Why Every Blockchain Needs a Constitution

Blockchains need a constitution. After 8 years and hundreds of blockchain experiments, one thing is perfectly clear: blockchains do not solve the governance problem. The theory that code is law and the argument that objective math is an incorruptible ruler have both failed in practice.

People are the Blockchain

It is the people who use a blockchain as an accounting system that give numbers derived from the blockchain value. Any and all value held by Bitcoin, Ethereum, or Steem exists solely at the whim of public opinion.

Governance in Bitcoin is mired in gridlock for lack of a formal process. Something as simple as changing the block size has led to unending debate, denial of service, censorship, and other underhanded tactics. If any system were to let the code rule it would be a system that makes effective coordination and cooperation impossible.

Most people recognize that a rigid set of code is a cruel master. If code is to rule, then code must be immutable. If code is immutable then it lacks the ability to adapt which will eventually lead to extinction in the darwinian marketplace.

What is worse, immutable code assumes perfect (bug free) code. Any serious programmer knows an nontrivial code is impossible to perfect or guarantee to be bug free. Developers are still finding exploits in security critical code that is decades old and has been reviewed by thousands of open source users.

If code is to be tamed by people, then governance becomes essential. The code can help implement the governance process, but ultimately it is the people who must cooperate with one another to effect change. We cannot even rely on the code to perfectly implement governance.

Majority Rules is not Enough

Systems like BitShares, Steem, and The DAO operate on the premise of one-share, one-vote. The model is very similar to a corporation where the shareholders vote to select directors who operate the company.

Under a majority rules system there is no guarantee that 51% will not abuse the 49% or that the 99% will not abuse the 1%. Majority rules is a variation of might-makes-right and cannot protect property rights or any other community values.

Governance by Constitution

I have been a critic of the United States Constitution because it either authorizes the tyrannical police state we have today, or it is powerless to stop it. Either way, the Constitution of These United States has failed.

Constitution a body of fundamental principles or established precedents according to which a state or other organization is acknowledged to be governed.

In my opinion, the U.S. constitution has failed for the following reasons:

  1. It authorized the use of force for taxation
  2. Laws are interpreted by human judges
  3. It makes it too easy to change laws
  4. Geographic monopoly prevents competition

A blockchain based system can remedy all of these things.

Blockchains are Nonviolent

A blockchain is inherently non-violent. A blockchain is sovereign over its own data and changing numbers in the database is never a violent act. If these numbers have meaning/value to people, that meaning and value resides in the subjective opinion of each individual. A blockchain law that taxes your account is not violent, it is merely an expression of public opinion on your purchasing power.

Blockchains are Interpreted by Computers

The law of the blockchain is written in code. Code is unambiguous and reliably evaluated by every individual who cares to evaluate it. There is no possibility of disagreement on the deterministic judgements rendered by the computer. This level of clarity and formality protects everyone and prevents judges from exercising arbitrary power through biased interpretations.

Blockchain Laws can be Difficult to Change

Bitcoin is a perfect example of how lack-of-governance makes laws difficult to change. It is trivial to implement a formal process that makes changing of laws just as difficult (or more so) than changing Bitcoin.

If you require 100% unanimous agreement to change the code, then your system will be just as hard to change as Bitcoin. Eventually market forces will determine the fate. The blockchain will fork and the market will decide which fork has value and which one is worthless. The market might even give both sides different non-zero values.

The goal is to avoid Forks

The purpose of any governance system is to minimize the likelihood of a fork. A fork occurs anytime an organization is divided into two or more parts that each go their separate way. Usually both sides of a fork lose as the sum of the forks is less than the value of the whole.

A constitution combined with on-blockchain governance exists to avoid forks. This is achieved through the following processes.

  1. the community self-selects people with common values
  2. the community has a means to measure validity of proposed laws

Failure to define a constitution will result in everyone developing their own opinion on what the community values should be. Eventually something will happen that will result in an unresolvable conflict of values. When this happens the community will split and everyone will be poorer for it.

Qualities of a Good Constitution

A good constitution sets the boundaries of acceptable law / code. It must be narrow enough to have meaning, but not so narrow as to over restrict development of code.

Define Values not Laws

Values - a person's principles or standards of behavior; one's judgment of what is important in life.

Given the same set of facts, rational people draw different conclusions due to different values. Two people that have the same values can have a productive debate that reaches a conclusion they both agree with. People with different values often have unresolvable differences of opinion. By defining values a community self-selects for people that are likely able to reach consensus.

Defining laws does not work because they are overly specific. Two people with different values can agree on the same law for different reasons. If people come together because of agreement on the current set of laws, there is no guarantee that they are likely to agree to any changes to the law.

Define the Minimal set of Values

We don’t need to agree on religion to do business. The more values a community defines in its constitution, the less likely the community is to grow. Broad, universally accepted values are more likely to be successful than narrow / controversial values.

Don’t assume the Impossible

If you declare the value that code is law in your constitution then you assume code is bug free and that code reflects intent. This is a set of values that are clearly based upon flawed premises. Even Bitcoin forks to fix bugs.

Make Constitution Immutable

If a blockchain is to have flexible laws (code), then it needs a practically immutable constitution. If there is a need to change the constitution, then chances are it is defining laws rather than values. Community values should not change over time because not everyone will change their values at once. If values change then forks are inevitable.

In the event that new values are required, then a new community should form and the market will assign value to each community. If an issue isn’t big enough to form a new community over, then it isn’t big enough to justify a change to the constitution.

Provide for Dispute Resolution and Jurisdiction

In the absence of an agreed jurisdiction, conflicts between community members are subject to any and all jurisdictions. Ultimately a blockchain is nothing more than an unincorporated cooperative, partnership, community, organization, or company operating outside any jurisdiction. People come together, define a governance structure, and adopt a blockchain as an accounting system.

There will be disputes that go beyond the blockchain. By planning in advance, everyone in the community is better off.

I recommend using arbitration and an immutable set of international law. Specifying any countries law is likely to result in laws that change in ways that violate community values.

Get Signed Acceptance

Every user should cryptographically sign the constitution. This gives the dispute resolution terms standing in a court of law and demonstrates the extent to which the community has consented to a common set of values. Failure to agree on values should be a red-flag.


A properly written constitution that is universally accepted by almost all members of a crypto-currency community is a critical component toward building confidence in the market. It is best to define your constitution early, before problems come up. If you wait until problems show up, then it will only make the problems more difficult.

My original post and community discussion can be found on steemit.com or hive.blog


© Daniel Larimer