Why Progressive Decentralization is Blockchain‘s Best Hope

Decentralization is the revolutionary promise of blockchain technology. By distributing control away from central authorities and out to peer-to-peer networks, blockchains aim to create a more open, transparent, and equitable world. They hold the potential to reshape entire industries and public institutions, shifting power dynamics in favor of the individual.

However, as the first cohort of blockchain platforms and decentralized applications (dapps) have launched, the road to widespread adoption and impact has been rocky. Serious usability and scalability challenges have emerged. Governance models have fractured communities. User growth has been sluggish. According to DappRadar, the top 10 Ethereum dapps have fewer than 5,000 daily active users on average. For context, top mobile apps have millions of daily active users.

The uncomfortable truth is that, so far, wholly decentralized applications have failed to reach mainstream adoption. The user experience is too clunky, the learning curve too steep. Performance is subpar. And the economic incentives are often misaligned. If we want blockchain to realize its world-changing vision, we need a new approach.

Enter progressive decentralization.

Defining Progressive Decentralization

At its core, progressive decentralization is a framework for gradually transitioning control and governance of a blockchain platform or application from a more centralized starting point to a more decentralized end state. Rather than launching as a fully autonomous, immutable system from day one, projects can roll out in phases with clear milestones toward full community ownership.

So why is this useful? It comes down to the key challenge facing blockchain projects: balancing the benefits of decentralization with the practical needs of building successful products.

Completely decentralized systems enforce strict immutability of code and state. This is highly desirable in a mature, battle-hardened system. But in a complex, fast-moving domain with imperfect information, some degree of agility and iteration is essential, especially early on. Teams need to be able to make adjustments based on live testing and user feedback.

Progressive decentralization allows for this. By starting with a degree of centralized control and gradually decentralizing, projects can operate with the flexibility of a lean startup while preserving (and working toward) the benefits and ethos of decentralization. They can optimize for product-market fit and user experience, without sacrificing the promise of community ownership and censorship resistance.

Progressive Decentralization in Practice

So what does progressive decentralization actually look like in practice? There are a number of different approaches, and the right one will vary based on the specific goals and constraints of the project. But there are some common principles and patterns.

Phased Rollout

One of the core tenets of progressive decentralization is a phased rollout plan. Rather than deploying all functionality in an immutable form from the beginning, the system is released in stages with clear conditions for graduating from one stage to the next.

For example, a project might launch with a core set of smart contracts that are immutable from day one, but with a larger set of configurable parameters that can be tuned by the founding team within predefined constraints. As the platform stabilizes and proves its functionality, the control of those parameters can be handed over to the community via on-chain governance mechanisms.

The key is that these phases are communicated transparently up front, with measurable milestones for progressing to further stages of decentralization. This allows the community to hold the team accountable and ensures that the system converges on the intended final state.

Permission Management

Another common pattern in progressive decentralization is programmatic permission management. Smart contracts can be designed with role-based access control (RBAC) primitives that allow certain actions to be performed only by addresses with predefined privileges.

In the early days of the platform, those privileges can be assigned to trusted parties like the founding team, bug bounty participants, or proven community members. Over time, the smart contracts can transition control of those privileges to decentralized processes like on-chain voting or randomized selection.

This allows for a balance of agility and security. Low-level, security critical functions can be fully locked down from the start, while higher-level, product-focused functions can be iterated on under controlled conditions. The system can evolve and adapt without compromising its core guarantees.

Modular Architecture

Pursuing progressive decentralization also often entails a more modular smart contract architecture. Rather than deploying a single, monolithic contract, the system is decomposed into multiple interoperating contracts with clear boundaries and limited privileges.

This allows different components of the system to be upgraded or replaced without impacting the entire platform. A vulnerability in one module can be patched without needing to redeploy the whole system. New features can be added incrementally as separate contracts.

Of course, this modularity introduces new challenges around managing dependencies and ensuring consistent state across the system. Developers must be thoughtful about the interfaces between contracts and aim to minimize tight coupling. But when done well, a modular architecture can substantially improve the flexibility and resilience of the platform.

Community Governance

Ultimately, the goal of progressive decentralization is to transfer control of the platform from the founders to the community. But "the community" is a nebulous concept. Defining governance processes that balance representation, participation, and efficiency is a key challenge.

We‘re still in the early days of decentralized governance, and best practices are emergent. But projects pursuing progressive decentralization are pioneering a range of on-chain and off-chain mechanisms:

• Token-based voting, where holdings of the native platform token confer voting rights
• Delegated voting, where token holders can assign their voting power to chosen representatives
• Reputation-based voting, where voting power is earned through positive participation over time
• Multi-signature requirements, where a quorum of approved stakeholders must sign off on decisions
• Quadratic voting, where individuals can express the intensity of their preferences
• Sortition, where a random sample of token holders are selected to make decisions

The right model will depend on the community and the type of decisions being made. But the unifying principle is a phased transition from founder control to transparent, participatory governance by engaged stakeholders.

The Road to Mainstream Adoption

Realizing the vision of a decentralized future is a generational challenge. Blockchain technology is still in its infancy, and there are major obstacles to overcome on the path to mainstream adoption. Technical scalability, regulatory uncertainty, and UX design are just a few of the hurdles ahead.

Progressive decentralization is a crucial tool for navigating this landscape. By allowing for agility and iteration, it accelerates the process of finding product-market fit. By aligning incentives between founders and the community, it builds trust and buy-in. And by preserving the core tenets of decentralization, it ensures we don‘t lose sight of the larger mission.

Challenges and open questions remain. Progressive trust requires trust in founders to steward projects toward their decentralized end state. Defining and tracking metrics for sufficient decentralization is thorny. And not every decision can be anticipated and coded into a smart contract from day one.

But on the whole, progressive decentralization offers a promising path forward. It‘s a framework for bootstrapping decentralized platforms and applications in a scalable, user-friendly way. And done thoughtfully, it has the potential to drive exponential growth and adoption.

That potential is already being demonstrated by pioneering projects. Compound, a decentralized finance protocol, has successfully used progressive decentralization to grow to over $1 billion in total value locked while transferring core governance to its community. Uniswap, the largest decentralized exchange, has taken a similar approach in rolling out its v2 protocol.

As more projects embrace this model and share their learnings, a playbook will emerge for bringing decentralized applications into the mainstream. With careful craftsmanship and an iterative mindset, we can build the infrastructure for a more open and equitable economy – one step at a time. Progressive decentralization lights the way.