As decentralized blockchains see growing adoption, questions about how they’re governed at the foundational network layer are becoming increasingly important. In Cardano, its governance, development, and adoption are to be self-sustaining, where the community has the ultimate say in shaping how the network evolves for its users and utilizes elements of different decentralized governance.
A uniting, key component to effectively implementing decentralized blockchain governance models is the usage of a self-custodial crypto wallet such as Yoroi. It’s the single piece of technology that allows users to interact with distributed ledgers and participate in governance. Without crypto wallets, the different decentralized governance features would be difficult to implement, leading to ineffective governance.
Let’s go over how Yoroi can interact with different types of governance models.
Key Takeaways
- Blockchain governance plays an ever-increasing role as the industry evolves, with more community stakeholders adopting and interacting within a particular ecosystem.
- On-chain governance features involve decision-making processes encoded into the blockchain protocol with transparent and automated processes. Yoroi is used to cast votes and sign the transaction confirming the choice.
- Hybrid governance features combine elements of both on-chain and off-chain governance to balance transparency and flexibility. Here, Yoroi connects with governance platforms, allowing for participation in the open debates.
- DAO governance is a decentralized approach where decisions are made collectively by stakeholders without a central authority. Yoroi both holds the voting tokens and interacts with the smart contracts that allow DAOs to function.
1. On-Chain Governance
On-chain governance involves decision-making processes that are encoded directly into the blockchain protocol and are recorded for anyone to view. It allows community stakeholders to propose and vote on changes using the blockchain itself, either directly or through a delegated representative.
It’s a model that requires mechanisms to collect votes, count them, and ensure no one can modify the results. On-chain governance can be complicated at a technical level, as the ledger itself must support the governance process.
In Cardano, DReps (Delegated Representatives) and SPOs (Stake Pool Operators) use on-chain voting to vote on community-led Governance Action proposals and other initiatives. Its Project Catalyst program is also another example of on-chain voting for governance-related matters, where ADA holders can decide to vote through their self-custodial wallet on funding various project proposals looking to add value to the Cardano ecosystem.
Key Features:
- Transparent and automated processes.
- Decisions are executed automatically through smart contracts.
- Voting power is often proportional to the number of tokens held.
On-chain governance relies on crypto wallets such as Yoroi for the signature of the owner’s private key to validate their votes. That is what allows this model to work since the private key cannot be replicated. This way, the community can be sure a person voted only once with one key.
Through Yoroi, users can sign transactions in voting actions, delegate their voting power to a selected DRep, such as Yoroi, participate in Catalyst, etc. Its ability to store ADA is essential to calculating voting power and makes sure that the ADA in the wallet can only be used once for voting power calculations, which is part of on-chain governance functionalities.
Read more: How to delegate to Yoroi as a DRep on desktop and mobile
2. Hybrid Governance
Hybrid governance combines elements of both on-chain and off-chain governance. It aims to balance transparency and flexibility by incorporating structured on-chain mechanisms with off-chain discussions.
Its main feature is that it requires much more community involvement. Crypto holders, technical developer groups, dApp developers, and other stakeholders must actively participate.
If there is no active participation, the model can be dominated by just a few people or groups. This can lead to mismanaged resources and the final failure of the blockchain network itself.
In the Cardano ecosystem, combining the processes mentioned above also leads to some features of hybrid governance, whereby certain elements of both on-chain and off-chain governance are blended. For instance, Intersect is a member-based organization tasked with supporting the implementation of Cardano’s on and off-chain governance initiatives.
Key Features:
- On-chain voting for major decisions.
- Off-chain deliberation to build consensus.
Yoroi enables users to participate in hybrid governance features as well on the GovTool side, which is a governance platform that enables connection to a self-custodial Cardano wallet for on-chain activity. Users can connect their wallet, prove their minimum deposit, sign up to become a DRep, or even propose Governance Actions, for example.
3. Decentralized Autonomous Organization (DAO) Governance
DAO governance is a decentralized approach leveraging a blockchain network where decisions are made collectively by stakeholders like an organization, but without a central authority. It’s a model that is only possible using blockchain technology, making the DAO the first native entity in the Web3 space.
DAOs can have many purposes, such as charity, investment, tool development, etc., so they have the potential to be used for a wider range of governance purposes, but require the active participation of stakeholders involved in the DAO.
DAOs are set apart from the other examples because they mainly focus on a project’s governance. Whereas the other examples above are primarily concerned with the decision-making of an entire blockchain, a DAO focuses more on how a particular project should make decisions.
They do this by relying on the asset distribution of so-called governance tokens. These tokens can be used to vote, make proposals, and even distribute rewards amongst the members of a DAO.
In some cases, the governance token is divided into a membership token, which represents a person belonging to a certain DAO, and voting tokens, which represent the voting power of said member. The former can be an NFT (non-fungible token), while the latter is a fungible token.
Key Features:
- Operates via smart contracts that automate governance processes.
- Proposals are submitted, voted on, and implemented programmatically.
The DAO model and its features rely on crypto wallets such as Yoroi to function. In it, there are several types of tokens used to participate in the organization.
First, we have the membership token that is given to people who join. This token needs to be held in a wallet native to the network, not a wallet from a centralized exchange. Yoroi is capable of holding membership types of tokens if they are Cardano-issued assets.
Second, the voting tokens also need to be held in a crypto wallet capable of interacting with smart contracts. These tokens represent the voting power of members, and votes are tabulated by a smart contract. In both cases, a native wallet such as Yoroi is needed.
Wallets are also used to sign the transactions that conclude a vote. Users need to use their private keys so everyone can be sure they only voted once, and no participant can manipulate the system. Yoroi is capable of fulfilling these requirements and can be used as a tool for DAOs launched on Cardano.
Download Yoroi Wallet to Participate in Cardano Governance
Yoroi Wallet is open-source, built for the community, and committed to secure access to Cardano.
Follow Yoroi on X for more updates on how we’re supporting dApps and Cardano development.
Download Yoroi Wallet for your desktop browser or mobile and leverage your ADA stake as voting power for important decisions affecting the Cardano network.
About Yoroi Wallet
- X: @YoroiWallet
- Official Website: yoroi-wallet.com
Disclaimer
You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by EMURGO to invest.
