DeFiChain

<p>Blockchain projects sometimes attract flak for placing emphasis on community governance, as if this is a means of its founders shirking responsibility or exiting altogether. While it’s true that some projects only pay lip service to the concept of community participation, others walk the walk. And what’s more, they do it for the right reasons: namely to align incentives between network participants and, through close consultation, to ensure product-market fit.</p><p><a href="https://defichain.com/" rel="noopener noreferrer nofollow">DeFiChain</a> is one such case. The non-turing complete blockchain, which makes use of Bitcoin’s security model to provide an immutable record of transactions, prioritizes community involvement, particularly when it comes to protocol upgrade proposals. Its use of stakeholder governance provides a practical example of how blockchain projects can leverage community decision-making to good effect.</p><h3 id="the-case-for-consulting-the-community">The Case for Consulting the Community</h3><p>There are several advantages to involving the community in decision-making, commonly via token-holder governance. One of these is that it increases decentralization. By involving the community in key decisions, a blockchain project can become more decentralized and less reliant on a small group of individuals to make important decisions. This increases the transparency and trust in the project.</p><p>Token-holder governance also aligns the interests of the community with those of the project, as token holders have a vested interest in its success. This can lead to more active participation and engagement from the community. It can also spark new and innovative ideas, as a diverse group of individuals can bring a wide range of perspectives and expertise to the table.</p><p>Not all community decision-making needs to involve onchain voting, incidentally; it can also occur informally in Discord and Telegram groups. But when it does involve consulting token-holders through onchain voting, another benefit is that it allows all users to have a say in the direction of the project, making it more inclusive and accessible for everyone.</p><h3 id="it-all-starts-with-a-proposal">It All Starts With a Proposal</h3><p>Because blockchains are decentralized by design, there’s no single entity that can change their codebase. Making protocol upgrades requires consensus, something that can only be achieved if a majority of all validators or stakers are in agreement. Thus, blockchains are much more than experiments in networking: they’re also experiments in democracy, business management, and game theory.</p><p>Getting a majority of network users to agree on a proposal that will benefit the entire community sounds like it should be straightforward. In reality, however, most upgrades that are tabled come with trade-offs and with winners and losers attached.</p><p>The process to make core amendments to a blockchain starts with a proposal. For example, a Bitcoin Improvement Proposal (BIP) is a design document for introducing features or information to Bitcoin. It is a formal way for Bitcoin developers to propose changes to the protocol and for the community to reach consensus on those changes.</p><p>An Ethereum Improvement Proposal (EIP) is the Ethereum equivalent of a BIP. It is a design document that describes a new feature or improvement for the Ethereum protocol, and is used as a way for developers to propose changes and for the community to reach consensus on those changes. DeFiChain uses its own term: <a href="https://defichain-wiki.com/wiki/Improvement_Proposals" rel="noopener noreferrer nofollow">DFIP</a>, also known as a DeFiChain Improvement Proposal (DFIP) or Community Funding Proposal (CFP).</p><p>After being submitted by its creator, each accepted DeFiChain proposal goes through two further stages: Request for Comment (RFC) and Voting. In the case of the former, the RFC is presented as a Reddit Post and GitHub Issue, allowing for free and open discussion among community members. The RFC period typically lasts for 45 days.</p><p>Once the consultation period is over, attention turns to voting as the proposal is voted on by masternode operators. Because 20,000 DFI are required to run a node, onchain voting is undertaken by DeFiChain users who have a financial interest in seeing the network prosper. This broadly ensures that the votes they cast are likely to be beneficial to the protocol and its development.</p><p>DeFiChain operates a system of one vote per masternode. The beauty of onchain governance, as implemented here and with other PoS blockchains, is that it permits community decision-making to be made in a <a href="https://blog.defichain.com/the-community-has-spoken-dfip-cfp-results/" rel="noopener noreferrer nofollow">transparent</a> and verifiable manner. The vote can’t be rigged, in other words.</p><p>In December, DeFiChain posted an <a href="https://blog.defichain.com/dfip-cfp-schedule-changes/" rel="noopener noreferrer nofollow">update</a> concerning its DFIP process. It includes a new provision stating that following their submission, proposals are eligible for voting over the next 90 days.</p><h3 id="closing-thoughts">Closing thoughts</h3><p>It’s clear that DeFiChain has put significant thought into not only developing its governance framework, but in upgrading it just like other project components such as the protocol itself. By involving the community every stage of the way, DeFiChain can claim to be a highly decentralized network that is still nimble enough to evolve through the rapid implementation of improvement proposals.</p>

How DeFiChain Leverages Community Decisions to Guide Its Direction

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