Basic Principles For Governance In Decentralized Systems

Decentralized systems, such as blockchain networks, come with some major challenges regarding their governance frameworks. Whereas centralized systems, such as typical enterprises, are typically organised as hierarchical structures with top-down processes, blockchains lack a central authority that sets the rules and acts as the ultimate policymaker. In a blockchain network, all participants (full nodes) decide upon the architecture and the processes in a decentralized way, defined by a governance model, set-up by the participants themselves.

Whereas public blockchains are open to the public, i.e. everybody can download a client and participate in the network, the members of private networks decide who can join as a new member. The consensus mechanisms are the rules that define how information is added and how the network’s participants can work together in the network. Many public networks rely on Proof-of-Work (PoW) that requires some work from the nodes, usually meaning processing time, in order to prove that effort has been invested to qualify for the right to decide what is the truth. In most private networks, other consensus mechanisms, such as Proof-of-Authority (PoA), or Proof-of-Stake (PoS) are used. In these cases, the network’s participants agree upon a governance model defining the processes within the networks. PoA and PoS don’t depend on nodes solving arbitrarily difficult mathematical problems, but instead use a set of authorities – nodes that are explicitly allowed to create new blocks and secure the blockchain (in the case of PoA), or the creator of the next block is chosen via various combinations of random selection and wealth or age – the stake (in case of PoS).

Governance of decentralized systems is a matter of hot debate on conferences and in technological, as well as political and sociological circles. Without claiming to discuss this topic in its entirety in this post, based on our practical experiences creating and working with blockchain networks, we want to point out three basic principles for governance models for decentralized systems:

1. Ability of self-regulation

Every decentralized system starts in a centralized way: an individual or a group of people have the idea to create the network and start by designing its architecture and processes. Given the human nature, even in the best case, this network will be designed based on the beliefs and convictions of its founding members – but not necessarily matching the requirements of its future members, let alone future challenges caused by social-technological change.

In order to design the network in a resilient, future-proof way, its most important design principle is an inherent self-regulation ability: based on the to-be-defined rules the network‘s members can re-define their rule set, beginning with the elementary governance principles. As important as the general ability to self-regulate, is the process that defines the conditions under which this self-regulation takes place. As in any democratic process, a major challenge lies in motivating the system‘s members to actively participate in the formation of opinion.

2. Based on accepted regulatory frameworks

Blockchain technology itself is quite new: with the advent of Ethereum‘s smart contracts, these distributed ledgers could be applied to industrial use cases. However, the basic functionalities of a database and a ledger are well known and are also provided by traditional software offerings.

When blockchains are introduced in enterprises, they come across their legacy forefathers – and – the legal and regulatory frameworks the legacy systems are embedded in. Some of these frameworks, such as the open source modelling framework Eclipse (EMF), are well known and accepted in their respective industries. Often, enterprises have invested significant resources to check which framework works best – in a functional, and in a legal sense.

For a wider acceptance of new breed of decentralized ledger technologies, it makes sense to adopt basic elements of existing and already accepted legacy frameworks. If a blockchain solution comes with a governance model based on an accepted model, they are easier to handle by the company‘s legal department. As so often, it‘s easier to sell innovation if it comes with a pinch of familiarity.

3. Integrated incentive scheme

Whereas the above-mentioned self-regulation and familiarity aspects are necessary conditions of decentralized governance models, a frictionless integrated incentive scheme is the sufficient condition: any decentralized system will exclusively work if a sufficient number of network participants feel permanently motivated to add their inputs to the system. In other words: each individual member must be incentivized to constantly add value to the network.

The essence of any efficient incentive scheme is a monetary incentive that is positively correlated with the respective participant‘s efforts: the more value I add, the more value I get. Ideally, the incentive evolves in parallel to the system; i.e. depending on the network’s development the incentive adapts, accordingly.

Of course, there are many other elements of efficient decentralized governance models. However, we regard the above mentioned as key aspects. In cooperation with a team of the European Blockchain Association, we have developed a blockchain-based governance model that inherits these elements. In our first 2019 Blockchain Meetup, on 22 January, we will present and discuss this model in public. Afterwards, the first clients can plug themselves in and make use of this model in a Governance-as-a-Service scheme.

XSC Wallet Driven Crypto Payments Available at the FI-Forum

The success story of the XSC Wallet continues as Datarella, for the second conference this year, offered visitors of the FI-Forum the possibility to use the XSC Wallet. This builds upon the our XSC Wallet deployment at the the DAHO.AM conference last July.

The Fi-Forum is the trade fair of Finanz Informatik, the IT service provider of the Sparkassen-Finanzgruppe. IT solutions, innovations and new services are presented there each year. There were also more than 90 speeches and a parallel hackathon with interesting topics to be addressed. 

At the fair, visitors got XSC Coins in their own private event-wallet which they could spend on merchandising products such as powerbanks, bags and notebooks, generously provided by partner ZEB (zeb.rolfes.schierenbeck.associates GmbH). To do so, the visitors only had to download the wallet from the App Store or from Google Play. They were instantly rewarded with XSC Coins which they could spend on the goodies. The ease of use and rapid transaction execution often opened a new and more positive view on crypto payment. Moreover people who didn’t spend all of their XSC were regularly asked by others to send them the unused XSC to their wallet in order to buy extra goodies. 

Together with ZEB, we held many discussions with prospects about topics such as blockchain-based financial systems, crypto payments and the future challenges of this technology.

A big thank you to the Finanz Informatik and ZEB for making it possible to help visitors explore the world of crypto payments by using the XSC Wallet on the Fi-Forum.

Crowdvote – A Community Driven Decision Making Model To Compensate Blockchain Developers With CrowdstartCoins XSC

Big news over at Crowdstart: with CROWDVOTE we will provide a community driven opinion forming and decision making model that follows on the present centralized distribution model of CrowdstartCoins XSC.

Starting with our IOTA hackathon in Gdansk, in November 2017, we have distributed CrowdstartCoins XSC to over 2,000 developers who have added valuable code to the blockchain ecosystem. As promised, we at Crowdstart do not think that we are the best people to decide who is eligible to receive CrowdstartCoins XSC, but rather it should be the responsibility of the entire blockchain community to form opinions and make decisions that define the distribution of XSC.

CROWDVOTE to be launched at DAHOAM Tech Conference
We announced our plan of developing a liquid democracy model to enable that kind of a decentralized decision making process last November. Today, we are very happy to announce that we will launch the first version of CROWDVOTE at DAHOAM Tech Conference, on July, 24.

With CROWDVOTE, members of the blockchain community will be able to propose and vote for blockchain projects supporting them to receive their deserved CrowdstartCoins XSC. In the first version, there still  will be some centralized elements; e.g. there will be a set of rules that define the proposal and voting mechanism. A framework of rules has to be implemented from the start – otherwise the model would create more confusion than joy about the new decision making opportunities. Our plan, however, is to go further and also decentralise these aspects. In future versions of CROWDVOTE, the community will be able to define the rules for proposing and voting for projects by themselves.

Want to participate and help CROWDVOTE to be developed?

If you are generally interested in decentralise decision making processes and liquid democracy, please feel invited to participate and support the development of CROWDVOTE. Send us an email to crowdvote (at) crowdstart (dot) capital.

What Is CrowdstartCoin?

CrowdstartCoin (Ticker: XSC) is a digital currency rewarding blockchain developers.

Launched in December 2017, CrowdstartCoin presents the additional advantage of being a tangible virtual currency: in fact, by coupling each line of code committed to projects within the blockchain ecosystem to the production of a CrowdstartCoin, the virtual world joins our physical world. Put another way, CrowdstartCoin works as Reward Miles: any blockchain developer receives CrowdstartCoins for code that she adds to tye development of the blockchain ecosystem – and it’s free!

CrowdstartCoin has a social utility for its community: by rewarding a blockchain developer, CrowdstrtCoin acts as an incentive, stimulating the development of the blockchain ecosystem worldwide. CrowdstartCoin is already distributed within three European countries and is intended to be circulated worldwide: any blockchain developer may apply and claim his CrowdstartCoins for free. To do so, the developer simply fills out this form online with data proving that she has committed code to the blockchain ecosystem.

3-Phase Incentive Scheme

The grant mechanism for delivering CrowdstartCoins is based on 3 phases:

In the first phase, CrowdstartCoins will be directly distributed to the active developer community, approached through blockchain conferences, meetups, forums, etc. Developers committing code to key blockchain projects can opt-in to receive CrowdstartCoins for free for code that has been accepted.

In the second phase, the distribution of CrowdstartCoins will be semi-automated by using a smart-contract-based system to pay out tokens according to the accepted commits. Technologies to be supported by these incentives include the core protocols of leading blockchains, e.g. Ethereum, IOTA, Monero, etc..

In the third phase, members of the community will be able to suggest projects to be rewarded with CrowdstartCoins. A liquid feedback model will be used to enable community voting and determine which blockchain projects should be included.

CrowdstartCoin therefore acts as an incentive for the future development of blockchain technology. Since 1 December, 2017, CrowdstartCoin  is officially listed at the cryptoexchange EtherDelta, with the ticker symbol XSC.

Cryptoexchange EtherDelta Officially Lists CrowdstartCoin XSC

As of today, 1 December 2017, our CrowdstartCoin XSC is tradable on EtherDelta, a decentralized cryptoexchange. 

We are very happy that, ten days after having issued the first CSC to IOTA developers at IOTA hackathon, in Gdansk, the tokens have been officially listed on EtherDelta!  From today, blockchain developers can grow the value of their own token that serves as a reward for contributing to the evolution of the blockchain ecosystem!

Don‘t waste your time, devs! Go, claim your XSC – and trade them!

Incentivizing Blockchain Ecosystem Development

The final decision has been made: We will not ICO through our brand Crowdstart Capital. After having worked on the preparation of a token sale based out of Germany several months we’ve reached the conclusion that such an ICO is not advisable at this time.

Two issues have been the decisive factors: First, an ICO based out of Germany would have to be done in the environment of a legal limbo. Other project teams may decide to take the risk of selling a virtual currency to professional and/or individual investors in Germany but we’ve decided that the regulatory uncertainty and risk is too high. With our parent company Datarella, we have built a solid brand reputation within the blockchain ecosystem and we are not willing to put this at risk.

Second, we think that we can better meet our goal of contributing to the blockchain community by giving our Crowdstart Coins away.  Instead of selling tokens to investors and using this cash to provide blockchain-based startups with consulting, services and solutions, we will reward Crowdstart Coins (XSC) to developers who add valuable code to the blockchain ecosystem.

We gained this insight to change our model while working on the cryptoeconomics; i.e. the inventive mechanism within a specific community. Finally, we have come up with a 3-step-process of distributing Crowdstart Coins – “XSC” – to the blockchain community:

A Blockchain Evolution Incentive Scheme

Phase 1 – Initial Token Distribution

In the first phase, we will distribute tokens to developers at conferences, events and hackathons. This activity will occur primarily in Europe and the distribution will be at the discretion of CSC. The goal of this phase is to get tokens into the hand of active developers and blockchain early adopters/enthusiasts.

Phase 2 – Smart-Contract-Based Token Distribution

Developers committing code to key blockchain projects can opt-in to receive XSC tokens for every line of code that is accepted for their respective projects. CSC will set up a smart-contract-based system that will pay out tokens according to the accepted commits. CSC will programmatically monitor the git repos of major projects.

Phase 3 – Liquid Feedback Mechanism

In the third phase, members of the community will be able to suggest projects to be included in the incentive scheme, a model known as liquid feedback. Token-based ballots will be used to enable community voting and determine which blockchain projects should be included.

In this phase, we’ll also be rewarding developers to contribute to our code base. Essentially, over the course of the three phases of the incentive program, it should morph from being a mostly manual process to a fully automated process.

If you’re a developer who committed code to advance Blockchain technology at-large, you’ll be eligible to receive XSC tokens. You can request XSC by filling out the form:

Developer Incentive Program: Claim XSC Rewards

Show us that you’ve got the right stuff!

IOTA Hackathon Kick-off Event For CSC Blockchain Ecosystem Incentive Scheme

With our project Crowdstart Capital (CSC) we seek to support the developer community and the blockchain ecosystem at-large. This document seeks to clarify specifically what these terms mean as well as outline several options for supporting our goals in this area. First, we define the target audience:

Developer Community: We define the developer community broadly including:

  • Active professional developers
  • Computer science and university STEM students
  • Potential future developers
  • Software companies
  • Open source software development organizations
  • Software startups

Blockchain Ecosystem: This term refers to various blockchain technologies as well as all the technologies that support and connect these projects. Here we are using the word blockchain as a catch-all for all distributed ledger technologies including block-less tech such as the IOTA Tangle:

  • Core Blockchain Protocols: i.e. Ethereum, Monero, Neo, Qtum, Polkadot
  • Selected dApps  (decentralized applications)
  • Supporting and connecting technologies: Atomic swaps,
  • multisig, hardware and lite wallets, governance protocols, etc.
  • Alternative protocols directed at a specific segment, such as IOTA for IoT
  • Exchange and liquidity services
  • Blockchain derivatives
  • CSC = Crowdstart Capital, a brand of Datarella GmbH, Munich
  • XSC = Tokens, originally provided by Crowdstart Capital

After having defined the target audience, we will create the incentive scheme in three consecutive steps:

Phase 1 – Initial Token Distribution

In the first phase, we will distribute tokens to developers at conferences, events and hackathons. This activity will occur primarily in Europe and the distribution will be at the discretion of CSC. The goal of this phase is to get tokens into the hand of active developers and blockchain early adopters/enthusiasts.

  • Potential Venues for XSC Distribution
  • Blockchain-related conferences
  • Hackathons
  • Incubator events
  • Blockchain meetups

In all of these contexts, different amounts of tokens will be made available for various levels of community participation. A wide variety of people will be rewarded for their community participation. Some types of participation could be more highly valued than others. The winners of a competition for building a new type of dApps at a hackathon might receive significantly more XSC than the bulk of the participants. However, the idea is that most types of contribution should result in earning some XSC tokens.

Exemplary reasons for being awarded tokens

  • Prizes for the winners of hackathon events
  • Honorarium for development event speakers
  • Bonus for event participants
  • Bonus for webinar participants
  • Bonus for participants travelling long distances to attend events

In order to collect tokens at, for example, an event, all you need is to have an Ethereum wallet which supports ERC20 tokens. During events, we will collect the relevant public keys and distribute tokens live to the participants. After that, participants can trade or hold their tokens or use them to purchase discounted consulting services from CSC. For more information on using XSC tokens to purchase discounted consulting services, please see http://crowdstart.capital.

During Phase 1, tokens may also be awarded outside of events to reward individual contributions to the overall blockchain community. The point here is to get tokens into a wide variety of people’s hands and incentivize participation in building the local development community.

Phase 2 – Smart-Contract-Based Token Distribution

Developers committing code to key blockchain projects can opt-in to receive XSC tokens for every line of code that is accepted for their respective projects. CSC will set up a smart-contract-based system that will pay out tokens according to the accepted commits. CSC will programmatically monitor the git repos of major projects.

The Process

Developers sign up on our website with their GitHub username and a public key for an Ethereum wallet.  In order to ensure that those people actually doing the development work are also the people who get the token rewards, developers will also have to post their public key in their public GitHub profile.

Once registered, developers just need to do what they do best: Code! For every line of code accepted to one of our registered and monitored projects within the blockchain ecosystem, CSC will transfer tokens to the author of the code. CSC also reserves the right to transfer bonus tokens to developers who solve particularly pressing bugs or issues or who contribute significantly to certain features.

  • Additional Actions Earning Tokens
  • Referrals: Developers who refer other developers to the incentive program
  • Commits to documentation/wikis
  • How-to’s or blog posts associated with official project documentation

The exact number of tokens that each action will earn is not determined exactly, yet. Project code will likely be rewarded with more tokens than pure documentation for example, but all accepted commits are eligible for earning tokens. Obviously, good documentation and stability of key blockchain projects needs to be improved in order to bring the blockchain ecosystem closer to enterprise-readiness.

CSC will start with providing incentives for development of Ethereum because it is the biggest and most widely accepted blockchain with a Turing-complete programming language. This said, it is also under-documented and could definitely use further support in order to progress and become an enterprise-ready solution. The second blockchain project whose development will be awarded with XSC tokens is IOTA, because of its assumed aptitude for IoT-related projects.

In Phase 3, CSC will incorporate a mechanism for electing new projects to be supported. This mechanism will be based on a liquid feedback model enabling a contemporary scalable, decentralized decision making.

Phase 3 – Liquid Feedback Mechanism

In the third phase, members of the community will be able to suggest projects to be included in the incentive scheme, a model known as liquid feedback. Token-based ballots will be used to enable community voting and determine which blockchain projects should be included.

In this phase, we’ll also be rewarding developers to contribute to our code base. Essentially, over the course of the three phases of the incentive program it should morph from being a mostly manual process to a fully automated process.

One essential part of this phase is that developers will be incentivized heavily to build the secondary smart contract which will continuously monitor the GitHub accounts for commits and facilitate voting.

A secondary smart contract will enable voting by people who already have some XSC. The community will be able to propose which projects to support in Phase 3. The framework for Phase 3 – a Liquid Democracy, or, Liquid Feedback process – will be described in the next post.

Kick-off at IOTA Hackathon, Gdansk

The kick-off event for this blockchain ecosystem incentive scheme will be the IOTA Hackathon in Gdansk, Poland, 17-19 November, 2017. There, we will award IOTA developers XSC tokens for committing code to the main branch and for other valuable inputs. The IOTA hackathon provides the ideal event for the initial distribution of XSC since during this 2,5-day get-together the Crowdstart Capital team and the hackathoe’s participants can perfectly define and decide on the value of the inputs to the blockchain and, henceforth, on the   amount of to-be-earbned XSC tokens.