The importance of governance, namely the set of processes that blockchain platforms and projects utilize in order to perform decision-making and converge to a widely accepted direction for the system to evolve. Voting systems enable us to argue about the governance process in an ideal and philosophical sense.
The word “consensus” is defined as “a generally accepted opinion or decision among a group of people”, the state of agreeing with someone or something (Cambridge Dictionary, 2022).
Plurality voting is defined as a system in which each actor votes for one option and the highest scoring option is named the victor. When voting the winning option is not required to have absolute majority, just the majority.
The term “decision by consensus” is used to refer to a decision making process and can be observed in small groups, small communities, political assemblies, international organizations, etc. This practice is either by “consensus” or “unanimity”. Over the last century we have seen a general trend towards decisions by consensus, and now we are seeing it proliferate within decentralized organizations.
The Dimensions of The Modes of Decision Making
To demonstrate decision modes and their logical relationships the image below. Although sometimes vague conceptually, we can more often than not use the terms “majority decision” and “amicable agreement”.
If a disagreement is openly articulated, the first question is whether or not the substance of conflict is resolved or not. If not, one may still speak of a decision, but this decision is limited to the procedural matter of leaving the conflict unresolved. This may be defined as a non-decision.
By contrast, if the substance of conflict is resolved, then a distinction can be made along a second dimension, a formalization of the decision. A decision may be made in a formalized way if at the end of discussion all actors explicitly express their opinions and final position. A decision may not be formalized if an actor simply interprets what they believe to be the essence of the discussion, which is then accepted by the other actors.
Decisions by interpretation are not feasible because it is a property of discussions by interpretation that remains uncertain whether the dissent in the group still exists or not. Uncertainty does not exist in formalized decisions, if the dissent in a group persists, we apply a majority decision. If the dissent no longer exists at the end of discussions, we have a decision by amicable agreement.
A decision by interpretation is distinctly different from the majority decisions. Decisions by interpretation don’t always bring about a victory of the majority; decisions by interpretation are often unclear as to which group has the highest number of supporters. The question is whether or not decisions by interpretation can be sufficiently differentiated from amicable agreement. In decisions by interpretation It may be the case that when everyone was in agreement with the decision, however if not made explicit it is fundamentally different from amicable agreement.
Finally before we discuss collective decision-making we should question whether or not decisions by interpretation can be sufficiently distinguished from non-decisions. Whether a debate ended by non-decision or a decision by interpretation doesn't really matter. Functionally the two modes are so similar that although useful to distinguish between the two conceptually, however they can be distinguished in that 81% of cases of decisions by interpretation are implemented, thus can be regarded as distinctly different from non-decision (J. Steiner and R. H. Dorff 1980).
Modes of Collective Decision-Making
Although widespread, the term “decision by consensus” is not clear. It is often informal and found where unanimity rule or an absence of voting procedure is observed. It is considered to be more democratic and may benefit decentralized finance (DeFi) and the wider crypto ecosystems by helping to align values and governance. We will begin by identifying two distinct ways in which collective decisions are made. The following two studies provide clear descriptions.
In 1970 Sheif El-Hakim observed the collective decision-making process of a Sudanese. He found that participation in making decisions was governed by two principles. Firstly “notables”, who held a degree of authority, often which was associated with responsibilities; notables had specific roles and weight in the process. Secondly, every male villager had the right to participate in any decision. Only the most influential villages were able to take the initiative of calling a meeting aimed at making a collective decision. Effort was made to ensure that all those who would be affected by the decision were notified. After a stated period of time the notable begins to speak, presenting the purpose, details, context of the problem, opinions expressed in previous informal meetings. The only exception noted was speaking out to notify an absence of one or more villages concerned by the matter, this would then be discussed if believed to adversely affect the proceedings. The notable ends this presentation with a statement of their proposed solution. Other individuals at the meeting are then able to speak up to express their opinions. Once done so, another man - never the same as the one who opened the meeting, presents what seems to him the consensus has been. El-Hakim then observed that the meeting proceeded in one of three ways:
No accounting for preferences or formal rules for aggregating views were observed.
In 1978 Barbara Yngvesson studied the decision-making process of a community of fishermen in Sweden. Aboard the boats and in the assembly clear concern that the proceedings be egalitarian, and that collective-decisions follow the same protocol as the island’s political body were observed. A rule of “non-opposition” was revealed. Decision-making followed three step:
It is important to note that in both the above studies, what follows discussions is not a vote but a statement of a proposal or series of proposals that correspond to what consensus is. The “apparent consensus” is gained not by the counting of preferences but by noting that no opposition has been made.
Apparent Consensus
We can define three typical contexts in which “apparent consensus” is used in decisions-making. However, we will use the two most pertinent to crypto. The Areopagus, a modern leaned assembly made up of “wise” persons, savants, magistrates, etc., which are brought together in the name of competence and qualifications. The second, assemblies or commissions that use several rules for decision-making, to make consensus expedient.
Apparent consensus decision-making may be chosen predominantly for two types of situation:
To define the decision rule “apparent consensus” we must reference six defining characteristics:
It is important to note, decision-making is never aimed at attaining a state of knowledge; the point is to determine an action to be taken. Concern is only with a decision where there is a discernible time lapse between making that decision and acting on it. A decision fixes an intention to act (Raz 1975).
Apparent Consensus and Emphasis on Decision Quality
Decision-making by apparent consensus may particularly be usefully in contexts where importance of consensus is closely linked to participation approval and the quality of the decisions made. Apparent consensus opposes a voting system in two ways:
It is not that voting should outright be rejected, since there is the possibility of putting the matter to a vote after opinions have been enriched by discussion. The quest for representativeness has seemingly replaced the concern for quality. Voting can create a disjunction between the concern for a quality decision that is presumed to govern discussion, and the counting and adding together of individual preferences. **
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In apparent consensus decision making, the attempt to reach consensus is not dissociated from concern for the quality of decision made. It allows for a merging of wisdom and the greatest number rather than the opposition of the two.
Silence Means Consent or the “Rule of Non-Opposition”
Consensus decision-making is possible because some participants consent to not oppose the latest consensus proposal. In most cases a minority rallies to the option that seems to produce consensus. Not all Areopagus members may entirely approve decisions that are made partly due to their silence. This implies adherence to the majority rule principle. Participants in this sort of decision-making expose themselves to having consented in this way. (Hazard 2022 and P. Urfalino2006).
In apparent consensus consent is more personalized and requires a more active role. Once a given proposal pulls ahead of other suggestions, by the decreased amount by which explicit opposition is observed - any hold-outs against said proposal must ask themselves if they will continue to express disagreement or keep silent. In apparent consensus each participant is granted a veto, so it is worthy of asking those who oppose the proposal as to what their motives and reasons are for doing so. The are two common reasons given for silence:
Areopagus Selection
Those who make up the assembly of “wise” persons, based on competence and qualifications should be able to be elected through the same rules of consensus that are used for all proposals. Becoming a delegate and/or team member of delegated group is a large responsibility and comes with time commitments and requires technical understanding of governance, proposals and specified technical understanding.
The process of becoming an elected individual should be selective. Candidates should be able to act autonomously while demonstrating levels of high, organization, and understanding. Furthermore, they must remain engaged and responsive in a productive manner.
A simple example of this process could be through the use of a delegation rubric to assess the candidate(s). If the desired individual is adequate and approval is granted, then an agreement in the form of a delegation letter may be made. Helping to reinforce the responsibility and accountability required (A. Kroeger 2021).
Now we have distinguished, defined, explored the characteristics, and provided examples of consensus decision-making and plurality voting. Let's summarize their pros and cons.
Plurality Voting Pros/Cons
Plurality systems are used widely across the globe for democratic processes. The main benefits of voting systems are (LongForWisdom 2022 and Wikipedia 2022):
What are some of the negative points about the voting system?
Consensus Decision-Making Pros/Cons
A more egalitarian and democratic approach of decision-making, with the goals being an acceptable resolution that can be supported by the majority even if not the favorite of any individual. The main benefits include (LongForWisdom 2022 and Wikipedia 2022):
What are some of the negative points of consensus decision-making?
Core Procedures for Consensus Decision-Making
Once an agenda has been set, each item on the agenda is addressed. This is called “blocking”, although effective for small and trained groups, in large groups it can be susceptible to status quo preservation, widespread disagreement, stagnation, exclusion and channelling decisions away from inclusive processes. Typically, each decision arising from an agenda follows a simple structure:
Specific Roles in Consensus Meeting
There are a variety of roles that help make the process of consensus decision-making run more effectively. Not all organizations make use of all these roles, although the role of facilitator almost always features. These roles are not always fixed, they can be rotated or randomly assigned (Wikipedia 2022).
The common roles in consensus meetings are:
Similar Practices of Consensus Decision-Making
Japanese companies commonly use consensus decision-making which seeks to achieve unanimous support across the board of directors for any decision. It is deeply anchored in the socio-cultural values of the society, as a whole the effective corporate communication system is related to the high level of productivity and technological innovation observed in Japan. A ringi-sho is a document used to obtain agreement. The document must first be signed by the lowest level manager, and then continues upwards, if it is revised the process begins again.
For the “Ringi” system to operate effectively, certain conditions must prevail. It calls for a good organizational culture with harmony among employees and seeks for a well organized communication pattern at the workplace. Much of the discussion, negotiation, bargaining, and persuasion are performed through mobilization of personal networks. To make this possible, organizational and physical settings must encourage regular and frequent face-to-face interaction. It is important to have a strong sense of shared understanding and values among participants (S. Sagi 2015).
The Internet Engineering Task Force (IETF) employs the rough consensus model. Rough consensus is used to indicate the “sense of the group” concerning any particular matter under consideration. The means to establish rough consensus was described by the IETF as follows: “Working groups make decisions through a "rough consensus" process. IETF consensus does not require that all participants agree although this is, of course, preferred. In general, the dominant view of the working group shall prevail. (However, "dominance" is not to be determined on the basis of volume or persistence, but rather a more general sense of agreement). Consensus can be determined by a show of hands, humming, or any other means on which the WG agrees (by rough consensus, of course). Note that 51% of the working group does not qualify as "rough consensus" and 99% is better than rough. It is up to the Chair to determine if rough consensus has been reached (IETF Working Group Guidelines and Procedures).”
The IETF published a subsequent document pointing out that supporting percentage is less important for determining “rough consensus” than ensuring opposing views are addressed.
How Might Plurality Based Token-Weighted Voting Integrate With Consensus Decision-Making?
Many projects in DeFi currently share similarities based loosely on corporate governance such as shareholders and “token holders”. However there are some distinct differences that should be highlighted, such as the governmental laws which in traditional finance are enforced to ensure the preservation of rights held by shareholders. This is absent in DeFi and DAOs. Although, it is starting to emerge through projects such as Aragon which aims to be a web3 court that settles subjective disputes requiring human judgment.
The question across both plurality voting and consensus decision-making is whether an outcome may be enforced. If not, it cannot be considered “passed” or “failed”. If we look to corporate organizations which share the most similarities with DAOs, such as mutual funds, we may observe that voting has become vestigial, or in some cases absent entirely. Often we see an inherent vulnerability within DeFi and DAOs towards forms of oligarchic and plutocratic governance. Tokenholder voting is not analogous to shareholder voting (V. Buterin 2018).
In 2022 a beige paper by Hazard suggested “Token-weighted voting measures the scale of a threat to exit. When considering a proposal those who would exit if the proposal were to pass, may signal that fact using a token-weighted vote that only counts “no”s. The result is the number of tokens that would exit, allowing the group to measure the degree of consensus. In other words, we propose that the natural use for a token-weighted vote is to answer the question, “are there any objections?”.” This suggests the combination of consensus decision-making alongside voting. Deliberation may be made towards actionable options, whilst giving dissenters an opportunity to oppose and express criticism and concern where they would like, helping to ensure quality and competence, and then quantifying consensus with a token-weighted vote.
Meritocracy
Much of what has been explored and discussed above has eluded to meritocracy. This political system is one in which economic good and/or political power are vested in individual people of talent, effort and achievement, rather than wealth or social class. In meritocratic societies and institutions, power is earned through contribution, reputation, quality and competence (Wikipedia 2022).
Does the presence of those selected individuals have a negative affect upon the legitimacy of decentralized governance? It appears not. Evidence suggests not, providing their authority is properly limited, they will play critical roles towards the betterment of the specified project or protocol (G. Lee and R. Cole 2003 and Hazard 2022).
Closing Thoughts
It is clear that governance of blockchain platforms is lacking a well established set of methods and practices that are adopted industry wide. Instead, each different system adopts their own unique approach or simply copies another. They vary in levels of sophistication and degrees of integration.
Both plurality voting and consensus decision-making have vulnerabilities and strengths, the two are compatible and may be utilized to mutually benefit one another. Productive communities need a form and structure of governance to be able to orientate their interdependent efforts towards mutually agreed upon goals.
Employing game theoretics the prisoner’s dilemma may be optimized for in the context of DAOs and within DeFi. Given that Dunbar’s number may limit the sustainability of social relationships within large scale and “flat” governance. It is reasonable to suggest that structure, division of labor, restrictive rules, and enforced norms are necessary to maintain cohesiveness. We need institutions and hierarchies, they allow for effective division of labor, specialization, strategy, and vision. Thus achieving both a high-level vision and long-term goals through the competent deployment of skills and resources in the short-term, using highly specialized local knowledge.
When legitimate and competent leaders and group members are guided by collective interests and a common goal, that aligns with self benefit and if possible shared values, governance can become resilient, resolutory, effective and successful. Those involved must be held accountable and responsible by a shared positional authority. We need a monopoly on power (the ability to bring violence to bear) to have a legal system, we need a legal system to have property rights which underpin all markets.
“Property rights and prosperity are inextricably linked. The importance of having well‐defined and strongly protected property rights is now widely recognized among economists and policymakers. A private property system gives individuals the exclusive right to use their resources as they see fit. That dominion over what is theirs leads property users to take full account of all the benefits and costs of employing those resources in a particular manner. The process of weighing costs and benefits produces what economists call efficient outcomes. That translates into higher standards of living for all.” (G. O’driscoll and W. Hoskins 2003).
“Bitcoin’s innovation is that: “It detaches property rights from the legal system and the monopoly on violence. For the first time, we can have property that does not rely on a local authority to enforce and protect. It is easy to conceal, defend, divide, move, and verify — all by yourself, granting you the highest level of personal sovereignty.” (Su Zhu and Hasu 2019).
In order to employ effective plurality voting and consensus decision-making a defined structure and hierarchy should be created. This should be divided into groups of active and highly specialized individuals which are elected and continually reviewed (within a stated time period), based on a meritocratic system, properly incentivized and functionally held accountable and responsible (A. Hall and P. Smith 2022). An always-on-voting system (a repetitive blockchain-based voting framework that allows participants to continuously vote and change elected candidates or policies) may be used to maintain or change these individuals or groups when implemented within pertinent parameters.
They should be highly cooperative and autonomous, and collaborative when needed. There should ideally be a “constitution” in place which serves as a constantly evolving yet hard to change (only through extensive deliberation and discussion) document, it should contain the foundational principles, vision, goals and strategy that the given protocol or project embodies. This constitution will help guide and inform how decision-making takes place and approved proposals are implemented.
It is important to note the centralization risk associated with the implementation of such structures. To remain true to the idea of any form of collective consensus a veto system must remain in some form of which is accessible to all participants. Ultimately, in decision making in the context of DAOs and DeFi there is a sliding scale between representative democracy and direct democracy. However, democracy or not, it must remain transparent, public and censorship-resistant.
References
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J. Steiner and R. H. Dorff. 1980. Decision by Interpretation: A new concept for an often overlooked decision mode. https://www.jstor.org/stable/193446
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