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By
Leo Henkels
In the ever-evolving landscape of blockchain technology and decentralized governance, ZKSync has made a bold move that could potentially reshape how we think about managing and governing decentralized protocols. The recent introduction of their community-driven governance framework, dubbed "ZK Nation," marks a significant milestone in the journey towards true decentralization in the crypto space. This innovative approach not only addresses some of the persistent challenges faced by Decentralized Autonomous Organizations (DAOs) but also sets a new standard for how blockchain protocols can transition from centralized control to community governance.
ZKSync's new governance structure, as reported by The Block and announced on the official ZK Nation X account (@TheZKNation), consists of three distinct on-chain bodies:
Each of these bodies plays a crucial role in the overall governance of the ZKSync protocol, creating a system of checks and balances that aims to ensure both efficiency and decentralization.
Adam Miller, co-founder of MIDAO and host of the Just DAO It! podcast, summarizes the significance of this move:
"Basically, ZKSync is decentralizing, right? They're saying, 'Hey, instead of us being in charge, we're giving control to this new decentralized...' And maybe it's fair to call it a framework because really they have multiple organizations in the traditional sense of the word."
One of the most intriguing aspects of ZK Nation is that each of these governance bodies has its own legal form. Miller notes:
"Each has its own legal entity and legal form, and they all interact collectively to govern the ZKSync protocol."
This approach of combining on-chain governance with traditional legal structures could provide a blueprint for how DAOs can interface with existing legal and regulatory frameworks.
The multi-body structure of ZK Nation offers several potential advantages:
Bryan Peters (@BPetes), founder of Team Sobol and an experienced DAO contributor, expresses his excitement about this approach:
"I think this is exciting. I hadn't heard of this news, but I had heard that the ZK drop had a large proportion of tokens going to the community, and I think that in itself was already a really strong signal. Following it up with this is really powerful when coupled to that."
Despite the potential benefits, this governance model also raises some concerns:
Adam Miller voices some of these concerns:
"There's almost two bodies here with veto power. There are the Guardians who seem to have overall veto power to keep things aligned with the 'quote-unquote' values of the project. And there's also a Security Council that has the ability to freeze the chain if there's a security threat."
While the idea of complete decentralization is appealing, there are arguments for maintaining some level of centralized control, especially in the early stages of a project. Peters offers this perspective:
"These are worthy reasons to perhaps, in an early phase of experimentation, centralize power. But I do agree with you that this should be something that we're continuing to push towards more decentralization when we can have the confidence and comfort to do so."
Both Miller and Peters emphasize the importance of community pressure in driving the evolution of governance structures. Peters notes:
"I hope that because there are a lot of folks who are token holders, and hopefully the token distribution is strongly decentralized, that could at least produce the correct pushback if centralization of power is not actually serving the community."
Miller draws a parallel to the governance structure of Purple DAO:
"It reminds me even of what's happening in Purple DAO right now, which I think we're both in, right? ... We've always actually had a veto power vested in one person. So now, what we're talking about doing, there's a proposal live to decentralize that a bit more and elect a Security Council, and so actually moving in the direction of more decentralization."
This example illustrates how DAOs can evolve their governance structures over time, potentially starting with more centralized control and gradually decentralizing.
Both Miller and Peters emphasize the value of experimentation in DAO governance. Peters states:
"I think it's because it's such a complex domain that we kind of need to be playing with both. I remember from a lot of the DAOs that I was participating in the last cycle, and there was this dialogue around how aggressively you decentralize versus whether you centralize things into committees, grants committees, these types of centralized authorities that may or may not last forever."
One of the key challenges in DAO governance is balancing decentralization with protection against malicious actors. Peters explains:
"Unfortunately, it takes people to experiment and risk capture. Because at the other end of the spectrum is, we push decentralization, we don't have the right mechanisms, tokenomics, etc. in place, and then something beautiful that we wish lasted actually gets captured."
ZKSync's governance model could potentially set a new standard for how blockchain protocols transition from centralized to decentralized control. If successful, it could inspire other projects to adopt similar multi-body structures.
The incorporation of legal entities for each governance body could provide a blueprint for how DAOs can interface with existing legal and regulatory frameworks. This approach could potentially make DAOs more palatable to traditional institutions and regulators.
By introducing this novel governance structure, ZKSync is contributing to the ongoing experimentation and innovation in DAO governance. This could spur further research and development in the field, potentially leading to even more effective governance models in the future.
Peters highlights the importance of token distribution in making this governance model work:
"And there are some things about this that remind me of when Optimism was pushing their two-house model and trying to innovate on how we approach DAO governance. I think that's done a lot of good for us as a group to see something different. So, if ZKSync is now doing a multi-party setup, has dropped a lot of tokens to the community, and continues to plan to do so, that allows for them to have the right incentives to do the tough work, to work on the DAO, its operations, and its governance."
This approach of combining a novel governance structure with broad token distribution could be key to achieving true decentralization.
Miller, drawing on his experience with Hats Protocol, suggests an interesting direction for the evolution of governance structures:
"I want to see, and you know, I'm wearing my Hats hat, and I'm a member of the Hats proto, and I like the idea of being able to play with having a very decentralized group being able to make those big shifts. But moving power functionally into roles, the Security Council is a role, and if the community is struggling with how that role is being fulfilled, they have the opportunity to do something, whether it's exit, fork, or change who's wearing the hat."
This concept of community-controlled roles could provide a middle ground between centralized control and complete decentralization.
ZKSync's introduction of the ZK Nation governance framework represents a significant step in the ongoing evolution of decentralized governance. By combining multiple governance bodies, each with its own legal entity, ZKSync is attempting to create a system that balances the need for efficient decision-making with the principles of decentralization.
As the blockchain and DAO ecosystems continue to mature, we can expect to see further innovations in governance structures. The success or failure of models like ZK Nation will provide valuable lessons for the entire community, helping to shape the future of decentralized organizations.
Ultimately, the goal is to create governance systems that are not only decentralized but also effective, secure, and adaptable. ZKSync's bold move with ZK Nation is a significant step in this direction, and its progress will be closely watched by DAO enthusiasts, blockchain developers, and anyone interested in the future of decentralized governance.
As we move forward, it's clear that the path to effective DAO governance will involve continued experimentation, learning from both successes and failures and a willingness to adapt and evolve. ZKSync's ZK Nation may well be remembered as a pivotal moment in this journey, regardless of its ultimate outcome.
