🏛️ On-Chain Governance: Protocol Upgrades
Learn how blockchains upgrade through token holder votes
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0 / 5 completedIntroduction to On-chain Governance
What is On-chain Governance?
On-chain governance enables decentralized protocols to evolve through token holder voting, with proposals and execution handled entirely on the blockchain. Unlike traditional corporate governance or off-chain signaling, on-chain systems enforce decisions automatically through smart contracts.
🗳️ Governance Protocol Explorer
Explore how major DeFi protocols implement on-chain governance:
Compound Governance
Core Components
Tokens representing voting power in protocol decisions. Holders can create proposals, vote on changes, and delegate their voting power to representatives.
On-chain transactions proposing parameter changes, upgrades, or fund allocations. Each proposal contains executable code that runs if the vote passes.
Systems determining how votes are counted: token-weighted, quadratic, conviction voting, or delegated models. Each has tradeoffs between plutocracy and sybil resistance.
Mandatory delay between proposal approval and execution, allowing stakeholders to exit if they disagree with changes. Critical security mechanism against governance attacks.
On-chain vs Off-chain Governance
| Aspect | On-chain | Off-chain |
|---|---|---|
| Execution | Automatic via smart contracts | Manual by core team |
| Transparency | Fully transparent and verifiable | Depends on team disclosure |
| Cost | Gas fees for voting | Free (Snapshot) |
| Speed | Days to weeks | Hours to days |
| Flexibility | Limited to coded options | High flexibility |
⚠️ The Governance Trilemma
On-chain governance faces three competing objectives that cannot all be maximized simultaneously:
- •Decentralization: Broad distribution of voting power prevents concentration
- •Efficiency: Fast decisions without excessive overhead or voter apathy
- •Security: Protection against governance attacks, vote buying, and manipulation