Encointer is a decentralized digital platform that empowers local communities to issue their own currencies and manage common funds. But who is actually in charge? Who can make changes to the configuration of monetary policy or the geographical boundaries of the community?
In contrast to most other community currencies, Encointer operates without a central entity that keeps the books, defines the rules and needs to be trusted. Encointer communities are managed on a public blockchain and the governance rules are enforced by the blockchain protocol. In this article, we’d like to present our first prototype of democratic governance for local communities.
First, let’s clarify what we mean by democracy on the local community level:
- Equality: every person who is affected by a decision has exactly one vote. All affected persons have equal power over the outcome.
- Deliberation: Everyone affected by a decision can publicly and freely express their views and learn from others.
- Information Symmetry: Every voter has equal access to the necessary information to form an opinion and cast their vote by themselves.
- Sovereignty: Communities independently determine their fate without relying on any internal or external authority to respect and implement their decisions. This ensures full control over governance and decision-making processes.
While these idealistic goals are challenging in practice, technology can help approximate them. This article presents the first implementation of democratic governance for Encointer communities, focusing on equality and sovereignty. It allows for essential experimentation, driving the protocol’s evolution.
Who gets to vote?
Encointer communities are open to all individuals physically present within the community’s defined area who are willing to participate in its social protocol. A mobile phone with the Encointer wallet app and internet access is all that’s required—no identity documents, bank accounts, credit cards, or spare money needed. Participants don’t even need to reveal their name, email address, or other identity attributes.
Encointer uses a digital personhood protocol to assign votes to unique individuals physically present in the community over time. This protocol relies on in-person gatherings, as explained in our whitepaper: Community members attest to each other’s personhood and membership at cycle events every 10 days. The more frequently a person attends these gatherings, the higher the confidence that they maintain a single account. To prevent Sybil attacks, each cycle attendance within the last five cycles counts as one vote for governance decisions. This approach, though not perfect, aligns much better with democratic values than plutocratic token voting, common in proof-of-stake blockchains, and is preferable to relying on an autocratic platform operator.
How to propose changes?
Any community member can propose spending community reserves or changing currency rules, such as modifying community income, adjusting the demurrage rate, or changing cycle gathering locations. These changes can be automatically enacted by the protocol upon approval without needing an administrator or authority. Additionally, members can submit petitions signaling community wishes for change, which motivated groups can act upon.
As any member can submit proposals, there can be many proposals up for vote at the same time and they might mutually contradict: One proposal may set the community income to 10 units every 10 days, another one to 100 units and one may even suggest 0 units. This allows for a more expressive participation than a simple Aye/Nay vote on a number that has been previously agreed on in a working group of only few people in a take it or leave it manner.
The simple rule to resolve the conflict among competing proposals is that the first proposal that maintains approving state for a confirmation period will be scheduled for enactment whereas all other open proposals for the same parameter change get canceled.
Stagnation vs. Chaos: Adaptive Quorum Biasing
Every governance system needs to balance stability vs agility. “Never change a working system” vs. adapting to changing needs.
We need to acknowledge that not every community member will actively participate in governance. Many may take a passive stance and don’t act as long as they don’t suffer. Building an opinion on a matter can be a lot of work and not everybody is willing or capable to invest this effort. This is one of the reasons many democracies elect representative bodies to decide on their behalf. As a grassroots protocol, Encointer attempts to avoid such representative bodies and instead proposes a very dynamic proposal system which still defaults to the status quo unless the approval for the change is very strong.
The basic principle is: The lower the voter turnout, the higher the approval threshold. At 100% turnout, the threshold is 50% and matches the simple majority rule. With lower turnout, a higher percentage of Aye votes is required for approval, ensuring only well-supported changes pass. A turnout threshold, suggested at 5%, ensures proposals represent a significant portion of the electorate.
The Lifetime of a Proposal
Proposals can be submitted anytime and are voted on continuously. Let’s first look at an example where only one proposal is active.
After submission, a proposal has a 9-day voting period. To be approved, it must stay in a passing state for a 2-day confirmation period within its lifetime. Approved proposals are scheduled for enactment for the upcoming cycle.
On Leaderlessness
Every community will have its leaders, whether those who initiated the currency or those knowledgeable about the technical tools. While striving for equality, we must recognize the importance of leadership in accomplishing necessary tasks. Encointer provides tools for communities to distribute power more equally, but each community must find what works best for them. Encointer’s architecture intentionally avoids centralizing power in a single leader by default while still maintaining structure.
Sovereignty
A community is only sovereign if it controls all necessary components for its platform and does not depend on external actors. With Encointer being a global platform, there is a dependency on the Kusama Network and the Encointer parachain for a local community currency to operate. Encointer takes various steps to enable communities to run their own infrastructure, from blockchain nodes to indexers. But in the end, Kusama governance can overrule all local decisions if KSM holders choose to. Therefore, true sovereignty requires an exit option for communities.
Exit means: leave the Kusama consensus system and go solo or join a different consensus system. Thanks to the technical flexibility of substrate chains, this is actually possible: A community can snapshot their state at any point in time and re-genesis on their own substrate chain – which they then need to maintain alone, obviously.
Pioneering Web3 Democratization
Decentralized systems like blockchains have typically used cryptoeconomic governance, inevitably leading to plutocracy. While some may favor plutocracy over the autocracy of big tech or certain nation states, we shouldn’t give in to the lesser evil too quickly if a more socially sustainable solution is possible.
With its approach to democracy, Encointer gives humans a vote. There are no gatekeepers controlling membership or credentials. Participation is based on physical presence and voluntary engagement.
Simply implementing the best governance system possible won’t do: We also need the communities who adopt it and give it meaning. Your turn!
Are you interested in how it works exactly? Try our deep dive tutorial!
Ready to experiment in your community? Follow the examples of leu.zuerich, GreenBayDollar, and Nyota in Tanzania: Bootstrap an Encointer community!
