Decentralized Governance
Craig Calcaterra, Wulf A. Kaal · 2021
Chapter ) introduces governance designs for decentralized systems. Decentral- ized governance is the process of keeping decentralized organizations stable and on track to achieve their goals, without letting them devolve into a centralized organiza- tion. Decentralized organizations are naturally more difficult to control than central- ized organizations. They are more difficult to govern. Very few existing PCP project have anything close to a sophisticated governance process. The authors show that reputation is the key to achieving effective decentralized governance. Reputation gives the promise of future rewards. Reputation can be ob- jectively valued, by estimating the probability of future business deals, taking the ex- pected value of that probability, and calculating the present value of those business deals. Yet this value can seemingly be created from nothing, in a place it didn’t exist before, based solely on whether the participants choose to display good will toward each other. This makes reputation a positive-sum property from the game-theory per- spective. A reputational system that is formally linked to profits makes the members forward-thinking and cooperative, to combat the natural tendency of competition to separate members. It also motivates members to self-police their past investments. Reputation changes the incentive structure from a single-stage, zero-sum game to a repeated positive-sum game. The book can be accessed here: https://www.amazon.com/Decentralization-Technologies-Organizational-Societal-Struc- ture/dp/3110673924/ and here: https://www.degruyter.com/view/title/569051 Electronic copy available at: https://ssrn.com/abstract=3782214
Cite: Craig Calcaterra, Wulf A. Kaal, Decentralized Governance (2021). SSRN: https://ssrn.com/abstract=3782214. https://doi.org/10.2139/ssrn.3782214
PDF sha256: ba892bb200c1455447c0014f5067a501a93ea9ec413c31942d95952eb3bdfd9d