Hedera Hashgraph: Blockchain Alternative?

 Tezos: On-Chain Governance in Action


Tezos is a blockchain platform that stands out for its on-chain governance mechanism, which allows stakeholders to participate directly in protocol upgrades. This innovative governance model aims to solve one of the most pressing issues in blockchain development: how to upgrade protocols without hard forks or centralized intervention.


🔍 What Is On-Chain Governance?

On-chain governance refers to a system where decisions about protocol upgrades and changes are made through a formalized, blockchain-based voting process. Unlike off-chain governance (e.g., Bitcoin or Ethereum pre-2.0), where upgrades are coordinated off the network and implemented by developers and miners, Tezos enshrines this process into the protocol itself.


🧬 How Tezos Governance Works

Tezos operates on a self-amending ledger, meaning the protocol can upgrade itself through a series of voting and testing phases. Here’s how the process works:


Proposal Period


Developers (called bakers in Tezos) submit protocol upgrade proposals.


Each proposal includes code changes and can request compensation for the proposer.


Exploration Vote Period


Stakeholders vote on the proposals using their stake (XTZ tokens).


A proposal needs a supermajority (typically >80%) to move forward.


Testing Period


The winning proposal is tested in a separate temporary chain ("Testnet") for 48 hours.


This ensures the upgrade is technically sound.


Promotion Vote Period


If testing is successful, bakers vote again to promote the proposal to the mainnet.


Again, a supermajority is required.


Adoption


If the final vote passes, the new protocol version is automatically activated.


🌐 Real-World Example: The Granada Upgrade

The Granada protocol upgrade (activated in 2021) improved performance and reduced gas consumption significantly. It went through all governance stages:


Proposed by Nomadic Labs.


Voted and approved by stakeholders.


Tested on a temporary testnet.


Adopted without a hard fork.


This was one of several seamless upgrades, showing how Tezos can evolve without community splits.


✅ Advantages of Tezos’ On-Chain Governance

No Hard Forks: Changes are implemented smoothly without splitting the chain.


Incentivized Participation: Proposal developers can receive compensation, encouraging innovation.


Decentralization: Stakeholders directly influence development.


Security & Formal Verification: Protocol changes often emphasize secure, formally verified code.


⚠️ Challenges and Criticism

Voter Apathy: Many stakeholders delegate votes and don’t participate actively.


Complexity: The process, while robust, can be intricate and slow.


Power Centralization: Large bakers and staking services may wield disproportionate influence.


🚀 Conclusion

Tezos exemplifies on-chain governance in action, enabling adaptive protocol development with direct stakeholder involvement. While not without challenges, it remains a pioneering model for decentralized governance—one that other blockchains are now studying or adopting in various forms.

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