Blockchain-based decentralized management

Original author: Eric Sammons
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In the world of cryptocurrencies, everyone is talking about the Civil War, and not about the one that broke out between Captain America and Iron Man. They talk about the civil war in the Bitcoin project, which has been going on for a year. This is a fierce battle for control over scalability.

On the one hand, there are Core developers who want to maintain a block size limit of 1 MB. They expect the upcoming Lightning Network to solve any congestion problems.

On the other hand, there are supporters from the Bitcoin Classic camp who want to increase the block size limit to at least 2 MB. So far, Core is winning, since most of the Bitcoin miners adhere to their version of the project.

These differences raised some fundamental questions about the nature of a decentralized project like Bitcoin. Who ultimately sets the direction for the development of a decentralized project? Who makes the final development decisions? In other words, how should such a project be managed?



Management need


Before you look at the management itself, it is important to ask if there is a need for it. For most people, the word "management" is associated with a certain official, possibly from Washington, Moscow, London or Brussels, who is trying to rule the world.

Some normally perceive such a thought, while others such a picture causes trembling. But it is important to note that management in this case is not related to the state.

Management simply means how decisions are made. For example, each person has self-control. This is the power that allows you to make your own choices. Each family also has a management system - there it is a decision-making path that relates to the direction of family development. Each group of people (a baseball team, a hacker club, a small business) has some form of control: official and fixed in writing or without words understood by its members.

Most enthusiasts in the world of cryptocurrencies do not reject control in itself, but imposed control or, in other words, decisions that are made without the participation of those who are affected by the choice made.

Moreover, cryptocurrency advocates want decentralized governance that extends the power to make decisions as widely as possible.

And yet, in practice, cryptocurrencies are managed a little differently.

The general model is the “benevolent dictator”, where one person, usually the creator of the project, makes the final decision.

Bitcoin itself initially followed such a model, since Satoshi Nakamoto set the direction for cryptocurrency development at an early stage. Today, Ethereum is a great example of such a model.

This model has some advantages, but it is not decentralized. It has one critical point, and the success or failure of a project depends on only one person.

Another model changes the “friendly dictator” to a small group of developers. In many ways, Bitcoin did. Now exclusively the Core team is responsible for the direction of software development.

Of course, the team retains this right only because a small group of miners allows it, which controls the overwhelming majority of network capacities for hashing.

But this model has the same strengths and weaknesses as the “benevolent dictator,” since all control is in the hands of a small group of people.

But the solution may be another model where management is embedded in the blockchain. The democratic model is a true decentralized approach to governance that works everywhere.

Decentralized transparent management


In recent years, an innovative blockchain-based management model has been created as part of the Dash cryptocurrency project .

It is based on the Masternode network. Masternodes are complete nodes that provide network operation. In order for them to work for the network, they are stimulated by payments from the block reward.

Masternodes must have a security deposit of 1000 DASH. This means that Masternode owners invest in the network and receive regular income from it.

Unlike Bitcoin miners, who have no real reason to keep their money in Bitcoin, Masternode owners are interested in the success of their platform. The owners of Dash Masternodes can be different - developers, marketers, artists, writers or builders, but they all have one thing in common: they are financially interested in the success of this cryptocurrency.

Today, the network has more than 3700 Masternodes. They are owned by hundreds, or maybe thousands of people - one person can have more than one Masternode (ownership can be kept secret).

This decentralized group of owners are investors and recipients of income. But they play another important role for cryptocurrency. Each Masternode has a voice in the Budgeting System, which distributes funds allocated for the development of the project.

Anyone who has at least some business experience will tell you that someone who controls financial resources sets the direction for the organization. Through the Budgeting System, the development team is paid a regular salary. Moreover, anyone can submit proposals that will be put to a vote. These offers may relate to individual development projects (such as mobile applications or settlement terminal systems) or advertising projects (for example, developing a business or raising awareness of Dash).

How does it work in practice? First, it is worth noting that the Dash development team is still responsible for the development of the project. They set a short-term direction for the development of the project and update the code as necessary. It would be ridiculous if the owners of more than 3700 Masternodes made decisions about the code every day.

But the development team is paid for by the blockchain based on the Masternode votes. If development goes in a direction that contradicts the wishes of the Masternode owners, the financing of the team may be cut. Funding can also be directed to other developers who hold a prevailing opinion.

In addition, when important project changes are considered, such as increasing block size limits, these decisions can be voted on by Masternode owners. This is exactly what happened in January 2016, when lead developer Evan Duffield proposed increasing the block size to 2 MB.

This proposal was put to a vote in the Budgeting System. In a few hours, it gained the support of the majority. What has been a stumbling block in the Bitcoin community for more than a year has been finally decided in Dash in less than a day.

This process is not only decentralized, but also transparent. Proposals put to a vote and results are publicly available on the blockchain. They can be tracked in real time at www.dashvotetracker.com, which shows the results of the last vote, as well as the voting history for each project.

All fears about a centralized, closed management structure (as it actually happens in Bitcoin) are overcome by the innovative, democratic Dash system. This is a strong argument in favor of a progressive approach, namely decentralized, transparent and based on the blockchain.

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