensive means of hashing, it did the job of validating transactions in an effective manner. As such, there was no need for another consensus algorithm.
Anyone could join, become a miner, and validate the transactions. While this provided true decentralization, it also allowed for a large number of users to become miners, with the total number of them increasing gradually.
However, Ethereum soon outgrew the expectations and did not only attract a whopping user base that built blockchain applications and generated custom tokens on the platform but also used and transacted Ether to a considerable frequency of transactions.
As a result, during times of higher usage, the PoW consensus (due to its demanding computing and expensive equipment requirements) has given Ethereum some trouble.
It has resulted in lagging processes and higher transaction costs.
However, Ethereum is still using the PoW consensus at the time of writing.
Ethereum plans to move towards a proof-of-stake (PoS) model soon where those users who are given the task of validating existing transactions and mining Ether have a vested interest in the Ethereum blockchain. This would allow for only serious parties to participate in mining, and would ensure that only those who actually care about the Ethereum blockchain’s performance are working on it.
But even with those plans, Ethereum does not intend to have an on-chain governance model such as delegated proof of stake (DPoS) present on its platform. This is because Buterin is a vocal opponent of blockchain models such as DPoS which tend to provide administration to those, who by default, have a higher amount of coins to stake.
According to Buterin, this gives those entities the opportunity to hold a larger chunk of the block rewards than an individual user with an average amount of cryptocurrencies, and disrupts the model of decentralization to a great extent.
However, while the on-chain governance is opposed by more than one key entity at Ethereum, the platform does have off-chain governance in the form of Ethereum Improvement Proposals (EIPs).
What are EIPs?
If you have looked into other off-the-chain governance models of this sort before, then the acronym EIP would have sounded an awful lot like BIP, which is an acronym for Bitcoin Improvement Proposals.
These improvement proposals work off of the blockchain. The processes are not presented, recorded, passed or voted for on the blockchain itself. Instead, the improvements are proposed through GitHub, where they are taken into consideration and then discussed on a larger scale.
EIPs are often based on detailed design documents that provide suggestions on improving the Ethereum blockchain by addressing certain existing services, adding new features, and by improving any discovered bugs.
According to Ethereum guidelines, EIPs need to be backed by technical knowledge and specifications. The author of the EIP should also have enough influence or gather enough support to get it passed without causing a rift between the community while also ensuring that all comments including the ones that oppose the EIP are documented properly.
This process makes certain that all of the views are heard and considered. Individuals may view the EIP documentation and its pertaining discussions and see the progress in a comprehensive manner.
The same process is followed when EIPs originate from simple forms such as Ethereum Request for Comments (ERCs).
What are ERCs?
EIPs are sometimes also formed through ERCs, which are suggestions that are submitted for peer review through Ethereum. These suggestions are usually about application standards and related operating processes such as how certain smart contracts should work, but that is not always the case.
Once these ERCs are submitted and show promise to improve the Ethereum blockchain, they are discussed within the community more extensively. Afterward, they are turned into EIPs and put on the table for further consideration. The famous ERC-2o and its ERC-20 tokens came to life from the same mechanism.
Once an ERC makes it to the EIP stage, things tend to get more serious. It means that the ERC showed enough traction and promise to make it to the next phase, and from there it has some potential to gain some traction.
What Happens in the EIP Discussion Phase?
The EIP discussion phase, while promising, is also a proverbial sinkhole to stop the traction of many EIPs. In this stage, developers who work on Ethereum decide whether the EIP is viable enough and is sound technically to take on the real world at all.
These developers, who also have a consortium of their own by the name of the Fellowship of Ethereum Magicians, are deeply involved with the development of Ethereum.
Similar to Bitcoin Core’s development which is fueled by MIT Digital Currency Initiative, along with other entities’ efforts such as Blockstream, Ethereum’s improvement is backed by entities such as the Fellowship of Ethereum Magicians and the Ethereum Foundation.
There’s a whole room that is dedicated to Ethereum governance and development on GitHub, where these discussions often take place in real time. People may discuss ideas, share suggestions, and voice critiques with other developers and people just like them.
You may think of this room as a café to hang out in to discuss your thoughts with other like-minded people.
While disagreements often happen, they are mostly, if not always, civilized. The core objective of these discussion remains the topic at hand along with its improvement, which is what makes Ethereum related discussions healthy under this environment.
Along with this, a project management room for All Core Devs is also made available at GitHub.
The meeting is to bring together the different segments that work on Ethereum to consistently make it better. You may think of this is a collaboration and calibration meeting.
Core developers are not only able to share their ideas with each other and put them out for discussion, but also get to determine where exactly do they stand in terms of thinking like the people whom they are working with.
After detailed and what some may consider exhaustive discussions, all core devs reach a decision on whether or not to make under-consideration EIPs available within the code. If the answer is in agreement, then the code is made a part of the most updated iteration of Ethereum.
Then it is on the entities connected to Ethereum, such as the nodes and the miners to implement the code or not. That is why, all core devs meetings also have to ensure that they are listening to these stakeholders before implementing any updates.
They need to make sure that they do not risk a full on rebellion and lose a massive amount of users just because they do not want to use the updated code.
That is where the “sinkhole” comes into effect.
Most of the EIPs simply get stuck because the larger Ethereum community is not comfortable with it being rolled out or having been made a part of the main blockchain.
In order to avoid a hard fork and repeating the Ethereum Classic incident, Ethereum core devs have to ensure that everyone related to the blockchain is on board with the planned updates and that no one has any issues with the upgrades that they have planned.
The process is more difficult and nuanced because in Ethereum, there is no way to obtain the stakeholder’s consensus through on-chain voting. As mentioned above, Ethereum’s core key developers tend to stay away from those forms of on-chain voting that could favor those with more Ethereum tokens.
Building a smart contract that accepts answers with a simple “Yes” or “No” from every public node would not be the logical road to take.
While navigating the jagged pathways of off-chain governance, Ethereum developers, who have digitized so many day to day processes through smart contracts, still stick with the traditional. They choose to go through older and conventional methods of gathering, discussing and processing opinions in order to make sure that the concerns of stakeholders are being addressed in a timely manner.
There are both advantages and disadvantages to this process.
In off-chain governance, you can make use of many social cues and discuss matters in a more conventional manner. If a stakeholder doesn’t agree with you in one meeting, it doesn’t mean that they would keep opposing you until the next meeting.
Between these two meetings, you may have shown them a quality or two or explained your point in a manner which had them turn to your side. On the other hand, if they had been simply presented with the option of choosing your proposal or not during the very first meeting, then you would have never gotten that chance.
But that upside also comes with its own disadvantages, the biggest drawback of which seems to be the time that is involved within the process.
Instead of EIPs being proposed on the blockchain, being considered for a few days and then being called for voting, they are considered for days, weeks or even months on end before their fate is decided by the Ethereum core developer team.
You may think of this process as the conventional lobbying and voting process in U.S. governmental bodies.
Legislative propositions are not just presented to be passed out of nowhere, instead a lot of work has to be done behind the scenes to make sure that the proposing party has the right amount of the votes to secure the passing of their presented bill.
If proper deal making and consensus is not done, then the bill could go either way at the time of voting, and then months of work and efforts goes down the drain.
Once again, this makes Ethereum a blockchain network that is more considerate towards its users, but nonetheless fails in delivering faster results and making use of its own technology.
How Can You Start with Ethereum Governance?
If you think that you have a novel idea that could either be submitted as an ERC or an EIP, then you can certainly go ahead and make a contribution to GitHub.
However, before you do so, make sure that you understand all the requirements that are related to submitting an ERC or EIP to Ethereum. Ensuring that you are adhering to the required policies and guidelines would be a surefire way for your ERC or EIP to be considered in a serious manner.
Your first step in this journey should be the EIP-1. You may think of this as the Adam or Eve of EIPs, since it’s the first ever EIP to be created for Ethereum.
Among other things, EIP-1 contains details regarding governance on the Ethereum blockchain. It is there that you would be able to seek specific help while going through the process of having your proposal submitted and approved.
Another great resource here would be the book called Mastering Ethereum. Written by Andreas M. Antonopoulos and Gavin Wood, the book details all aspects of Ethereum and serves as a definitive guide to the world of this revolutionary platform.
Once you check the book and realize how in-depth it is, it would no longer come as a surprise to see that it has a very detailed chapter that is dedicated to Ethereum governance, where the book provides an objective yet very interesting take on the related topic.
The book also notes that Ethereum developers are more inclined towards keeping the social layer part of the governance mechanism intact in order to make sure that they are not pushing off the concerns of any stakeholder or taking their worries lightly.
According to the book, to Ethereum developers, blockchain governance is “more art than science” and they would rather have governance processes taken care of manually than having them written in code.
This ensures that the stakeholders do not lose their fortune or find the blockchain to be an unsafe space for their concerns due to it being a code only environment.
You may also go through this helpful presentation by Ethereum Foundation programmer Jamie Pitts on EIP how tos. It is helpful in understanding what you would require in order to pull off the task of submitting an EIP or ERC that has chances of surviving the gauntlet of Ethereum’s extensive governance.
Once you have gone through this material as part of your preparatory process, go ahead and submit your EIP on GitHub. In case you want it to be an ERC, then simply label it that way while you are making the contribution.
What to Expect While Participating in Ethereum Governance
Since anyone can submit a proposal to Ethereum, the off-chain governance model follows a standard operating process for such scenarios. In general, it looks like this:
Courtesy of Ethereum GitHub
However, as the model states underneath the map, it doesn’t always mean that the process will follow this set standard. Due to the nuanced nature of the off chain governance model, a few steps may be added or rejected accordingly.
To get the basics out of the way, if your proposed ERC or EIP makes it past the initial stage of discussions, then it will go towards the next step.
If it did not require a protocol change, then it might go ahead and get implemented right away.
However, if there are any technical flaws within the proposal, then it will be thrown back to the first step.
You or your collaborators will have to make changes to the technical functions and continue through the process.
On the other hand, if your ERC or EIP does need a protocol change in the platform after making it through initial discussions, it will be discussed in the All Core Devs meeting. From here, it can be thrown backwards if any technical flaws are present, but if it is technically sound, it will be moved ahead to be implemented into code.
If all stakeholders accept the change and use the updated iteration of the code, then your ERC or EIP would go through and get implemented within the Ethereum platform.
However, if not all users implement it, then you will be looking at a hard fork situation.
Ethereum’s strict loyalty towards off-chain governance prevents the possibility of potential hard forks.
As in control as Ethereum’s core dev team seems to be for its blockchain, there are a few issues that outline the flaws in the governance plan.
As you may have noticed by now, time is nobody’s friend when it comes to updating the Ethereum blockchain. The updates that could have only taken days at a project such as Dash, which uses on-blockchain voting, take months to get approved at Ethereum.
This has caused the Ethereum community to raise a few questions on how effective Ethereum could be in this fast evolving space of blockchain technology.
Another concern is how a few developers control the updates of the blockchain and make decisions by themselves.
While community concerns seem to be addressed during these decisions, the way that these individuals have taken the responsibility of the blockchain without being designated by the public community also inspire questions to the decentralization of the process.
Ethereum Governance Might Look Under Control, But There’s Room for Improvement
With that being said, Ethereum is not budging from its stance of off-chain governance. Ethereum wants to avoid risks of having it go the same way as EOS where exchanges such as ZB.com, Huobi, and Bitfinex rule the voting and rewards system to their advantage.
All things considered, the governance on Ethereum is pretty detailed even if it is not reflected on the blockchain by itself.
With planned updates in 2019 about its Casper upgrade and PoS consensus algorithm, Ethereum might be able to solve the lagging and performance issues that it faces at the moment in times of extensive usage.
However, it would also need to look into speeding up the consensus issues that it faces at the moment.
With competitor blockchains such as NEO, EOS, and Tezos now demonstrating rapid decision making with more or less success, it is high time for Ethereum to start looking into maximizing its own efficiency when it comes to governance – whether it be on-chain or off-chain.