How can decentralized governance shift to a results-oriented way? (Part 2: Elinor Ostrom)

The journey of governance from ancient Sumerians to today’s decentralized governance mechanisms, and how to improve economic and social outcomes.

Decentralized governance is a topic most often discussed by a result of personal philosophy, ethics, and non-scientific predictions.

Some believe plutocracy is the best way to decentralized governance, others believe it should be a democracy, and most founders inherently believe they know the right way to govern more than anyone else.

If we look at the current blockchain ecosystem, we have not seen too many successful decentralized governance models. The most significant attempt was DAO, which was at the time a huge thing, but unfortunately, after the hack, it lost its glitter.

If we are true to ourselves, currently “decentralization” is mostly occurring in the network layer in the blockchain. The numbers and statistics suggest an environment that talks much about ideas, but when it comes to reality, fails to keep to its promises. ( )

Maybe we see decentralization as a risk inherently because we are so used to the old ways. Maybe we do not have any examples that show the real power of community-driven governance mechanisms. Alternatively, maybe the known is a comfort, and the unknown is scary.

As humans, we tend not to like the unknown. It makes us feel vulnerable, and when it comes to business dealings and enormous stakes, we do not want to make stupid mistakes. However, so far, these tendencies have kept us from experiencing truly decentralized governance models.

What if there was already a scientific research that could shed light to decentralized governance which seems quite chaotic?

Elinor Claire Ostrom, who was born in 1933 in Los Angeles, California, was perhaps the most literate person that could reshape everything we do not know about community-driven governance mechanisms, and how these models can bring out the most exciting results.

During her lifelong studies, she wanted to understand how communities can share finite resources, in a lot of different real-life examples, and most importantly, she was excited about finding patterns on what kind of models and principles lead to more abundance and happiness.

Her dedication and passion for understanding the interconnection between economy, policy, and communities, earned her the most important honor prize one can get; the Nobel Memorial Prize.

a biography from Elinor Ostrom’s website

Her groundbreaking research demonstrated that ordinary people are capable of creating rules and organizational methods that allow for sustainable and scalable management of shared resources. Perhaps this might have reminded the DAO.

Conventional economic thought suggests that when resources are communally owned and shared, it usually ends up as a phenomenon that is known as the “tragedy of the commons.”

On the contrast, Elinor Ostrom’s lifelong studies brought scientific results that debunked this notion.

She also managed to recognize the patterns behind what made communities govern themselves and their shared resources that increase the success of outcomes.

The 8 principles known as Ostrom’s Principles for Governing Commons are:

  1. Commons need to have clearly defined group boundaries on who is entitled to access which resources.
  2. Rules should be custom tailored to fit local needs and conditions.
  3. Communities affected by rules can participate in decision-making and modification of the rules.
  4. Monitoring usage of shared resources is vital.
  5. Sanctions for those who abuse the rules must be gradual.
  6. Dispute resolution approaches must be accessible, easy and low cost.
  7. Higher-level authorities and regulators must recognize the established rules and governance methods.
  8. Common resources should have different tiers from the lowest level to the interconnected system for best resource management.

While the tragedy of the commons has been a denomination that brought fear into decentralized governance, it is possible to shape true decentralization thrive under these core principles, and eliminate centralized decision making as well as the tragedy of the commons.

Current technologies of today give us the capabilities to build solutions for each principle mentioned above.

By design, perhaps the most potent aspect of designing decentralized governance methodologies is using technology and participation, so unique and innovative ideas can continue to evolve the governance model.

Blockchains are currently mostly run on “Plutocracy” model where the rich has much more power over the poor.

Most certainly there is still much room in this space to see decentralized governance models that can transform the interrelation between communities, organizations, and outcomes.

While we have not even seen the tip of the iceberg yet on how communities can involve to drive better outcomes, a hunger for change is necessary if we want to create technologies that are more human than machine.

In the next part of this series, we will analyze Plutocracy, and whether it is the best “decentralized” model this ecosystem can create for the best results.

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