Panel | The state of onchain governance | ETHDam III - 2025

Welcome to E to E to E to E to E. Uh moving up, we're going to pivot to uh governance. I want to welcome to the stage Amy Wilkinson first. Um yeah, you can have her mic and uh you can introduce the rest of uh the panelists. I will.

So, do we have everyone here? We have Gideon. This is Please welcome Gideon. I don't know where everyone else is. Oh, here we have Justin.

Please join join us. We have Matus and Joel. Please [Applause] welcome check. So, they just pop up. Cool.

Hi, Ethan. Welcome everybody. Um and thanks for joining us for the governance panel. Really excited to have this conversation. I think governance has had a really interesting journey so far um through the industry with the rise of Dows to where we kind of stand today with the state of governance.

Uh we have a super exciting panel with a really diverse background to um kick off the discussions. So should we start with introductions? You want to start Gideon? Yeah. Hi everybody.

I'm Gideon Peters. Um have grown a bit of a beard lately. It's been a couple months. Uh great to be here. Uh I've been involved in the world of uh changing large scale organizations, right?

So the corporate world. Uh done a lot of consultancy work, built a consultancy around that and and sold it. But I I would call myself a organizational geek and as such I got sucked into the world of Dows, lived on a DAO in Austin, Texas at Capendo, which just closed by the way, regretfully. Um, and I've since been uh advising both big real world organizations as well as new initiatives on how to DAO and uh I'm also part of that how to DAW movement and provide courses on how to DAO. So that's it.

Oh, by the way, I'm from Amsterdam. If you need any tips for the city, uh, let me know. Let's hang out tonight. So, hey everyone. I'm Joel and I run business development marketing for Dash.

At least that's what the DAO has decided. Um, Dash is the longest running DAO alive right now as far as I'm aware. And so I've been sort of interacting with Dows for a good nine years straight for myself. So definitely have a lot of um I'm definitely not one of the head in the clouds kind of geeks on this subject, but definitely have a lot of, you know, real um cryptoolitical experience and getting proposals through and interacting with all that and, you know, all the related insights. Hello everyone.

Uh my name is Mateosh. Um I have recently joined the Arbitum Foundation in my role as head of governance. Um I've been in the space since 2014 working professionally since 2018 uh for multiple different projects and protocols. Uh contributing to companies like Dapper Labs, Flow Maker, DAO, Deontology, Polygon, and now most recently Arbitrum. Um yeah, that's it from me.

I'm Justin Bonds. I'm the founder of Cyber Capital, which is now the oldest liquid token fund in the world. As part of my role there, I'm a uh a researcher and investor, and I've been a full-time researcher since 2013. And one of my areas of uh specialtity, which is important within a team of research is actually governance. And specifically, I'll be interested talking about uh L1 governance as opposed to uh just the DAO question here as well because I think that's very important going into the future for cryptocurrency as a whole.

Thank you. Thanks guys. I'm Amy. I'm head of marketing at Aragon. We build infrastructure and tooling for governance and value acrruel.

Okay, cool. Should we kick off? So, I think we have I'm hoping we get some spicy takes today. I think governance is um yeah, a topic that is really evolving. I think especially with regulatory clarity potentially hopefully coming um and as you say kind of stepping out of the historical synonymity with uh with Dows and really getting into like more matured infrastructures.

I'm curious your guys thoughts and maybe we can go one by one um from reputation to tooling and adoption. What what is your take on the state of onchain governance today? any anyone feel free. I'll take it. Um I think the number one and the number two blockchain right now, Bitcoin and Ethereum, do not have onchain governance.

And I think that's highly antithetical to what cryptocurrency is really supposed to be about. You know, this idea that decisions are made by developers sitting in an ivory tower which which are effectively subject to like old school politics, right? And like a lot of devs are not really equipped to deal with real politic. I think in that process there's a lot of corruption. There's there's a serious lack of transparency and often just very bad decision-m.

So what I'm proposing uh uh layer 1 blockchain should do such as Bitcoin, such as Ethereum, such as Salana, etc. is we really need stakeholder governance. It's the stakeholders. It's the owners of the cryptocurrency who own the capital but then therefore also should have a right about the decision-m around that capital and this is not such a strange idea because this is exactly how equity works as well and in the absence of democratic systems I think this is the best solution we have because moving forward with the idea that some centralized group of developers gets to decide for everyone despite what businesses think despite what users thinks despite economic pressures I think is just completely insane So, I'll kick it off with that. I think compared to where we were a few years ago, things are better now, but we still have a long way to go.

Um, I think the main aspect of onchain governance right now is that we're extremely early on. Um, and I think this is this is fair for all of the frameworks. Um there isn't really a sustainable long-term um business model for uh governance providers and it is a quite ungrateful job to to be doing um providing a public good that projects can you know implement without uh without any sort of uh payment model. Um with that being said I think that the issues that onchain governance is trying to solve are are issues that are you know at times thousands of years old. uh they relate to social coordination and issues that have not been solved in the past by political philosophy, science uh and any practical implementation thereof.

uh and so I think that that it's it's at times very hard and and also very important to to to you know go back to the definitions of what do we mean by governance, what do we mean by dows, what do we mean by uh decentralized decision-m because the um the definitions are are the key here. Um, yeah. Let me just just quickly respond to what you said there. I I I completely disagree with you. Like this idea that we haven't solved this these problems are false.

And I think it's it's kind of playing into the current status quo by saying that. We've have thousands of years of experience of political philosophy and history. There's a ton of lessons there that we absolutely can apply and we have plenty of cryptocurrencies that do. I I think I think you are mistaken in that particular point. I think that that is an oversimplification.

Uh I do believe that we have a multitude of different political systems that have been tested and have been proven to work and fail at times. I believe that when it comes to at scale participation of at times unaligned members of of a of a system whether that be a nation state or a uh blockchain system uh that has not been solved. I believe that the uh you know introduction of of of proof of work in the concept of in the you know uh bitcoin project I think that has been has done a massive job at lining those incentives at a very basic level. The agreement that and the consensus that members of this system come to is on a you know what is included in a block. It is fairly basic I would say but it is groundbreaking in the sense that these are at at at you know um at its core subjective decisions that need to be made by by the validators uh participating.

So I would agree that there is some that can be drawn. For example, you could go back to you know the Roman Republic where you would see um what happens when you truly have a state where the citizens gather from time to time and make decisions on on all issues essentially. And you can see the um you know degradation of that system that led to the to the fall of the of the Roman Republic was never a direct democracy. I think you're confusing it with Athens. No, no, it it Okay.

Yeah. This this goes pretty far by the way. I I love the fire right um but I I see a lot of these types of discussions right now to delegitimize this because it is very important and by the way Roman history is endless and beautiful. Uh at the same time um my real criterion for whether onchain governance is working or not is you know can we govern actual organizations with them and uh there are some successes but most of them are still self-referential and within the crypto world and I think the only way to really validate whether we're doing something interesting here is to see whether we can go into uh let's say irregular environments right so when I was building a DAO with the believe it or not Dutch national police and I got actual policemen uh to participate in these types of governance with people they had never met before from the same organization. I knew something was cooking, right?

So for me that is a frontier or at least an indicator that things are working regardless of uh Roman history which is also interesting. I'm I'm curious from that perspective um when you're when you're looking at real world applications, what do you find are and you obviously authored the heart book. What do you find are the real opportunities that uh you know traditional organizations see in decentralized governance? Yeah, the the opportunities for big organizations I think one of them is um organizations have very well solved how to govern themselves with their stakeholders and shareholders. Um but to have intraorganizational governance right to work with their ecosystem partners uh on a truly uh neutral platform that is still a frontier that is pretty much unexplored especially for government uh because government is looking for partners but they're still within their own uh budgetary dynamics their own political dynamics and to say as a government and I've I've worked with the city government here uh on a question like how do we improve education primary education with our partners together and create a true level playing field that is inspectable, adaptable, transparent and all these other benefits that we know of.

Uh that's where we really see stuff uh cooking and uh I find that very promising to be honest. Nice. Joel, I'm curious for you. Um you know, I think you maybe sit close to the community side. When we look at value ad on the individuals level, um there's a bit of controversial thinking around whether delegate systems work and whether token v token voting systems work.

What do you think, you know, is the solution for low turnout in kind of traditional onchain governance systems? Um and how can we add more value to to the community and end users? Yeah. So that's there's a few levels to that. So first of all I would say low turnout is a subjective problem like a lot of times you have um turnout at all is effort it is engagement is whatever and that is a cost right it may not might not might be a fee an onchain cost but it might it is a cost a human cost of whatever and I do know that there is there's a lot of times when people I think there's very much power in the abstain main vote of I don't have anything to add to this.

I'm just going to let things continue to go. And where low turnout becomes a problem is when you start to have things that the people who did not turn out are now upset because things didn't happen. Okay, well maybe they should have turned out. But generally speaking, um there's something that I've kind of um sort of a phrase I've had which is the Dow that governs least governs best. a lot of times and I it is whenever you get together and have to make a big decision come together as a community you need to do something especially if it's in in a truly decentralized way and it's not just prefuncter it's not just a group of the same people who are going to do anything just putting some paperwork on top of it when you're actually coming together for a decision there's a lot of like effort and um I remember uh Amari Siché of um you know of ecash or you know former Bitcoin cash um he described Dows as effective at making decisions but bureaucratic and there is a an element of like truth to that and so if you're having a DAO vote on what you eat for breakfast maybe that maybe that there's going to be some maybe you don't need to do that much but if it's like should we do onchain scaling or should we p pivot to a layer 2 roadmap that very very very much needs a Dow vote and so yeah that's kind of the the perspective of um how you can kind of streamline.

I think that if people people don't need to turn like if people have a big decision, people should turn out and vote. Stakeholders should be out there voting. And if there's a problem with it, there's I think the low turnout is because, you know, there's a lot of times an oversaturation of votes. There's too many things thrown at people and then they're just like, I've got I spent too much time on this damn computer. I'm going to go out take my kids out to the park.

And then they don't vote. And so at some point I think that yeah, you condense it to just the the bigger better the decisions where it does make sense and then you I think you won't really see too much of a voter turnout problem. Yeah, I I would actually concur with Joel on that. I'm actually not at all concerned about um voter participation. If people are apathetic and uninformed, honestly, I don't actually want you to vote.

Stay away from our governance system. Um I I will echo something and this is maybe talking about something Joel mentioned as well and something Matteas mentioned. You mentioned Bitcoin and and referred to how Bitcoin is able to order transactions etc. And you refer to that as governance. I would I would actually entirely disagree with that because what Bitcoin doesn't right but that's that's consensus right that's that those are objective things that the protocol is able to determine is valid or invalid.

Governance is not that at all. governance is about far more subjective decision-making. So you mentioned Bitcoin as a good example. I will actually reframe Bitcoin as a terrible example of governance and a perfect example of where governance goes wrong because if you look back at the block size debates, no matter what you might think of your opinion of what way they should have gone, the fact remains that the majority of businesses wanted a bigger block size. The majority of users wanted a bigger block size.

The majority of stake wanted a bigger block size. like the vast majority of the industry wanted a bigger block size and the developers did their thing anyway. So this is I think the perfect example of like these are just dictators. There's no feedback mechanism. They're they're completely do not have to answer to the whims of the market.

That is an extremely dysfunctional system that ultimately leads it to being completely uncompetitive. And this is why governance is also so important because if you end up making the wrong decisions as a blockchain, you'll end up destroying yourself effectively or and that's we've seen that happen time and time again. And that's why governance is so important. I mean, I'm known to be a very big advocate of scalability and a very big critic of Ethereum and Bitcoin because of the lack of scalability. But if you really think about it, the biggest problem is not scalability.

It is the decision not to scale that is the biggest problem. And that's governance. I think I'm not disagreeing with you when you say that Bitcoin governance does not work. Uh I'm simply pointing out the fact that governance Bitcoin does take uh the shape of of validator consensus. And when you talk about things like the uh the the scalability debate uh what it ultimately comes down to is the consensus of validator speaking the uh canonical chain.

No, I would disagree with that. I would say that is not governance. That is just a matter of evaluation. Absolutely fair and I would say that this is a matter of definitions which is also something that I mentioned before. Not everyone is going to have the same definition and we can you know discuss them and debate them.

Um perhaps not the the right time to do that. Uh but going back also something go also going back to the um you know to the virtues of of Roman versus Athenian democracy. You could we could debate that for hours. I'm not going to do that. But I think it's important to factually state that there was a time in the Roman Republic where all the roads would lead to Rome for Roman citizens who would come in and vote on their representatives as well as any issue that was currently present.

Those representatives would then take up the reigns of governance for the uh you know next epoch, let's call it. Uh but there was absolutely direct democracy in the Roman Republic. I I I think you're wrong, but I'm not going to debate history if you're on this stage. It's easily googleable. Yeah.

They say something about Bitcoin governance. Um, so I think that people assume Nakamoto consensus was a govern an effective governance mechanism. And I think it's it's that it time showed that not to be the case. But it I think that it wasn't just that no, we'll have no decision-making capabilities. I think that they thought that Nakamoto consensus was that and it just didn't end up working out that way.

And part of I would actually argue I mean obviously part of it is that the mechanism itself is just not that great at making decisions but also there was a certain social engineering thing going on where and you're seeing this today in the the new block size war going on right now with Bitcoin about the the opera turn limit where there was a convincing that non-mining nodes decided that they were part of governance when it's not part of Nakamoto consensus really but then that kind became sort of like a red herring for governance and now you can see that it's very confused as far as no one in Bitcoin understands how decisions are made but they all think they do and they all have a different opinion on it and that's kind of that kind of illustrates the problem like why we need governance why we need but but that confusion serves the actual decision makers and that's kind of the corruption the perversion of this system because there are still people who effectively have the final say yes and as a fun thought experiment Like what if Nakamoto consensus is an actual like hash rate and stuff had been used effectively to determine that first block size consensus. We might be like 5 10 years later after that still not knowing that we needed a DAO. That's a very positive view of things like if if these systems don't fail then we never see the flaws and we just dig ourselves a deeper hole. Right. I'm with you on that.

That's a positive view. That's more of a negative view of like at least we have governance mechanisms that are more explicit today. Maybe that never would have happened if these ones would have failed later. Maybe that's fair. Matas, I'm I'm curious at the organizational level, what uh beyond like traditional governance systems, what do what you know what do you guys need at arbitum and what kind of are the foundations for onchain organizations to be decentralized and and function and acrew value and grow.

I think um onchain governance as I said is not solved. However, what Arbitum has done what is uh absolutely unique is that they've launched a essentially fully decentralized system in which the token holders do hold the rights over both the treasury as well as the protocol and can execute changes to both um unilaterally um which I do believe is is something that you know not many Dows can um can can claim to to have this type of of of token holder ownership. uh and it is something that is you know constantly evolving. Uh we're not stuck in in in a certain point with onchain governance in that sense. We we need to introduce new um new new new theories into the system, new um new models as well as new tools for that governance to keep evolving.

So Matteos, can I ask you a question? what are let's say indicators and metrics uh for you to know whether your governance process and the engagement of the community is going in the right direction. That's a very fair question. I think that there is a multitude and and uh you know some of those definitely include the uh the number as well as the uh diversity of stakeholders. I believe that, you know, a a a well distributed um you know, token holder and stakeholder set is critical um to the long-term functioning of of of an onchain governance system.

I think that some of the you know troubles with voter apathy um is is is is another thing that that we we tend to to measure and and see how the system is performing um and adapt to it. I think that that was also said that that you do need to take the system as it is uh and not think of it in an idealistic way you know at least if you're practicing governance let's call it that um and so I would say that that these are are are some of the metrics that we use and to arbitrum's credit they actually honor the decisions of their stakeholders unlike optimism right I'm not going to you know criticize optimism from this stage it was easier for me to do that so I did it for you. Please do. Please do. Yeah.

But uh but yes, like like I think the system does function in a way that it was intended to function. Nice. We have just uh just under 10 minutes left and I want to give some time for questions at the end. Um one thing I'd like to pick your guys' brains on, we're seeing an acceleration in regulatory developments in the US obviously. How do we what do you guys think um regulatory changes will like what kind of impact do you think they will have on governance and onchain organizations and how they operate and kind of build their roadmap moving forward for better or worse?

I listen I think that the better that we can get and so by the way I have testified before the legislature of New Hampshire about a DAO specifically a DAO bill and I had to make a little presentation for them with little graphics and things because the average age in the legislature is like 70 plus years old and so they needed some help understand what it now was. Um as an aside can you repeat the question? Sorry, I got too entertained remembering my presentation with the little snow plows and everything that anyway sounds interesting. I'd love to see it. Um, how do you think regulatory developments which seem to be potentially going in maybe a positive direction will impact governance and how onchain or organizations can operate.

So I got to start with the the smaller piece which is the positive and then the much larger which is negative in my opinion. Um the positive ways is clarity where people can just understand that they're not going to you know be held responsible for the actions of the whole DAO if they don't have like what if the DAO overwhelmingly votes to fund some illicit thing and you're one of the Dow members are you going to be held liable for that like that having clarity around that is better and you know those kinds of things I think just generally speaking whatever makes people not scared that they're going to go to prison for doing nothing wrong. That is the positive side of things. Right now, the negative side of things is the entire purpose for a decentralized and autonomous organization as opposed to a centralized one that's dependent upon a legal structure for enforcement. The entire point is you don't need the legal structure for enforcement supposedly like you should not need it for a lot of these decisions.

And so what I worry is overregulation of Dows kind of makes it so that you have like the worst of both worlds where now you have a system where there's legal certain legal restrictions where there's a bunch of you know there's like universal KYC for example there's a bunch of other problems that get in there that make things bad but then also because the DAO is still on a technical level autonomous now you have a much less actual control over things than if you just had a traditional company, then people won't use Dows, they'll just use regular companies and then this great innovation is just kind of lost. Yeah, I'm I'm a big believer in cryptocurrency that in terms of what makes sense, either go full decentralized or go full centralized. Very rarely do I see anything in crypto, there's a few exceptions to that, but very rarely it's either one or the other. So, especially when it comes to L1 governance, I think, yeah, ignore ignore the regulation when it comes to designing a layer 1 blockchain cuz like the idea that regulation would affect the design of a layer 1 blockchain really is anathema to the whole cryptocurrency ethos. Uh, you know, and the idea that regulators would be lecturing us on blockchain design is also a particularly laughable one.

So, yeah, I think that's that's def definitely the wrong path. And for uh for any young developers out there that are uh potentially want to start a new layer 1 blockchain, just be very careful about what jurisdiction you're sitting in because there's a lot of good innocent people that are in jail right now that shouldn't be. So just be aware of that. Um Matteas and Gideon, I'm curious your thoughts working closely, you know, with projects building these infrastructures. Yeah, I mean it's uh it's a question that of course comes up uh again and again, right?

where should we incorporate? Um sometimes that might be multiple jurisdictions for multiple goals. Uh you know working together just like some corporations do. So yeah obviously this is a fastmoving space and I am optimistic that things are improving uh clarity right that's that's one of the aspects here. Uh but I'd also love to flip the question on its head, right?

So if the question is um how can a legislator help Dows operate with more clarity and a better framework um maybe we can flip it around and say you know how can the DAO spirit and this type of coordination and collaboration uh inspire the legislature to legislate differently right to as a government adopt these principles. Um, and you know there's a a very fun mirror image there, right? Because uh one of the oldest government institutions of the Netherlands are the the organizations that maintain the dikes that make sure that this is still a dry place, right? We're like 30 m or I don't know more than 10 meters under the sea level here. Uh there's a lot of voter apathy there actually, but it's still a democratic system, right?

People don't really care uh a lot about which political parties govern keeping us dry. Uh but it still happens. And this is an interesting parallel to protocols, right? I hope that the protocols that someday will be such a, let's say, backwater, no pun intended, story, because that's just hygiene, right? We just need them to run smoothly and that's it.

And on top of that, we might actually help real voter turnout on real political topics become way more nuanced than just voting in a either a referendum or on a political party that will inevitably disappoint you. It seems I would just like add a little bit of nuance to that and to your work as well. Obviously, I was referring to layer ones needing to ignore regulation, but there's a ton of examples of applications or particular Dows for specific use cases. Yeah, absolutely. You should comply.

It really just depends on the use case and the trade-offs made. But my focus on governance has very much been on the layer one blockchain. And in that example, we need to stay pure to the crypto ethos, I would say. Oh, yeah. I feel you.

Yeah. Cool. I have some questions here from the audience. Um, can you have governance without trust? Yes.

I I think the whole point of a blockchain is to have a a a predictable system with rules that you do not that doesn't require trust in other institutions or people. I think quote unquote trust comes from confidence and understanding in the system. It doesn't require say trust in the traditional sense of what we mean by trust which is I trust you to not betray me. That type of trust is not required. The type of trust that you need in a blockchain is understanding the technology and when you understand the technology then you have confidence which is not per se what most people think when they say trust.

In other words, trusting in verifiable code uh I think would be correct way of we can agree on that one. Well done. Nice. Um, in what ways do you think ETH would change with a staked ETH voting system? Would ETH L1 eventually scale and L2 would be less important?

Layer 2s would be less important. Just have a very small thing to say about that. The question is back in the day if this had happened like you know many years ago I think it would be pretty clear it would scale on chain. Today it might be a different depend might be a different set of stakeholders that are involved today. Well, I mean I mean you all know my view on I think most of you probably know my view on this.

I don't think BC will scale and BC is a failed project in my eyes because of that. We have an interesting one here. What are some good alternatives to coin voting in onchain governance given that it given that it often leads to governance theater and doesn't align with best interests? I mean uh it could be one person one vote of course depending on you know how you how you guarantee you can't do that in a decentralized and permissionless context that's the problem right now I I get the uh I I get those well okay let me explain this right so I work I operate in a lot of environments in which I actually do get people in the room whether that's a virtual one or not right so we establish a base layer of trust and not so much a voting game uh which then allows you to have other mechanisms like one person one vote or have stuff like uh sweat equity um and reward people based on participation. So there's definitely al alternatives.

Actually I start a lot of Dows uh coinless and we we go towards actual you know monetary value coins later optionally. Nice. I think we can quickly take one more. Um what is the role of privacy privacy namely offchain solutions within Dows? Does it make sense to verifiably compute certain actions offchain and then settle onchain?

I think it should all be on chain, but I'll let someone else maybe cover that in more detail. I would agree with that. I think that there is um you know much wider attack surface if you're relying on on any off-chain solutions. Um I do see the um the the you know um potential use cases for off-chain governance solutions. Uh but they are very specific and most likely relate to uh to treasuries rather than protocols.

uh because as soon as you're dealing with with user funds um you better have a a decentralized and permissionless way of of of of upgrading the protocol. Nice. Well, thank you guys so much. Can we get a round of applause for the speakers? [Applause]