BLOCKCHAIN GOVERNANCE: PROMISES, MECHANISMS, AND BROKEN IDEALS

The rapid advancement and adoption of blockchain technology have fundamentally
transformed various aspects of digital interaction, leading to the emergence
of novel governance frameworks that challenge traditional centralized models. At
the forefront of this transformation are decentralized autonomous organizations
(DAOs) and an array of other governance structures applied in both permissionless
and permissioned blockchain environments. Unlike conventional organizations
that rely on hierarchical authority, DAOs within permissionless systems strive
to operate through decentralized networks where decision-making power is distributed
among all members, facilitated by smart contracts and governance tokens.
In parallel, permissioned blockchain applications, often employed by consortia
or enterprises, experiment with more structured membership and delegated
authority, blending decentralized principles with selective participation to maintain
compliance, accountability, and operational efficiency.
These governance mechanisms, whether in DAOs or permissioned networks, are
envisioned to enhance transparency, inclusivity, and autonomy. Yet, despite their
idealistic promises, practical implementations have revealed significant challenges.
Within DAOs, governance tokens intended to promote equitable decision-making
often lead to power concentration and stakeholder inequality. Moreover, vulnerabilities
in smart contract design and the absence of robust accountability
frameworks have produced notable failures. In permissioned contexts, while
governance structures can mitigate some of these issues through established roles
and clearer recourse mechanisms, complexities arise in balancing decentralized
ideals with enterprise-grade stability and oversight.
This thesis critically examines the foundational principles of blockchain-based
governance—spanning from permissionless DAOs to permissioned consortia—
alongside their operational realities and limitations. It explores the effectiveness
of governance tokens and the vulnerabilities undermining participatory ideals.
It further examines whether emerging innovations, such as quadratic voting,
market-based, and NFT-based voting mechanisms, mitigate any of the identified
issues.