Figureheads Or Figments: Decentralizing Blockchain Leadership
At press time, over 930 cryptocurrency projects have been pronounced deceased, riddled with malware or hacks; parodies; or just outright scams. What was the failure point of these projects that are no longer with us? Was it a lack of leadership? Too much control? Poor governance? Speed of implementation?
For that matter, what has made Bitcoin successful for the past 10 years, where other projects have failed?
According to crypto analyst Murad Mahmudov, the long and patient approach has been beneficial for Bitcoin’s resilience.
“Governance of Bitcoin is not formally defined,” Murad Mahmudov said on Anthony Pompliano’s podcast Off the Chain. Mahmudov went on to say Bitcoin’s governance has a lot to do with its improvement process, which is a “very conservative, extremely meticulous process.” Something he considers to be a strength of Bitcoin, as altcoins are “much more centralized in relative terms,” and easier to change.
An example of patience and pace demonstrated by Bitcoin’s meticulous processes includes the segregated witness (or SegWit) debates, which wouldn’t be implemented until 95% of Bitcoin miners signaled support. The upgrade implementation was introduced to the network in October of 2016 (6 months behind schedule), and took effect in August of 2017.
Since Satoshi’s departure from the project, Bitcoin’s decentralized governance and improvement processes have not only allowed the cryptocurrency to survive, but have continued to strengthen the cryptocurrency. Even after many potentially project-ending events such as the Mt. Gox hack, the closing of the Silk Road, or a massive “civil war.”
Centralized leadership: the good, the bad, the ugly.
With regards to governance and leadership, the author examined Tezos, Cardano, and Tron, to examine how scandals and potentially project-ending events have been handled.
Tezos, the world’s first self-amending platform, “aims at avoiding hard-forks by allowing the network to upgrade itself.” The blockchain platform raised $232 million in its initial coin offering (ICO), the second highest ICO raised in 2017. Following its ICO, founders Kathleen and Arthur Breitman, became embroiled in a legal battle with the Tezos Foundation president, Johann Gevers.
Whereas the Bretimans owned the intellectual property through a Delaware corporate entity, Gevers held control of the funds raised until he stepped down from his role with the Tezos Foundation.
Despite the lawsuits from the SEC and community dissatisfaction with the collection of KYC/AML information in June of 2018, Tezos launched its MainNet in September of 2018 and is now a community run blockchain.
Then there’s Cardano, a project with a $2 billion marketcap and no clear product. Its leader, Charles Hoskinson, an intelligent individual qualified to steer the Cardano ship, has also faced issues with Cardano leadership. Cardano’s governance model distributes oversight among three entities – IOHK, Emurgo, and Cardano Foundation – established to provide a check-and-balance structure to ensure one entity’s failure won’t cause the entire project to implode.
In an open letter to the Cardano community this past October, Charles and Ken Kodama (CEO of Emurgo), asked the Cardano Foundation’s chairman, Michael Parsons, to step down. In effect, Parsons had “been acting as the Foundation’s de facto sole decision-maker in respect of the day-to-day business of the Foundation and ruling its staff like a monarch.”
The project has yet to launch a platform, but continues to release research papers.
Tron’s ICO took place in September of 2017, and within four months was hit with a scandal that its whitepaper had been plagiarized. CEO and founder, Justin Sun, blamed translators for the blatant copy-paste job. Shortly after, a report released by TrustNodes in January of 2018 called Tron founder and CEO, Justin Sun, a “marketing wiz” and stated “little lives on promises alone.”
Since then, the Tron project has grown to over 200,000 active accounts and those users have elected Sun as one of 27 super representatives who act as consensus nodes and validate blocks.
Strong leadership can help or hinder. Justin Sun’s star power has helped Tron to successfully overcome significant hurdles in the quest for adoption; Charle Hoskinson’s intellectual prowess may have solved one of blockchain’s biggest problems, but Cardano’s infighting will not help the project.
And Tezos, perhaps the most unlikely candidate for a positive and successful mainnet launch, is enjoying a smooth ride for once, despite bitter and acrimonious leadership issues.
Vitalik Buterin vacillates regularly between having more input to the Ethereum project, and walking away. Satoshi Nakamoto pulled the ultimate anti-leadership stunt, and Bitcoin hasn’t suffered much.
It seems that the blockchain space is divided between the unifying power of a clear leader, and the decentralized ideals for which cryptocurrency is famous. Neither model is obviously stronger than the other, at this nascent stage of the technology.
In an industry in which 92% of cryptocurrency projects have failed, with an average lifespan of 1.22 years, it has yet to be determined what characteristics of leadership and governance will prove to be the model for success moving forward.
Are projects and their investors resilient to ICO fund lock-away, lack of branch participation in a check-and-balance system, or plagiarism of the core tenets of a projects whitepaper?
Will they rally around rock star CEOs like Elon Musk? Or will their leaders remain as anonymous as the transactions some coins purport to enable?
The author is invested in Bitcoin, which is mentioned in this article.