Equity for All: Welcome to Opt-In Governance

Welcome to Opt-In Governance, a blog where I hope to promote discussion around a wide variety of topics relating to equitable governance. This post is mostly going to talk about what equitable governance means to me, and which emerging technologies I think could help us achieve it. I wont bore you with my background here, but if you would like to learn more about me and how I became interested in these ideas, see my post titled [link to bio post].

What is “equitable governance?”

Equitable governance is a term that can be applied to the concept of true democracy in an organization, process, or system. Simply put, its a way to account for an individuals input when determining group outputs. In ethical systems where individual inputs are unequal, the groups generated output should be distributed accordingly back to the individual. Western economic theory would posit that capitalism is a method to accomplish this, as people who perform important services for the economy are rewarded with large sums of money. While there is plenty of discussion around the efficacy of capitalism, what about non-economic systems? What about governments, businesses, institutions, etc. which all depend on the input of individuals to achieve outputs for the group? How can we account for the intrinsic value of the human bring providing that input?

The answer: by giving them an equitable role in the governance of the organization.

Equitable Governance in Practice

Many examples exist today which showcase the progress humanity has already made in this area of our social development. Democratic government stands out as a leading example, although many types of democracy exist and each have their own flaws; the perfect recipe has yet to be formulated. Lets look at how representation works in the United States at the Federal level.

Individuals get to participate in government decisions through the election of officials. These government officials then act as representatives for their constituents, and in a perfect world would always be acting in the best interest of those who put them in office. At the end of their term, the voters get to decide if the official represented their interests accurately, and if not they will get voted out. But realistically, this is really the only decision-making aspect that the population gets to participate in: who will the elected officials be this term? Everything that happens after is up to the representatives, who’s decisions are granted a degree of legitimacy through the voting process.

Another imperfect instance of equitable governance exists as an employee owned business. Many of these businesses allow employees to receive company stocks in addition to regular pay, and the employees are then represented as shareholders. This system provides a way for employees to accrue equity in the company over time. This helps the organization grow stronger; as individual employees gain new skills and capabilities, the value they provide to the company increases. This is mutually beneficial since the increased value of the company will in theory translate to an increased value of the employee owned stocks. In terms of governance however, this can eventually prompt employees to trade their equity for monetary value, decreasing their individual shareholder representation.

In both of these examples, the individual lacks true agency when it comes to influencing the decisions made for the group. At best, they get to voice an opinion for consideration. At worst, their opinions are not considered at all by those in positions of power.

All organizations suffer from the inevitable consolidation of power that occurs when individuals are tasked with making decisions for the group. For the most part, this has been a necessary evil due to the nature of complex problems that require swift solutions. It wouldn’t be practical for say, a US Congressmen to poll all individuals within his district for their opinions on a spending proposal before casting his vote in the legislature. Not everything can be a referendum. But could more things become a referendum?

Solution: Decentralized Decision-Making

Decentralization. This term has become more prominent as people across a variety of industries are working to address the problems caused by consolidated power structures. In technology, decentralization can be an important feature to consider as centralized systems have a single point of failure. For instance, imagine if Google housed all of its email services on one physical device. If the building which housed this device lost power due to a storm, every single account would become inaccessible. That’s one reason why they host email servers in locations all over the world, not just for speed and security, but also redundancy.

That’s a pretty crude example so lets look at something a bit more complex. In the crypto world, decentralization is a core concept. Bitcoin, the first mainstream cryptocurrency, was created using blockchain technology as a solution for the problems that come with centralized fiat currency systems. Fiat currencies (USD, EUR, etc.) are backed by government authorities, opening the possibility for economic manipulation through money-printing, interest rate adjustments, and other mechanisms. Furthermore, the government serves as a single point of failure. If the government fails, the fiat currency becomes worthless. Cryptocurrencies offer an alternative to relying on governments or other central authorities to implement responsible monetary policy. But what does email and crypto have to do with governance?

Use Case: Cryptocurrencies and Ethical Decision-Making

Blockchain was a critical development to allow the creation of the first Decentralized Autonomous Organizations (DAO’s). DAO is a loose term applied to participant-owned entities where all operational, financial, and strategic decisions are handled through a decentralized ledger. DAO’s do not have centralized leadership. Decision-making is coordinated using governance tokens, the ownership of which may be required to participate in the DAO in any capacity. When proposals are introduced, members allocate their governance tokens to vote on the proposal. Distribution of the governance token can be reward-based, providing incentives for participation.

One of the fastest growing types of DAO’s are Decentralized Exchanges (DEX’s). DEX’s are meant to provide an alternative to financial institutions that offer brokerage services. Uniswap is one of the best known DEX’s and operates on the Ethereum blockchain. Users have many options for participating in the exchange:

1. Liquidity Pools allow users to provide tokens to the exchange for facilitating trades. Users earn a percentage of trading fees based on the proportion of total liquidity on the exchange that they are providing.

2. $UNI is the platforms governance token. Users that own $UNI can participate in voting to direct future development of the Uniswap platform.
3. Uniswap’s open-source software allows users to create new DEX’s utilizing the Uniswap code.

These factors, among others not listed here, show how DEX’s provide a framework for how we can apply decentralization to provide more equity to an organizations participants. When compared to a product like Robinhood or Coinbase, that is privately owned as a revenue generating service for the companies shareholders, the benefits are clear. Conventional exchanges are just gate keepers who charge a fee for access to the market. DEX’s provide the same access while allowing users to shape how the platform is run, while returning profits back to those actively participating in its profit-generation.

This framework can serve as an example for applying decentralized concepts across a variety of organizations, from businesses to governments.

Use Case: Opt-In Taxation

One of the first use-cases I began to consider for decentralized governance is opt-in taxation (hence the name for this blog!). This thought experiment involves the creation of a “tax token” that can be purchased with fiat currency and staked to government proposals to fund them. The transparent nature of distributed ledger technologies would allow for accountability in the spending process.

Current tax systems collect money from individuals without any indication of how that money will be spent. As we discussed earlier, the only method of participation individuals have is to elect representatives who will hopefully spend their taxes in an acceptable fashion. If the government operated more like a DAO, citizens would have more equity in the decision-making process. Proposals could be created, voted on, and funded with by the tax token which would be made available to all citizens. Smart contracts could be set to execute when enough tokens have been allocated to a proposal to fund it, instantly transferring the necessary funds to the appropriate spending accounts. The possibilities for bringing more power away from the centralized institutions, back to the individual are endless.

Participation could be incentivized through rewards for public service. A reputation system could be implemented to highlight individuals who create and fund proposals that turn out to be highly valued by the community. NFT’s could be minted to provide access for opt-in services that all taxpayers may not want or need, such as universal healthcare, free college education, and publicly funded retirement benefits.

The main benefits for a tokenized taxation system are the adaptability, transparency, and security. While I don’t have the technological expertise to discuss the latter of the three, I do feel like the other two aspects can be easily understood by any layperson. The public ledger would immortalize all transactions so that elected officials are bound to the will of the people they serve. The ability for proposals to be created and funded at any time would allow for the adaptability citizens cannot get between election cycles.

I’m not arguing that it would be a perfect system. But I do think it is an interesting use case for the concept of equitable governance. Great care would need to be taken to ensure there are systems in place that prevent the ultra-wealthy from being able to control all decision making (among countless other issues we can examine in another post).

Final Thoughts…

If you’re still with me after 1,600+ words of rambling, thanks! A lot of the ideas I’m talking about aren’t fully fleshed out yet, and I’m treating this as a writing exercise that can help me solidify them into an actual theory or model someday.

Hopefully this idea has sparked some curiosity for you as it has for me, and if so, take a look around the site for some links to more information about what I’ve talked about in this post! Thought of some interesting ways that equitable governance could be applied in the real world? Drop a comment, visit the “Contact” page, or send me an email at contact.optin@proton.me with your ideas!