A governance trilemma - neutrality, fairness, inclusivity

We like our trilemmas in crypto, so here’s one for governance systems - neutrality, fairness, and inclusivity. This is probably my 6th or 7th post about governance in the last 6 months, and I’ll liberally assume you’re familiar with my worldview of DAO governance.

Let’s start with neutrality. Some DAOs may want to simply focus on profits, and their tokenholders are merely owners in the capital structure. There’s no real reason to go beyond neutrality with minimal governance.

However, most DAOs are more than just profit-making organisations - they are more about communities. Of course, there’s a vast spectrum, with many different types of governance systems and DAOs.

This means just being neutral is not enough, you also must think about welfare for your community members. As a result, there will be more active governance, laws and rules, that are designed to empower the smaller tokenholders, while ensuring the whales don’t have an outsized influence.

However, you can have too many rules, which leads to division, toxicity and thus compromising on inclusivity.

This is the neutrality, fairness, inclusivity governance trilemma.

A recent example of this happened in Optimism governance. As you may know, Optimism has been focused on breaking past just neutrality, and working on fairness and inclusivity. It’s probably the most complex governance in crypto, with the most rules and regulations. Recently, a Code of Conduct violation proposal led to significant backlash, and generally bred contempt and interrupted the community’s harmony.

This is a great reminder why governance is a delicate balance. You need to have just enough governance protocols so that it is both neutral and fair, but not too much where it actively alienates some of the community or exposes points of failure that may compromise neutrality.

I apologise for not expanding on many of these concepts, as I’ve covered them in future posts. I’m happy to discuss more on Farcaster (@polynya).