In simple terms, “Governance” is a structure that every user or participant agrees to follow. Everything we use is under some form of governance. Its core purpose is to meet the user or participant’s needs with available resources as efficiently as possible and achieve the long-term sustainability of the structure. It applies to any type of group, be it in the real world or digital.
Therefore, for any kind of institutions, organizations, or services, especially as it grows, governance becomes increasingly indispensable. The governance style also needs to keep evolving to be relevant to the current need, but this is far easier said than done.
Initially, the blockchain used to be a governance-free system, given the small user base. But as the size and complexity have grown, better management calls for proper governance. To understand how decentralized governance works is a different ballgame. Hence it’s better first to familiarize yourself with the traditional formats of governance.
There are different kinds of governance styles employed today, but all have stemmed out from basically two main types –
- Direct Governance: As the name suggests, in its pure sense, it is direct. Every participant or user will directly vote on every decision and any action need to be undertaken, no exception.
- Representative Governance: In this model, all users or people vote to elect a few as their representative who would take all governing decisions on their behalf – vote on new rules and implement them.