Blockchain Governance: Accountability in Decentralised Technology Communities
Kelsie Nabben. May, 2023.
It’s May 2023, which marks 3 years since I formally embarked on a PhD research journey to investigate ‘resilience in decentralised technologies’. As one journey (hopefully) comes to an end (see findings here, here, here, and forthcoming), I am hereby holding myself accountable to set out another research project by sharing it with you here.*
Accountability is a core governance concern in legal, social, and technical systems. Accountability refers to the mechanisms and processes through which individuals, organisations, or institutions are responsible for their decisions and actions in relation to others, which can occur via social norms or monitoring, enforcement, and consequences (Bovens, 2007). Accountability can be pursued through any combination of social, regulatory, economic, and technical measures (Lessig, 1998). Creating and maintaining accountability is crucial for establishing trust, legitimacy, and fostering effective and responsible governance, whether in public institutions, private organisations, or self-governed communities (Nabben, 2023a).
Blockchain governance occurs in a unique context of collective, digital, self-governance, where participants in a system 'self-infrastructure’ the rules of that system to create the boundaries that they wish to operate by (Nabben, 2023b). At the heart of decentralised governance sits accountability. We have little understanding of what accountability is, how it is created, how it is maintained, what scale and scope of accountability is needed to be considered sufficient by stakeholders participating in the ecosystem, and how accountability in decentralised systems fares in comparison to other models of accountability (e.g. the law).
Who is accountable in a decentralised system, and to who or what, is not clear. Neither is how this can be created and maintained through decentralised governance tools and processes. According to the logics of peer-to-peer systems (as an architectural sub-set of decentralised technologies), accountability is occurring at multiple scales and between multiple actors and forums. It could refer either to each-other, to the rules of the system, or to oneself. For example, accountability is very different in a decentralised, public blockchain protocol, compared to a Decentralised Autonomous Organisation (DAO), a liquid staking protocol that operates on a Layer 1 blockchain protocol (e.g. Lido), and a project that has a centralised, private Foundation and a community (a ‘Foundation model’).
This project aims to understand how accountability can be created and maintained in contexts of collective, digital, self-governance by addressing the research question of ‘are decentralised technology communities able to create and maintain accountability, and if so, how?’.
This research project investigates this question by answering the following questions:
● What does accountability mean to decentralised technology communities?
● How is accountability created (or ‘infrastructured’) and maintained across regulatory modalities? (a.k.a., through any combination of social norms, and/or technical, legal, and/or market mechanisms),
● Is accountability sufficient in decentralised technology community governance? (to stakeholders participating within a system or to external stakeholders).
Decentralised Technologies and the Need for Accountability
Decentralisation in decentralised technology communities refers to the technical typology of a distributed computational system where multiple authorities control different components and no authority is fully trusted by all (Troncoso, et. al., 2017; Balázs, et. al., 2021), as well as a socio-political goal towards “freedom” and “autonomy” from external political influence or capture (Buterin, 2017; Balázs & Giannopoulou, 2017, Balázs, et. al., 2021). As such, decentralisation is both a technical, architectural dynamics as well as a normative, political aspiration that is aligned to an ideal of independence through distributed computing architecture.
Public blockchains, as an example sub-set of decentralised technology, have been described as digital infrastructure that creates “new institutional possibilities” and unique infrastructural practices (Berg, et. al., 2019). Decentralised technologies create these new institutional frontiers in digital domains by offering a governance infrastructure that purportedly minimises trust in existing institutions through computational processes, including transparent and verifiable software code and cryptography. This, in turn, aspirationally reduces the role of intermediaries and third parties, such as regulators (although this is not necessarily the case in practice) (Becker & Balázs, 2021; Wright & De Filippi, 2015). Scholars Wright, De Filippi, Werbach, and others, characterise decentralised systems as reliant on distributed operation and control, with consensus and trust among participants being established through cryptographic mechanisms and algorithms (De Filippi & Wright, 2018; Werbach, 2022; De Filippi, et. al., 2020). Decentralised technologies defer some administrative and regulatory processes of coordination to software encoded rules, establishing a system of “trustless trust” (Bruun, et. al., 2020; Werbach, 2018; Alston, 2023). Thus, they are often thought of as a macro-social coordination infrastructure for greater public choice and freedom.
Although there is a small body of critical literature on blockchain technology, there is starkly little consideration of “ethics” in the field of decentralised technologies, as the moral values, principles, and guidelines that orient and govern human behaviour (Tang, et. al., 2020; Hyrynsalmi, et. al., 2020). The critical literature that does exist focuses on the underpinning logics of ‘decentralisation’ and that prevailing technocratic tendencies in blockchain communities towards ‘algorithmic governance’ (O’Dwyer, 2016; Walch, 2017; Walch, 2019; Walch, 2017, Schneider, 2019). Consideration of ethical governance principles is particularly devoid from within the field itself, with minimal discussion of this topic (Zargham, 2021; Bagus, 2021, Allen, et. al., 2023). Rather than focusing on the ethics of governance in blockchain (an ‘economy’ fraught with virtue signalling and private interests (see Phan, et. al., 2023)), this research project focuses on the more pragmatic topic of accountability. Accountability pertains to social questions of human interaction and governance, operational practices, legal considerations, and technical mechanisms in decentralised technology communities because it can be pursued through a blend of such measures and mechanisms.
Trust, legitimacy, confidence, and accountability are essential components to effective governance. Compared to proprietary, centralised algorithmic systems where users do not know how the system works and systems are often closed to cross platform collaboration to retain users (Bucher, 2012), decentralised technologies are also considered transparent and thus accountable. In decentralised technologies, software code is open-source and transactions are recorded openly on a public ledger, and systems talk to one-another (known as ‘interoperability’). This transparency of software code rules and interactions does not necessarily equate to legibility. Yet, legibility is critical for legitimacy in blockchain governance. De Filippi, et. al., contend that legitimacy in blockchain governance relates not just to exogenous legitimacy (as how a system is viewed from the outside, such as by legislators), but also endogenous legitimacy, which refers to how structures and processes through which these blockchain systems are being governed are perceived from within by their own community of users (2022). Legitimacy helps to facilitate participation, which is fundamental to both the governance and operation of distributed systems with multiple peers. The need for legitimacy directly corresponds to the recent trend in blockchain communities towards ‘constitutionalising’ to codify community purposes and rules in written documentation and technical infrastructure (an active area of research and practice at BlockchainGov and BlockScience) (Zargham, et. al., 2023; BlockchainGov, 2023). A legitimate governance structure and processes create confidence in a blockchain system. This provides a basis of trust in a distributed web of stakeholders on which participants can act (De Filippi, et. al., 2022).
Accountability can occur through a blend of social trust-based and regulatory measures. According to O’Neill, the ideal of a “trust-free world is based on fantasising”, as accountability requires some forms of trust (2003). O’Neill contends that what needs to be considered is forms of accountability that support trust relations (2003). This perspective emphasises the importance of cultivating trustworthiness through well-designed accountability measures that are relevant, proportionate, and constructive to a specific context, rather than overemphasis on transparency and compliance that can inadvertently undermine trust. An example of proportionate accountability standards is demonstrated in Ostrom’s “graduated sanctions”, whereby penalties that enforce community rules and norms escalate in severity based on the nature, frequency, or seriousness of rule violations to promote cooperation among resource users (2015). The alternative to cultivating trustworthiness for accountability through standards is enforcing accountability through regulation, measurement, and consequences. These types of approaches are evident in some of the economic incentive and penalty mechanisms that govern blockchains as ‘cryptoeconomic systems’, such as “block rewards” and “slashing” (Nabben, 2023a). Blockchain is an administrative technology that is intended to reduce transaction costs and afford maximal autonomy to participants in that system. Therefore, what blockchain communities may wish to avoid is the design of system in which the political demands for accountability and control catalyses a proliferation of accountability mechanisms. This ever-expanding administration formalisation and auditing to govern the behaviour occurring within a system creates what Power calls an “audit society” (1999). Such control systems erode trust and autonomy, and do not coexist easily with the operational capabilities of organisations (Power, 1999).
What is Accountability?
The working definition adopted to analyse and assess accountability in this research project is ‘the mechanisms and processes through which individuals, organisations, or institutions are responsible for their decisions and actions, in relation to others, which concur via social norms or monitoring, enforcement, and consequences’. This definition is based-off the conceptual framework provided by Bovens, of “a relationship between an actor and a forum, in which the actor has an obligation to explain and to justify his or her conduct, the forum can pose questions and pass judgement, and the actor may face consequences.” (Bovens, 2009) This framework has been adopted in other studies of algorithmic accountability (Wieringa, 2020). It is also well suited to the analysis of decentralised technologies. Decentralised technologies are socio-technical systems that frequently involve emergent outcomes of a collection of actors, there is a cultural bias for actions to occur “on-chain”, at either the protocol level or via ‘decentralised applications’, where they are transparent and traceable. Governance in this context refers to “governance interactions” in a system, defined as actions towards “solving societal problems or creating societal opportunities; attending to the institutions as contexts for these governing interactions; and establishing a normative foundation for all those activities” (Kooiman, 2003). In order to analyse if governance in decentralised technology communities produces accountability according to the dynamics set out by Bovens, what I am looking for is governance interactions between actors and forums, along social, technical, economic, and legal dimensions.
These dimensions (of social norms, technical architecture, market mechanisms, and the law) are articulated by Lessig as the four forces of regulatory modalities that shape and govern human behaviour in a given environment (and particularly in the context of the internet and digital technologies). These intersect and interact to apply to human (or machine) interactions in any combination in society, at multiple scales (i.e. individual, collective or organisational, and societal), and evolve over time (Lessig, 1998). Blockchain-based organisations rely on distinct mixes of algorithmic and normative governance techniques and behaviours to self-regulate and govern. In both blockchain protocols and ‘Decentralised Autonomous Organisations’ (DAOs), governance depends on both social and technical monitoring, verifiability, and enforcement that occurs both “on” and “off” the blockchain (Nabben & Zargham, 2022). This means that some regulatory rules of governance are embedded in the software code of the protocol itself and executed automatically (on-chain governance), whilst others occur through social processes of person-to-person interactions, deliberation, and norms (off-chain governance), with governance occurring of and by the infrastructure (De Filippi & Loveluck, 2016; Yeung, 2019). These institutions of regulatory behaviour are both formal and informal, as well as blending algorithmic and human components to limit and enable interactions.
Upon preliminary investigation, blockchain communities possess all four of these forces of regulation in their governance in various mixes, depending on the context and operating environment of a particular community. In the context of blockchain technologies, these include algorithmic monitoring (e.g. contribution and reward systems like Tally and Coordinape, and ChatGPT plug-ins), legal mechanisms which may be legally enforceable (e.g. technical mechanisms based on legal logics, such as Kleros and Celeste decentralised courts and arbitration mechanisms), market incentives and penalties (e.g. block rewards and slashing), and social norms (e.g. “no shit posting” in community Discord channels or people will yell at you). These forces occur via different mechanisms and with varying dominance according to the community and context. What remains to be understood is what forces are dominant in what contexts, and if, how, and in what contexts blockchain governance produces accountability. By considering the effects of law, social norms, market forces, and architecture, policymakers (who are system designers in this context) and stakeholders can design more effective and context-sensitive approaches to accountability.
Methodological Approach
To conduct this research, I employ participatory, digital ethnographic methods as the study of the consequences of digital media in the everyday (including algorithms and blockchains) on people, culture, and society (Pink, et. al., 2016), to investigate the regulatory forces, mechanisms, behaviours, and tensions of blockchain community accountability in practice. I couple this with a case studies approach, as the field site of decentralised technology communities requires observation of multiple contexts as a non-homogenous class in terms of technology, culture, and aims (Schwandt & Gates, 2018). Decentralised technology communities are digitally native, geographically distributed, and disparate across numerous traditional and ‘Web3’ infrastructures and applications, including governance proposal and discussion forums, the Discord chat application, the voting application Snapshot, and Twitter, as well as in-person conferences and meet-ups (Rella, 2021; Nabben & Zargham, 2022). My observation and participation in online community channels will be paired with ethnographic interviews to collect data for this research. Digital ethnography is particularly well suited to the study of decentralised technologies in that it provides insights into the social dynamics that shape the rules of a field with a decidedly technical bias, that often only looks at how technical forces and rules shape behaviour, rather than also acknowledging social dynamics. The suitability of digital ethnographic methods has been demonstrated by other scholars to conduct research into the social dynamics and outcomes of decentralised technical systems and governance arrangements (Faustino, 2019; Kosmarski & Gordiychuk, 2019; Rennie, et. al., 2022).
This research project provides both a theoretical and empirical contribution to the field of decentralised governance by connecting blockchain governance with existing theory on algorithmic regulation and accountability, contributing to the design of new governance models that synthesise theoretical findings through design ethnography, and evaluating governance models in practice through participatory digital ethnography. This research aims to surface findings relevant to accountability in digital infrastructures, algorithmic regulation, accountability, and policy making in blockchain and AI.
Next Steps
This research is underway. I’m already speaking with a number of fascinating people and projects about how ChatGPT is being used in attempts to augment DAO governance, ‘best practices’ for decentralised court systems, and labour management in Decentralised Autonomous Organisations. (With many thanks to both BlockchainGov and BlockScience and the teams we research and work with for ongoing engagement and/or application of these ideas). I’d love to hear if this research is relevant to you and your community, and how you think instantiations of accountability are being applied (or should be!). Thanks for reading.
Notes:
* I will save the many thank you’s for when I actually submit and pass.
With thanks for feedback to Primavera De Filippi at BlockchainGov, Michael Zargham and Eric Alston at BlockScience, Darcy Allen, and Aaron Lane from RMIT University Blockchain Innovation Hub.
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Suggested Citation:
Nabben, K. ‘Blockchain Governance: Accountability in Decentralised Technology Communities’. May, 2023. Substack / Medium. Available online: https://kelsienabben.substack.com/p/blockchain-governance-accountability