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On-Chain Governance on Tezos: Simply Explained

On-Chain Governance on Tezos: Simply Explained Blockchain PlatoAiStream PlatoAiStream. Data Intelligence. Vertical Search. Ai.
On-Chain Governance on Tezos: Simply Explained

When I first stumbled onto Tezos, I did a quick Google search to see what I was getting myself into. Like most people, when I saw “A blockchain designed to evolve” and “a self-amending crypto-ledger,” I was quite confused. What does “self-amending” mean? Upon further research, I began to understand the values that Tezos was built on. One of the few (yet major) flaws of decentralization are disagreements within a community. As a result, major blockchains, such as Bitcoin or Ethereum have seen “forks” (or splits) in their protocol. When protocols are forked, communities are split and innovation is stifled. Most notably, when Ethereum Classic split from Ethereum in 2016. We see issues today in the Ethereum community where validators want to adopt proof of Proof-of-Stake while others want to stick with Proof-Of-Work. Tezos was created with the idea of finding a solution to this: preventing hard forks completely — through on-chain governance.

On-Chain Governance on Tezos: Simply Explained Blockchain PlatoAiStream PlatoAiStream. Data Intelligence. Vertical Search. Ai.
On-Chain Governance on Tezos: Simply Explained

Contrary to other blockchains, Tezos upgrades itself on the blockchain itself (AKA “on-chain governance”). The process has five steps, each period lasting about two weeks. The five steps are:

  1. Proposal period
  2. Exploration vote period
  3. Cooldown
  4. Promotion Period
  5. Adoption period

It is definitely worth noting that before the Florence upgrade of the Tezos blockchain, the periods of on-chain governance were Proposal, Testing Vote, Testnet, Promotion Vote, and Adoption. As said in the documents, “Prior to Florence, Tezos nodes spawned a test chain during the ‘Testing’ phase of voting for the purpose of allowing users to test the new amendment. However, this feature was both unused in practice and quite complex. It has been removed, simplifying the amendment protocol.” Using on-chain governance to change on-chain governance, a win for democracy!

Now, let’s discuss how the update process actually works:

Phase 1: The Proposal Period

The proposal period is first initiated by users submitting an update proposal. They are submitted on-chain and the proposal must be approved by 5% of all Tezos delegates. Delegates are people who stake their Tezos coins (XTZ) with a baker (validator). If it reaches this 5% consensus, then it moves onto the next stage of the on-chain governance process. If not, then the process restarts.

Phase 2: The Exploration Vote Period

In this stage, delegates vote on their favorite proposals. Delegates can vote “Yay”, “Nay”, or “Pass”. For a proposal to pass, it must reach a super majority. A super majority is when “Yea” votes are greater than 80% of “Yea” and “Nay” votes (“pass” votes are excluded). We call this a “positive voter turnout”, or a PVT. In order to ensure a viable number of users are voting, we must reach a quorum. For simplicity purposes, think of a quorum as 30%-70% of delegators are voting in the governance process. You can read more on quorums here. Once (or if) a proposal reaches the 80% super majority, the process continues. If no proposal reaches super majority, we return back to Phase 1.

Phase 3: The Cooldown Period

As discussed earlier, this period used to be the testnet period. The testnet was rarely used in practice and caused technical issues to the node validators. Instead, the Cooldown period gives ample time for users to test the new protocol on private testnets.

Phase 4: The Promotion Vote Period

Upon the conclusion of the cooldown period and no issues arise, the community now has a chance to vote on it again. The same voting rules as phase 2. Remember, the quorum must be greater than the voter turnout, and the positive voter turnout must be greater than 80%.

Phase 5: The Adoption Period

The final phase is the adoption period which allows validators to update their bakers and nodes to the new upgrade. After 5 block cycles, the blockchain fully updates and the new protocol is activated.

The beauty of Tezos is how efficient and advanced the upgrade process is. If there is any new feature on a trending blockchain, Tezos can implement it in the next proposal. Now we you see what “built to last” really means.

Source: https://medium.com/tezos-israel/on-chain-governance-on-tezos-simply-explained-f71d5a2bad67