Polkadot’s path to decentralization: latest insights

PolkadotDOT, the interoperable blockchain ecosystem conceived by EthereumETH co-founder Gavin Wood, launched to great fanfare in 2020. Over the ensuing bull market, DOT became one of the best performing altcoins, earning a much-coveted slot in the top ten. However, over the past year or so, DOT has struggled to maintain the same performance as competing alts such as ETH.

Late last year, the project made extensive changes to its organization as part of its ongoing commitment to promoting decentralization – a move that sees more funds directed to projects in the Polkadot ecosystem.

Here we discuss what’s behind the changes and how they’re really playing out among the grassroots members of the Polkadot community.

Here comes the Polk Assembly

Like many decentralized blockchain projects, Polkadot has several centralized entities that play a significant role in its development and stewardship. Among these is Parity Technologies, the Berlin-based blockchain development company also founded by Gavin Wood. Since Polkadot’s launch, Parity has not only developed the Polkadot codebase and architecture, but has also taken a leading role in the project’s ecosystem development and marketing.

However, the project made the big decision late last year to advance its commitment to decentralization by delegating responsibility for some important non-engineering functions to its community, using Polkadot’s established decentralized management system, Polkassembly.

Under Polkassembly rules, token holders decide how and where funds are allocated using a system called OpenGov, where DOT ownership equals voting power, in the same way that shareholder voting rights are allocated under company equity rules. The decision was inevitably a difficult one for the staff at Parity, many of whom were unfortunately made redundant as a result.

But as Polkadot activist Giotto De Filippi explained to me, the dramatic decision had quick payoffs for the wider ecosystem: “Parity is absolutely amazing when it comes to its core function – engineering – but there was an opportunity to improve many other areas. Decentralizing the functions outside of engineering to the community and allowing OpenGov to take control has been an incredibly powerful catalyst for change and success. The community took control in a permissionless way, and that change happened very quickly. A few months ago we went from basically no marketing to hiring some of the best influencers – all in a completely transparent and decentralized way – thanks to OpenGov.

Not just a quick fix

Ecosystem participants also believe that longer-term benefits can be derived from the change. William Chen, COO at Talisman wallet, was quick to get his team on board with the bigger picture.

When I reached out to him about the switch, he said, “Parity’s decentralization initiative was a big surprise at first, but we realized that it actually opened a door for us to own an important aspect of Polkadot and directly contributing to future growth.. Global blockchain adoption is in its infancy, and as an industry we will face unprecedented challenges as we grow – decentralization is the underrated force that gives true long-term resilience to the network.

To address Chen’s point about resilience, a recent US Commodity and Futures Trading Commission report on DeFi risks highlighted the various dimensions on which projects can be decentralized as a way to explain their resilience against censorship, shutdowns and attacks. Although Polkadot is a development platform, the principles still hold true.

At this point in the evolution of blockchain, there are many projects using decentralized governance, some of which have been established longer than Polkadot. However, it is difficult to find cases where projects have made any real inroads on decentralizing aspects of their operations. Nevertheless, the CFTC report also refers to the decentralization of operations as one of the dimensions on which projects can increase resilience.

When I reached out for comment, governance network The Ivy Collective emphasized the importance of testing the art of the possible when it comes to decentralizing responsibility for ecosystem functions, saying: “Web3 demonstrated the power of decentralized consensus mechanisms, which clearly mission – critical but represents only one aspect of a comprehensive system. Polkadot’s move to open governance enables the decentralization of other system functions along with much-needed experimentation.”

Paving the Way

There is another important benefit associated with decentralizing operational functions such as marketing: Increased diversity.

Ingo Ruebe, founder of KILT Identity Protocol, told me: “Polkadot’s strategic move to independently finance business development and marketing sectors is an important milestone that benefits the wider Web3 community, promoting diversity and non-linear communication strategies . By allowing independent agents to propose actions and seek community funding, it encourages decentralized teams to engage and collectively decide on the best course of action, serving as a model for other projects with less developed governance.”

Different approaches

Polkadot’s multi-chain architecture has proven to be one of its greatest strengths when it comes to decentralization, as its inherent scalability means the ecosystem is not subject to the so-called ‘blockchain trilemma’ that plagued Ethereum as a legacy platform . The Polkadot community is in a position to make seemingly radical decisions about decentralization without compromising platform scalability.

However, a recent radical proposal regarding Ethereum’s scalability shows that the legacy platform still faces significant challenges in solving its trilemma. Vitalik Buterin recently proposed raising the minimum stake to a staggering 4096 ETH, limiting participation to staking pools, which would be decentralized pools under the proposal.

But how such a change can be implemented without compromising on decentralization is completely unclear. For example, how would the network limit participation to only decentralized pools without obtaining permission? How would Ethereum define and measure the decentralization of any given pool?

While the move has yet to gain any formal traction within the Ethereum community, it would be a far more transformational change than Polkadot has recently accomplished. This could alienate many of those committed to Ethereum thanks to its ethos of decentralization. If that happens, Polkadot’s renewed push toward open operations might just make it an attractive alternative.

Follow me further LinkedIn.