Decred’s Politeia: Lessons Learned From A Year Of Decentralized Governance

With its tandem on and off-chain governance system, the Decred community has enjoyed a productive year of uniquely decentralized decision-making. After the submission of more than 50 proposals, resulting in 25 approvals, with the casting of nearly half a million votes, members of the Decred community have learned a lot about reaching consensus on a broad range of issues.

Decred Project Lead, Jake Yocom-Piatt, sat down with Crypto Briefing to share some of the learning experiences derived from Politeia’s first year of decentralized blockchain governance experience. 

Decred’s Politeia voting system utilizes a two-pronged approach to the problem of communal decision-making: on-chain Proof-of-Work consensus for block validation and production, paired with off-chain Proof-of-Stake voting, in the form of tickets, for making decisions about project proposals.

The unique approach is intended to avoid chain splits over contentious issues while maintaining decentralized governance and healthy debate over important matters.

Politeia was launched on October 16, 2018, taking on-chain governance issues off-chain. Yocom-Piatt explains why simply: “On-chain should be restricted to on-chain matters.”

One of the biggest priorities for off-chain governance has been treasury custody and payout mechanisms, Yocom-Piatt says. Faced with the question of how to spend the treasury in a more decentralized and democratic manner, Politeia was a key tool in providing answers.

Yocom-Piatt explains the governance system “… was built for determining how to do things with respect to the treasury. We started out just shooting from the hip, but it’s become a more formalized thing over time.”

Decred’s DAO system (decentralized autonomous organization) was built one piece at a time. “The soft-signalling system was built out first, which is Politeia. People need to be able to go thumbs up, thumbs down on proposals, and make comments.” 

He explains Decred is taking a unique approach to handling DCR treasury funds via the Politeia system. “What we’re doing with the treasury proposal is, we’re creating a way to remove custody of the funds back into the hands of stakeholders, using the signalling system of Politeia.”

When it comes to other DAO solutions, he is noticeably cautious: “It’s very easy to shoot yourself in the foot with smart contracts, where you get a catastrophic problem due to some bug.”

To prevent this, Decred uses a stop-gap measure. “There’s the normal transaction script system and the stake system, used for the PoS governance in a separate module. We had to do that to prevent unexpected interactions. We’re doing the same thing with the treasury — a special little bubble that’s separate so it’s impossible to fall victim to bugs in the contract.”

Humans and manual controls remain a part of the process, Yocom-Piatt explains. “Invoices come in every month after proposals, and the process of approving payouts is still a human process. There isn’t a good way for computers to tell if something is nepotistic, for example… at least not yet.” 

At the end of each month, all invoices are turned into a series of payouts. Then, payouts are sent from the treasury via a centralized corporate entity. “But we’re going to change that,” Yocom-Piatt says,  “so the payouts are from a decentralized smart contract. That special transaction gets voted on by stakeholders.” 

This process allows stakeholders to vote on the payout transactions via a mechanical process. A physical pool of funds is thus moved into a smart contract space, after which it must be voted upon to complete transactions for the funding of proposals. 

This decentralizes the custody and movement of the funds, preventing malfeasance with payments. “By taking the custody problem away, we strip a lot of the problems away. With the network having custody, no individual is on the hook legally, nor is an individual able to steal funds.”

Yocom-Piatt recognizes the problem of treasury custody is a complicated one. “We’re trying to ‘engineer out’ the problems of custody. We hoped we could deliver this sooner, but it’s a testament to the complexity of the problem that we’ve been working on it for three or four years and it’s just now going live.”

Politeia came in handy in the contentious process of choosing a PR firm too, Yocom-Piatt says. The decision was down to just a couple competitors, with two finalists. When it came time for a decision, Ditto PR won the job – after a remarkably healthy debate on Reddit.

Yocom-Piatt explains “That was one of our first and most controversial proposals because people weren’t aware of all the groundwork that went on behind the scenes and people were really angry, thinking it was a cash grab. The decision was really the result of weeks of work…”

Comments in the Politeia discussion boards can give a misleading impression of sentiment sometimes, the project lead elaborates. When it was first proposed that Decred fund and build a DEX, things got seriously heated. “It seemed contentious when you read the comments because we have a Reddit-style thing going on with proposals, and if you read all the comments on those proposals, you’d be like, ‘Oh my God, this sounds like it’s going to be really contentious,’ but then the proposal passed with 90% approval.”

It’s a pretty common problem across social media, he says: “Anyone who’s nominally on the internet with any frequency knows there’s a very vocal minority whether it’s on Reddit or Twitter or Facebook and when they stamp their feet and start yelling and screaming and howling, it might seem like people are gonna set fire to cars in the streets if we don’t do X, Y, or Z, but in reality, it’s maybe 0.1 percent who are really angry people.” Yocom-Piatt explains.

Politeia allows for the community to discern between the negative sentiment of a vocal minority and the reality of how the majority of stakeholders are actually feeling. Ironically, Yocom-Piatt says, sometimes comment sentiment directly contradicts reality: “The pattern we’ve noticed is, it can even be a contrary indicator. If anyone shows up and gets really vocal against a certain proposal, it’s almost a sure-shot sign that the proposal will pass with flying colors.”  

More recently, a debate over choosing “market-makers”, or liquidity providers demonstrated the same contrast between a critical minority and a supportive majority.

“Comments were extremely hostile to the idea, suggesting ‘The world’s going to end, regulators are going to shut down Decred! This is a bad idea!’  But when it came time to vote, the community was nearly unanimously supportive, “No one was able to present an airtight argument over why we shouldn’t go ahead with it… Eventually, it goes up for vote and it’s approved by more than 90% of the community.”

The DEX was created as a result of numerous requests to cover marketing costs when listing on exchanges. “A lot of people would have said, just bite the bullet, pay up, and get the listing. But this whole process really rubbed me the wrong way.”

Centralized exchanges, Yocom-Piatt says, are just another gatekeeper. “And you know what we do with gatekeepers in the cryptocurrency community? We dissolve them. That’s where the whole motivation for a DEX came from.”

Decred is focusing on fairness with their DEX project, with no custody, no rent-seeking, and only an anti-spam account fee. It’s also designed to stamp out unfair trading practices, “Something that becomes clearer in trading is, whoever has the lowest latency, or has the best connection with an exchange has a huge advantage, which is incredibly unfair.”

Decred offers a unique solution to the problem. “We made the order-matching pseudo-random, so the order in which trades get filled is randomized within an epoch, to nullify unfair advantages.”

“Every order that gets submitted then gets fanned out so everyone else who is connected can see the order at the same time.” This prevents front-running as well as latency and server advantages, the project lead explains. As a trading epoch ends, everyone can see order-matching being performed pseudo-randomly.

“This is all getting built right now and currently has about 13,000 lines of code. It should be ready by roughly the end of the year” Yocom-Piatt says. Swaps will begin between Decred and BTC, but others can join in with other pairings on the DEX with minimal work, Yocom-Piatt explains. There’s no special barrier for projects to trade on the DEX.

For those wanting to get in on the Decred action by presenting a proposal, Yocom-Piatt offers some tips. Showing up and engaging community first is crucial, he says. “By showing up and engaging, you can make some allies. You might even find your original idea wasn’t so great and you might modify and improve your proposal based on feedback.”

The community does not have a whole lot of patience for shysters and scammers looking to make a quick buck off a crazy idea. “If you’re some random person off the street who makes a proposal, we’re all going to be pretty skeptical. If you just show up and propose something to give you, I don’t know, a million dollars, or half a million dollars to do something… people are going to be like, ‘get out of here’.”

Yocom-Piatt recommends potential developers make sure their proposals are realistic and achievable. “Stick to things that are concrete, that don’t feel like they’re just a money-grab.” He advises, “Keep it real and don’t get too far into outer space, where your smart contract is going to do everyone’s laundry and make sandwiches for everyone’s kids… If your proposal looks like a scam, people are just going to relentlessly vote it down.”

Fairness is a key principle of Decred’s ecosystem, Yocom-Piatt insists. “The best way to build in the crypto space is to build infrastructure that is maximally fair. We’re doing that with Politeia and with the Treasury, and we will continue to do that with whatever projects we come up with.

It’s what crypto is all about, he says, “Fairness is what has attracted most people to the crypto space. Fairness is something we care a lot about as a project.”

Image: 20th Century FOX

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