Crypto Investing #73 – What Is Governance In Cryptocurrency?

Tai Zen: What’s up guys. This is Tai Zen. With me today, I have LeonFu.com, the great oracle of cryptocurrency.

In this video, Leon and I have been on a few cryptocurrency talk shows recently. Matter of fact, it was on one of the Bitcoin Meisters recent episodes.

I had brought up the idea that Bitcoin has gone as far as it can go at the moment because it doesn’t have a governance process to determine how it can scale up.

A lot of people think that the scaling is an issue with Bitcoin, but the reality is scaling is not an issue with Bitcoin. The issue with Bitcoins is governance.

When LeonFu.com mentioned that on his twitter feed, people are jumping on their ass and asking us why we keep favoring government or a central government to be in charge of Bitcoin.

In this video, we want to explain to you that governance does not mean government.

Leon Fu: It doesn’t.

Tai Zen: it doesn’t have to be. Do you want to go ahead and explain that real quick, LeonFu.com?

Leon Fu: When we say governance, it doesn’t mean government, even though the words are very similar.

We’re talking about the process that a community can come together and make a decision because every community is made up of different people

We disagreed on Stratis or we might even disagree on which restaurant we want to go to.

If it’s just a handful of people, it could be several ways that we can decide on every time a needs to be made. It’s not that hard.

For Bitcoin to become what we all hope it to be, that’s not going to work. If there is no process, what happens is decisions will make the community fractured.

Everybody thinks that the Bitcoin problem is segwit versus Bitcoin unlimited versus or scaling issues. That’s a very short term issue. That’s a very tactical issue.

When we say scaling, we don’t mean how to scale to get more throughput, whether we use segwit or a few proposals that we’ve seen around the community.

What we mean by governance is there’s no process for the community to reach consensus about what the way to move forward on every time we have a decision that needs to be made.

Let’s take an example of government, which we’re all familiar with.

Let’s say we have a dispute. I think you ripped me off or you think I ripped you off or something like that.

However, there’s a governance process. We go to court to argue our case in front of a judge. If somebody committed a crime, there’s a jury out there. Prosecutor presents their case. Defense presents their case. Then, the jury deliberates and then a decision is made.

We’re talking about that process.

Tai Zen: In the criminal world, that would be called due process.

Leon Fu: Typically, governance is run by the government, but in the crypto world, it’s run by the community and there is no government here. Therefore, we still need to find a method that the community all agrees

Even if I don’t agree with the decision, I don’t just go off and start my own coin, which just might happen on August 1st.

Everyone’s worried about a hard for. That’s exactly what the lack of a governance process might result in.

Basically, one part of the community says we don’t agree with you, so we’re just going to do our own thing.

That’s going to create what we saw that with Ethereum Classic & Ethereum., where they kind of have a governance process, which is Vitalik and the Ethereum foundation.

However, if the community doesn’t accept it, you could see Vitalik wasn’t able to stop Ethereum Classic from forming.

We might see the same thing with Bitcoin. We don’t know. I’m not saying it will or it won’t happen, but there’s a possibility.

That’s why I believe the coin that eventually becomes dominant will be a coin that addresses this issue.

Tai Zen: That is probably the last remaining issue.

Leon Fu: That’s right.

Tai Zen: That’s holding blockchain will just blockchains in cryptos from gaining mainstream adoption.

Leon Fu: Sure. Sure.

Tai Zen: We have to stress that the governance process is usually done by governments all over the world. However, it does not mean it requires a government to scale Bitcoin or any cryptocurrency.

Leon Fu: There is a possibility that maybe a government like the United States government or some other country’s government comes in and regulates a blockchain, but it doesn’t have to be like that.

For example, Dash has some kind of treasury model where a portion of the mining rewards are allocated to the Dash Foundation and the community has a way to make proposals and that vote on it. That might be one possible way to do governance.

There’s a project such as Decred that’s also working on blockchain governance.

Of course, a widely known project is also working on a solution to that.

Therefore, I believe that this is a critical solution that needs to be solved. The chain that figures it out will have a shot at becoming the dominant crypto, whether it’s Bitcoin, Ethereum, Dash or one of these.

It’s not so much of an issue when a project is just starting out because usually you have a leader such as Satoshi Nakamoto of Bitcoin, Chris of Stratsis or so.

That’s fine when you can get to a few billion USD with just a benevolent dictator model.

Tai Zen: I’m going to cite James D’Angelo from the world Bitcoin network here. He stated that the one thing that the cryptocurrency community fails to realize is throughout thousands of years of human history, the best governance model to come to a consensus is the legislative process or the Congress process.

Leon Fu: But that dream in Crypto is the process can be automated

Tai Zen: I believe what James said is true as long as human beings involved in the process becasue it’s the interaction from one human being to another human being despite the more advanced and automated crypto we invented.

Leon Fu: Sure.

Tai Zen: Therefore, as long as human beings are involved in using these cryptos, you still need a human base legislative process or a governance process.

Leon Fu: I think the question is whether we have something like a legislative congress type which would be based on humans or we have something that still has humans involvement, but it’s done via the blockchain.

Tai Zen: That could be possible. I’m not saying that you can’t use technology to help facilitate the human governance process.

What I am denying is that as long as humans are involved in crypto, we need to do the governance process to scale up.

When we say scale up, we mean the mainstream use of Bitcoin. We’re not talking about increasing the block size. We’re talking about gaining mainstream use of a Bitcoin or any cryptocurrency. That’s what we’re talking about

Leon Fu: In the future, when there are hundreds of millions of people are using the blockchain, whatever that might be, there will need to be some kind of governance process put in place whether it’s automated through machines or whether it’s a legislative body.

Tai Zen: Okay. Let’s talk about why some of the Bitcoin maximalist and some people are die-hard fans of other cryptocurrencies believe that it’s not necessarily

Leon Fu: I’m not stating this as fact. This is just my view.

One of the first communities of Bitcoin were libertarian who believes that we should have the least amount of government that we can get by with. That the majority of decisions should be done by everyone’s free will. That’s one end of the Libertarians.

Another part of libertarians is more like anarchists who believe in no government.

I’d say a large part of the Bitcoin community or a significant part of the community is almost towards the end anarchist side.

Therefore, when they hear the word governance, they think the government, which certainly is a possibility. That’s why we get these revolts.

There is the view that a large group of people that have no processes in place can somehow magically come to a consensus every time a decision needs to be made.

I think that’s just not possible. That’s not realistic. A real-life example of that is Bitcoin segwit versus Bitcoin unlimited.

It’s really not a hard decision to make. The problem has been getting the entire community to agree. That’s a governance issue.

Whether we go with big blocks or go with segwit or whether we do segwit now and the big box later, all of these are fine. They all work to make Bitcoin faster, but the problem is there’s no governance process to pick one to go with a plan forward.

Tai Zen: Basically, governance means a decision-making process. It doesn’t mean that it has to involve the government.

Leon Fu: I think the plan is a segwit 2X, where they do segwit now and then double the block size to 2MBs of sometime in the future.

Look at how that was done. That was basically called the New York agreement, where a bunch of powerful people in the Bitcoin community, a bunch of miners discuss with the Bitcoin core Dev, which I guess in New York, and decided this is what we’re going to do.

Tai Zen: When we talk about governance, people confuse it for a decision-making process versus a government like a country’s government.

Then, when we talk about scaling up, I think that a lot of people are getting confused with scaling up in terms of increasing the capacity and the speed of the Bitcoin network, which is a technical issue from versus scaling Bitcoin community to get more users to use.

Leon Fu: Exactly. We’re not talking about scaling in terms of like how many transactions per second Bitcoin can do. That’s a technical problem.

We’re talking about how you scale the community or bring the next 100,000,000 people on Bitcoin or any other cryptocurrency. In order to do that, it requires governance.

Tai Zen: Hopefully you understand this governance issue that is holding Bitcoin or any cryptocurrency back from gaining mainstream adoption.

The governance process is the decision-making process. That’s what Bitcoin is missing. We hope that this video helps you understand that.

Don’t think that the governance process is about a centralized government of a country controlling Bitcoin. We know we do not believe in that.

If you guys find this video helpful and you want to learn more about cryptocurrencies, Bitcoin and cryptocurrency investing, as well as you want to follow us, go to www.cryptocurrency.market/newsletter. That’s where we put out new videos and that’s where Leon writes new articles to send to everyone.

If you like this video, give us a thumbs up. If you don’t like it, give us a thumbs down, so we stopped wasting time making it.

We’ll look forward to seeing you in a future video.

 

Here is the governance debate I had on the Bitcoin Meister’s channel starting at 14:59:

Here is an article by Leon Fu Dot Com explaining his investment theme for governance:

Big Investment Theme #2 For 2017: Governance

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