The AMPnet Governance Model: Collaborative On-Chain Decision Making

The AMPnet protocol is an asset tokenization protocol that establishes a truly decentralized and permissionless ecosystem allowing anybody to issue digitized assets without the need for centralized arbitration.

We’ve covered the details of how AMPnet issues and verifies digital assets within the AMPnet ecosystem in the previous articles, focusing on the democratic, decentralized nature of the AMPnet asset issuance model.

How do we collectively govern a decentralized ecosystem, though?

Blockchain governance can get complicated. Here’s how AMPnet handles on-chain governance, decision making, and voting within the AMPnet ecosystem.

All organizations need a system through which ideas can be presented, discussed, and decided upon. Governance systems allow complex networks of stakeholders to reach a consensus on key issues.

Most organizations, such as companies, operate with centralized governance systems that are driven by leadership teams.

The decentralized nature of blockchain networks, however, requires a mechanism through which design changes or operational decisions can be made without the need for a centralized, vertical governance structure. Different blockchain networks have developed a variety of strategies to govern decentralized systems.

Before launching into the governance structure of the AMPnet protocol, it’s important to take a quick look at the key problems and solutions presented by blockchain governance. Every blockchain is a complex, rapidly evolving ecosystem that must adapt in response to the needs of users and the market at large.

Blockchain networks need to collectively identify problems, present solutions, and decide which solutions to execute in order to solve these problems. In centralized governance systems, the final authority for these decisions is typically a leadership team or board of directors.

The decentralized nature of blockchain networks demands a decentralized decision-making process. Most blockchain governance structures rely on democratic systems to reach consensus, but these systems are not without flaws.

Voter apathy is a serious issue within blockchain governance — data published by Foreground Capital indicates that voter participation in significant Ethereum proposals, such as the 2016 TheDAO hard fork, is less than 6% of all ETH token holders.

Voter apathy isn’t the only obstacle that must be overcome in blockchain governance. Many blockchain governance structures provide far greater voting power to individuals that hold large amounts of tokens. These token holders possess the ability to significantly affect voting results.

Successful blockchain governance systems incentivize stakeholders and provide stakeholders with a means of coordination. Incentivization is critical — stakeholders won’t participate without incentives, which can cause development to stagnate. Without a coordination framework, it’s impossible for stakeholders to present and decide on changes.

Lastly, there exists a critical need for a democratic mechanism that prevents a small minority of “whale” token holders from dominating the decision-making process.

AMPnet allows anybody to digitize any asset. The AMPnet protocol ecosystem is driven by tokenizers and auditors, who work together to issue and verify the assets issued via AMPnet.

We’ve covered these roles in previous articles that provide detail on how the AMPnet ecosystem enforces decentralized trust.

While these network participants participate in the issuance and verification of assets, the AMPnet protocol requires a system through which protocol changes can be suggested and decided upon, as well as a means of escalating and resolving conflicts identified within the tokenizer auditing and auditor slashing processes — all while solving the problems inherent in on-chain governance.

The AMPnet protocol governance model provides all stakeholders within the AMPnet ecosystem with a decision-making framework that solves the blockchain governance problems presented above.

AMPnet establishes a governance council of 7 to 31 members, who collectively represent the interest of all stakeholders — including passive token holders that are not interested in actively participating in voting, development, or governance.

The AMPnet protocol governance model solves the primary issues presented by on-chain governance with the following approach:

  • Voter apathy is overcome through a liquid democracy system that allows passive token holders such as investors, tokenizers, or liquidity providers to pass their voting power to others
  • Runaway voting power held by high-volume token holders is overcome through a weighted voting system
  • Decision making is executed through a system via which any token holder can submit a proposal, which is then voted on through AMPnet’s liquid democracy mechanism

The following article will provide a more detailed overview of the mechanics behind AMPnet’s governance model.

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