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How does the Ethereum Governance Function?

Because of the numerous features that the Ethereum project wishes to provide to its users, the system is quite complicated. Nonetheless, as a result of the need for decentralization, the creation and management of the project are both a relatively difficult undertaking. Today, we’re particularly interested in the administration of Ethereum and the primary players involved.

The concept of governance is important!

When it comes to open blockchains, they are distributed systems that do not have a central control body and whose network actors may not necessarily have a common vision, particularly when it comes to their development and management. It is for this reason that consensuses are established to coordinate users who seek to actively participate in the network’s activities and services.

This can be accomplished, for example, through the use of a voting mechanism on the blockchain or on social media networks on an as-needed basis. However, this can also be accomplished through the establishment of a DAO, a decentralised organisation in which everyone has a say in the direction the project is headed.

Initially, the project has a strong tendency to become centred around the development team, as well as the initial users and investors, among other things. A roadmap can help to direct the company’s efforts in order to provide the product and the anticipated functionalities as soon and efficiently as feasible.

However, as the project increases in scope and after it is up and running, the team can progressively delegate more control to the community and allow it to become more involved in the project.

Ethereum’s top-level governance

With reference to Ethereum, governance can be separated into two categories: network and blockchain governance. The first is technological in nature and may involve Ethereum clients or the Ethereum Virtual Machine (EVM), for example. Because it is less defined than the first, the second type of governance, off-chain governance, is more difficult to research and characterise in terms of its specific operation.

Both the coordination of human resources in the ecosystem and the modification of the technical infrastructure of the network fall into this category. The administration of Ethereum is not fixed in time, and the numerous actors are all interested in gaining the greatest amount of power over the system in order to further their own personal objectives.

The administration of a public blockchain must therefore include points that ensure to some extent the network’s decentralisation, which is necessary in order for the network to function properly. These aspects can include monetary incentives such as reward distributions, as well as immutable procedures that prevent any overflow from occurring. The mechanics and individuals involved, as well as the current limitations that Ethereum is experiencing, will be discussed in greater detail later.

The actors of Ethereum governance

In the case of Ethereum, governance is decentralised and dispersed across a number of actors, each of whom has a counter-power over the others. Between users, developers, miners, network nodes and other actors, everyone can influence decisions related to the evolution of the platform.

1. The Ethereum Foundation

According to its website, the Ethereum Foundation is a Swiss foundation whose mission is to aid in the development of the Ethereum project by providing financial support to various ecosystem initiatives, including those related to the platform’s development, as well as to researchers working on the project. The foundation’s funds are mostly derived from the Ethereum Initial Coin Offering (ICO) and the occasional selling of ethers.

We must consider the Ethereum Foundation as a prominent participant in the Ethereum ecosystem, one that engages in its influence through the Devcon and research activities, but does not have direct control over technical advances themselves. The impact of the Ethereum foundation diminishes as the latter develops, even if the foundation’s gratifications are not insignificant at the moment and it participates more heavily in certain initiatives than in others.

2. Ethereum Nodes

User engagement in the network can be enhanced even further by setting up and administering their own Ethereum node. These are devices that are dedicated to participating in the network and that keep the current state of the blockchain in real time, as well as verifying and sharing the transactions that have taken place on the blockchain.

There are several different types of software, referred to as clients, that are available that update when Ethereum changes. Setting up your own Ethereum node, on the other hand, is a somewhat complicated process because the conditions necessitate a system with at least 16 GB of RAM and 500 GB of data storage.

3. Developers

Developers are extremely essential players in the administration of the Ethereum blockchain. In the development of Ethereum, there are several categories of participants, each of which contributes in their own way, whether on the direct infrastructure or in the ecosystem.

The protocol and its applications are thus shaped by them, even if the funding for their projects comes from end users or investors.

4. Dapps Developers

Developers of decentralised applications have a dual role in the administration of the Ethereum blockchain. These individuals develop the Dapps that make the system useful, carry out an increasing share of network transactions, and, in some circumstances, allow the blocking of ethers in separate smart-contracts to take effect. All of this adds value to Ethereum while also indirectly representing users’ interests.

However, as we will see later, they also serve as a technical precaution for the Ethereum protocol’s developers, as we will see. Indeed, if the average Ethereum user lacks the technical expertise required to understand all of Ethereum’s evolutions, the creators of Dapps can fill in the gaps and give their thoughts on the matter.

5. Ethereum client developers

Because they are the ones who create the protocol, Ethereum client developers play an important role in the governance of the blockchain network. According to the latest client upgrades, Ethereum is advancing in the direction specified by the clients. However, they do not choose the alterations on their own, and it is partly each actor’s interaction with the other that determines the project’s future.

It is particularly at the various developer meetings that everyone has the opportunity to readily interact with key Ethereum actors on a variety of topics pertaining to the latter’s development. These ” Core Development Meetings ” are, in fact, available to the public, with access given on a case-by-case basis.

Although there are only two major Ethereum clients available today (Parity and Geth), there are a plethora of others that can be used as well. Due to the great influence of the developers of the latter, it is important for the decentralization of Ethereum that a sufficient number of different clients exist in the ecosystem.

6. Exchange platforms

Cryptocurrency exchanges and centralised trading platforms are both participants in the administration of Ethereum, and their actions have far-reaching repercussions. The rejection of one or more exchanges from a hard fork might, in fact, result in the formation of a split in the chain, which would isolate the users of the latter from the rest of the community.

The organisation funds a hard fork coordinator for each hard fork, who works directly with the main trading platforms to ensure that they are properly supported. As a result, even if there is a small chance that an exchange will not follow an upgrade hard fork, it is possible to learn about the platforms’ intentions toward the latter.

7. Ether miners

Ethereum miners continue to exist today, despite the fact that Ethereum is steadily shifting to a proof-of-stake model and eventually moving away from a proof-of-work one. And even if the latter go on to become stakeholders, their function in the governance of the platform would remain the same as it is now. A split hard fork can be caused by miners by creating a new Ethereum chain and supporting it with the help of a mining cluster.

By analysing the reactions of miners to hard forks and studying the mechanics of cryptocurrency mining, we rapidly conclude that miners are not the primary engine of Ethereum governance, as was previously thought. Indeed, it is quite difficult for the latter to have the same interests as the former on specific issues.

They are also reliant on users, who place a monetary value on the precious ethers that are handed to them with each block they receive. The conclusion is that Ethereum advancements are regarded as relatively insignificant by miners, provided they do not have an impact on the terms of ether mining.