08 Apr Akin Sawyerr
Akin is the Founder and Managing Director of Feleman Limited, a consulting firm focused on advising Blockchain focused startups and projects. He works with the Decred project on global governance efforts and growth opportunities across Africa.
Akin discusses how governing a blockchain network can be similar to governing a publicly listed company, Decred’s hybrid incentive system & ticket-based voting process, and his industry outlook for 2020.
Interview conducted by Shayaan Khanna
Hello and welcome! So Akin, how exactly do you spend most of your time working with Decred?
I’m the Strategy and Governance lead for Decred with a current focus on Africa, expanding awareness and building communities across Africa. A lot of my work entails representing Decred at speaking engagements and engagements focused on governance, developing thought leadership in the governance space and overall awareness building. I also set out to interact with the media.
And I know that you’re founder and CEO of a company right now. Could you please share a bit more about that?
I run a FinTech consulting company that I have been managing over the last decade. Typically, a lot of contributors to Decred are working through their own LLCs or small businesses. When I got into the crypto space a lot of people research is trying to understand what these networks mean to how markets will develop in the future. When I look at the economics, I tend to look at things from a broad market perspective. As I did more and more research, I began to actually understand how value would accrue to network. I started kind of moving down the governance rabbit hole, realizing that ultimately the quality of networks and the sustainability of networks rely heavily on the strength of the community. The strength of the community would be defined by how robust and transparent the governance process is. Therefore, I spent more time focusing on governance, understanding how these networks are governed. I realized that understanding that what the best practices and governance plays are really important. And a lot of value is accrued based on the quality of how these networks are governed.
Blockchain governance is a somewhat new area for a lot of folks. How do you explain blockchain governance to someone who is not really that familiar with the space?
The best place to start is just to think about how any collective is run. A government, a company, an entity where you’re pulling multiple parties should have a governance process. What an explicit or not, right, so there’s some process that is transparent and clear, or whether it’s opaque. What drives decision making & what drives the network forward.
So, in many ways, one can think about blockchain governance in a way that is not that dissimilar to how publicly listed companies, for example, are governed right now. Starting with a Board of Directors, they have a lot of internal processes on how decision making is done which are fairly intricate and complex. I think the same things will occur and happen in the blockchain space. Now, where were they differ to some extent. When you think about decentralized networks, in many ways, you know governance actually has to be a lot more explicit and clear, because you don’t have a lot of coordination & metrics because you don’t have the centralized authority like a company, which is more of a top-down structure.
A decentralized process where people can enter and exit the network at any point in time, you need to have a clear, verifiable governance process in which the participants can easily understand the opportunity that was in the network, once they get for their contributions when they fit into a broad structure. I think it’s incumbent on blockchain networks and decentralized networks to have even more explicit governance processes, just based on the nature of how these networks can grow and proliferate.
I know that proof of work and proof of stake are really top of mind in especially with what will be going on with Ethereum fairly soon. Could you please touch upon how Decred is a hybrid of both proof of work and proof of stake systems?
So Decred, similar to Bitcoin, has proof of work layer where miners mine cryptocurrency and essentially secure the network. The first layer of security is to ensure you have enough hash power – providing assurance that as the network grows and proliferates, it becomes harder to attack through a number of attack vectors. When you think about mining reward with Bitcoin, 100% of the reward goes to the miners. A lot of power is concentrated in the hands of miners because of account mining reward. And they get a lot of say in the decision-making process.
In Decred the mining reward is split between three buckets. A proof of the work layer, a proof of stake layer and a portion of the mining rewards also goes into Treasury. The Treasury is how we fund, the continued development of the network. Sixty percent of the mining rewards go to miners (the function of miners is similar to Bitcoin), thirty percent goes to the proof of stake layer and how that works is stakeholders who accumulate DCR hold it and essentially buy what we call tickets. A ticket gives you the ability to stake some tokens and essentially create a second validation layer for the network. So every block that’s mined by the proof of work layer has to be validated by proof of stake layer. That is the second layer of security! And the reward for people staking their tokens is they get block rewards when these tickets get called. As you mine Decred It goes into a pool, that’s optimized around 41,000 tickets. The algorithm tries to create an optimized pool of about 41,000 tickets. And every block that’s mined, five tickets get called up randomly to vote on those blocks. So you can never be sure when your ticket will be called up to vote.
That said, tickets on average vote once every month. The third piece was the Treasury; ten percent of the block rewards go to Treasury. And that Treasury funds operations of contractors like myself who work on the network. The way those funds get disbursed is an off-chain governance process, a platform called Politeia, and all the funds allocated to developing the network or continue to iterate on software and marketing other operations must go through a proposal process. People actually have to write proposals on what they’re spending money on and get some level of detail as to the value that would accrue to the network. And then ticket holders also get to vote. The same ticket holders who are buying tickets on the network also get to vote and approve or decline requests and Treasury funding.
So more to that point what are some of the challenges to a well-governed blockchain network? We hear a lot about has power concentration and plutocracy for the proof of stake ones. What are the challenges for your network?
Fundamentally the first-order challenges relate to how you design governance systems and think about them fully upfront. The challenge of a lot of blockchain networks that are launched early was that there wasn’t a lot of forethought to ensure that governance was transparent and explicit. The problem with not having a well thought through governance process upfront is that where there’s a lack of explicit & clear governance, something will take over. If a network is prone to capture by a plutocracy or is prone to capture by certain interests or where there are no checks against that then it’s more likely to happen. It’s human nature to want to grab power and so in some ways, governance itself is an attack vector: Lots of products that don’t really think comprehensively or just have very poorly designed governance processes. You then end up with results that are not the original intent of the network. So that’s the first thing – ensuring you have thought upfront around what the governance process should be and what the potential holes are in the governance process.
The second thing is having mechanisms to evolve your governance processes over time. For Decred, because of how our governance process was designed upfront and the ideals of power & individual sovereignty. Every node gets a vote – we don’t have master nodes, we don’t have a delegated system, each individual has the ultimate power to vote in the network. If there are practical things about the governance process as we evolve that are not working well – we actually have a mechanism to fix that: any committee member could put up a proposal that proposal can be discussed and the network votes. And because we designed parts of Decred to really align across all stakeholder groups, the general idea is that everyone is sort of in the same boat. And we’re going to have to live and abide by our decisions. In many ways, creating that alignment helps quite a bit to ensure we don’t have concentrations of power and influence in particular areas or in particular groups. The goal, one more time, is to decentralize power and dilute power that may be initially concentrated in certain groups. To summarize, we look at two things – first, you need to have a very clear and apparent to all stakeholders; second, you need a mechanism to actually evolve governance over time. Because if not, people will find issues with governance processes or holes that need to be addressed. And there needs to be some way explicitly to change or adapt your governance over time.
Speaking of things evolving and changing – what would be on your regulatory & market wish list for 2020 and beyond?
Frankly, our design of Decred is of a fully decentralized system where there are no fiduciaries. We’re evolving into a decentralized organization where there’s really no central authority that controls the network. And I think if we continue to do that effectively, then we’re not really a network that can be affected by the way a central party may act in its own benefit (and against the rest of the network). We do this through the several checks and balances we have even on governance. I don’t lose too much sleep over regulations.
On the market side of things, markets will continue to mature. Projects that have shown some level of credibility or a product-market fit will continue to iterate on that and will continue to be extremely well-placed. This will be the year where we continue to move across along that plane. We will see projects build user interfaces that the general public can more easily interact with. Interfaces that abstract away a lot of the challenges of crypto for those who lack technical understanding of these protocols.
I think 2020 is the year where users can just download apps and interact with the crypto space without necessarily having to hold crypto. I think we’ll get to the point where especially in the financial services space and DeFi. For example, there’s a lot of innovation around where people are able to onboard fiat and get a return in crypto which could potentially be a lot higher than what they get at traditional financial institutions. We start having those products that are easy to use and give a much higher return. That would attract, for example, a lot more interested users. But it has to do with user interfaces and applications are easy to use that they’re used to, that doesn’t require a lot of behavior change to adopt. Then we will see greater mass adoption.