Study Guide for On-Chain Governance of Blockchain

Glossary

Term DefinitionsBlockchainA distributed ledger technology that uses cryptography to link blocks of data together to form an immutable, transparent and secure database.On-Chain GovernanceA mechanism for storing the governance rules and policies of a blockchain directly on the blockchain.Genesis BlockThe first block in a blockchain that contains initial configuration information and governance policies.Peer NodeA participant in a blockchain network that maintains a complete copy of the blockchain and participates in transaction validation and data storage.Ordering NodeA node responsible for sorting transactions and packaging them into blocks.Smart ContractA code stored on the blockchain and automatically executed that defines the agreements and rules between parties.TransactionAn action that changes the state of a blockchain, such as adding, modifying or deleting data.Signature PolicyA rule that defines the number and combination of signatures required to approve changes to blockchain governance policies.Distributed LedgerA data structure that is shared and synchronized between multiple nodes, ensuring data consistency and transparency.Trust RatingA metric that assesses the trustworthiness of a blockchain network based on network properties and historical data.

Short Answer Questions

What is on-chain governance and what are its advantages over traditional off-chain governance?

On-chain governance refers to the mechanism for storing blockchain governance rules and policies directly on the blockchain. Compared to traditional off-chain governance that relies on external protocols and social consensus, on-chain governance has higher transparency, security, automation, and modifiability.

Explain how on-chain governance stores and manages governance policies on the blockchain.

On-chain governance typically stores governance policies in the genesis block or subsequent blocks of the blockchain. These policies can define various parameters of the network, such as block size, consensus mechanism, membership rules, etc. Any modification to the governance policy needs to follow a pre-defined signature policy and pass network consensus before it can take effect.

Describe the roles and responsibilities of peer nodes in the on-chain governance model.

Peer nodes are key players in the on-chain governance model. They are responsible for storing a full copy of the blockchain, validating transactions, and executing smart contracts. In on-chain governance, peer nodes can also participate in voting and consensus on changes to governance policies.

What is a signature policy and what role does it play in on-chain governance?

A signature policy is a rule that defines the number and combination of signatures required to approve changes to a blockchain's governance policy. It ensures that only authorized entities can modify the governance policy, preventing malicious behavior and single points of failure.

How are recursive data structures used to manage signature policies in on-chain governance?

Recursive data structures, such as tree structures, can efficiently store and manage signature policies in on-chain governance. This structure allows for the definition of different levels of authorization and complex signature combinations to meet different governance needs.

Explain how to modify an existing governance policy in the context of on-chain governance.

Modifying an on-chain governance policy typically requires creating a transaction proposal that contains the modifications. The proposal needs to collect enough valid signatures based on the existing signature policy before it can be submitted to the network for verification and consensus.

Describe some of the advantages of storing governance information on the blockchain.

Storing governance information on the blockchain can improve transparency because all participants can access and audit the governance rules. It can also enhance security because the immutability of the blockchain prevents tampering with the governance policy. In addition, it promotes automation because governance rules can be directly enforced by smart contracts.

How is the blockchain trust rating determined and why is it important to users?

The blockchain trust rating is a metric that assesses the trustworthiness of a blockchain network based on network properties and historical data. It can consider factors such as the geographical distribution of nodes, the strength of governance rules, verification of membership, and the overall activity level of the network. Trust ratings can help users choose more secure and reliable blockchain networks for transactions and interactions.

List and briefly describe three factors that may affect a blockchain's trust rating.

Geographic distribution of nodes: A more dispersed distribution of nodes can improve the network's resilience and censorship resistance.

Strength of governance rules: Strict governance rules can reduce the risk of malicious behavior and disputes.

Verification of membership: Verifying the identities of network members can enhance trust and accountability.

Explain why on-chain governance as a feature is critical for blockchain-based business networks.

On-chain governance provides a transparent, accountable, and sustainable governance framework for blockchain-based business networks. It allows stakeholders to participate in network decision-making, ensures that the network operates according to pre-defined rules, and adapts to changing business needs.

Essay questions

Compare and contrast on-chain and off-chain governance, discuss the pros and cons of each approach, and give examples of scenarios where each approach is best suited.

Explore the challenges and opportunities of implementing on-chain governance in blockchain networks. Consider factors such as scalability, security, privacy, and community participation.

Analyze different types of signing strategies that can be used for on-chain governance and evaluate their pros and cons. Provide real-world use cases to illustrate the applicability of each signing strategy.

As blockchain technology continues to evolve, what do you think the future of on-chain governance will look like? Discuss emerging trends, potential challenges, and impacts on different industries.

Design an on-chain governance model for a specific use case, such as supply chain management, digital identity, or decentralized finance. Define governance rules, signing policies, and processes to ensure transparency, accountability, and efficiency.