A decentralized governance model refers to the process of making a decision in which control and authority are scattered throughout a network of participants and never consolidated into a single governing entity or small clique of high-end stakeholders. This mainly finds its application in the blockchain and DeFi ecosystems where the concept of centralization has been flipped upside down. This is under a system of decentralized governance where the stakeholders, usually the token holders, vote to provide proposals for changes and also vote for the provided proposals that can be implemented over the network.
Features of Decentralized Governance :
- Token-Based Voting:
Governance in many decentralized models introduces a feature where participants hold a certain number of governance tokens that equate directly to voting power. It means that the more tokens one has, the more influential power he or she will hold in any decision-making process. Keeping all the above-mentioned factors in mind, users vote on the upgrade of protocols, new features, or rules and regulation changes.
- Transparency and Autonomy:
Decentralized governance decisions are usually transparent because they are made using smart contracts built on the blockchain. This means every vote and decision are publicly known, which, in turn, minimizes corruption and hidden deals. Another important characteristic of a decentralized system is that decisions are capable of self-execution without resorting to any central authorities.
- Community Engagement:
In short, decentralized governance requires intensive and wide participation in the sense that, in its full meaning, users from all over the world have the ability to propose changes and vote for their favorite proposals. By doing this, innovation is nurtured and the voice of the community comes out in the evolution of the network.
While decentralized governance empowers the community and better aligns incentives, the challenges it has been presenting so far have been low voter turnout, along with a risk of centralization should the decisions fall in the hands of a few big token holders.
~ Regards,
VEIGO (Community Mod)
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