Potential for decision making and governance is the second general issue since Ethereum is a decentralized system. Unlike most companies and organisations where a few individuals take decisions, Ethereum’s governance maps decisions with many interested parties; developers, miners, node operators, and token holders. This diversity complicates the efforts to establish unity of action and to reach consensus where often changes and improvements get slowed down.
Off-chain governance is a form of decision and collection of opinions that are resolved outside the blockchain via soft forums such as GitHub, EIPs, and social media. Less widespread but more involved in the functioning of protocols is on-chain governance, the tools of which can be used to affect protocol change, such as a vote. The first ‘off-chain’ form of governance is through EIPs that are changes made to the Ethereum network that have to pass through certain review processes before being implemented.
Ethereum was developed with the aim of creating a decentralized organizational structure which has both efficiency and openness as core goals. It therefore follows that the optimal solution would be a combination of off-chain and on-chain processes where stakeholders are therefore in a position to make informed decisions.
Ethereum Improvement Proposals (EIPs): EIPs are the fundamental building block of the Ethereum governance system. It is an open platform that accepts suggestions for change from the general public that are then debated and improved upon by the participants. Some of these are proposed by third parties, while others originate from another core developer or a core developer team; the ones that are most popular advance to the next level.
Voting Systems: Implemented to less extent, solutions like on-chain voting are considered as an effective way to enable stakeholders to have a stronger say in the process. This could include token sale where the rights of a token holder would determine the proportion of Ether they could use to vote.
Transparency and Communication: It is also important to address the decision regularly and engage in open communication which involves updating. Since the platform is more open and is majorly located on sites such as GitHub, Reddit, and online forums, everyone’s opinion counts.
Layer 2 Solutions: The integration of Layer 2 solutions can aid the scaling capabilities of governance procedures, which in turn makes them more efficient and effective while avoiding centralization.
What is EIP?
Ethereum has its off-chain governance system which is based around Ethereum Improvement Proposal (EIP) that sets the rules for proposing alterations to Ethereum network. Known as an EIP, these can be created by anyone, and explain the technical details and reasonings behind a given change.
These proposals go through a rigorous stakeholder engagement period within the community which involves developers, miners among others. A proposed EIP goes for implementation as soon as it achieves cross-platform stakeholders support.
Creation of an EIP
Probably the most notable and widely known aspect of Ethereum’s off-chain governance is the Ethereum Improvement Proposal or EIP for short that sets the rules regarding any change in Ethereum.
The process of creation an EIP is rather easy open anyone in Ethereum community with enough knowledge in programming can open a page on GitHub. Another important aspect is that the proposal should contain all the information related to the changes, the need for which is stated in the proposal; this includes the rationale for the changes, technical details of the change and potential security threats and measures against them.
After that an EIP is created, there are further debates amongst the members of Ethereum community in order to achieve a form of ‘working consensus’ on whether the changes should be introduced or not.
This involves communications between the developers, mines, and many other participants with interest in the project. The authors of the EIP propose changes, and then the community discusses the changes, supports or does not support, and develops the changes. It helps to make sure that the proposed change is ever reviewed from different angles by following the steps described herein.
Gathering Feedbacks
With respect to off-chain governance of Ethereum, the main tool here is the Ethereum Improvement Proposal, or EIP, which is the specification for proposing changes to the Ethereum network. It is simply making a post on GitHub that requires no special authorization and can include a brief background, technical implementation, and possible security concerns or advantages.
After an EIP has been proposed, significant discussions take place to decide on a ‘rough consensus’ within the Ethereum community; these entail peer review by actual users, miners, and other participants in online venues such as Ethereum Magicians. Any given EIP author writes the ideas they have, defend any issues that may arise and aims at gaining approval of a community.
Presenting Core EIP to Core Developers
For the case of core EIPs, higher consensus is needed since changes are introduced into the base Ethereum protocol; therefore, all nodes need to be upgraded in order to stay a part of the network. In such a case, an EIP author should prepare and present his proposal in front of the core developers. Core developers go through the EIP during their weekly meetings and achieve a ‘rough consensus’ with regard to whether the proposal should be considered or rejected. This would be a call taking into consideration community sentiment, technical soundness, and potential contentiousness to avoid a network split like in 2016.
In case an EIP proceeds forward, the authors should update their proposals according to community feedback. With this iteration mechanism in place, changes are generally very strictly reviewed regarding technical robustness and usefulness for the community; therefore, Ethereum is saved from issues and made safe from failures.
Implementation and Testing stage
Once the core developers reach a ‘rough consensus’ regarding an EIP, the authors write the code necessary for its implementation, followed by rigorous testing. After that, the EIP is combined with others and goes live upon a network upgrade. Notable examples include Ethereum’s years-long transition from proof-of-work to proof-of-stake.
There is no signal metric for community consensus in this process. In general, the stakeholder community reaches a ‘rough consensus’ with respect to each point via incessant back-and-forth discussions. This iterative and collaborative approach shall make sure that any change proposals will be vetted according to the best interest of the community and aligned accordingly before their implementation.