Dapp ownership and governance

The term Decentralized Application ("Dapp") is somewhat misleading in terms of word formation. The so-called "Decentralized" feature only refers to the fact that these apps are deployed on a "decentralized" platform such as the public chain (not on traditional centralized Amazon, Alibaba Cloud, or private servers). But many people think that such a Dapp itself is "decentralized" as the name suggests-it is not.

In terms of ownership attributes, many Dapps can be roughly divided into three categories: purely private Dapps, Dapps in which the public participates in income distribution through tokens, and Dapps in which the public participates in governance through tokens-according to the degree of decentralization from low to high Sort.

(1) Pure private Dapp

From a statistical point of view, most Dapps should fall into this category at present, including those that issue coins and those that do not. The essential feature is that one person or organization owns all the right to operate and profit from the Dapp, and no one else participates in the sharing. These rights. Therefore, from this perspective, Dapp is not actually "decentralized".

Typical purely private Dapps are the most common gambling Dapps, which often do not issue coins. For developers/operators, there is no difference between this type of Dapp and regular apps, except for deployment on the public chain (which results in openness, transparency, and inability to tamper with).

Developers/operators rely on operating such Dapps to obtain user traffic and revenue. If the currency is not issued, the income is basically paid and collected in the native token of the relevant public chain, otherwise it is paid and collected in the token issued by the Dapp itself. This is actually a very typical Internet entrepreneurial project. Entrepreneurs can start doing such projects as long as they are familiar with blockchain development technology.

For those private Dapps that issue their own tokens, the use of tokens is limited to payment for the use of Dapp services. This era currency is a prepaid voucher (similar to prepaid point cards in online games). Under this token economic model, token holders will not have any degree of management rights, control rights or ownership over Dapp due to token holding, so the purely private attributes of Dapp will not be changed. According to historical experience, the value stability of the tokens issued by such Dapps is much worse than that of the public chain native currency, so it is less suitable for payment, so the industry gradually tends to decrease.

There may be many reasons why private Dapps choose a public chain instead of a traditional server deployment environment. The most common one is: the anti-censorship of the public chain allows some apps that are in a legal forbidden zone or gray area to finally have a home. The party can therefore operate anonymously to avoid supervision. In addition, the user traffic of the public chain itself, the credibility brought by openness and transparency, the protection of user privacy, and the borderlessness are also attractive to some Dapps.

From a supervisory point of view, such Dapps are like a company that "has a master", even if the "master" is anonymous. Therefore, all applicable regulatory obligations need to be fulfilled by the owner/operator of the Dapp, which are typically various obligations regarding currency payments (such as registration as MSB, KYC and AML, etc.). In this regard, FinCEN in the United States has long been clear in the relevant regulations, which means that developers should not think that because the word "decentralized" is in the Dapp name, they can offload the responsibility to the community.

(2) Dapp where the public participates in income distribution through tokens

Such Dapps are all issued coins, and the related tokens are profitable (similar to a certain kind of securities), not just for payment for the purchase of services within the Dapp. Under this model, currency holders are no longer as simple as "users" because they participate in the distribution of income; at the same time, the ownership attributes of Dapp have also been opened to a certain extent.

The issuance of this type of Dapp is undoubtedly for financing. In contrast, if the Dapp in category (1) above is issued with a currency, it is a commodity crowdfunding or group purchase, although the United States generally considers it to be a securities issuance. Issuing currency financing is originally a neutral event. After all, developers themselves do have financing needs-but too many Dapps are deliberately designed to issue coins for financing, and they may not be suitable for issuing coins regardless of their own circumstances.

Although the right to profit is shared by token holders, such Dapps still have a clear operator. The operator only surrendered part of the income rights to the currency holding community, but the operational control of the ownership is still firmly in his own hands-a bit similar to a traditional company that only issues preferred shares without voting rights, and preferred shareholders do not Cannot intervene in company operations. Therefore, there is no essential difference between the obligations of the operator of this category (2) Dapp and the above category (1) Dapp.

(3) Dapp where the public participates in governance through tokens

This type of Dapp that best reflects the essence of "decentralized" is the least so far, because "governance" is still a huge challenge even in the field of public chains, and the optimal model has not yet been converged, let alone in the field of Dapp.

Once the governance is opened to the public (coin holders), it means that the Dapp has positioned itself as a "public product" rather than a private product, and the developer will not be able to determine the major operating policies and development choices of the Dapp. This is unthinkable in the traditional Internet field-it is impossible for any entrepreneur to let the public decide on the product design of their own App. At most, they just listen to the opinions of users. On the other hand, this kind of open governance is not necessary for most Dapps. Traditional business operations rely on the mature and prudent business judgments of a few elite management. Public participation in decision-making will make the effect counterproductive.

Therefore, judging whether the service provided by a Dapp should be a public good is a key factor in determining whether to open governance. At present, the most typical example of this type of Dapp is MakerDAO-the name can tell, it positions itself as a DAO, rather than an ordinary Dapp.

What MakerDAO provides is a decentralized stable currency, which has almost played the role of a central bank in the DEFI field on Ethereum. Obviously, currency issuance is a typical public good, and its issuance policy has an overall impact, rather than simply the issuer's own commercial interests. Therefore, it is reasonable and even necessary to mold Maker into a DAO with public participation in governance (as for the current specific governance of MakerDAO, it is a technical issue that can be continuously polished and optimized); otherwise, it will affect DAI itself After all, it is unlikely that a currency that is made by a single purely private institution will be widely adopted as "currency." Only non-private public goods can serve the public, and people who use public goods must have "political" demands to participate in governance.

In addition to MakerDAO, a small number of Dapps, if they have strong public attributes, should also open up their governance rights and become a public DAO. Although relevant developers can insist on choosing to design it as a closed and private commercial Dapp, if its essential public attributes far exceed commercial attributes, then the lack of open public governance will inevitably hinder the good development of the Dapp.

For this kind of DAO-like Dapp, due to its strong decentralization properties, it is often difficult to determine whether it has an owner or operator at this time, including regulators. In theory, the code developer may completely surrender the governance rights, just (anonymously) by holding tokens to exercise the same power as other token holders, just like Satoshi Nakamoto to Bitcoin. Regulators must think twice even if they insist that developers assume certain responsibilities, and developers can also have many defenses to avoid responsibility.

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The above classification is completely neutral in terms of value, and does not represent which one is better or worse than the others. On the contrary, developers must choose the most suitable model according to the specific actual content of the Dapp-whether it is forcing currency to be issued or forcibly opening the governance rights to the public, it may be a choice that is arty and divorced from their actual needs.

Looking to the future, most Dapps that choose private nature are still the best destinations, because most Dapps are still purely commercial for profit; but the absolute number (not the proportion) of open governance public Dapps will also increase , Because the vigorous development of any ecosystem will inevitably require more and more public goods. Recently, DAO has begun to become a hot spot, although it is still uncertain whether this is a trend or a fad.

These public Dapps or DAOs, due to the technical requirements of governance, will they choose to continue to be a (group) smart contract, an application side chain in the public chain system, or simply make their own independent public chain? The path choices of various developers may diverge. The natural weakness of smart contracts at the governance level will be gradually amplified, but if developers develop their own independent public chains, they will consume too much design and development effort and resources in maintaining security. Therefore, providing these public goods with public services with a safe + efficient governance structure will become a new industry and a problem that needs to be solved urgently in each public chain ecology.