Analyzing On-Chain and Off-Chain Governance Models in Crypto Projects

In every project most especially crypto projects that we might have seen which have been successful , one of the things that determine their success is governance. Governance actually play a very important role to determine the way the crypto project should goes. Over the years, the Blockchain technology have really evolved and get better and better beyond what one can ever imagine of. We have two major types of governance, we have the on chain governance and the off chain governance.

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They seem to be so close and we might have heard it before but there exist slight differences between them which I want to talk about below. Let me first talk about the on chain governance. On chain governance as it actually means making wise decisions that helps to be processed directly into the Blockchain. In chain governance, only stakeholders, like the token holders can bore for changes within that Blockchain ecosystem.

Let me briefly describe the way it works. The first is what is called the proposal submission. The first is something called the proposal submission and this works in a way whereby the developers will have their proposal submitted. Then there is something called the voting mechanisms where token holders will be able to vote on those proposals that have been submitted. Then any proposal that is picked will be selected for something called implementation.

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There are a whole lot of advantages attached to on chain governance which I will like to talk about. The first is that it offers this transparency. The second one is that it is very efficient as almost every of the processes is automated so it makes it easy for decisions to be made. But even with those advantages, it also has its own challenges like the wealth centralisation or even the complexity also most of the time making it difficult for the token holders to know how to handle them.

Let me talk about the off chain governance as that is the Second type of governance. The off chain governance works in a way whereby it is mostly conducted outside the Blockchain as compared to the on chain governance that is done on the Blockchain. It works much more in form like community discussion, consensus building and also implementation. Most of the time, it is used on discord and even Reddit.

Even though it might not be popular like the on chain governance, I will say it still have a lot of advantages. The first is the flexibility also. The second is the expert driven decisions as a lot of people most especially the developers can make decisions. And the last advantage which I strongly believe in is the fact that it helps lower barriers to entry which is a massive advantage.

At the end of the day, I believe it depends on the person choice, for some people, they prefer to go for the on chain governance and for some people, it might be off chain governance. Both of them have their advantages and their challenges attached to it also. Everything point down to preferences.