Introduction
This book (and accompanying audiobook) forms a go-to reference for understanding and achieving true decentralisation in social community blockchains and digital Network States. We believe in a model with:
- - No Pre-Mines (For further information see Annex I – Glossary of Terms and Acronyms)
- - No ICO's (Initial Coin Offerings – for further information on ICO’s see Annex I – Glossary of
- Terms and Acronyms)
- - No Companies or CEOs
- - No Early Venture Capital
- Instead, the community should guide the technology and governance, maintaining the neutrality of the base layer for itself, ensuring freedom and participation for everyone.
- We will explore the game theory of network attacks, attack vectors, how to defend against attacks, guiding principles for decentralisation, a realistic vision for the future, and the best technical stacks for censorship resistance and governance. You will find an in-depth discussion of:
- - Reputation and Governance Mechanisms
- - Tokenomics and Immutable Communities
- - DAO's and New Funding Models
- - Future Implications of This Technology
- Throughout, we emphasize how these decentralised approaches may reshape society. We plan to illustrate our concepts with real-world examples of communities that have implemented them. This is a fully open-source, community-driven work, freely available to anyone who wants to replicate or expand upon these principles.
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The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. First edition, May 2025. From the Call Me Dan and Stalkers. Chapter one. Preword. The legacy economic system only responds to legitimate parallel competition that treats people better. Introduction. The text lays the foundation for a book we hope will become the go to reference for understanding and achieving true decentralization in blockchain and digital network states. We believe in a model with no pre mines, no ICOs or initial coin offerings, no companies or CEOs, and no early venture capital.
Instead, the community should guide the technology and governance, maintaining the neutrality of the base layer, thus ensuring freedom and participation for everyone. We will explore the game theory of network attacks, attack vectors, guiding principles, a realistic vision for the future, and the best technical stacks for censorship resistance and governance. You will find an in-depth discussion of reputation and governance mechanisms, tokenomics and immutable communities, DAOs and new funding models, and future implications. Throughout, we emphasize how these decentralized approaches may reshape society.
We plan to illustrate our concepts with real world examples of communities that have implemented them. This is a fully open source community driven work, freely available to anyone who wants to replicate or expand upon these principles. Our ultimate aim is to document the how and why of proper and principled decentralization, including the deeper implications for human freedom. In a world often controlled by entrenched power structures, hostile to genuine decentralized and therefore neutral systems. This knowledge is recorded immutably and preserved on the Hive blockchain, one of the most principled, battle hardened, and proven communities in decentralization.
Why document this now? The community forming what has become the backbone of the Hive blockchain has endured years of conflict, evolution, and defense against multiple takeover attempts, yet it remains decentralized. The ability to remain decentralized over almost a decade at the time of publishing means there is a noteworthy knowledge to be gained and lessons to be learned from dissecting how Hives community achieved this resilience. In doing this, we reveal the critical requirements and pass on an industry standard for any other community network and network state hoping to stand the greatest chance of true decentralization, remain censorship resistant, and thrive economically and socially.
The next 25 chapters, you're listening to chapter one, are the product of twenty plus months of filming, writing, systematic breakdown of underlying principles and technology, and continuous reflection. Each topic builds on the last culminating in a holistic framework for decentralized governance and secure digital communities. For those of you interested in understanding more about how this book was created, go to httpscolonbackslashbackslashhive.blogbackslash at networkstate to see the discussions and conversations that went into the creation of this work as well as see the immutable text version stored on the blockchain so that it cannot be erased from our consciousness.
This is a new field of human understanding, and so we invite your input. Constructive dialogue helps refine these ideas and is essential to the understanding of the principles required for this burgeoning field, which is essential to the maintenance of digital freedom and digital rights into the future. It is long overdue that we share these methods in a digestible, publicly documented way so others may replicate them and maximize their own decentralization. Scope and purpose. Decentralization is a term widely misunderstood in the crypto industry.
Many projects, including Ethereum and most other leading reputed crypto projects are not actually fully decentralized. Launched with conflicts of interest from ICOs, founder stakes, and premines, amongst many other conflicts, such mechanisms often embed weaknesses that undermine genuine decentralization in the long run. We will contrast such pitfalls with a more robust formula for censorship resistant design. In particular, we show how projects can thrive without centralized corporate structures or seed investors. By removing these single points of failure, communities can achieve self sovereign token economies, immutable social layers, and user owned governance and reputation systems.
This work aims to become both an industry and societal standard on decentralization for social and network state type communities. By explaining the precise steps and technologies, we hope everyone can more easily understand and, if they choose, build their own censorship resistant networks, taking many of the foundational, timeless lessons explored in the following paragraphs about true decentralization and what is required to achieve, maintain, attack and defend, apply, and expand it. You must know your worth before you can be worth anything.
The Hive community has a history of being one of the only blockchain communities which successfully defended itself against centralized takeovers, removed exploitative stake, and fortified governance, and so sets a vital precedent which can be studied and replicated. These successes and the underlying lessons can serve the entire world as it searches for more equitable, secure ways to operate. We believe there is a specific method for achieving and sustaining decentralization, an approach offering genuine freedom and a more enlightened path on Earth.
In a world where established power structures often oppose truly decentralized systems, it is crucial to document, debate, and preserve the knowledge gleaned from this tech storage based blockchain community. Make a value for value donation to support this work. If you found the information in this work valuable, please do consider returning some of your value back to the author's way with some value for value. Value for value is a monetization model, a content format, and a way of life. It is about freedom and openness, connection, and free speech, sound money, and censorship resistance.
Time. Your time and attention are valuable. Spending them is valuable in and of itself. Talent. It doesn't have to be money. Whatever your skills, there are many ways to give back. Treasure. Thanks to lightning, hive back dollars, and other forms of monetary transfer, value can now be exchanged permissionlessly, instantly without friction and completely outside of the legacy economy. You can donate lightning to network state at sats.vforv.app or donate HBD, that is Hiveback dollars, to at network state. Contributors, the voice for the audiobook is Aloha Ed.
The cover graphics are from at Reuben Kress. Content assistance is from at Eddie Spino. And technical input, Thanks to various high blockchain community members over the years for teaching this stuff. We invite anyone to challenge the ideas in this book at the official blog spot, httpscolonbackslashbackslashecency.combackslash@networkstate. We will incorporate your ideas in future editions and mention your usernames in this contributor's part. Our hope is that this book clarifies what real decentralization means, shows how to maintain it practically, establishes a replicable model for future projects, and assist the reader to participate in discussions about whether or not a project is actually decentralized.
No single person or company can define freedom in a decentralized ecosystem. It must emerge from the community itself. These chapters will detail our experiences, analyses, and guidelines to ensure your community can thrive, defend itself, and stay decentralized for generations to come. In freedom and in defense of it, let us begin. Signed, at they call me Dan and at Starkers, May 2025. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter two, vision and implications of decentralization for network states, a peaceful way to opt out of past, present, future, and increasingly oppressive legacy economic systems.
Introduction. What is a network state? Decentralized technology extends far beyond the realm of digital payments. It gives communities the tools to form autonomous network states online. As these groups gain genuine self sovereignty, they can voluntarily exit failing systems and design their own economies and governance structures. This chapter examines how decentralized communities can evolve into fully realized digital sovereignties, ultimately achieving the kind of real world recognition once reserved exclusively for traditional nation states.
Section 2.1. What is a network state? The network state is in contrast to the nation state. Here we have a governance system that is based upon where one is geographically born. That is how citizenship is established. The rules of the land are based upon where one is physically. In comparison, the network state is dependent upon which digital ecosystem or community one interacts and associates. This is paralleling the idea of nations and networks. From the definition in the book, the network state by Balaji Srinivasan. Network state is a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from preexisting states.
Section 2.2, voluntary migration to an alternative parallel economy. Section two point two point one. Why an alternative parallel economy? In the current centralized model, true power rests with large institutions, governments, megacorporations, and global financial conglomerates. These entities operate in a system which is set up to extract more from everyday people than it returns, leading to an erosion of personal freedom. Technological advancements should have simplified our workloads and enhanced autonomy, but in practice, they primarily enrich a narrow elite, controlling both infrastructure and money supply.
As individuals, we lack genuine alternatives and often find our freedoms and free time dwindling while technology continues to improve. Section two point two point two. New options for opting out of oppressive economies. Decentralized economies offer a peaceful and genuinely empowering exit route. They allow people to own digital assets outright. No single authority can block access or seize your holdings. Speak freely. Immutable social layers ensure no corporate or governmental power can censor your voice. Retain more value. Distribution models are built to reward contributors to the community rather than siphoning gains off to distant headquarters or political cronies.
Initially, people may adopt these technologies alongside legacy systems. But as self sovereign tools become more accessible and the central system's constraints grow intolerable, A larger exodus is likely. When you can genuinely own your voice, your currency, and your data, why remain in a structure that limits them? Section 2.3, communities achieving self sovereignty. Section two point three point one, the historical town square context. In the past, small towns or local tribes held autonomous decision making power, yet they were confined by strict borders or overshadowed by strong neighboring states.
Modern digital platforms like Facebook, Twitter, and YouTube tried to become the virtual town square, but they're run by CEOs and police by regulations. Voicing wrong opinions can lead to an instant ban, removing your ability to participate. The essence of genuine community self sovereignty had nearly vanished in the digital world until decentralized infrastructures offered a fresh solution. Section two point three point two, building digital self sovereignty. Using decentralized networks helps communities recapture the autonomy once found in small self governing bodies, immutable accounts.
Neither governments nor corporations can suspend these financial or social profiles. Self run infrastructure, network witnesses, or validators elected by the community maintain the chain. The project continues even if some nodes drop out. Flexible governance. Communities can choose any model for governance and distribution of value, socialist, liberal, libertarian, anarchistic, capitalist, economically conservative, culturally conservative, or a fusion depending on their collective decisions on the blockchain. Currently, if there is no large corporate backer or centralized founder stake, No single entity can sell or infiltrate the entire project.
The community itself provides the real defense against hostile takeovers. It is the layer zero and is what the ecosystem ultimately derives its value from. Section 2.4, creating one's own self sovereign economy. Section two point four point one, why self sovereign economies? Local currencies have long been tested examples ranging from town based scrip to the Brixton pound. Authorities typically shut these down swiftly to preserve their monopoly on money. However, digital tokens can escape such crackdowns because they are global in nature.
No single jurisdiction can fully ban them. Programmatically distributed. People earn tokens based on value added, nonmonetary contributions to the community rather than political connections or inherited privileges. Section two point four point two, mechanics of a community economy. One, a neutral base layer. Blockchain without major corporate investors or large founder allocations avoids centralized tampering with a consensus driven token minting schedule or token supply control. Two, value for value distribution. Contributors to development, social engagement, and infrastructure receive tokens.
This system fosters genuine fairness. No middlemen or external gatekeepers. Three, stablecoin integration. An over collateralized algorithmic stablecoin. For instance, HBD on the Hive blockchain. For further information, see Annex I, glossary of terms and acronyms, shields community members from volatile price swings. This gives day to day stability crucial for broader economic usage. Four, transparent governance, a decentralized autonomous organization, a DAO or a a DAO. For further information, see Annex I, glossary of terms and acronyms, might hold community funds with decisions made via stake weighted or reputation based voting.
Proposals get funded if the consensus views them as beneficial. By minting and managing its own currency, a community breaks free from external authorities and their restrictive policies. Goods, services, and ideas flow within a network governed by its own participants. Section 2.5. From online community to recognized network state. Two point five point one, path to recognition. Decentralized group with credible infrastructure can resist shutdown. It has no CEO, a registered office, and no large chunk of tokens in a single wallet for regulators to freeze, develop real liquidity Through stablecoins and decentralized exchanges, its internal currency becomes practical for everyday transactions.
Fund infrastructure and social projects. A DAO can build community water wells, finance social ventures, create its own Wi Fi networks and physical infrastructure, or support local commerce, much like a small municipality, improve physical and societal quality of life in locations traditionally difficult for government to reach. Local people can take direct action where governments have found it impossible to in the past. Locals can campaign for funding from the blockchain community they are part of and build valuable transparent initiative in their local areas directly.
Provide local governments a tool with which to gain transparent legitimacy. The transparent nature of blockchains and especially those designed for social interaction can allow local governments to contribute to society in a much more transparent way and dispel assumptions of corruption. This can lead to reestablishment of legitimacy over time. As these digital societies exhibit tangible benefits, economic productivity, peaceful collaboration, and mutual aid, external governments may start cooperating. Governments might find it financially worthwhile to trade with or even formally acknowledge these emerging network states.
Over time, major global powers could sign treaties or agreements, conferring a form of legitimacy once unimaginable for an online community operating on the legacy web two social platforms. Section two point five point two, governments joining new parallel economies. Some governments may not only recognize but also actively engage by exchanging reserves, converting part of their natural reserves into blockchain assets, earning yields or governance rights, leveraging on chain reputations. Public officials might validate their own standing within the transparent governance protocols used by the community, direct cooperation, through joint infrastructure projects, or social programs aligning the interest of both the digital state and traditional government.
Revolutionary conflict becomes less likely when there are clear incentives for collaboration. By demonstrating tangible value, network states can secure legal stature and self determination without resorting to conflict. Conclusion. A shift toward voluntary digital native economies is already in motion. Individuals are seeking alternatives where freedoms like unhindered speech and genuine financial autonomy are safeguarded, which the conventional system often fails to provide. As these decentralized communities expand, they, claiming self sovereignty, control their own technical, financial, social, and eventually physical architecture and infrastructure, issue their own currencies, rewarding true contributors rather than serving centralized interest, evolve into network states, gaining recognition from established nations, and forming global partnerships.
What begins as a small collective of idealistic individuals can develop into a thriving society with a unique currency and governance model, potentially culminating in formal diplomatic acknowledgment. Far from being a fringe movement, these new network states could offer humanity's best chance at equitable prosperity and authentic self governance in the digital age. Chapter three, the underlying principles. When it comes to digital freedom, it is principles that matter most. Economy is always a counterintuitive second.
Introduction. Most blockchains claim to be decentralized, yet many have fallen short of delivering actual censorship resistance or meaningful digital rights. In this chapter, we explore the fundamental principles that support genuine decentralization, why it is so hard to achieve, and how certain historical freak events accidentally resulted in the correct structural design. We also introduced the concept of the petri dish cultivation model, where an ecosystem evolves organically rather than being designed from the top down. Section 3.1, why true decentralization is difficult.
Section three point one point one, profit versus principles. Most project leaders focus on profit and convenience. They raise venture capital, preordain themselves tokens from the first day of the project in the form of large pre mines or ICOs, or form legal entities. While these strategies may somewhat help to fund development, they inevitably compromise on decentralization. Regulators can easily target corporations, foundations, or high profile founders. For more details on preminds and ICOs, see chapter 15, censorship and the morality of preminds.
Section three point one point two, censorship resistance is binary. Either your system can be controlled by external parties or it cannot. If a chain has a headquarters, a known CEO, or a large pre mine stake in the hands of a few insiders with self ordained pre mines or ICO stakes. There are clear points of failure. True censorship resistance requires that no single entity or small colluding group can seize control. Section three point one point three, counterintuitive choices. Many of the decisions that yield true decentralization look bad on paper.
For example, not raising money or not giving a founder a large token allocation seems unprofitable, yet these moves are necessary to avoid creating central points of attack. At almost every juncture, founders who are profit driven do so at the cost of decentralization and so undermine censorship resistance. The key is in striking the balance to adequate decentralization for the application in question. When dealing with digital rights and maintaining neutral decentralized layers, this means putting counterintuitive decision choices ahead of profit.
Section three point one point four, freak events and serendipity. History shows that blockchains achieving genuine decentralization rarely follow a neat logical plan. Often, the original builders did not fully grasp what they had created. In retrospect, the intuitive right features that are typically chosen, such as certain lockup periods for founders or adding a centralized treasury, turned out to be weak points in a future, which compromised neutrality and decentralization of the community. Repeating a sequence of events that are counterintuitive and principled enough in order to ensure decentralization and digital rights is extremely difficult to deterministicly plan for and orchestrate deliberately.
Section 3.2. Everyone did it wrong except a few. Section three point two point one. What Bitcoin got right. Bitcoin avoided pre mines, ICOs, and corporate sponsors. Satoshi Nakamoto disappeared, leaving no formal leadership. While Bitcoin's proof of work is excellent for store value and permissionless access to liquidity and a permissionless transaction layer for those that can afford fees, its high fees and limited throughput make it ill suited for scalable social or governance ecosystems. Section three point two point two, what most proof of stake chains got wrong. Many proof of stake projects launched with large ICOs, venture backing, or corporate structures.
They also adopted high fees and layer one smart contracts. For further information on smart contracts, see annex I, glossary of terms and acronyms, creating a rich get richer environment where governance is dominated by two or three naturally occurring large staking pools. Over time, these chains tend towards de facto centralization. A few pools or validators control the system, and regulators can target them. This model is useful, useful, however, for earning yield where social nuance is not an issue. And many DeFi, decentralized finance applications, benefit from a financial passive earning system where the one with the largest stake has the most to lose from unfair treatment of users.
For further information on DeFi and staking, CNXI, glossary of terms and acronyms, section three point two point three, Steam and the emergence of Hive. The Steam blockchain, later forked into the Hive blockchain, provides a rare illustration. Steam originally had a NinjaMind founder stake controlled by the company Steemint Inc. Unexpectedly, that stake was sold to a high profile buyer, Justin Sun, founder of the Tron blockchain, sparking a hostile takeover attempt. The community, through its DPOS, delegated proof of stake, mechanism, managed to fork away and create Hive, zeroing out the founder's stake.
This forced event removed the largest point of centralization and left the chain truly community owned and operated. See chapter 11.4, de governance, for further information on delegated proof of stake. See chapter thirteen point four point two for more information on forking away from an abusive well stake. Section three point two point four. Why the Hive blockchain is a freak event. Founder exit. The principal developer left early, taking minimal continuous control. Hostile takeover. The attempt to seize the chain triggered the community to unify and fork out the hostile stake.
No ICO, no VC, no foundation. Without a formal entity or a large pre mine, Hive has no single point of regulatory or financial capture, community focused mechanics, a thirteen week power down of stake locked for governments disincentivizes large custodial accounts from staking user deposits, making exchange led takeovers far more difficult. This prevents exchanges from using custodial stake to vote against the interest of users who have deposited with the exchanges for purposes of trading. Additionally, a new investor has to wait for thirty days in order to carry out governance votes after having staked their tokens to vote.
In cases where the stake is large enough to affect the governance of the chain directly, the thirty days gives the community time to find out whether or not the new investor is a benevolent force and will act in the interest of the community before they are able to carry out malicious votes. This also gives the community time to act and take defensive measures where it cannot establish a benevolent intent from the new investor. Section 3.3, petri dish cultivation model. Section three point three point one, the need for organic growth.
A petri dish offers nutrients in the right environment, but you cannot force which organisms thrive. Similarly, a censorship resistant chain must set the right parameters, like consensus rules, lockup times, and governance models so that a truly decentralized community can take root and expand. Section three point three point two, value for value incentives. When participants receive rewards for providing meaningful contributions, whether running infrastructure or creating valuable content, they build reputations and earn tokens without needing technical credentials or large initial investments.
Users would stake earn when they vote on content. These votes direct tokens from a daily communal rewards pool to the content that is voted for. Over time, this democratizes token distribution and reinforces a healthy middle class of stakeholders. Section three point three point three, voluntary participation. No chain can cause people to stay. Individuals stay with the community if they see real benefits, like guaranteed speech, secure transactions, fairness, and sustainable token economics. Change with poor governance, oppressive or extractive structures drive away genuine participants, lose credibility, and remain small or centralized.
Section three point three point four, hard to replicate events. Forking away from a centralized founder stake or orchestrating a widespread volunteer development effort is extremely difficult and risky. Forks represent delicate moments in the history of a chain where communities can easily fracture due to ideological disagreements and misalignments. Most new chains attempt to engineer a community through funding rounds or marketing, whereas genuinely decentralized ecosystems often emerge from unexpected crisis that unify participants around a single set of core principles.
Section 3.4, universal digital human rights, UDHR. Section three point four point one, digital self sovereignty. True decentralization grants individuals irrevocable rights to their accounts, data, and tokens. If a chain's foundation or CEO can be pressured by authorities, it cannot guarantee those rights. Neutral, leaderless systems are what enable globally uniform digital rights. Section three point four point two, immutable speech and transaction. A robust delegated proof of stake or similar parameterized consensus ensures no small group can censor or freeze accounts. By having a predictable transparent on chain governance, users know that no arbitrary decision from a corporate board or government office will invalidate their actions.
Section three point four point three, beyond the reach of a single country. When a chain is fully decentralized, no headquarters, no corporate registration, no founder stake, jurisdictional bans fail to shut it down globally. Any country that outlaws it simply loses the talent and economic benefits migrating to friendlier jurisdictions. Section 3.5, key lessons of the required principles. Section three point five point one, no single control point. Avoid pre mines, ICOs, or founder stakes. Do not rely on a CEO or legal entity for development. Section three point five point two, parameterized consensus.
An example of a parameterized consensus is delegated proof of stake with a fixed number of elected validators can offer high throughput and strong security, ideal for social interactions and governance of community social nuance, if carefully designed, since the top validators can be elected and unelected by the community itself. Long unstaking periods for stake tokens for governance, for example, thirteen weeks, Discourage exchanges from powering up custodial user tokens and using them to vote against the interest of the users themselves. Section three point five point three, distribute tokens broadly.
Encourage in distributing freshly mined tokens to nontechnical users through rewarding positive, provable social actions or value for value rewards. A wide distribution prevents a few insiders from hoarding the majority of supply, leading to a more easily, regulatable, or corruptible system. Section three point five point four. Freak events often trigger real decentralization. True censorship resistance has historically emerged from crisis, founder exit, hostile takeover, or unexpected forks. Trying to design a perfect system upfront often fails because profit motives have been shown to override long term security.
Section three point five point five, censorship resistance as a social phenomenon. Technology alone is insufficient. A dedicated community that believes in censorship resistance and has the tools and social impetus to enact it is crucial. Reputation based engagement and transparent on chain governance foster collective responsibility. Conclusion. Arriving at genuine decentralization is counterintuitive and rarely driven by immediate profit. Most chains chose easy funding routes, free mines, ICOs, large outside investments, and now face takeover risk or regulatory capture.
History shows that robust digital rights grow from systems that lack a single controlling entity and operate on a truly neutral base layer, forcing communities to self govern. The petri dish metaphor captures this perfectly. You can provide the right conditions, no corporate ownership, fair token distribution, parameterized governance, but you cannot fabricate real decentralization just by declaring it. It requires a community voluntarily standing behind censorship resistance and self sovereignty with the right digital tools, often galvanized by crisis or unexpected forks.
In the chapters ahead, we will detail how to maintain these principles technically and in practice, examining the deeper mechanics of consensus design, token distribution, and ongoing governance models that reinforce genuine network autonomy. Only by embedding these ideas deeply into the chain structure can we realize universal digital human rights that no centralized forces can override. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter four, what a social blockchain's layer one should do. The layer one should be as simple and as boring as it can possibly be. That's what scales.
Introduction. Layer one, also known as the base layer, is the basis for immutability. Here is where decentralization takes place due to the node system. It also includes block time, the consensus mechanism deployed, programming languages, and rules pertaining to the network's core operations. Layer one is the foundational tier of a censorship resistant community governed blockchain. It underpins all core functions such as account creation, historical data storage, governance voting, and transactions that must remain immutable and easily retrievable by anyone. The guiding principle is to keep layer one as simple and lightweight as possible so that it can be run by many independent operators without prohibitive hardware, scale to accommodate network growth without becoming unmanageably large, remain easily forkable so a community can remove or zero out abusive oligarchs or malicious stakeholders by supermajority consensus.
However, that consensus may be reached for each blockchain. This approach contrasts with many other chains that overburden their base layers, often leading to high fees, low throughput, or compromised decentralization. Below is an outline of which features belong on layer one and why. Section 4.1, data availability. Text based data only. Long form text storage on the base layer one is a powerful tool. By limiting layer one to text data, instead of storing large files like videos or images or conducting compute and DeFi operations, nodes remain lightweight.
Operators can more easily store and playback an ever growing blockchain if it is mostly text based, censorship resistant. A truly decentralized text based layer where the node operators and token holders are spread across multiple countries ensures people cannot be silenced by corporate or state actors. When each node stores the same text ledger, no single entity can remove or change that record. This guarantees data availability for governance, on chain reputations, and community discussions. Higher bandwidth content and operation, such as large media files and computation, should live off chain or on a layer two specifically designed for larger data.
Section 4.2, state recall and historical record. A secure layer one must provide historical state recall, a full record of the chain's progression from inception to the present. Due to the fact that all text based data remains accessible on chain on such a blockchain, anyone can verify past actions, post, votes, transfers, etcetera, reconstruct an account's exact history, ensuring transparency, detect attempts to rewrite or delete historical events. In effect, this table of truth is essential for accountability. If the chain experiences a hostile takeover, honest community members can use the historical record to fork away and preserve legitimate balances, reputations, and activities.
Section 4.3, table of truth and custom JSON. A table of truth is the immutable text ledger storing transactions and events. Sometimes communities want to store structured data, for example, metadata about a post or a custom vote type. This is enabled by custom JSON operations on layer one, a feature allowing nonstandard data fields to be written on chain. Indexing layer, a mechanism often run by specialized nodes that filters or base blockchain only sees text fields, custom JSON can represent many actions or data points, game moves, specialized votes, community tags, etcetera, if those actions are still validated by the chain's consensus.
If this is followed to its natural conclusion, the result is that the chain can incentivize real world actions that benefit the community. This enables the chain and the community to distribute value to valuable actors in the community that are doing real world actions. It becomes a value for value exchange that, if designed correctly, can become accessible for the vast majority of people to involve themselves with, making earning crypto from a neutral layer accessible without the user having to know how to do technical activities, such as cryptocurrency mining. Ultimately, it makes newly created cryptocurrency accessible to all people, meaning everyone has the right to earn regardless of their technical competency.
Section 4.4, accounts and resource management. Accounts are a core function of layer one. In a truly decentralized system, no user should be forced to rely on a centralized provider to create an account. Users can create public keys, store them locally, and sign transactions independently. Additionally, an on chain resource management layer, e g resource credits, can replace transaction fees. By staking tokens, users gain the right to make a certain number of daily transactions for free rather than paying each time. This approach keeps transactions feeless at the user level, deters spam by requiring state resources, helps scale usage without imposing gas or high fee structures.
Section 4.5, on chain actions, posting content, and commenting. Social content like text post, comments, or community updates can be fully on chain if the system is optimized for text. This preserves speech that cannot be retroactively edited or removed by a central party, empowers front end applications to display your filter content, but not to delete it at the ledger level, supports immutable communities where membership discussions and follower relationships are historically documented. While full text records may sound large, modern compression and incremental storage can keep it manageable, especially when storing only text and not high bandwidth media.
Section 4.6, communities and followers list. Layer one can also track which accounts immutably follow which others, community memberships, roles, when these relationships live on chain. Centralized Web two style front ends cannot arbitrarily ban or eliminate entire groups. The user's social graph, followers and following, is secure, and competing interfaces can tap into the same data. This is a huge leap forward from centralized social networks that can wipe your entire audience or content with policy change. The application of this technology means that no central party has the ability to delegate or regulate online communities any longer.
Section 4.7, governance voting. Details in later chapters. To remain secure, a decentralized network needs a mechanism for the community to vote on infrastructure providers, which are elected witnesses or validators, protocol level changes, hard forks, parameter updates, token minting schedules, and moderating inflation rates, resource distributions, proposal funding, development grants, etcetera. All governance actions, voting, proposals, and rank ordering should be recorded in the base chain's text ledger. Governance on layer one ensures the entire community can see and react to proposals, fosters accountability, and allows forks if a sizable super majority degrees with major stakeholders.
Section 4.8, infrastructure incentivization, micropayments for node operators. Incentivizing core infrastructure like witness, validator, or block producer nodes is critical. By awarding block rewards or newly created tokens to elected operators, you avoid requiring them to form centralized businesses or rely on external VC funding. This keeps infrastructure neutral by letting the community elect whom they trust, provides a steady reward for performing consensus, storing data, and serving it to the network, minimizes external pressure or constraints that often lead to censorship or central control, allows anonymous infrastructure operators to compete against large corporate entities that intend to outcompete them by cutting cost and fees or running at a loss, knowing that they can put the individual independent operator out of business over time. Other chains such as Bitcoin only incentivize their miners, but they do not incentivize their other critical infrastructure, such as lightning nodes or nostril relays from the layer one, mutually created new currency.
This leaves them susceptible to such a long term hostile attack from large corporate entities that comply to anti freedom government regulations, prioritizing those above the values of the community. Section 4.9, transactions and transfers. Finally, token transactions and transfers are fundamental on layer one. Users should be able to move assets from one account to another with instant finality or short confirmation times, feeless or low friction operations if they have sufficient staked resources, full immutability, forming the basis of the economy, all top witnesses, a small group of top community elected minors that run the community's preferred code, in the consensus should process all transactions, lest they be unelected by the community.
This guarantees the rights of all users to transact apart from in special circumstances. When the chain is under attack and an existential threat of a hostile takeover where the community may be supportive of some witnesses blocking transactions that threaten the chain's security, This is more efficient than small block proof of work systems, where there are many more block producers who are effectively voting with their infrastructure. This makes such layers slow and not suitable for low fee, large scale microtransactions. Section 4.1, balancing block production with efficiency in voting and operation.
It is in the community's best interest to elect witnesses that are among the top 20 or so most skilled operators of the code while also best reflecting the social ideology of that community. 20 is a minimum recommended number, each having equal weight in the governance decisions on the chain regardless of their stake size. This means that witnesses are not only technically skilled, but they have to have a deep understanding of the social implications of the code they run, from setting interest rates, voting parameters, new token minting schedules, and reviewing code to make sure upgrades meet community requirements and are secure.
The top 20 witnesses are also the primary block producers on the chain. They are responsible for the decision of which code to run, and that code decides which transactions are recorded on the chain. These are the transactions and data which fill blocks of the blockchain and form the immutable, unchangeable history which the blockchain records. This is the heart of the blockchain, the block production process. Providing there is no centralizing party, no ICO or pre mine, there is a fair token distribution mechanism, No company behind the blockchain.
This process is what decentralizes the storage of data on a proof of stake or delegated proof of stake chain makes it uncensorable or tamper proof. As a result, the community members can operate permissionlessly on the chain with certain guaranteed digital rights, such as property rights, free speech rights, voting rights, and others. The incentives paid from the chain to the block producers must be high enough that they are incentivized to remain as honest actors and not susceptible to corruption. The intuitive approach is that the more block producers a chain has, the more decentralized it is, and the more censorship resistant it is.
However, things are not always as simple as this, and counterintuitive approaches often apply. Section four point ten point one, block producer rotation and backups. Often chains choose to have a top elected group of the best block producers as their witnesses and then have one or several rotating backup block producers. Having backup block producers means that there is a chance for more entities to earn, and so more people run nodes. If an incumbent block producer becomes malignant, they can always be elected out, and a backup is ready to step in immediately.
It keeps the other block producers on their toes as those in the rotation positions are hungry to prove themselves and move up the rankings. Collaboration between the incumbents is more risky for those incumbents. A small group of elected block producers can be more easily held to account and replaced if the community so wishes by always online backup block producers. Some chains choose only to have one backup block producer, resulting in a top 20 plus one, where the backup is rotated into the block production schedule at random. Other chains have many hundreds or even thousands as future advancements in the technology are developed.
Section four point ten point two, pros of having many block producers. More difficult to get a super majority to agree to censor transactions or speech or competition for top spots, keeping incumbents on their toes. More difficult for a government to force their will on a community to censor transactions. Section four point ten point three, cons of having many block producers. More difficult to coordinate for forts or upgrades to technology, more difficult to tell if all block producers or all individuals or just one entity running many nodes, Where ICOs or companies are involved in the inception stage of a project, they naturally gain a centralizing influence over the block producer pool, making the chain seem more decentralized than it actually is.
Each block producer gets paid less as there is less money to go around per block producer. And so the chances of dishonest block producers increases since they have more to gain by coordinating with other block producers to corrupt the chain and steal funds. Each block producer gets paid less as there is less money to go around per block producer, And so the chances of dishonest block producers increases since they have more to gain by coordinating with other block producers to corrupt the chain and steal funds. Alternatively, the more block producers there are, the more of a chain's inflation must be dedicated to them in order to pay them enough to remain honest actors.
Can reduce efficiency, speed, and scalability of a blockchain. Section four point ten point four, optimizing for reality. The reality is that each community must strike a balance between too large an amount of block producers and too small a number. On social or community driven chains using delegated proof of stake or similar technology, the block producers build their own chain reputations over time. This means there is a theoretical optimum number of top class block producers with which a community can operate in an adequately decentralized, censorship resistant way, which is resistant to civil attack while not being so small that it can be easily corrupted by government.
Other types of attack will become easily corrupted over time as the market capitalization of a chain grows. It can afford to incentivize more block producers and should look to incorporate modern technologies to allow for an increase of block producer numbers while not sacrificing the scalability and speed of the chain. Based on the experience of the fork away from Steam that created the Hive blockchain, it seems that a top 20 is an adequate number of block producers. It allows coordination when it makes sense to block a transaction, but makes it difficult enough to get consensus that such measures won't be taken lightly.
In cases where there is one entity that can easily elect all of the top 20, this, of course, does not work. So attention must be paid to the issue on a chain by chain basis. Communities with lopsided token distributions are often better having a much larger block producer pool. However, in the cases where a small group of entities control the majority of the tokens, they are known to run the majority of the block producers anyway. This means that just because a chain has a large number of block producers, it does not necessarily mean it can't be pressured into unfairly blocking transactions or other unfair actions that centralize the chain in critical moments when decentralization and censorship resistant is needed most.
The issue often comes about as a result of whether or not the chain had an ICO or a premine. If there was a premine, then a lopsided distribution is normally present. And so even chains with large numbers of block producers are often easily pushed into making decisions that effectively centralize the chain, particularly in times of need, such as in hacks, takeovers, or when subject to government pressure or regulation. It is unclear as to how much more secure a chain is based on an increased number of block producers. After all, a government can just as easily pursue a top 200 as a top 20 to achieve the censorship it wants.
It seems that only once the number of block producers increase by an order of magnitude does increasing the number of block producers start to have a significant effect. This, however, increases the cost to the chain of incentivizing these block producers to remain honest actors. Communities should design their systems to suit their own situation based on these factors. A serious defense against an organized attack would be where many thousands of block producer nodes could easily be spun up by community members at any time for almost no cost. In a similar way to how torrent sites evade shutdown, but respawning a new version of the site shortly after the original site was legislated out of existence.
Section 4.11. Why keep layer one minimalist? Scaling. The more complicated the base chain, the more likely it becomes bloated, expensive to run, and difficult to fork. Forking. A simpler, smaller code base is easier for the community to adopt in a fork, safeguarding against hostile actors or rich wells who attempt takeovers. Performance. Text based data alone can be compressed and synchronized efficiently, making it accessible for diverse operators in many regions without requiring specialized hardware. Everything heavier like complex smart contracts, large file storage, or advanced application logic should move to a layer two or specialized network that references the trusted state from layer one. This architecture avoids turning the core ledger into a single point of failure or bottleneck.
Conclusions and implications. A well designed layer one is the bedrock of any censorship resistant community driven blockchain. By keeping it limited to text based data availability, historical state recall, basic governance mechanics, and secure transactions, you ensure high decentralization and easy operation, human readable transparency for all critical updates, votes, and account histories, flexibility to fork when necessary, preserving community rights, optimum number of block producers, and block production algorithm for the network.
Adhering to these layer one principles lays the foundation for truly self sovereign digital communities and network states. Layers above can then innovate with large scale data, complex smart contracts, or specialized applications without jeopardizing the core security that lives on this minimal robust base chain. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter five, zero fee structure. Zero fees means the masses can use it, and the complex operations can remain trustless.
Introduction. Transaction fees on a blockchain can make or break its usefulness in decentralization. Many projects overburden their layer one with features that dramatically raise fees or force it to become overly complex and resource heavy. This leads to two typical problems. High fees that discourage on chain activity, making the network exclusive to wealthy users that can afford the fees, and especially when carrying out the large volumes of microtransactions required in social communities. High volume and throughput FAT nodes where only smaller numbers and groups of well funded operators can run the chain's infrastructure, reducing community self sovereignty.
Below, we explore how to address spam, infrastructure incentives, and why a fee less or low fee layer one model best serves a truly decentralized community when it comes to social interaction and network states. Section 5.1, spam limitation and resource credit systems. A common objection to free transactions is, won't it be spammed? The answer is to require staked resources, sometimes called resource credits, instead of charging individual fees per transaction. Section five point one point one, requiring users or apps to stake. To transact, an account should lock up a small amount of the chain's native token.
The larger your stake, the more daily or hourly resource credits you receive. The more free on chain transactions one can carry out per day. Section five point one point two eliminates per transaction fees. Each operation, a post, a vote, or a transfer, consumes a small portion of these credits, but does not charge you a fee. Resource credits recharge at a certain daily rate, say 20% per day. Meaning, if an account executes enough transactions in a particular day that the resource credits drop below 80%, it will take more than twenty four hours for the account to regenerate to a 100%.
Once credits recharge, you can transact again at no extra cost. Section five point one point three, deter spam. Malicious spammers must stake substantial tokens to sustain large scale attacks, making spam expensive. Honest users who do not overshoot transaction limits continue accessing the network without paying fees. Section five point one point four fosters app level staking. Applications can stake and delegate tokens and their associated resources in bulk so their end users can transact for free using the resources of a larger stakeholder. The token or resource delegation happens in such a way that the delegator's tokens are never at risk of being stolen by the account receiving the delegation.
Resource delegations can be withdrawn at any time. See chapter 7.3, making spam costly and creating competition for resources, increasing buy pressure with increasing network effect for further information on delegation of resources. This further democratizes access because everyday users do not need to buy or hold tokens personally. Apps become holders of last resort, maintaining large stakes to serve their communities. See more information on this matter in chapter 12.11. Decentralized apps and services as holders of last resort. This approach banks the unbanked.
People in low income regions can post, comment, or transfer value without paying fees so long as the application or sponsor account stakes enough to cover them. Section 5.2, incentivizing community run nodes and infrastructure. In a genuinely decentralized model, elected community members run the nodes, not giant corporate data centers or venture funded teams. To make that viable, five point two point one, paying infrastructure operators from the protocol. The base chain's inflation or block rewards should fund node operators directly.
This prevents infrastructure operator Sol Reliance on businesses' models or venture capital. Five point two point two, reputation and community voting. The community votes for reputable infrastructure operators. The community votes for reputable infrastructure operators. Elected operators receive predictable rewards to maintain servers, store data, and confirm blocks. This does not need, however, to be the full daily rewards pool, but only a portion of it. The remaining rewards can be distributed to other types of value creators and infrastructure operators in the ecosystem.
If they fail or behave maliciously, they lose votes and therefore rewards. Five point two point three, freedom to be anonymous. Operators can receive block rewards from the chain without revealing their identities. This protects them from external pressure, enabling truly neutral infrastructure, which creates the foundation for protection of digital rights for all users. Combining fee less end user transactions with direct infrastructure rewards ensures the network remains inclusive, while node operators have the incentive to keep running services that benefit everyone.
Section 5.3, why high fee layers are bad for communities. Many blockchains impose high fees, especially if they store everything on one layer, heavy code, complex smart contracts, or large data, or have limited throughput that forces bidding wars for transaction space. Five point three point one, high fees calls. Exclusion. Everyday users, especially in low income areas, can afford consistent on chain activity. Stunted growth. Apps cannot embed frequent transactions or user generated data if each operation is expensive. Centralization.
Only wealthy entities can transact heavily or run specialized infrastructure. When base layer fees become high, communities cannot harness the blockchain for everyday speech, social features, or microtransactions. Instead, usage reverts to speculative DeFi and whales who can afford to pay high fees, undermining the vision of broad censorship resistant participation for the widest possible user base. High fee layers also mean that layer two systems cannot clear to the layer one security layer very frequently due to having to constantly pay layer one fees in order to do so. The result is that one has to trust layer two with the information until it clears to the finality layer, layer one.
On a feeless blockchain, this is not an issue since one can always afford to clear to layer one as long as it has enough stake in the ecosystem to control the resource credits necessary to clear to layer one on a continuous basis proportional to its usage. Section 5.4. Why a low fee or fee less layer one is preferred. A fee less or near zero fee system on layer one is crucial for five point four point one, universal access. Anyone can create content, transfer funds, or engage in governance without cost barriers. This ensures that economic class does not dictate who can speak on chain.
Five point four point two, circular economies. When transactions are free at the user level, the network can become a platform for day to day exchanges, enables sending small tips, micropayments, or publishing social post, fosters a vibrant on chain community rather than a speculative click. Five point four point three, stronghold incentives for decentralized applications. Applications stake tokens to cover user interactions. They must keep these tokens staked long term to serve their audience. This effectively locks supply out of circulation, providing floor demand and lending intrinsic value to the token.
This means that the majority of DApps or decentralized applications won't sell their stake at any price since if they did, their DApps would stop being able to post a chain through lack of resource credit. This means dApps or holders of last resort and thus create an intrinsic value and floor price to the token, providing resource credit staking in the ecosystem. See more information on this matter in chapter 12.11, dApps and services as holders of last resort. Five point four point four, equitable distribution for everyday users.
Fee less usage makes it far easier to distribute tokens to everyday participants. Example, rewarding posted content or community contributions, real world documentable actions in a low cost environment. Conclusion. Fee policies shape who can use your chain and how. If you want mass adoption, true censorship resistance, and a community run architecture for social based network state systems, you must ensure staked resource credits instead of per transaction fees, on chain incentives for node operators, allowing them to remain independent, lightweight, mostly text based layer one, so many people can run it without specialized hardware.
Simplicity, that keeps the system forkable and avoids centralization by complexity. With a fee less or near zero fee model, you empower a global user base far beyond crypto speculators to store text, engage in social communities, and exchange value via cheap or zero fee utility systems, not speculation alone. The change neutral funding of infrastructure ensures longevity and true decentralization, preventing regulatable corporate takeover or excessive corporate influence, leaving the community to be governed and regulated by itself. This is the bedrock for building scalable, censorship resistant network states where anyone can join and freely transact without gatekeepers.
The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter six, what a social blockchains layer two should do. It's not that difficult to understand why trying to put everything on layer one is a fruitless task. Introduction. The second layer, or layer two, refers to the secondary layer or protocol that is built on top of a blockchain. These are designed to enhance the scaling of the ecosystem, far above what can occur at the base layer. Blockchains tend to be limited in the number of transactions they can process.
There are also memory concerns since individual nodes have limitations. A well designed layer two is where most application logic, heavy data, smart contracts, and computationally intensive operations should live, while still relying on layer one for security, finality, and account management. By keeping layer one lightweight, mainly storing text based data, social actions, and essential governance. Layer two can handle large scale application services, smart contracts, and non text data without bogging down the base chain. This division lets the community run layer one remain forkable, scalable, and fee efficient, while layer two delivers complex functionality to end users.
This chapter explains what layer two should do and how it can build upon a secure, fee less, or low fee base layer. Section 6.1, application operation and services. Section six point one point one, offloading heavier logic. Instead of stuffing all computation into layer one, the business logic runs on layer two. This keeps the base chain from becoming overloaded with code or inflated transaction fees. Section six point one point two, front end interactions. Social platforms, smart contracts, games, collaborative editing tools, or advanced finance products can store heavier data or run specialized computations off chain or partly off chain, and only anchor key results and checks to layer one when needed. Section six point one point three, data efficiency.
Large media files or high volume data like videos, images, or complex transaction logs are better suited for layer two networks or off chain storage solutions. Layer one records essential references, for example, pointers or hashes, to ensure immutability and censorship resistance for crucial metadata. This synergy lets layer one remain nimble and secure, while layer two fosters rich application ecosystems. Section 6.2, rely on the security and account system of layer one. Section six point two point one leverages layer one accounts. User identities and private keys are established on the base chain.
Layer two applications rely on these same accounts, ensuring a single source of truth for ownership. Section six point two point two anchors the critical state. Key events like finalizing token transfers or verifying integrity are committed back to layer one to prevent manipulation. With a zero fee base layer, this can happen instantly, all day long, providing the layer two has the required amount of resources, staked on layer one. This minimizes trust in layer twos, as they can affordably and instantly clear to the base layer, or L one, security for finalization.
Section 6.2.3 avoids duplicating security on layer two. Layer two should not require a separate miner or validator set to replicate the entire chain security. Reduces complexity and resource consumption while maintaining trust in the layer one consensus. Because layer twos can inherit the reliability and user attendee from layer one, each new application or service does not have to solve security from scratch. This means layer two builders can focus resources and what they're good at, and not on having to replicate layer one blockchain features and maintaining operation of a decentralized network.
Section 6.3. If done correctly, layer two does not need layer one security. Section six point three point one. Minimal on chain dependencies. Layer two can store ephemeral or detailed data on specialized distributed off chain storage systems, such as the SPEAK network, referencing only final states or signatures on layer one. See chapter 18, off chain data availability layer for non text data. Layer one, therefore, functions as a final settlement layer rather than a global CPU or data warehouse. Section six point three point two, reduced attack surface.
Since layer two uses layer one only for account identity, finality, and minimal checks, the base layer remains robust. Layer two systems can therefore innovate freely without risking or having to replicate the entire network stability. Section six point three point three, separate upgrades. Layer two services can evolve at their own pace, and scale independently without putting load on the entire chain. Boost flexibility while preserving layer one continuity and neutrality. Section 6.4, smart contracts, heavy data such as non text, and computation. Section six point four point one, smart contracts, complex scripting logic, DeFi protocols, advanced NFT mechanics, or multistep financial flows operate off the base layer one chain, keeping the layer one light and scalable.
While modularized layer two systems can scale individually based on demand and usage, as a result, not putting additional load on the base layer. Only essential confirmations, like final balances or contract triggers, settle on layer one. Intercomputational information can be kept on the layer two until computation reaches points at which it needs layer one security. Section six point four point two, heavy media and non tech storage. Videos, large documents, or images do not belong on the base layer, and can be stored on layer two storage systems. Layer two or other off chain networks, e. G, IPFS, and the SPEAK network store these files, referencing them via hashes or pointers on layer one.
This allows the layer one to scale significantly more. Any non essential action or piece of data can be stored on layer two instead of on the base layer. Section six point four point three, computationally intensive operations. Simulations, gaming logic, aggregator queries, or batch updates can operate on layer two nodes, or specialized side chains. Summarized or finalized results are recorded on the base layer. This prevents layer one from becoming bloated and requiring centralized super nodes. Section 6.5, tokens, wrapping, and decentralized finance, or DeFi.
Section six point five point one, custom tokens. Communities can create layer two tokens representing digital assets, reward points, or governance stakes pertaining to that community only. Such tokens can be managed by layer two logic, but recognized or mapped at layer one. For authenticity and security, Section 6.5.2, instant low cost swaps and wrapping external or cross chain tokens can be wrapped into layer two equivalents. Multi signature or bridging mechanisms facilitate this process. Fast, feeless transfers mean that liquidity can be held on both chains by the layer two smart contract multi signature system, and thus instant low fee swaps can be facilitated.
Section six point five point three, Felis decentralized finance. Decentralized exchanges, lending protocols, and yield forms operate on layer two. They frequently specialize in DeFi lending and a value token swap transactions, which require low cost execution, making a zero fee layer two the ideal environment for such systems. By relying on layer one for final settlement and accounts, layer two tokens or DeFi remain trustless, auditable, and tamper resistant. Section 6.6, implications, efficiency, scale, and user experience. Section six point six point one, lower fees.
Using this layer one, two division of responsibilities approach, layer one can optimally reduce its load from computations and other high intensity transaction types. Layer one transactions can therefore more easily remain near zero fee or resource credit based when the chain operates at scale. Layer two handles heavy transaction flow. This flow can be modularized per layer two smart contract, meaning the cost of demand does not have to be passed to the whole community, as it does on many other chains, where layer one executes almost everything, including smart contracts and compute.
This results in a general reducing of cost across the network, And cost raise only in areas where demand is high, not for all end users, as with many of the early blockchains. Section six point six point two. Fast, rich applications. Layer two is able to offer real time updates, large data sets, and interactive dApps at scale, whereas layer one can focus on being the security and finality layer. This means dApps can specialize in making their user experience top quality and not have to worry as much as with traditional blockchain tech stacks about operating at scale.
Section six point six point three, protection of the base chain. If something goes wrong with a layer two app, the underlying chain remains intact. Financial risk assets and operations can be minimized on layer one, and risk taking can be moved to the layer two systems that specialize in generating high economic yield to users for risk taking. This reduces risk on the community base layer, layer one, and isolates mistakes and over leverage to layer two, helping to protect and preserve the layer one in times of financial uncertainty. Section 6.7, BLS multisigs on layer one and escrow and liquidity pools on layer two. Section 6.7.1 BLS and escrows.
This type of feature allows two parties to lock funds or assets until certain conditions are met, at which point the funds can be released. These are governed by layer two logic, often with multisigs with final release transactions on layer one. If the collateral involved in such transactions is large, in the tens or hundreds of millions of dollars, the community may opt to use BLS threshold signatures on the layer one, where a multisig in which a preferred method of on chain fund release requires many hundreds of signatures to be obtained in order for funds to be released from liquidity pools or escrow systems.
Section six point seven point two, layer two liquidity pools. Layer two automated market makers, AMMs, or multi asset pools can handle continuous swaps and yield strategies away from layer one. High frequency operations stay on layer two, reducing contract calls on layer one where finality clearances happen. Some communities may wish to create their own dedicated layer two liquidity pools separate to the layer one, reducing risk of hacks on layer one. Conclusion. Layer two is the engine for advanced functionality, heavy data, and day to day decentralized application logic By leaning on the secure, fee less, or low cost layer one, accounts and final settlements remain tamper proof.
Smart contracts, heavy storage, and complex computations stay off the base chain. Tokens in DeFi gain flexibility without increasing layer one congestion. Communities and DApp operators can expand freely, confident their basic user identities and transaction proofs are anchored in an unbloated decentralized base layer. This complementary design empowers vast application ecosystems, such as community social tokens, advanced financial instruments, and data rich content platforms, while preserving true decentralization and for capability at the root.
By separating what layer two should do from what layer one must do, you maximize scalability, lower cost, and open the door to censorship resistant digital communities at real world scale. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter seven, sustainable economy and decentralized coin distribution. Distributing tokens fairly and making it sustainable is among history's most difficult challenges. Introduction. A sustainable economy in a decentralized blockchain hinges on properly distributing the coin supply so that no single entity or small group can dominate, unlike many existing, more centralized models that rely on large pre mines, ICOs, or purely profit driven validation, a truly censorship resistant system needs a continuous community driven distribution that rewards actual value creation.
Section 7.1, token distribution methods. Current main distribution methods include mining or validating, earn by providing infrastructure, proof of work or proof of stake, DAO proposals on chain, fund work or community projects through inflation or treasury as voted by stakeholders, direct trading. People buy the coin from existing holders, though this alone does not ensure fairness or broad distribution. Incentivized stakeholder distribution, ISHD, also called proof of brain, where community members are incentivized with a portion of the daily rewards pool when they vote tokens to those producing valued content or services.
For further information, see Annex I, Glossary of terms and acronyms. Most blockchains rely on a narrow set of these, often resulting in whales accumulating large amounts of the supply. A robust model should leverage multiple mechanisms, ensuring that miners, validators, content creators, infrastructure operators, and general contributors can all earn. Section 7.2, incentivize stakeholder distribution, ISHD, or proof of brain. ISHD awards tokens based on recognized value creation. That is publishing, curating, developing, marketing, or performing tasks that the community deems worthwhile.
Stakeholders vote, and the protocol mints new tokens to reward both creators and voters. This aligns incentives. People who have a stake in the network by staking tokens benefit from finding and rewarding good content or valuable work invites broad participation. Nontechnical users earn most of the newly minted tokens by contributing ideas, media, or organizational help, rather than being limited to buying or having to do prohibitive technical mining by running infrastructure. This model counters the typical pay to play approach, letting anyone enter permissionlessly, and earn if they provide real value to the community.
Section 7.3, making spam costly and creating competition for resources, increasing buy pressure with increasing network effect. A major problem with public blockchain systems is spam. The chain can easily become clogged up with data of users who are attempting to drain bandwidth on the chain and make it difficult for others to post their own data. The problem is that if fees are charged on each transaction, this can become highly costly and a prohibitive barrier to entry for many users. Each user now requires additional tokens that they must first obtain from an exchange so that they can pay the transaction or gas fees in order to post to chain. In social media systems, this becomes prohibitive to users, especially where there are thousands of tiny micro interactions each day in replies, likes, and distributions of rewards.
This can be solved by making a competition for resources on chain. This may manifest in users being required to stake small amounts of the token. The users who stake the most get access to the most free transactions each day. In order to help new users onboard, an existing user may wish to delegate some of their tokens such that new users can access zero fee transactions to post a change straight away. A delegation is a process whereby an existing user can delegate the power or resources of their tokens to a new user without actually giving them their own tokens. This means that the new user cannot steal the tokens of the existing user, but they can access the chain for free with some of their resources, stinking for access to resources on chain.
Transactions, processing, storage, voting, curating, etcetera, brings about a sustaining buy pressure for the token as long as a network effect takes hold and demand to post information to chain grows over time. This results in a sustainable token price, which is proportional to the network effect of the chain, as well as the number of new users signing up. Section 7.4, social distribution as a Trojan horse. Social content distribution can serve as the entry point for far broader decentralized ecosystems. Ongoing token flow. Every post comment or contribution that gains upvotes injects new tokens into many individual wallets, forming a de facto distribution engine to those who contribute and create value. Moving beyond lunch post.
Over time, the community can prioritize content related to actual value, e. G. Building projects, marketing the chain, developing infrastructure. This becomes a Trojan horse for encouraging real productivity and value creation, not just social media. By starting as a user friendly content system, the ecosystem indirectly bootstraps mass token distribution and engagement, ensuring the coin doesn't end up in just a few technically capable hands, but rather also in the hands of many regular people who add value to the network in their own ways.
Section 7.5, distribution to multiple parties and ongoing issuance. A single distribution path, e. G. Only validators or only an ICO, creates central points of control. Instead, section seven point five point one, multiple mechanisms of distribution to validators and infrastructure providers, social and curation rewards, DAO and treasury proposals, developer bounties, and community sponsorships. Section seven point five point two, continuous controlled new token minting. The protocol can continuously mint tokens at a strictly controlled rate controlled by the community consensus, directing them toward contributors who deliver recognizable value.
Zero founder or early stake. Founders should earn tokens alongside everyone else with no large pre mine that cements early dominance. Founders are more aligned with their community members. To add value instead of using them is exit liquidity, as is often seen in many of today's decentralized blockchains. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines. Ongoing issuance means many new participants and future contributors can still obtain tokens without purely buying in. This fosters dynamic growth and social mobility. It also means that new participants do not have to take risk to earn stake in the community.
They can just contribute and earn from community votes. Continuous new token minting means the community can continuously reward users for contributing value, and it can also direct some of this supply to subsidizing transaction fees, keeping them as low as possible into the future. As long as the value created via the incentivization with freshly minted tokens exceeds the value of freshly minted tokens that are distributed, it is possible to achieve a sustainable growing token price into the future. Section 7.6, the importance of earning your tokens.
Many blockchains feature founders of venture capital firms, VCs, receiving large stakes via ICO or pre mine, which often centralizes control, eventually invites regulatory scrutiny as an unregistered security turns users into exit liquidity. Early insiders sell off tokens, depleting value for later entrance. By contrast, in a free permissionless system, tokens are earned by contribution, documented value creation, e. G, infrastructure operation, marketing, code, or social content is rewarded. Founders earn from zero tokens fairly like everyone else.
Community recognition determines ongoing rewards. Avoiding scams. Often tokens that are scamming their users will inevitably bring the conversation around to buy our token. However, in ecosystems that are not scams, users should be able to earn their tokens from a neutral CEO less protocol. As such, one can do beneficial actions for the community, earn stake from the protocol itself, and thereby not take any financial risk at all. This significantly lowers the possibility of users being scammed for their money. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines.
All parties starting at zero tokens and having an equal opportunity to earn tokens from a neutral protocol ensures that no party can claim an unfair proportion of tokens by fiat or capital alone. This aligns the incentives of all members of the community in that they must first add value before they can take any out as profit, be it by building of code, purchasing the tokens on the open market, running infrastructure, creating valuable content, documenting their usage of the system, or running events to promote the community. Amongst other things, all participants can contribute and earn a stake in the system, as long as what they are doing adds value. This minimizes extractive behavior in blockchain systems where founders have large pre mines and ICO stakes that they have obtained by decree without adding value, and therefore unfairly compared to the other participants in the system. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines.
Section 7.7, keeping inflation in check. Unlike Bitcoin's cap supply, a content or community focused chain might retain continuous tail inflation, but at a controlled rate, starting higher, e. G. 15% per year, to bootstrap distribution, gradually decline annually until stabilized at a nominal rate, e. G. One to 2%. Consensus governance adjustments, community consensus driven adjustments to inflation based on needs. In contrast to a capped inflation schedule, like on the Bitcoin blockchain, where fees will remain high in order to pay for the security budget of the chain. A chain with a long tail emission can keep fees very low or free, which is more applicable to social layer with high interaction and transaction volumes on chain. The real test is whether the community's total value output, value creation and demand, outweighs the value of new token minting.
Section 7.8, what you want to see versus what you don't. What you want to see, no pre mine, no ICO, multiple distribution paths, small controlled consensus driven inflation, broad middle class growth or path to it, permissionless entry, Ability for low tech users to earn stake without taking financial risk. What you do not want to see. Massive founder stake controlling a disproportionate supply. Single distribution channel, funneling all tokens to only a few, often technically capable entities, excessive open ended new token minting, leading to token devaluation, stagnant social mobility, preventing smaller holders from growing even when they voluntarily add value to the community.
Section 7.9. No compromise on free speech and censorship resistant. Projects aiming to secure digital human rights cannot allow pre mine central control, easily coerced by governments or powerful interest, CEO or company structures. Single legal entities are direct regulatory targets. They're also more coercable than anonymous individuals operating on such systems who are mobile and can move jurisdiction when pressured. A neutral ownerless base layer ensures speech and user accounts remain unstoppable. Conclusion. A sustainable coin economy arises from continuous and equitable distribution to those providing recognized value.
Systems relying on single distribution channels, large pre mines, or purely fee based mining tilt toward centralization in truly censorship resistant networks. ISHD, proof of brain, must be a major pillar of governance, token distribution. Low inflationary tokenomics prevents excessive dilution while funding future participants for providing value to the community. Strict vigilance against centralizing whales or external money attacks that do not align with the values of the community. No founder pre mines for chains protecting digital rights. By following these principles, a blockchain fosters a self reinforcing, sustainable economy while remaining resilient to both internal power grabs and external regulatory pressure.
The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter eight. Reputation. How do you know who to trust when you are under attack? Introduction. Most blockchains rely on pseudonymous wallet addresses, long strings of letters and numbers that do not clearly reveal who you are, how much you contribute, or whether others in the network find you trustworthy. By contrast, named account systems such as those used by the Hive blockchain let you appear under a human readable name, e g, Starkers, or they call me Dan.
This approach opens the door to reputation. Not only can people see your own chain actions, they can also develop a subjective sense of who you are and what you contribute to the network. It should be noted that it is the user's own choice as to whether or not they reveal their true identity. Reputation in decentralized systems functions on two layers, tangible on chain reputation, measurable community votes, account history, and stake related indicators, intangible, human to human reputation, subjective assessments by community members. Over time, when combined, these give each user an identity within the network.
It takes a user a significant amount of time to build both tangible and intangible reputations and relationships on chain. As a result, the value of these reputations to the user often means more than the token balance in their accounts. This has interesting improved escrow and trust implications as will be discussed below. Section 8.1, why reputation matters. Section eight point one point one, social trust over trust in code. Blockchains pride themselves on code is law. But in crisis scenarios, takeovers, chain splits, people look to trusted individuals.
A strong group of reputed accounts can be more decisive than any purely technical solution during an attack or a time of crisis. Section eight point one point two, accountability and skin in the game. If you spend years building a good reputation, it becomes very costly to betray the community. Losing a high trust status can hurt more than even losing tokens you hold. Section eight point one point three, support of nuanced complex social interactions. Named accounts with recognized reputations enable user to user escrow, collaborative proposals, delegated voting, and similar advanced features. The intangible trust you build through honest interactions and consistent contributions underpins these unwritten social contracts.
Reputed users can provide on chain legitimacy to real world physical locations such as businesses, with the user carrying out an action in a trusted business such as making a purchase with a time stamp, product purchased, photograph of the purchase, price, geolocation, amongst other information, this allows proof of person systems to be built using trusted real world locations. These locations are identified based on the reputation of certain trusted users within the community. Section 8.2, two types of reputation in decentralized systems.
Section eight point two point one, on chain numeric reputation, often tracked via reputation score or stake based metric. Every upvote, downvote, or curated activity leaves a digital trail. Over time, these accumulate into a visible on chain record and reputation. This numeric score is transparent. Anyone can inspect an account's history and voting record. Section eight point two point two, intangible, human to human reputation. Beyond metrics, people form personal judgments about your character, reliability, and expertise. This intangible layer allows you to gain influence even if your numeric on chain reputation score is moderate, Because active community members may appreciate your attitude, problem solving, social, or code contributions.
Both layers reinforce each other. Good numeric signals usually reflect consistent quality, which boost intangible reputation, and intangible credibility often translates into stronger numeric endorsements from top stakeholders. Section 8.3, building reputation. Section eight point three point one, consistent value creation. Write informative post, produce helpful tools, run infrastructure, or moderate community forums. Over time, repeated value added behavior raises your standing in the community. Being active, responsive, and transparent goes a long way.
Section eight point three point two, stakeholder validation. On such delegated proof of stake systems like the Hive blockchain, large stakeholders can give upvotes that significantly affect an account's on chain reputation and earnings. If recognized stakeholders repeatedly endorse you, it signals broader trust in your work. Section eight point three point three, social presence and visibility. Engage in discussions, help onboard newcomers, run meet ups or digital events. People gradually learn you are reliable. Reputation is earned.
The more you prove yourself and carry out actions that benefit the community, the more intangible weight your account carries. Section 8.4, reputation based trust and account value. Section eight point four point one, account reputation as an escrow. If you hold significant stake in a solid reputation, others can safely entrust you with temporary custody of tokens, e g for trades or proposals. Because your intangible reputation often exceeds the face value of your tokens, you have enormous incentive not to risk losing community trust. Eight point four point two, increasing account valuation.
Your personal intangible capital can exceed the raw dollar value in your wallet because it reflects long term engagement, verified contributions, and community goodwill. You might even help resolve disputes or coordinate tasks purely on the strength of your good name. Section 8.5, reputation based delegation and voting. Section eight point five point one, why users delegate. Not everyone has the expertise or time to actively vote on governance proposals or curation. They choose to delegate their voting power to accounts they trust. This helps with distribution of tokens and allows the trusted delegate to earn stake from curation rewards whenever they vote.
Such delegations of voting power often goes to accounts with high own chain and intangible reputation. Section eight point five point two, scaling influence. As your reputation grows, people may delegate more stake to you, amplifying your decision making influence in governance or curation pools. Over time, this can make you a de facto community leader. If you misuse that power, your entire social investment in the community may collapse. Section eight point five point three, defense against attacks. Section eight point five point three, defense against attacks.
High reputation delegates are less likely to act maliciously because losing that reputation is worse than any short term gain. Attackers might buy tokens, but without trust, they cannot easily sway user delegations in the face of well established, reputable entities. Section 8.6, reputation in times of crisis or forking. Section eight point six point one, communities rally around known leaders. In a split scenario, the question isn't just what code do we run, but also which people do we follow? Named, reputable figures can mobilize a critical mass for a successful fort. Section eight point six point two, long term commitment.
Reputed long term token holders typically have spent years building trust. The personal cost of abandoning the chain or acting maliciously is enormous, which helps anchor community stability. Newcomers, even with large token balances, lack that intangible goodwill from the community, so they can't match the social capital of long standing high reputation contributors. See chapter thirteen point four point two for more information on forking away from an abusive or a malevolent well stake. Conclusion. Reputation is the social lifeblood of censorship resistant, decentralized systems.
It transcends the purely mechanical realm of token balances and block production. When crisis hits or when the community needs leadership and integrity, people turn to those with established, trustworthy track records. By embedding both numeric, on chain, and intangible, human based reputation layers, Digital communities following such a model as described in this book can incentivize long term behavior that consistently benefits the community, Enable advanced trust mechanisms, such as escrow and delegation. Foster a resilient culture where usernames, histories, and reputations matter just as much, if not more, than raw token stakes.
Identify trusted real world business networks where reliable trade and proof of person systems can be built. Ultimately, combining strong tokenomics with healthy social dynamics via reputation creates far more robust ecosystems than code alone can provide. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter nine. Why free open source software, FOSS, is needed for security. If it's free and open source software, eradicating it is like playing whack a mole. Introduction. As decentralized ecosystems grow in scope, especially those aiming to preserve individual freedoms, resist censorship, and protect digital human rights, Free and open source software, or FOSS, proves indispensable.
When projects rely on proprietary code, they introduce single points of failure and compromise transparency, directly weakening collective security. Below, we delve into why FOSS is central to reliable blockchain governance and how it upholds the deeper principles of decentralization and self sovereignty. Section 9.1, ensuring transparency and trust. Visible code base, enhanced accountability, making the full code base public forces developers to maintain high standards. It becomes infinitely harder to hide malicious backdoors or unauthorized special privileges.
Community verification. Users are no longer forced to trust the word of a core developer or a single entity. Instead, they can rely on the global community of developers, researchers, and even curious laypeople to confirm the absence of hidden flaws. Verification instead of blind faith. The many eyes principle. Open source code benefits from a wide pool of auditors, from security professionals to part time hobbyist. More people scrutinizing the code leads to quicker bug detection and fixes. Immutable ledger and transparent software.
A blockchain's immutability rings hollow if the software itself is opaque. False ensures that every aspect of a system designed to be trustless can genuinely be trusted. Why this matters? True decentralization hinges on the absence of privileged actors. FOSS inherently levels the playing field. All participants can access the rules, confirm they're applied uniformly, and hold each other accountable. Section 9.2, long term sustainability and fork resilience. No single point of failure. Avoiding lock ins. Closed source projects become hostage to the company or individual controlling the code. If they abandon it or forced offline, the project stalls or dies.
Seamless continuity. By contrast, open sourcing the code frees the community from sole reliance on a particular maintainer. If key developers leave or face pressure, others can immediately step in, code in hand. Forking and evolution. Necessity of forks. Healthy blockchain ecosystems sometimes need to fork, whether to thwart a hostile actor or adopt new beneficial novel features. With FOSS, forking the entire project is effortless when compared to doing this where the core code is held in the hands of a corporate entity whose intentions may not fully align with the community.
Censorship resistance. Censorship resistance. Because code is publicly replicated, targeting or shutting down one repository or developer does little. Another team can rehouse the code, redeploy the network, and ensure continued functionality. See chapter thirteen point four point two for more information on forking away from an abusive well stake. Community ownership. Decentralized upgrades. When nobody owns the code's rights, no single authority can demand licensing fees or deny others the ability to enhance or customize. Collective responsibility.
Collective responsibility. Everyone in the community has the autonomy to push improvements. This promotes a sense of stewardship, where users and developers become co owners, not passive consumers. Why this matters? Blockchains are designed for permanence and resilience. Proprietary code contradicts these aims by tying crucial operational elements to a central gatekeeper. FOSS, on the other hand, cements the system's self sufficiency and the community's role in directing its own destiny via open source code, maintenance, operation, and development.
Section 9.3, mitigating legal and regulatory risk, reduced central targets, choke points removed. A proprietary code base can be legally coerced, leading to potential sabotage or closure. By distributing the code and its rights across the community, no single party can be easily bullied. Ecosystem continuity. Because the code is in the wild, attempts to suppress the network by targeting individual developers or maintainers becomes largely futile. No patents or licensing traps. Permissionless by nature. A decentralized network thrives on open participation, enforcing patents from restrictive licenses, contradicts the collaborative ethos of blockchain technology, neutral infrastructure, a platform that withholds core software or demands fees, cannot claim to be neutral or fully community driven.
Why this matters? Censorship resistance extends beyond the technical sphere. It also includes defense against legal or regulatory maneuvers. FOSS disperses liability and control, putting the community rather than a single entity in the driver's seat. Section 9.4, enhancing community innovation, permissionless contribution, global developer pool. When code is public, any skilled developer worldwide can contribute bug fixes, implement new features, or build complimentary applications. Vibrant decentralized application ecosystem. Lively innovation drives the creation of decentralized exchanges, games, marketplaces, social platforms, and more, all of which extend the blockchain's value, faster iteration, parallel experimentation.
Multiple developer teams can work on improvements simultaneously. Competing ideas drive healthy innovation, agile decision making. If the network stakeholders prove a change, it can merge swiftly, stagnation is minimized, and the project remains competitive in the fast evolving blockchain sector. Why this matters, innovation and network effects often determine which blockchains endure. Free, open source software invites a global tapestry of creativity, making the system more adaptable and faster to incorporate new technology or user demands.
Section 9.5, security through community collaboration, crowd source security audits, sophisticated attack vectors. Modern blockchains face advanced exploits from consensus attacks to smart contract vulnerabilities. An open code base means thousands of potential auditors. Rapid response. When a flaw is detected, public collaboration typically fixes it in hours or days rather than waiting on a closed source entity to do the right thing in private, behind the scenes, lower attack incentives, minimal payoff. Compromising a closed source repository can yield total control.
In contrast, free, open source software based systems can be mirrored or restarted. The cost to benefit ratio for attackers worsens significantly. Redundant architecture. Because everyone could host, study, and tweak the code, an attacker cannot stealthily modify it to gain lasting advantage. Why this matters. Security in decentralized systems hinges on distribution of data, governance, and development. Free open source software intensifies this distribution. The software's design fosters anti fragility, becoming stronger as it endures challenges. Conclusion.
For blockchains to achieve true decentralization, where no single party can unilaterally alter the chain or silence users, free and open source software is indispensable. It underpins transparency and trust. No hidden code can undermine the community's confidence in governance or operations. Community resilience. Quick forks and replacements become possible if a lead developer leaves or is compromised. Legal safeguards. Distributing code among many stakeholders thwarts attempts at legal, corporate takedowns. Active innovation. A worldwide developer community can rapidly iterate, preventing stagnation.
Ultimately, free and open source software lifts a blockchain project from a vulnerable, centralized product to a collectively owned public good, Coupled with robust governance mechanisms and globally distributed infrastructure, open source technology stands as a cornerstone of secure, scalable blockchains, empowering digital network states to flourish without fear of censorship or capture. The Digital Community Manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 10, bridge to decentralized governance.
Why effective consensus mechanisms are essential? Introduction. Every blockchain, no matter how it's structured, ultimately needs a way for people to agree on what the chain's rules are, how to update them, and who owns which assets. This process of collective decision making, often called governance, is how a decentralized project remains stable and evolves over time. In practical terms, governance answers questions such as, how do we decide on changes to the protocol, like bug fixes or new features? Which individuals or entities have a say in these changes?
How do we resolve conflicts when the community is split on major issues? Understanding why governance matters and what forms it can take is crucial for anyone interested in building or contributing to scalable blockchains that uphold genuine digital self sovereignty and censorship resistance. Section 10.1. What is decentralized governance? Definition. Governance is the process by which a community makes decisions about shared rules and resources. In a blockchain setting, these shared resources include the digital ledger, the record of all transactions, and the underlying software, the protocols that define how transactions are processed and validated.
Consensus as the foundation. Because blockchains distribute data across many computers worldwide, there must be a consensus mechanism, a way for all participants to confirm the state of the ledger, historical data, current balances, etcetera. Governance is the umbrella under which this consensus mechanism operates, ensuring everyone agrees on not just daily updates, but also fundamental protocol changes over time, why you cannot avoid it. Some projects claim no governance or governance free systems. However, any distributed database that requires updates, whether bug fixes, performance improvements, or new features, relies on humans to come to an agreement. This agreement must be structured in a way that is decentralized as possible, or else the system risk being dominated by a small group. Section 10.2, why you need governance in decentralized systems.
One, resolving protocol updates. Blockchains are not static. They need software upgrades, security patches, and new features. Governance decides how and when to implement these changes so that the chain can grow without abruptly splitting the community or becoming vulnerable to attacks. Two, handling emergencies. When crisis arises, such as hacks or hostile takeovers, communities must act quickly to defend the network. Governance mechanisms allow participants to coordinate a response, possibly forking, that is copying and modifying, the chain to exclude an attacker's influence, or fix a critical bug.
See chapter thirteen point four point two for more information on forking away from an abusive whale stake. Three. Funding and collective projects. Fully decentralized blockchains often rely on some form of own chain funding, like a DAO for development, community initiatives, and infrastructure. Governance determines who receives that funding, on what terms, and how to track accountability. Four, maintaining long term vision. Without a structured process, short term profit motives can overshadow the chain's long term mission of free speech or censorship resistance.
Proper governance gives the community a voice, preventing a single founder or entity from unilaterally controlling the chain's direction. Section 10.3, data availability and agreement. Data availability layer. A blockchain's data availability layer stores all the historical records, transactions, smart contract states, social post, etcetera. These records must be reliably accessible worldwide. If only a handful of nodes retain full history, the system becomes centralized and prone to data loss or manipulation, and decentralized governance becomes compromised.
Distributed around the globe. To remain censorship resistant, multiple independent operators, often called validators, witnesses, or minors, hold copies of the ledger. This distribution ensures no single party can erase or alter historical data without everyone noticing. If one server goes offline or gets compromised, many others still have the verified history. Coming to an agreement. Every time new information is added, like a batch of transactions, these independent operators must agree on its validity. They use consensus rules, e g, delegated proof of stake, proof of work, or another protocol.
Governance is the higher level process that can tweak or overhaul those consensus rules if needed, but only with broad community support. Section 10.4, forms of consensus and voting. All systems have consensus. Regardless of ideology, be it coin voting, node infrastructure voting, or something else, a blockchain must converge on a single truth about who owns what. This single truth emerges from a vote of some kind, coin voting. Users stake tokens to influence upgrades or select block producers, traditionally known as proof of stake or POS. Infrastructure voting. Users with specialized hardware or reputations decide the chain's next block, traditionally known as proof of work or POW.
For further information on proof of work, see Annex I, glossary of terms and acronyms, reputation or hybrid systems, parameterized coin voting. Some networks might incorporate identity or other parameters to weight votes, known as delegated proof of stake or DPoS. Parameterizing on chain governance. No single voting method is perfect. For social networks and network states, the art of governance lies in parameterizing how votes are cast and counted. This allows for social nuance to be built into the community decision making process. An example of a parameter put on voting may be where a chain wants to prevent large exchanges from dominating the voting with custodial stakes that it did not earn itself.
The blockchain might require a long unstaking period, e g thirteen weeks, before someone can use newly acquired tokens for governance. These parameters can drastically change the power dynamics within the network. Section 10.5, potential governance models. One. One token, one vote. Pros. Aligns influence with financial stake. People who invest more have a bigger say. Collateral provision accountability. The user with the most tokens also has the most to lose if being used in a collateral provision or DeFi system. Cons.
Wealthy participants can accumulate disproportionate control, risking centralization. Two. One account, one vote. Pros. Every user with an account is treated equally, in principle. Cons. Difficult to enforce. Requires identity verification that can reintroduce central control. Newly joined uninformed users have the same weight as long term contributors, and it's prone to bot farm attacks if not carefully managed, where one user can control multiple accounts. Three, reputation based voting. Pros, encourages long term commitment and trust building. People who add proven value over time gain more say.
Cons, hard to quantify reputation objectively and might still require coin or identity layers for synergy. Four, hybrid approaches. Pros, combines financial stake, reputation, and possibly time locked tokens, like a power down period to balance power distribution. Cons, more complex to implement and explain. Possibly confusing for newcomers, but it can address many pitfalls of simpler models. Five, top elected infrastructure operator voting, many delegated proof of stake chains. In order to take into account social nuances of communities, elect their top 20 validators or witnesses who run the software of the chain.
They elect them, usually using stake weighted voting. These witnesses then become social representatives of the community, running only the code they are elected to represent. This code contains all of the governance systems that best reflect the community's value. See chapter 11.4 for further details on top witness voting. Section 10.6, governance and the human element. Social coordination is key. Even the most elegant on chain mechanisms ultimately rely on human agreement. If a large fraction of the community rebels against a proposed update, they can fork the chain.
Technology does not settle disputes. It only provides pathways. People must use those pathways wisely. Reputation and trust. Social governance also hinges on intangible social factors like reputation. Leaders who have consistently acted in the network's best interest earn community trust over time. At crisis moments, such leaders can guide the network to fork or adopt specific policies. Without this social cohesion, governance devolves into chaos or central authority. Conclusion. Governance in a decentralized blockchain isn't an optional add on. It's the backbone that coordinates consensus, updates, and community direction. Even if a project tries to minimize human decision making, it still depends on individuals to maintain code and respond to emergencies, recognizing that all distributed systems require some form of structured governance is the first step in building blockchains that remain truly open, censorship resistant, and capable of scaling into digital network states. Key takeaways: governance underpins consensus.
Whenever multiple nodes hold the ledger, they need a method to agree on updates and fixes. Two, no one size fits all voting. Different chains use different models. Coin stake, node infrastructure, reputation. Each has strengths and weaknesses. Three, parameters shape power dynamics. Lock up times, voting weights, and reputation scoring can prevent unhealthy centralization. Four, human community is inseparable. Technology alone does not ensure freedom. Dedicated people defending open source, decentralized processes are vital. Five, crucial for network states.
As communities evolve into fully fledged digital sovereignities, robust, social nuanced governance becomes the cornerstone of self rule and stability. By grasping these governance fundamentals, communities can design systems that genuinely live up to the promise of decentralized power resisting censorship, welcoming newcomers, and fostering the trust needed to build entire online nations. The digital community manifesto. Chapter 11. D governance. Where consensus meets human judgment. Introduction. Blockchains inevitably require a consensus mechanism, some form of governance to decide how data is validated, how upgrades occur, and who ultimately exerts control.
Yet many projects misunderstand governance, defaulting to simplistic models that invite centralization. This chapter examines three major paradigms, proof of work, proof of stake, and delegated proof of stake, while highlighting how true decentralization for communities and social systems requires more refined parameterized voting systems. We then show why neutral, ownerless blockchains must avoid founders, VCs, and preminds, and how community driven governance can act as a counterbalance against takeover attempts and regulatory threats.
Section 11.1. Governance is unavoidable. Why we need it. No matter how hands off a blockchain claims to be, someone must decide on software patches, security fixes, and emergency measures. Even code is law projects have humans writing and changing that code. When attackers strike or improvements are needed, effective governance enables swift community backed decisions rather than letting one party, like a founder or corporation, take over. De governance. Some blockchains say they have no governance or minimal governance, but that usually means governance is hidden or de facto centralized.
True decentralization conducts its governance out in the open and spreads it among stakeholders rather than pretending it can be removed entirely or conducted on a separate web two layer, such as Reddit, which is often the case in existing blockchain systems. Section 11.2, proof of work, otherwise known as infrastructure voting. In proof of work, computational power, energy plus hardware, is the mechanism to secure the chain. Nodes around the world expend resources to compete for block rewards, effectively voting with their electricity bills, security versus limitations, advantages of proof of work, highly resistant to censorship.
If enough miners operate globally, it is difficult to fake mining since you need real hardware and energy expenditures. Good for large amounts of permissionless liquidity and collateral. It allows everyone access to liquidity as long as they can afford the high fee, global infrastructure, and high security. The sheer capital required to replicate or outvote the network discourages attacks, Censorship resistance. Dispersed mining pools and hardware prevent easy shutdown or forced compliance. In theory, disadvantages of proof of work.
Centralizing tendencies. Over time, mining typically coalesces into a handful of pools, e g, two or three major ones. Smaller participants must join these pools, eliminating the grassroots democratic element. Limited governance flexibility. Proof of work is primarily designed to confirm transactions and maintain an immutable ledger. It does not inherently solve on chain governance. It cannot easily upgrade network rules or incorporate dynamic features for social media or consensus driven proposals. Scaling constraints. Storing large volumes of data or performing fast transactions under proof of work is cumbersome.
Blocks with high throughput require more computational and energy overhead. Miners rarely want to expand block sizes indefinitely because it increases node storage demands and can hamper decentralization exclusive to elites only, exclusive to those elites who can afford the fee by design. It must be high fee to preserve the security budget since there is no other way to incentivize this with the dominant proof of work chain present, Bitcoin, having a cap supply, centralized mining. Mining typically centralizes into large pools or in it being expensive to operate a validator.
Since everyday people can't afford specialized infrastructure, validators not accountable to community. The validators are not accountable to the community since they vote themselves into consensus with their own hardware power. 51% attacks cost money to defend. During a money attack, a 51% hashing rate takeover, there is no way to fork away from the attacker without it costing the community money since the defender must outcompete the attacker and gain back 51% of the hashing power on the new fork. You also cannot identify the attacker since you cannot see who they are due to the fact there is no on chain reputation system.
Replicating Bitcoin scale. Bitcoin success in censorship resistant rest on a massive expensive global mining network. Starting a new proof of work chain at that scale is nearly impossible today because you'd have to attract billions in a hardware investment. Smaller proof of work chains can be 51% attacked more easily by the main chain unless they can convince proof of work miners to switch to their own hashing algorithm. There is, therefore, most likely only one winner in proof of work mining. Using the most expensive hardware with the most resource intensive hashing algorithm to secure the network can can 51% attack the new fork if it was seen as a threat.
Section eleven point two point one, mitigations for proof of work attacks. Non custodial layer two options. Make sure layer twos are non custodial. Since layer one fees will be so high, there will be a tendency for exchanges and layer two systems to custodialize funds. With enough custodial funds collaborating and unsuspecting people operating on them, it is possible for the custodial stakes to fork the original chain and dictate which version of Bitcoin will be accepted on their custodial systems. Section eleven point two point two, longer term accumulation attacks on a proof of work chain. In a proof of work chain, a small group of people who collaborate with a large amount of the total stake can collude with other major stakeholders, exchanges, and businesses to create a new fork of the original chain and dictate which version, their version during an attack, that the on and off ramps will use, excluding the original and legitimate fork. This can be more easily defended against on delegated proof of stake chains, where human readable named accounts that have built reputation via long term stake, distribution, and voting mechanisms, can form a popular community fork made up of reputed community members, regardless of their total stake size, around which the legitimate community can gather to continue on away from the attackers.
Conclusion. Proof of work is a powerful security solution, analogous to a panzer tank, but is less flexible and not easily repurposed for rapid governance, high volume social use, or swift on chain decision making. Section eleven point two point three, attacking the largest Bitcoin block producers. There are only a few large block producers on Bitcoin, and most of the hashing power that secures the chain is centralized. Coordinating governments could physically cut the honest actors of those block producers off from the network, write legislation that prohibits them, or force them to operate under mining licenses, While setting up competing government compliant block producers, small free block producers could then try to pop up, but the larger governments would potentially overpower them.
Section eleven point two point four. Why we call proof of work infrastructure voting. This system should also be referred to as infrastructure voting, since the community recognizes the longest chain when forks split the consensus. The longest chain is normally formed only by the group which has been able to deploy the most infrastructure and thereby the most computing power to secure the consensus. Eventually, infrastructure operation becomes expensive and resource intensive, making it economically viable only to those who have the money to invest in large amounts of expensive equipment. Such a system is only therefore able to account for liquidity and collateral, but not the social nuances of communities and social governance.
Section 11.3, proof of stake, section eleven point three point one, otherwise known as unparameterized coin voting. In basic proof of stake, whoever holds the most tokens wields the most influence. Stakeholders lock coins to validate transactions or produce blocks. Over time, large holders typically become even larger, leading to potential centralization around wealthy interest. Section eleven point three point two, the fundamental idea. Pure proof of stake equates the proportion of tokens owned to governance power. Each stakeholder's influence stems solely from the size of their balance. On paper, this creates a skin in the game scenario.
Attacking the network undermines the value of one's own stake. However, early real world implementations of proof of stake often introduce no parameters, no rules to prevent or discourage centralizing forces, large token holders, or custodial services, exchanges, or pulling services quickly dominate, rendering the chain effectively controlled by a few whales. This makes proof of stake systems excellent for financial services and liquidity systems where there is no social nuance involved in making decisions. Money and yield are generally nonpolitical and do not directly affect culture and social systems.
Having the top validators in a finance system, those who have the most to lose, is one of the best ways to make sure your financial yield stays neutral. For further information on proof of stake and unparameterized coin voting, see Annexi, glossary of terms and acronyms, section eleven point three point three. Why unparameterized coin voting or proof of stake tends to centralize. In unparameterized coin voting, staking pools become inevitable pulling of user funds. The paradox with proof of stake is that you do not want too many validators as it can necessarily overburden the network.
And validators with small stakes are not really contributing to security of the block production with such small skin in the game. Therefore, often, a minimum staking for governance threshold is set, where if users stake above this amount, they can earn when mining in the network. On Ethereum, for example, the limit is set to 32 e for 80 k. Therefore, often a minimum staking for governance threshold is set, where if users stake above this amount, they can earn when mining on the network. However, this results in people who want to run validators, but don't have enough to stake, and so they pull their stakes into mining pools in order to share mining rewards.
Most small participants lack enough tokens or technical know how to run a validator node. They deposit stake into large third party pools, which then yield better returns through economies of scale. Eventually and naturally, one to three major pools emerge, dominating block production, making the chain far more centralized than it appears. Staking to vote delays. Without mandatory waiting periods, exchanges can temporarily power up user funds to vote in governance without users' explicit consent. This has happened historically on certain chains, allowing custodian led attacks or hostile takeovers.
For further information on powering up and powering down, see annex I, glossary of terms and acronyms. Both delegated proof of stake and proof of stake chains must have lock up delays for governance voting when staking to vote in order to defend against custodial stake attacks by entities such as centralized exchanges. The same issues are true for hostile attackers with large stakes. The idea is that the delay for voting after staking to vote, often one month, allows the community time to determine if the entity staking significant amounts is hostile and then take action to protect the chain.
Proof of stake, long lockups. Proof of stake and delegated proof of stake chains that do not have long lockups when staking to vote often are susceptible to takeover by those holding custodial stakes, such as large centralized exchanges. This is because exchanges can use custodial user funds that are deposited into their accounts for trading and stake them for short periods of time without the permission of the depositors in order to take control of the chain's governance and carry out a hostile takeover. There have been several instances of this occurring in the past, so this threat is very real.
Exchanges can do this since they can use a short unstaking period to make depositors whole in a timely manner when they request to withdraw funds. With long lockup periods for governance, this type of attack is not possible. Proof of stake chains that are not susceptible to this type of attack typically have three to six months lockups for governance. Coin voting is amazing if parameterized correctly. Unparameterized coin voting is lazy. It centralizes over time into massive staking pools that overshadow smaller individual stakeholders and somewhat centralize the network.
Section eleven point three point four, mitigations for proof of stake attacks. In order to avoid centralizing governance issues, users should be encouraged not to stake with large staking validators or exchanges and be informed on which forks that suit them ideologically in order to follow their best suited fork. Section eleven point three point five, danger of centralization. Staking pools dominate. Users often stake through third party pools, like Lido Finance, which end up resembling the pool dominance also seen in proof of work mining, VC and founder advantage.
Early insiders can hoard tokens cheaply, keeping governance under their control, high fees, and slow upgrades. Many proof of stake chains aim for general purpose, layer one smart contracts, processing not only transactions, but also computation on the layer one. This often results in high fees to reward infrastructure operators and stakers, making day to day usage expensive and discouraging broad adoption. Fat nodes, a common occurrence in blockchain, where the operation of smart contract processing as well as transaction processing on all baselayer nodes becomes the norm. This makes the standard on the chain the operation of large, heavy duty, and therefore expensive, unprofitable nodes that have to be kept afloat by constantly minting new tokens.
Inflation, due to the chain charging artificially low fee transactions on the base layer. The point here is that most such chain validators are uncompetitive. And as they scale, they have to charge proportionately higher fees, which over time cannot compete against systems that keep the base layer simple and lightweight and move the computation layer to the layer two, section eleven point three point six, the necessity of guardrails. To avoid these pitfalls, proof of stake needs constraints, time locks, minimum validator counts, voting delays, and so forth. We'll see in the next section how delegated proof of stake introduces precisely these guardrails to preserve the core skin in the game feature while preventing consolidation into a handful of players.
Section 11.4, delegated proof of stake or parameterized coin voting. Otherwise known as parameterized coin voting, delegated proof of stake starts with the premise staked coins equal skin in the game. Then it adds parameters to prevent the pitfalls of raw proof of stake. Delegated proof of stake can be considered an evolution of coin voting rather than letting raw stake automatically produce blocks. One, named validators. Stakeholders elect a fixed number of block producers, commonly called witnesses or validators. They are elected by the community using stake weighted voting.
Not one account, one vote. And the top 20 or 21 block producers are paid for securing the network and upholding consensus. Two, parameter constraints, stake lockups. Voters must stake tokens for a certain duration, e. G. Thirteen weeks. This prevents custodial wallets, such as exchange accounts holding users' funds, from freely flipping user deposits into governance attacks. This process is known as powering up on some delegated proof of stake chains. Unstaking is known as powering down. For further information, see Annexi, glossary of terms and acronyms.
Voting delay. The chain might enforce a waiting period, say one month, before newly staked tokens can actually cast votes. This gives the community time to spot potential aggressors powering up a suspiciously large stake. Minimum validator requirement. The protocol guarantees multiple active validators, e. G, 20 block producers, instead of an unlimited or undefined number. The chain can then sustain high throughput, thanks to a limited set of block producers, but remain decentralized enough to prevent collusion. Three, community accountability.
Stakeholders can remove validators at any time if they fail or collude. This fosters an ongoing immune system against malicious actors. Four, many elected equally weighted top validators. A top 20 elected validator set are more akin to having 20 equally weighted staking pools. Even though each validator can have a different stake size in the ecosystem, they are elected in. And so, for example, the largest account in the ecosystem, at best, has equal influence to the other 19 elected validators, even though their stakes are likely much smaller in comparison. This is in contrast to most chains using other consensus mechanisms that accumulate into two to three more centralized staking pools, staking custodial stake on behalf of users, and thus becoming overbearing forces on governance while having provided no value to earn such a position.
Section 11.4.1, community reputation and named accounts. A key feature of many delegated proof of stake systems is human readable account names. This fosters a social aspect. Users earn reputations. Engaging in core development, running reliable infrastructure, or promoting the ecosystem can earn community trust, which translates into witness votes. Social, community driven. Instead of the richest account wins, smaller players can rally around a witness candidate who has proven contributions but may not hold much stake personally. The entire system becomes more social and less purely financial as a result.
Section eleven point four point two, advantages over basic proof of stake, battle tested against exchange attacks. By requiring lockup periods or a period of time before vote, the chain can detect malicious power ups, like large exchanges powering up user deposits to sway governance, faster and cheaper transactions. With a limited predictable set of elected block producers, block times can be short, phase minimal or nonexistent, which is critical for social networks or content based decentralized applications. Continuous distribution.
Many delegated proof of stake systems reward users for content creation, running infrastructure, enabling them to acquire stake organically. This counters a rich get richer scenario. Faster block production. A fixed number of well equipped witnesses can confirm transactions quickly. Neutral Probably the most important Probably the most important distinction is that reputable people with smaller stakes or even no stake at all can rise to validator positions without having the largest stake because the community can delegate tokens to them or vote for them.
This adds social nuance to the raw coin vote model, where the user or mining pool with the largest stake is the most influential in the network. No minimum staking threshold. In contrast to proof of stake, delegated proof of stake does not need a minimum staking threshold for voting and governance. Instead, witnesses are ordered in relevance to the block production process based on the amount of stake weighted voting they receive from the wider community. Since the chain dedicates a certain amount of newly minted tokens to pay witnesses, there is a limited amount of them that can operate profitably.
After this limit, witnesses operate at a loss or voluntarily. It is up to the chain to make sure it is cheap as possible for a community member to run a node in order to maximize the number of backup witnesses. However, the advantage of this is that it makes the staking pools that are so common in proof of stake pointless and ensures that the chain forms into a minimum sized top witness set of 20 each with equal voting weight, regardless of their own stake or the state voting for them, as long as they get enough votes to reach the top 20. This means that delegated proof of stake chains really are like having a minimum of 20 equally weighted staking pools, where proof of stake and proof of work naturally settle to two to three major staking or mining pools, which is far more centralized when it comes down to defending against an attack. Section eleven point four point three, disadvantages of delegated proof of stake.
Voter apathy. If the active stake that is voting is not the majority of stake in the ecosystem, then the ecosystem is subject to takeover. The community should therefore monitor to make sure at least 51% of the voting stake is constantly voting, preventing voter apathy. A potential risk is that once voters pick witnesses, they leave their votes unchanged indefinitely. Some change solve this by witness vote decay, an automatic reduction of vote weight over time, forcing users to reconfirm votes periodically. This refresh cycle fosters dynamic governance, ensuring people stay informed and new voices can emerge.
Large stakeholder risk. The biggest stakeholder may accumulate a significant enough stake as to become a security risk when it comes to voting. The community should move to mitigate any such risk. Long term takeover. Susceptible to long term, slow accumulation of stake where the top elected witnesses are slowly replaced over time without the community taking note, and the new top witnesses operate code that is not in the best interest of the community. To mitigate this, the community should note the state of witnesses from a time when the chain operated in a way that reflected the ideals of the community and fork to return to this more representative validator set. Section 11.5, the importance of parameterization.
Why parameters matter? Without guardrails, simple proof of stake quickly centralizes around whales or single staking pools. Parameters act like traffic rules or guardrails on a winding road. Each parameter, e. G. Minimum validator count, witness vote decay, lock up times, is a protective measure so that real world attacks don't succeed. Examples of useful parameters. One, minimum validator count. Ensures at least a set number, e g, 20, of independent validators must coordinate, preventing one or two major pools from dominating. Two, lock up before voting.
Newly staked tokens must wait weeks, giving the community time to spot suspicious activity, e g an exchange powering up customer deposits. Three, vote decay. Stakeholders must periodically renew their votes, preventing potential voter apathy and forcing validators to remain accountable. Four, time delayed unstaking prevents attackers from quickly exiting after a hostile maneuver. They risk their own stake being stuck if the community florks out hostile funds. Distribution first. Even the best governance parameters fail if most tokens sit with early insiders or VCs.
A broad token distribution, ideally through value for value earning mechanisms, is vital for meaningful decentralization. Having people worldwide earn tokens from a neutral layer one by contributing something valuable rather than buying at scale helps create a large middle class of voters. Section 11.6. Why no founders, no ICO, and no VCs? Central attack points. Founders and CEOs, a single visionary becomes a legal or regulatory target. Governments can coerce them into compliance, leading to censorship or policy changes. VC pre mines and early sales.
Venture capital often demands a controlling stake, undermining decentralized governance. Unsuspecting retail users later serve as exit liquidity, and the interest of the founders and the late entry users are often therefore misaligned. Formal companies. If a blockchain company holds trademark or controls critical code, lawsuits and cease and desist orders can force compliance. Community built and ownerless. A true decentralized chain has no formal owner or headquarters, making legal threats difficult to enforce. This was illustrated by the Hive community when a mining company attempted legal action over the Hive brand name.
With no single entity to serve or respond to a lawsuit, it was later dropped. Section 11.7. Voting models are everywhere. All consensus is voting, whether proof of work, miners vote via computational work, proof of stake, largest stake votes, or delegated proof of stake, parameterized stake votes. Every system is some form of voting. Pretending code is law, eliminates humans, is naive. People choose how code upgrades, and they enforce or reject forks in emergency. The distinction lies in, what do you vote with? Mining power, tokens, or delegated tokens?
Which parameters ensure fair distribution? Lock ups, whitelist, minimum validators, etcetera. How do you handle staked reputations, backups, or emerging crisis? Delegation and politicians. Delegation allows a less technical holder to transfer voting power, not ownership, to a trusted witness or community leader. This replicates the concept of political representatives. Accountability. If a delegate misuses votes, the original stakeholder can revoke delegation. Reputation building. Ambitious or service oriented community members can gather delegated stake by proving themselves helpful, honest, and aligned with the network's ethos.
In this way, stakeholders can delegate votes to witnesses or proxies, much like electing politicians. This ensures smaller holders, or those without technical knowledge, can still influence governance through trusted representatives. Reputation systems help identify benevolent proxies. Section 11.8, accountability and preventing AI and big tech takeover. Human element. Some blockchains incorrectly assume purely algorithmic approaches can settle disputes. Real communities need human judgment. The chain social layer must be able to override purely technical missteps. Delegated proof of stake excels here because stakeholders can intervene if an actor or an AI accumulate stake maliciously.
As artificial intelligence matures, AI sock puppet accounts could appear credible in online communities, slowly accumulating stake. However, a chain that places value on long standing history, accounts building trust over years, are less likely to be AI, particularly if they started prior to AI's rise. Community based identity. Reputations, subjectively determined by real humans, can guard against an AI that merely posts content, participate in proof of person systems, where a known, trusted, and reputed real person holding an on chain account identifies a business, such as a shop.
Users who buy products and document the purchase on chain can prove they are a person without having to KYC. Know your customer. For further information, see annex I, glossary of terms and acronyms. This interplay of parameterized coin voting, reputation, and human oversight forms a bulwark against AI driven infiltration. New AI accounts will lack such historical footprints, letting the community discount them in governance decisions. Section 11.9, defining web 2.5. Most self proclaimed web three protocols still rely on centralizing venture capital.
Early token tree mines or private sales create small powerful clicks controlling governance. High fee layer one, forcing developers onto layer two solutions that are often themselves centralized, corporate entities. A chain might have an official company or foundation that can be targeted or regulated, leading to partial superficial decentralization. These projects are best categorized as web 2.5. They adopt some blockchain elements, but remain vulnerable to corporate or government pressure. Big tech versus web 2.5. Traditional corporations, web two point o, profit from user data and can easily create web 2.5 solutions.
Semi centralized blockchain based services where they still hold keys or run crucial servers. True web three demands protocols incentivize independent infrastructure globally Without a genuine neutral layer, convenience monsters, like large platforms, can undercut smaller operators and reintroduce central points of failure. Section 11.1, achieving true web three. A truly decentralized system has, one, no pre mines or founder stakes. The network is community owned from inception, so no single authority can be coerced into compliance or censorship.
Two, parameterized coin voting. Long lockups, minimum validators, well tested distributions, and social reputation layers prevent accidental or malicious centralization. Three, community accountability. Voting is frequent or reevaluated. Large custodial wallets cannot quietly hijack consensus. Four, neutral incentive driven infrastructure. Nodes and decentralized application operators are rewarded from the protocols minting of new tokens or fees, reducing reliance on corporate business models or KYC requirements. Key point, if a blockchain surrenders to large scale pre mines, venture capital dominance, or minimal parameters, it drifts into Web 2.5.
Realizing the full promise of Web three requires structural safeguards and widely distributed stake, combined with robust governance that no single entity can subvert. Section 11.11, putting it all together. One, proof of work, effective for base security at mass scales, like Bitcoin, but lacks governance, flexibility, speed, low cost transactions, and is nearly impossible to replicate in new projects, ideal for large permissionless liquidity and collateral provision. Two, basic proof of stake. Uncheck stake accumulates power, quickly centralizes around whales, venture capitalist, or exchanges, ideal for financial yield systems.
Three, delegated proof of stake, parameterized coin voting. Builds on stake equals skin in the game while adding crucial guardrails, lockups, vote decay, minimum validator sense, reputation, etcetera, to foster true decentralization, ideal for socially nuanced communities and network states. Four, web 2.5 versus web three. Many crypto platforms remain significantly centralized. True decentralization emerges when no founder, company, or small click can capture the chain, and governance decisions arise from a fair, widely distributed stake, informed by real human reputations, crucial tenets.
No founders, no pre mine, no VC. Remove single points of control. No one to coerce or to sue. Open infrastructure incentives. Protocol must pay community run nodes and developers. Avoiding web two business models, a large and active voting base. Broad token distribution and user engagement protect the chain from hostile takeovers, reputation, and human oversight. Genuine communities rely on trust built over time. When code fails or AI tries to infiltrate, humans must step in. Long voting stake lockups, multi week or multi month stake lockups to vote, minimum number of top validators, and transparent reputation for block producers.
Everyone can earn. Users with small stakes to earn stake through proven contributions, content creation, infrastructure, etcetera. Voting decay and ability to delegate votes. Healthy revoting and proxy delegation to reduce voter apathy and ensure dynamic leadership. Conclusion. Dedovernance is not about removing governance. It's about removing centralized governance and replacing it with a robust, multiparameter system that's hard to capture. Proof of work provided a censorship resistant foundation for Bitcoin, but it's impractical to recreate and offers little room for social or high throughput applications.
Unparameterized proof of stake tends to centralize around large holders or exchanges and makes the person or mining pool with the most stake, the most powerful, and most rewarded on the network. Delegated proof of stake or more generally, parameterized coin voting add social nuance, reputation, timed lockups, witness vote decay, stability, minimum node counts, and open development funding, and allows even the people with the smallest accounts to rise to the top of the witnesses and gain significant influence on the chain, provided they carry out the wheel of the community.
Under these conditions, communities can sustain vibrant digital ecosystems, censorship resistant social networks, governance systems, economies which are truly owned and operated by the people who rely on them. This is the vision of a scalable, democratic, and resilient blockchain, finally delivering what many call Web three. By enforcing decentralization at the protocol level through no founders or companies, fair distribution, and layered defenses against collusion, These systems can achieve genuine freedom from censorship and regulatory strangleholds.
The result is an ownerless, community driven blockchain that stands the greatest chance of scaling into a fully fledged digital network state where rights are coded and guarded by human consensus. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Introduction. Once a blockchain community agrees on parameterized coin voting, often called delegated proof of stake or DPOS, It must also define how the ecosystem's voting power is distributed and exercised.
These coin voting parameters determine everything, from how long stake must remain locked when powered up, protective time delays for stablecoin token swaps on the base layer, to how new tokens are issued or taxed, as well as many other variables. Each parameter serves as a safeguard against centralized takeovers and short term manipulation, while also incentivizing community members to hold, build, and coordinate in the long term. This chapter details key parameters, such as lockup durations for governance, stablecoin security rules, token minting and inflationary controls, and more.
It explains why collectively they form the backbone of secure, censorship resistant, on chain economies. Section 12.1, importance of long lockups for governance participation. Why locking matters? When stakeholders lock or power up tokens for an extended period, they reveal genuine skin in the game. Someone who can instantly withdraw has far less risk and can more easily perform a short term attack or manipulate votes. By contrast, a locked in stakeholder must carefully choose who or what they vote for because they can't exit quickly if they cause harm or fail to benefit the community, preventing custodial attacks.
Long lockups also prevent custodial wallets, like centralized exchanges, from freely using other people's tokens to hijack governance. If tokens must remain staked for months, it's much harder for an exchange to suddenly vote without telegraphing its move. The community gains time to see large power ups and respond if malicious behavior appears. Time as a security factor. Time itself becomes an integral part of security. With a multi month lock up requirement, any new well is effectively on probation for that period before it can fully influence governance. This discourages opportunistic short term attackers who want to buy in, vote, then sell.
Section 12.2, one month voting delay, seeing attackers coming. A voting delay is a specific parameter stating that even after you lock your tokens, for say three months, so that you can vote in governance decisions, You must still wait an additional period, e g one month, before you can cast those governance votes. This delay means the community can observe and reach out to new large stakeholders and see if they're legitimate or a threat. Any suspicious movement of funds from, for example, a major exchange's wallet becomes immediately visible, and keeping monitored in case it's going to be used in an attack on the community.
Critical defense had such a voting delay existed on certain delegated proof of stake chains in the past. Major hostile takeovers by custodial exchanges would have been thwarted or significantly hampered. See the Steam blockchain takeover. The extra time window lets defenders rally. They can withdraw support from compromised witnesses or even prepare a hard fork to nullify an attacker's stake if it's obviously stolen or the intention is to use stake against the super majority's will, which represents the community's consensus. Section 12.3.
Why a three month lock up? Why three months? Three months is a good lock duration for governance participation, but similar lengths are good as well. It strikes a balance, long enough to deter drive by attackers, but not so long as to alienate ordinary users. During this period, stakers cannot instantly sell their tokens, so they share in the chain's volatility and remain committed. Potential attackers must accept that if they sabotage the system, their funds remain at risk to volatile price movements and community consensus driven mitigations for months.
Future variations. Some ecosystems might experiment with different lengths or even tiered lockups with longer commitments, giving even greater voting power. The core idea is consistent, time bound staking cements accountability and weeds out short term exploiters. Section 12.4, stablecoin security. Why a decentralized stablecoin is crucial for an on chain economy to function, especially one prioritizing censorship resistance. Users need a stable unit of account that doesn't rely on centralized issuers or banks. A purely speculative chain with a volatile native token won't serve everyday commerce or wages.
Algorithmic stablecoins fill this gap by maintaining a peg, usually $1, but it could be pegged to some other stable asset, commodity, or basket of the same, should the community consensus wish it so, relying on on chain mechanics, free of direct fiat banking, allowing users to buy goods, save money, or transact in a familiar unit instead of an unfamiliar, volatile priced asset, collateralized by the base token. The main token is often 20 to 30 times larger than the stablecoin which it collateralizes. There should be multiple controls built into the base layer protocol, which ensures the stable asset is always vastly over collateralized by the main token.
A robust Algo stablecoin typically uses the chain's main token as collateral. For example, if you hold 1 Hive back dollar or HBD, you can always convert it into $1 worth of Hive, the main token, provided certain parameters remain healthy to prevent runaway issuance. The chain includes haircut rules and time delays on large token swaps, ensuring the stablecoin supply can't surpass the market capitalization of the underlying collateral in a way that threatens the peg. An example of where these rules were not followed, ending in inevitable disaster, was Terra Luna, which incorporated none of the above mitigations into its protocol, resulting in a hyperinflationary collapse.
Section 12.5, haircut rules, preventing over issuance. A haircut rule puts a hard cap on how large the stablecoin's total market can be relative to the base token's market cap, for example, 30%. If the stablecoin ever or approaches this threshold, one, the chain can stop creating additional stablecoins, e g, halting certain reward distributions in stable form. Two, it may devalue the internal stable coin peg to 90¢, 80¢, etcetera, to ensure overall system solvency by prioritizing the limitation of the creation of new main governance slash collateral tokens during conversions back from stable coins at the cost of the stable coin peg value.
This prevents a hyperinflationary event of the main collateral token, protecting the ecosystem, albeit at the cost of a temporary depegging of the stablecoin assets price, adaptive mechanism. This dynamic protects both the stablecoin and the chain from a bank run, where too many stablecoins chase too little collateral over time. Once conditions improve and the chain's base token regains value, the stable coin's internal peg and issuance can return to normal. This cyclical approach allows algorithmic stablecoins to recover from market dips without collapsing irreversibly.
Section 12.6, time delay on bulk token swaps. Slow conversions, more safety. If large holders could instantly swap massive amounts of tokens into stablecoins or vice versa, they could destabilize the market or execute rapid attacks by building short positions in the main token and then instantly converting large amounts of stablecoins to the main token. This causes massive inflation of the main token and devalues it, resulting in large payouts for the attacker's short positions. Imposing a three day or similar delay on major conversions gives the community consensus driven protocol time to adjust supply and internal pricing, alerts the community to suspicious behaviors well before the conversion finalizes, creates a highly risky situation for the attacker, who now has to wait for three days with a large short position that can be liquidated by a move higher in the base layer asset, causing a huge short squeeze against their position.
This makes the potential losses to the attacker infinite, and the inherent risk of such an attack far greater than carrying out such an attack without out the time delay on internal stablecoin conversions mitigation in place, avoiding system shocks. A delayed swap mechanism prevents sudden surges in the stablecoin or base token supply, reducing manipulative volatility. This resembles capital controls, ensuring a healthy conversion pace rather than abrupt floods that can crash markets. Section 12.7, inflation control. Steady, transparent token issuance.
Blockchains commonly issue or mint new tokens as inflation. Distributing them to infrastructure operators, also called validators, or to individuals providing value, for example, content creators, developers, or liquidity providers. However, the inflation rate must remain carefully managed. Too high, and the token's value dilutes, undermining long term growth, inflating it away to zero. Too low, and the chain can't adequately fund community projects or incentivize widespread distribution at the token. Community defined parameters. Many delegated proof of stake systems use scheduled token minting curves, e. G, starting at 12% and then dropping to 0.5% per year until 0.5%, or allow consensus decision by governance voting to adjust annual rates.
The key is that no central party arbitrarily mints unlimited tokens. When stakeholders collectively control inflation, they align it with network health. Section 12.8, importance of transaction taxes. Note, some chains opt for resource credits instead of explicit transaction fees, but the concept is similar. Prevent spam. Tiny taxes or resource credit cost in zero transaction fee systems on each transaction deter malicious actors from flooding the network with meaningless transactions. If designed properly, transaction fees can be channeled into a decentralized community fund, financing infrastructure upgrades, marketing, or development without relying on external VCs.
Trade off. High fees can stifle usage, pushing users to centralize layers or competitor chains. Lower zero fee designs risk spam unless you stake tokens to earn resource credits. The right solution typically involves parameterized resource models that scale usage based on staked token amounts. Section 12.9, backing the token with community interactions. Real economic activity. A chain's main token gains lasting value, not through speculation alone, but from genuine utility. If people need to stake tokens long term in order to post or comment, run apps, vote on governance proposals, earn stablecoins or other rewards, then they compete for access to on chain resources in exchange for holding and staking those tokens.
As network effect takes hold and the community grows, The demand for transaction grows, and thus competition for access on chain resources grows with it. This usage is what backs the token's worth. Far more stable than mere hype, speculation, and venture capital backed market makers. Circular incentives. Users earn tokens for creating valuable content, running infrastructure. They then stake, I e, lock those tokens to gain influence or resource credits, enabling them to access more on chain activity, which further enriches the ecosystem. This positive feedback loop cements real demand for tokens that pure speculation cannot match.
Section 12.1, rewards for holding and locking in, Staking benefits. Counterbalance short term traders. Incentivize early believers and builders. Foster and favor a middle class of stakeholders who have earned their tokens from the protocol over time, over whales that merely buy big positions on day one. Proof of commitment. These hold and earn or stake and earn models on social blockchains, where community stake weighted voting of capable content show that one can support the chain's vision long enough to shape its governance responsibly.
In many systems, staked accounts also receive a portion of newly minted tokens or content curation rewards over time. This incentivizes long term stakeholders with skin in the game to continue to contribute to the community while earning additional stake as a result of their value added contributions. Section 12.11. Decentralized applications and services as holders of last resort. Why they don't sell. Applications build atop a chain. Social media platforms, games, DeFi protocols need guaranteed access to transactions, bandwidth, and resource credits for their users.
They must lock large amounts of the base token. If they become distressed sellers and sold under times of price pressure, their entire app would cease to be able to post to chain and thus lose much of its functionality. This creates a class of holder of last resort entities who keep tokens no matter how low the price dips in order that they can continue to operate their applications on chain. Intrinsic value floor. When multiple serious decentralized applications stake substantial amounts of tokens, You get a demand floor, an intrinsic value to the token.
Even in market crashes, these services can't afford to offload their stake. This underpinning helps prevent token value from hitting zero, purely from panic sales. Section 12.12, anonymous accounts versus known accounts, freedom versus trust. A truly censorship resistant chain lets users create accounts without government issued IDs or personal details. However, if people want to build public reputations or operate recognized infrastructure, they may choose to dox themselves, revealing their identity. Both approaches matter. Anonymous or pseudonymous users enjoy privacy, crucial for free speech in hostile regimes.
Known users gain trust more quickly and may have official track records. Hybrid ecosystem. Chains typically end up with a mix. Some top validators or developers might be pseudonymous, while others are open about who they are. Reputations can form around handle names, proven over time by consistent participation. Section 12.13, importance of locally run desktop apps for censorship resistance. Web apps are vulnerable. If an application only exists as a website, e. G. Something.com, governments or ISPs can block the URL. Domain registers can seize or censor it, pressuring the app to follow local regulations, desktop clients.
By contrast, user installed desktop or mobile clients directly query the blockchain's node infrastructure. No single domain or centralized server can be shut down. Even if a front end's website disappears, the community run blockchain remains accessible through these locally operated apps. True decentralized access. Desktop clients shift control back to users. They choose which API nodes to connect to or even run a node themselves. This fosters unstoppable digital communities, no domain takedown, or corporate compliance order can erase the chain's content or access to it. Conclusion.
Coin voting parameters might seem like small technical rules, but collectively they fortify an ecosystem against takeover, ensure broad participation, and maintain the stablecoin foundation crucial for everyday transactions. Long lockups and voting delays deter short term money attacks, while stablecoin haircut rules and time delayed swaps prevent systemic collapse. Transaction fees or resource credits control spam and fund public goods, and decentralized applications become holders of last resort, sustaining demand for the base governance slash collateral token. Whether your account is anonymous or publicly known, these governance parameters allow a robust, censorship resistant environment where individuals can operate desktop apps, earn tokens from the rewards pool, and shape policy over time.
By weaving all these elements together, economic, technical, and social blockchain communities can grow into truly self sovereign digital network states, immune to the centralizing forces and quick profit motives that undermine so many freedom slash self sovereignty based projects. The Digital Community Manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 13. Defending decentralized delegated proof of state communities. Attack vectors, security mechanisms, and the power of layer zero. Introduction, decentralized ecosystems, promise censorship resistance, transparent governance, and community ownership. Yet these aspirations come under threat the moment someone attempts to gain disproportionate control.
Whether through direct purchase of tokens, stealthy accumulation, or coordinated influence, attackers seek to seize the reins of power, or at the very least, disrupt the shared values that hold the community together. As a result, the community must be highly vigilant to monitor its systems for signs of centralization and be ready to defend itself at all times. This chapter explores the key attack vectors in delegated proof of stake blockchains, the defenses that resilient communities employ, and how reputation, distribution, and circular economies become powerful shields against hostile takeovers.
Section 13.1, understanding the direct 51% attack. A 51% attack in the context of many blockchains typically refers to controlling the majority of mining hashing power in proof of work blockchains or the majority of total stake in proof of stake. In a delegated proof of stake chain, the equivalent is controlling over 51% of the active voting stake, not necessarily 51% of total tokens in existence. A large fraction of tokens may be nonvoting, dormant, or held by long term investors who choose not to participate in governance. So the threshold to seize decision making power might be lower, e g 30 to 40% of total tokens, if it translates to half of the actively voted stake. The goal of gaining 51% of the voting stake in either proof of work or delegated proof of stake governance systems is to control or change the underlying consensus software of the blockchain.
The group which controls 51% of the active voting stake has the power to nullify balances, change the rules to carry out any number of wide ranging, nefarious actions, which may act against the best interest of the wider community. Some of these actions may even be subtle and hard to detect without deep knowledge of the base code. Section thirteen point one point one, calculating the threshold in practice, dormant or apathetic stake. Many investors do not wish to use their governance rights. Some have lost access to keys. Others simply hold tokens passively.
Others are ill informed as to the importance of maintaining activity of their tokens in governance decisions. Voting delays. Delegated proof of stake platforms often include powering up requirements and waiting periods, also known as staking. For example, once tokens are staked or powered up, an attacker must wait, e g thirty days, before being able to vote for witnesses, the block producers. Community immune response. During peaceful times, only 30 to 40% of total supply might be actively voting. Under attack, additional dormant stake frequently awakens, pushing the actively voted stake higher.
An attacker who has purchased 30 to 40% of the total tokens might suddenly face 50 to 60% of active stakeholders voting against them when these voters were apathetic before their attack. Section thirteen point one point two, over the counter, OTC acquisitions. Attackers sometimes attempt shock acquisitions, buying large stakes through private, over the counter deals with major token holders to avoid moving markets. Even so, a month long lock or similar delay feature grants the broader community critical time to observe the build up, approach the new party about their intentions, and organize a defense if necessary.
Section 13.2, indirect or slow accumulation attacks. An alternative method is the slow stealthy approach, gradually buying tokens over a long period so that no sudden price surges draw suspicion the attacker attempts to outpace inflation and avoid spooking community members. This is often described as a red queen race or game where the attacker has to keep running, constantly purchasing stake to maintain or grow their position because, one, inflation issues new tokens to existing stakers, continuously diluting outsiders attempting to accumulate stake over the long term for an attack. Two, community awareness can lead to counter buys.
If accumulation becomes obvious, others may accumulate too, driving up price and making the attack prohibitively expensive. In practice, truly stealthy long term accumulation on a healthy, delegated proof of stake network proves extremely difficult because continuous buying raises a token's profile. It can also raise the price, creating a negative feedback loop that the attacker has to outpace. Section 13.3, distribution and security. Well distributed token ownership is the most fundamental defense against takeover attempts in delegated proof of stake.
If a small group of large holders controls the majority of tokens, an attacker may simply collude or purchase those stakes. Conversely, if significant token supply rest in the hands of numerous mid level stakeholders, dolphins or orcas in some ecosystems, No single OTC deal can guarantee majority control. One, a healthy middle class. A broad middle class of token holders ensures that a handful of whales cannot single handedly decide governance. Two, ongoing community allocation, continuous reward mechanisms, e g, content creation rewards, infrastructure rewards, gaming, or curation.
Spread tokens widely among active participants, reinforcing decentralization. Three, fair launch or post launch distribution. Token systems with large pre mines or concentrated early investors may face outsized risk of governance capture. Over time, these chains must actively work on distributing tokens to genuine, productive community members. Otherwise, they undermine their own security model. For more information on preminds in ICOs, see chapter 15, censorship and the morality of premines. Section 13.4, how to defend against attacks.
Section thirteen point four point one, the immune response. In the event of an attempted 51% attack, a delegated proof of stake community often springs into action, much like a biological immune system. Dormant stakeholders rally to vote. Whales who had previously been indifferent secure the network to protect their own investment. The sudden rise in active voting power can defeat or mitigate the attacker's advantage. The lower the level of dormant or apathetic voting stake during times of normal operation, the more of a deterrence it is to an attacker.
Section thirteen point four point two, forking, the ultimate escape hatch. Even if an attacker somehow takes control of the main chain, forking remains a final check on malicious power, copying state and excluding attackers. Communities can duplicate the blockchain's history, but exclude or freeze the attacker's stake. Everyone else's balances are preserved on the new fork, where the community will move in order to isolate an attacker on the old fork, migrating to a new brand. Though the original chain may keep its name under the attacker's control, the real community can move to a new chain complete with code and state continuity.
In this case, the community should do everything it can to communicate what the new brand is, where to find the new chain, and what changes the new chain has made in order to mitigate the attack on the previous fork. Failure to do this is often as bad as not forking away from a hostile attacker. Winner takes all. In most scenarios involving delegated proof of stake chains, which are being attacked, the community led fork becomes the de facto chain. The attacker holding no tokens on the new fork discovers you cannot buy a community. Without people to give the token utility, the original chain withers.
Forking therefore holds large token holders accountable, compelling them to act benevolently toward the community. If whales push too hard or threaten the ecosystem's values, the rest of the network can simply leave. This veto power ensures that smaller stakeholders, though individually less wealthy, collectively hold enormous influence, which far outweighs that of any of the whales, the large stakeholders in the ecosystem. Section 13.5. You can't buy a community. Centralized start ups or traditional corporations may be acquired by buying out a single entity or board of directors in a community governed ecosystem.
No single gatekeeper can sell the heart or values of the community. If an attacker attempts a hostile takeover, rebellion, the moment members sense motives detrimental to the network, they organize resistance, fork off. Communities fork away if necessary, taking the developer talent, user engagement, and brand loyalty with them. Moral imperative. Decentralized communities often coalesce around values like censorship resistance or autonomy. Members who have already tasted digital freedom or notoriously unwilling to forfeit control, or make a deal with a hostile attacker, especially when the overlord's intentions are questionable.
Section 13.6. The community is the layer zero. In blockchain architecture, we often hear about layer one, the core protocols, consensus, and data availability. And layer two, applications, smart contracts, dApps. Missing from many discussions is layer zero, the community of people who participate, build, and govern. Ultimate source of value. DApps transactions and social engagement bestow real world relevance and demand upon a token. Without active users and developers, the network is merely code, immune response. Layer zero unifies in times of crisis, bringing otherwise dormant stakeholders to defend the chain, collective veto, When whales or outside attackers threaten the ecosystem, it is the community, layer zero, who can coordinate a new fork, rendering any hostile stakes worthless.
In proof of stake systems, which usually lack engaged community members, due to the typical nature of the passive earning for staking model and proof of stake systems, a wealthy minority can capture governance outright with no recourse for remediation for the majority individual members of the community. By contrast, well distributed delegated proof of stake networks rely on their engaged vigilant user base. The crucial layer zero to monitor, maintain control decentralized, and fight for it digitally when necessary. Section 13.7, reputation building and trust.
When under attack, it is almost impossible to know who the honest acting block producers or witnesses are unless their accounts are named with human readable identifiers and already have reputation that has been built over many years of reliable operation. This is the only way to reliably identify who your adversaries and allies are during an attack and why reputation in a group of top witnesses who are known entities, even when they are pseudo anonymous, is so important. Why would one move to a fork of unknown or unidentifiable witnesses after all? Additionally, having reputed elected witnesses signaling which version of the blockchain's code they're running from the open source repository is far more secure than in cases where a small number of people communicate this on Twitter or other censurable Web two social platforms.
As is the case with the vast majority of top blockchain today, one of the questions to be asked when deciding for oneself whether or not a community will defend your digital rights is how many of the top elected witnesses will not bend the knee to state pressure. And if they do, will the community quickly elect backup witnesses into place? While one cannot know the answer to this directly, one has to use judgment to decide which chain has the technical ability and back up witnesses to cope with pressure and external attacks best. Their actions and how they acted in pressing times will be on chain forever for history to judge.
As long as a community requires censorship resistance, demand for competent, honest witnesses and block producers who are loyal to the community and exist outside areas from which government pressure arises will increase during attacks. In cases where incumbent witnesses submit to unjust or forced government requirements, Demand for backup witnesses will increase as the wider community will incentivize those who preserve censorship resistance. Section thirteen point seven point one. The value of on chain reputation. Reputation in decentralized systems combines intangible social capital, trust among peers, and tangible on chain achievements, e g track records of contributions, proposals funded, or community voted post, transparent history, actions such as authorship, writing new code to improve the base system, identification and curation of valuable or infrastructure operation are typically logged publicly on chain, making it easier to verify a participant's long term involvement.
Community voting. Projects can highlight individuals through initiatives like community member of the month, distributing tokens or issuing badges and NFTs to credible contributors. Section thirteen point seven point two, reputation damage. Acting against communal interest, voting in malicious witnesses, or exploiting and gaming the system to unfairly extract community rewards can destroy an individual's reputation. In a small tight knit community, reputation damage is often irreversible. One cannot easily hide or rebrand to escape on chain records. In many ways, on chain accountability can be more powerful than any legal or centralized penalty.
Section 13.7.3, NFTs for reputation. Non fungible tokens can also reflect reputational milestones. For example, earn contribution badges. Testing, bug hunting, or evangelizing a new application might earn you a a unique NFT that can be displayed on many of the ecosystems front end platforms as banjos of honor and status, long term involvement, an account that has built up multiple such NFTs over the years, signals genuine commitment to the community and the continuation of its values. Fork coordination. In a contentious fork, it becomes easier to identify trusted participants who have proven social and achievement based track records positive contributions, shown through their NFT collections, or verifiable participation.
Because forging an entire history of valuable actions is expensive and time consuming, NFTs serve as an additional line of defense. Attackers trying to infiltrate the community would have to do real beneficial work for years to build up a similar standing, an ironic deterrent that strengthens the network. They aim to subvert. Section 13.8, infrastructure operation and security. Distributed blockchain stands or falls on the breadth and redundancy of its infrastructure, validators and witnesses, and delegated proof of stake. The top 20 community elected block producers secure the network.
Decentralizing their ownership and distribution of block rewards curtails single points of failure. Node operators. More community operated nodes ensure that malicious actors cannot easily shut down or censor the network. Funding and incentives. Systems that autonomously reward node operators through new token minting or block rewards, help maintain a wide base of infrastructure providers without relying on trust in third parties. When the community invest in multiple forms of off chain infrastructure storage solutions, front end interfaces, decentralized identity, and proof of person systems, it becomes substantially harder for an attacker to sabotage the ecosystem in one fell swoop. Section 13.9, achieving circular economies.
Circular economies arise when members not only earn tokens for contributions, but also spend tokens within the same network. Real world examples include contractors and service providers willing to accept the ecosystem's stablecoin as payment. Local projects, e g, well drilling, community parks, funded directly in the native token. Cross border use, where members send tokens internationally without KYC friction, using them for day to day transactions. Physical shops accepting the currency in daily commerce, paying employees with it, and accepting it as payment, and providing clients with benefits, such as cash back for using the currency.
A robust circular economy means a token is no longer just a speculative asset. Instead, it becomes an everyday medium of exchange, weaving itself into the fabric of local businesses and communities. At that point, attacking or banning the token outright becomes politically and practically difficult. Governments risk backlash if they disrupt livelihoods of projects that rely on blockchain funding, commerce, or censorship resistant transactions. Section 13.1. You can't attack a system that's helping people. When a blockchain funds initiatives that truly improve lives, such as building water wells in underserved regions, supporting food drives, or financing local commerce, the optics of any crackdown becomes dire.
Governments or wealth driven attackers have little more high ground to justify shutting down an entity providing essential services. People defending the chain can credibly argue that any ban or hostile takeover punishes those most in need, galvanizing countrywide as well as global sympathy, garnering political pushback. Section thirteen point ten point one, benevolent acts and resilience. By design, delegated proof of state communities can sponsor benevolent acts through their own chain decentralized autonomous organizations, DAOs.
The transparency of these charity like distributions where every transaction is visible reduces or even completely removes suspicion of corruption. The result is both concrete impact, Villages gaining clean water, clinics improving medical supply chains, or impoverished regions finding alternative commerce channels, strategic strength. A network doing widespread good is more difficult for bad actors to undermine without resisting huge reputational fallout. Section 13.11, bringing governments into the ecosystem. Beyond passively tolerating blockchain projects, governments may be invited to participate in ways that align with community values, such as issuing community bonds on the blockchain or adopting tokens for local governance or budgeting.
Once governmental bodies see tangible benefits and even cost savings from decentralized transparent record keeping, The incentive to ban or attack the platform drops further. In some scenarios, municipal bonds on a blockchain. A city might raise funds from the global community by issuing interest bearing tokens with repayment schedules transparently tracked on chain, local tax initiatives. Governments might accept partial taxes in tokens if they see that usage benefits the region. Such measures weave state level actors into the community itself, transforming potential antagonists into stakeholders who would defend the network and giving incumbent political actors tools to build genuine community supported legitimacy for their blockchain documented good deeds to the communities they serve. Conclusion.
Delegated proof of stake ecosystems. Delegated proof of stake ecosystems are uniquely positioned to fend off attacks from dramatic 51% takeover bids to subtle, stealthy infiltration, provided they uphold a core set of principles. One, widespread token distribution. A thriving middle class of stakeholders dilutes takeover risk and empowers the broader community. Two, robust immune response. Dormant voters wake up when threatened, forming a collective shield. Three, forking as the final safeguard. The community's ability to abandon a compromised chain neutralizes the power of malicious whales.
Four, reputation and trust. Social capital, verifiable on chain contributions, and NFTs that certify long term engagement make infiltration extremely expensive. Five. Benevolence breeds resilience. Funding real world projects fosters local loyalty and global goodwill, making the chain even tougher to suppress. Six, embracing circular economies and government partnerships. Widespread daily usage in state level integration in the real economy render token based services indispensable and resistant towards hostile interference. Ultimately, no one can simply buy a community.
While an individual institution might acquire tokens, the heart of a decentralized ecosystem resides in its people. When those people champion transparency, freedom of speech, and open collaboration, that create a formidable system that cannot be so easily captured or coerced. In this way, layer zero, the community itself remains the bedrock of genuine decentralization and, indeed, the ultimate guardian against all forms of attack. The digital community manifesto. Digital rights, game theory, and governance of scalable block chains for use in network states. Chapter 14.
Balancing scalability and censorship resistance. Disproving the scalability trilemma. How to achieve high throughput without sacrificing security or decentralization. Introduction. The so called scalability trilemma asserts that a blockchain must compromise on either security, decentralization, or scalability. It seemingly cannot excel in all three. This idea, widely attributed to certain high profile developers, has shaped much of the industry's design choices, often leading to high fees, heavy layer one smart contracts, or alliance on centralized second layers.
However, the trilemma itself is based on flawed assumptions. By distinguishing data availability from computation, optimizing for truly low fee base layers, and ensuring fair token distribution. We can build systems that are both highly scalable and censorship resistant without sacrificing security. Section 14.1, why the scalability trilemma is misleading. Section fourteen point one point one, security and decentralization are the same goal. A core claim of the trilemma is that security, decentralization, and scalability are three separate pillars that a blockchain must juggle. Yet in reality, security in a censorship resistant blockchain derives from decentralization.
If a network can be censored, it is not secure. Hence, these two pillars are really just one. A network's degree of decentralization determines its censorship resistance, which determines its security. Any framework that treats security and decentralization as separate categories is already conflating the same property in two forms. This conceptual redundancy leads many projects astray. Section fourteen point one point two, mixing computation with data availability. Many protocols that attempt to handle everything, including smart contract computation and data storage at the base layer end up with high fees.
Because on chain computation is both expensive and socialized, unpredictable throughput, any popular app such as CryptoKitties, an early meme ecosystem that bloated all Ethereum transaction fees when it attempted to scale with its popularity can clog the network, driving fees sky high for everyone else. These symptoms are not inevitable, but arise if you force every node to perform all heavy computations on every block. By separating the roles, leaving text based data availability to the base layer while pushing complex computations to layer two systems, blockchains can avoid the trade offs that the trilemma insist upon.
Section 14.2, rethinking scalability. Scalability often means the network can handle many transactions per second. But ironically, many scalable chains impose high base layer fees or complex layer one logic that undermines widespread usage and results in fat nodes that are uneconomic to operate without passing excessive cost onto the user base. Section fourteen point two point one, lightweight base layer for true layer twos. A truly scalable layer one should focus almost exclusively on being a data availability layer with near fee less or staked resource transactions.
Layer two solutions, which rely on that base layer security, can then run intensive computations or store large non text based data off chain, referencing the base chain for its immutability requirements. If the base layer one is too expensive to write to, then any purported layer two will come centralized because it cannot afford to commit its data or proofs back on chain on a regular enough basis without having to trust the layer two system. This undermines the trustlessness that blockchain technology was supposed to minimize. Example, Bitcoin's lightning network.
Channels are expensive to open close, so users rely on a few large node operators, which form transaction hubs through which most of the network's traffic passes. Decentralization suffers as a result. Lightning effectively forms a small cluster of well funded custodians. Lightning nodes are not forced to process all transactions, and therefore, there is a level of censorship built in without having to risk losing mining rewards from the Bitcoin layer one. High fee smart contract chains. When layer two operators cannot frequently submit data on chain due to high layer one transaction cost, they must store it off chain, losing the guaranteed immutability from the layer one.
They turn into trusted centralized services as a result. Section fourteen point two point two, resource credits versus fee auctions. Standard blockchains often rely on fee auctions. Users outbid each other, so the chain always chooses the highest paying transaction first. This leads to spikes in fees whenever demand surges, I e, the CryptoKitties problem, poor user experience, and unpredictability, making it impossible for typical apps to guarantee stable transaction cost to their user bases. By contrast, a resource credit or stake based model requires users or applications to stake tokens to gain an allotment of daily transactions, credits.
No one else's willingness to pay can steal your bandwidth. As long as you hold enough stake, you can transact or store text data at minimal cost. This approach remains stable even during high usage because your right to transact is locked in by your stake, not by ephemeral variable fees, which always increase in times of high demand, when the user needs to transact the most. Result. By applying a feeless resource credit model, you get a chain that can handle large volumes of traffic without punishing normal users with unpredictable fee changes.
Section 14.3, censorship resistance equals security. If a project claims to solve the trilemma by scaling up, yet remains easily censorable, it fails on security. Real security means no single entity can freeze accounts or remove data. This is only feasible if one, token distribution, is broad enough that no whale foundation, venture capital firm, or centralized exchange can unilaterally dictate governance. Two, block production is parameterized, so a fixed amount of top independent validators, each accountable to the community and replaceable by stake weighted election, remain spread worldwide.
Three, low fees or staked resources ensure that usage doesn't centralize around large corporate infrastructure. Section fourteen point three point one, unparameterized proof of stake versus parameterized coin voting. Proof of stake systems without guardrails, unparameterized coin voting, often devolve into a handful of two to four large staking pools, e. G, Lido Finance, controlling consensus. Unless carefully designed, this leads to high centralization, where the votes of one or two large pools overshadow smaller validators. Easy regulatory targeting, since large staking surfaces become choke points for governments or corporations.
A better approach, especially for social and highly nuanced community governance, It's parameterized coin voting, e g, delegated proof of stake with a fixed number of validators and mandatory stake lockups. This ensures no single entity can spin up infinite validators and manage to have them all simultaneously elected into the consensus by the community's votes. Full transparency if anyone attempts to buy excessive influence. Time lock stakes for governance voting creates real accountability. People can't just vote maliciously and dump.
Section 14.4, governance and stake distribution, the most difficult and most crucial element. A proof of stake or delegated proof of stake blockchain can only be censorship resistant if its tokens are meaningfully and widely distributed. If a small group of venture capitalists, founders, or preminers holds the majority of tokens, they can override governance or be legally pressured into compliance that ultimately represents a takeover of a community, causing it to operate against its own best interest. Achieving broad distribution typically requires, one, no pre mines and no ICOs.
Nothing seeds an imbalance in centralization more than giving a few insiders large shares at launch. Two, low barriers to entry and to earning. Anyone, anywhere should be able to earn tokens by providing value running infrastructure, creating content, building apps, or other socially beneficial actions. Three. Long term engagement. Communities that improve everyday life, e. G, enabling people in countries where their currencies experience high levels of inflationary devaluation. To save in a currency which is pegged to a stable value, attract organic users who value and hold the token, forging deeper loyalty and distribution, and as a result, increase security for the communities, economy, and governance.
Section 14.5, zero knowledge roll ups for scaling and privacy. Scaling blockchain networks for mainstream use has been challenging due to network congestion and high transaction cost on layer ones. Zero knowledge z k roll ups, a layer two solution, addresses these issues by moving computation off the layer one chain and validating transactions with compact proofs on layer one, reducing congestion and cost. Z k proofs work essentially by allowing someone to prove that they have access to information without actually showing that information to the party asking for proof. For example, if the information that they possess allows them to correctly solve a complex mathematical problem over numerous iterations and adjustments in input variables, so that expected outputs are received in return.
Then after a number of repeated correct responses in a row, the party asking for the proof can be satisfied that the party with the information actually has it, even though they do not know what the information is and do not need to reveal it. A simple example of a z k proof is where you ask a friend to tweet out a word from a Twitter account that they say that they control. They oblige, and a few minutes later, you see the Twitter account in question has posted the word you requested. There is now a good chance that your friend is proven to be the owner of the account. But to be sure, you ask them to repeat the process several times, each time posting a different word that you have specified.
After several correct tweets, you have enough evidence to be convinced that your friend controls the password to that Twitter account. Your friend does not need to reveal to you the password to their Twitter account to prove to you that they do in fact have the keys to the account. This is a zero knowledge proof. The process of z k roll ups is where the computation to carry out and verify transactions is not done on the blockchain layer one, but on a z k capable layer two. Z k roll ups on such a layer two can batch or roll up many thousands of transactions. Then a z k proof can be published to the layer one for final clearing and security, verifying the correctness of the transactions in the process.
The important thing to note here is that these z k proofs are far smaller than complete layer one transaction data, making the layer one far less congested when it uses z k proofs to scale, while not adding to the cost of transactions. Because of their zero knowledge nature, these proofs can be adapted to enable layer one block producers to validate layer two transactions without needing the transaction information itself. This makes the transactions private, obscuring information from both the layer one block producers, third party observers, and even the person receiving the transaction.
Section 14.6, real world example, community forks. The evolution of certain delegated proof of stake systems shows how distribution often arises from unexpected events, like hostile takeovers or forks, rather than neat plan token sales. When a community must set aside its internal differences and unify to fork out a malicious actor stake, distribution can become more organic. Many previously inactive holders in voting become active voters to defend the chain, like an immune system kicking in. It increases the inherent security of the chain by reducing apathetic voters. Founder stakes or investor stakes get nullified if they attack the community.
The result is a large class of committed stakeholders who align around genuine and continued decentralization. See chapter thirteen point four point two for more information on forking away from abusive well stake. Conclusion. The so called scalability trilemma posits that a chain must sacrifice security, decentralization, for scalability or vice versa. In practice, this trilemma stems from conflating data availability with computation and ignoring the power of parameterized coin voting combined with a widely distributed token. Key lessons.
One, separate computation from the base layer. Keep layer one minimal, text data availability, and lightweight transactions. Push heavy smart contract logic, large media storage, or advanced computations to layer two. This allows near fee less base layer transactions, crucial for censorship resistant usage. Two, resource credit or stinking models. Eliminate high, unpredictable base layer fees, so layer two solutions and normal users can reliably store data or do basic transfers. Guarantee that the success of one application doesn't undermine the cost of transactions on others through universal fee auctions. Three, ensure no single entity can dominate.
Avoid pre mines, large ICOs, or central staking pools that accumulate majority control. Parameterized consensus, e g, a fixed set of elected replaceable block producers, and lock up stakes for governance. For more information on tree mines and ICOs, see chapter 15, censorship and the morality of preminds. True security equals decentralization. Security is not separate from decentralization. A chain is only secure if no single party can impose censorship or freeze assets. Five, broad distribution is non negotiable. Let anyone earn the token from real value added activities, such as building, content creation, or infrastructure support.
Community forks or freak events often achieve fair distribution more effectively and organically than any top down designs. By following these principles, a blockchain can deliver robust throughput and maintain censorship resistance, disproving the notion that one must compromise security versus decentralization versus scalability. Properly built systems show these are not mutually exclusive trade offs, but rather aspects of a carefully designed, parameterized network where no single dimension has to be sacrificed. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 15, censorship and the morality of premines.
How premine tokens enable centralized control and why true decentralization demands fair distribution. Section 15.1, understanding the moral and practical issues of a premine. Section fifteen point one point one, defining a premine. A premine occurs when a blockchain's token supply is minted, sold to, or allocated to specific insiders, founders, VC funds, early investors, before it becomes available to the broader community. This may happen in an ICO, private sale, or seed round. Moral concerns, unearned privilege. Those who receive a large portion of tokens at negligible or no cost gain disproportionate power over governance, essentially buying out a community that doesn't even exist yet.
Misalignment of incentives. Early insiders can exit, dump on future participants who then become de facto exit liquidity. The project's community and the insiders do not have the same goals as a result. Regulatory exposure. If the same small group has significant control, e g 20% plus of the supply, that project can be classed as an unregistered security under various interpretations. Even if it is not formally regulated by the FEC or CFTC, it remains susceptible to political or legal pressure due to its obvious central points of failure. Section fifteen point one point two, hidden regulation through pressure. Even when regulators officially classify a token as a commodity, where it falls outside of the regulation of the governing bodies, informal leverage still exist.
Centralized owners, large token holders, often operate in major financial jurisdictions. If pressured by authorities, they can be forced to comply or risk legal consequences. Control of infrastructure. On a chain that is majority owned by a handful of entities, governments, or powerful corporate interest can persuade infrastructure operators or coerce them to censor certain users or transactions, particularly if they are operating a significant amount of an ecosystem's infrastructure under one corporate entity. No official crackdown needed.
The project appears unregulated, yet it's quietly controllable by anyone who can influence those few wells or well funded validators or infrastructure operators. This is the case with most blockchain projects operating today, particularly those with the largest market capitalizations. Key point, pre mines hand regulators and large stakeholders a built in attack vector. They can shape the change rules or impose censorship indirectly because the underlying distribution is centralized. Section 15.2, how premines undermine censorship resistance.
Section fifteen point two point one, coin voting without parameters. Many chains use unparameterized proof of stake, which is effectively coin voting with no strict guardrails. If preminers hold large stakes, they can dominate every decision without having earned their positions of influence on a fair basis. Legitimate community members hold far less influence and cannot effectively resist if these big holders choose to censor certain addresses or content. Section fifteen point two point two. Tying in to centralized nodes. Large token holders often fund massive infrastructure, especially when the chain's nodes are expensive to run, e g requiring high end hardware.
This fosters a network of large centralized validators often operating in regulation friendly jurisdictions. If governments demand blacklisting or freezing, this small circle of validators will likely comply no matter how officially decentralized the chain claims to be. Section 15.3, moral arguments against preminds, fairness and earning. A chain that launches without pre mines or large ICO allocations forces every participant to earn their position, whether by early mining, meaningful contributions, buying tokens on the open market, or earning social value for value rewards, this fosters alignment. All holders have sacrificed time, labor, or resources, so they want the system to be robust and censorship resistant where there is no pre mine or ICO.
Even if the stakeholder wants to buy and exit quickly, they will at least have already added value to the ecosystem in some way where they obtained their tokens by pre mine. This is not always the case since no value was added when the stakeholder was ordained tokens. Since they added little to no value to obtain that stake, avoiding exit liquidity and exploitation. When venture capital or founders hold a massive early stake, they can and often do sell those tokens after hype builds, leaving later arrivals holding devalued coins. This dynamic cripples trust and channels wealth to insiders rather than distributing it among actual and organic community builders. Why would you run a validator on a chain, which is clearly owned by others?
This means that all of your efforts and works are going into supporting increasing the value of other people who didn't actually earn that value fairly since they obtained their tokens preordained in a pre mine. Most chains with pre mines are making it look like many people run validators. Whereas in reality, no person who genuinely values freedom would run a node in a chain that was pre mined by someone else as you are working for them by proxy. Once premines were removed from a community or on projects where there is no premine from inception of the project, often more open source contributions are observed from community members since they know that the value of the work they do is not going back to a corporation, owner, founder, CEO, or early venture capitalist firm. True decentralization from day one. If no single party holds, say, more than 7% of tokens, there is less risk that an external hostile force can capture the network by coercing that party or obtaining their tokens in an over the counter private purchase.
The network's governance emerges naturally. Participants vote proportionally to how much effort or value they have added, not how cheaply they acquired tokens at launch, or even ordained tokens at zeroed cost as happens in some cases. Section 15.4, censorship implications of centralized coins. The more centralized a blockchain is, the more likely it is to succumb to corruption, regulation, and shutdowns. The following are some of the ways centralized entities can corrupt a seemingly decentralized ecosystem given just enough centralized control to tip the balance of power in their favor. One, layer one manipulation.
Given enough stake and coordination from centralized exchanges that hold significant amounts of custodial stake, or large stakeholders can simply impose code changes and only reorganize the chain or block addresses that centralized entities who do not have the best interest of the community at heart, if so demanded by a regulating agency, users have no recourse. The change rules can be rewritten without broad consensus in this scenario. A change users must be vigilant, always monitoring for such vulnerabilities and attack vectors taking place or forming on the chain and in its governance token distribution.
Early venture capital, pre mine, ICO, or company backed chains will appear decentralized under normal operational periods. However, in times of defending against catastrophe, when the community needs the chain to be the most censorship resistant, the ability for these centralizing entities to censor transactions often becomes overwhelmingly clear. Even in times when the chain is not undergoing catastrophic attack, such as during a hack or when new more restrictive government regulation is released, code changes can be passed that go completely against the community's wishes.
In such cases, community has little recourse. Censorship on layer two. If the base chain is compromised, then so are layer two apps. Artificially imposed high fees by bad actors on layer one or central gatekeepers hamper true censorship resistance because it can become expensive to clear to layer one for immutability. In such cases, many layer two solutions rely on layer one stablecoins, which may become controlled by a few large token issuers. Again, pre mined or prefunded, authorities can freeze or reverse transactions on these assets easily in such scenarios.
No grassroots defense. In truly decentralized systems, communities can fork out malicious large holders. But if the majority stake belongs to a handful of powerful investors or exchanges holding custodial stake, That can be used for governance voting. Forking to remove them is nearly impossible. The entire infrastructure effectively obeys or is operated by the largest stakeholders. Section 15.5, case studies and real world consequences. The steam hive fork. When Steamit Inc, the company behind the Steam blockchain, sold its large NinjaMine stake to an external buyer.
That buyer, Justin Sun, attempted to dominate chain governance and stated that the ecosystem's decentralized applications would now be migrating across to another chain. Without first getting approval from the decentralized applications in question, the community quickly forked steam, creating the Hive blockchain, which removed the hostile NinjaMine stake on the new fork. Since there was one identifiable hostile stakeholder and many opposing wells and community members that supported the community, The New Fork was sufficiently decentralized after having forked out the hostile entity, and so the High Fork was a success.
However, had there not been sufficient decentralization of large stakeholders, It may have been the case that the New Fork created a situation in which a new group could easily form an alliance to dominate and dictate the New Fork's governance, making it a failure. Key lesson. If a chain can unify and remove an overbearing founder stake by forking, it avoids permanent capture, but only if distribution is already broad enough to resist takeover on the new fork. Ethereum's regulatory gray area. Ethereum presold tokens in its initial coin offering, yet it still ended up under partial regulatory capture because it is big enough and has signaled compliance.
EG censored Tornado Cash transactions at the protocol level based on regulatory body actions, causing compliance among major validators. Key lesson. Even if not formally labeled a security, the chain is still vulnerable to censorship demands because large validators and infrastructure operators, especially those who obtain their stake by being sold cheap tokens by the founders in a pre mine, can be pressured indirectly by regulatory and government bodies, highly centralized chains. Some networks remain so heavily premined that a founder or VC sees almost all future community participants as exit liquidity.
They seldom resist censorship, or they bow out to regulation if it threatens the early insiders' majority stake. Section 16.5. How a premine hurts everyday users. Misaligned incentives. Insiders may not care about genuine freedom of speech or censorship resistance. They often care only about short term return on investment. They will normally comply with any authority if it sustains token price or personal safety. No real vote, even if the chain claims to have on chain governance. Smaller user stake is dwarfed by whales who are self ordained pre mines and who never earn their tokens, making community voting largely symbolic.
Susceptibility to attacks. A single compromised entity, venture fund or centralized exchange, can pivot chain policy, effectively turning the network into a lightly disguised corporate product. Section 15.7, Moving forward without premines, founderless, or no ICO launch. It is critical to allow people to mine or contribute from day one without privileged allocations on a fair basis so that as many people, technical and nontechnical alike, can mine the token from a neutral base layer. The result is a much wider organic distribution where the goals and interest of the vast majority of players are aligned.
And people trying to exit have already added value in some form. Stake distribution. Encouraging value for value earn models, so tokens flow to users who actually run nodes, create valuable content, or provide valuable services, rather than early self ordained pre mine holders. Long lockup periods and other distribution and voting constraints make it harder for one group to seize control. Community watchdog. If any large entity accumulates too much power and becomes hostile or is perceived as a security risk, the community is prepared to fork or vote them out. This is impossible if premines gave them a large enough majority stake.
Then the community becomes fragmented following the defensive fork. The community needs, therefore, to self regulate this dynamic and make sure it does not become susceptible to such a situation. Conclusion. Free lines are more than a funding shortcut. They are a structural vulnerability that undermines the very decentralization many blockchains claim to champion. By empowering a small elite or large investors from inception, Such projects paved the way for censorship, regulatory capture, and moral hazards. No matter what the official legal label might be, key takeaways.
One, moral misalignment. Pre mined coins let a handful of insiders profit off later participants. Two, regulatory pressure. Even if not formally classed as securities, largeholders can be coerced to implement censorship or comply with government mandates. Weak community defense. When a chain is top heavy, resisting takeovers or forks that remove corrupt actors is nearly impossible. Four, true freedom requires fair distribution. Launching without pre mines or ICOs compels all to earn tokens proportionately to contributions. Building a naturally decentralized governance system in which all have a fair chance to build stake and participate without serving someone else who has not already added value to the ecosystem themselves.
Five, misalignment of incentives. Early preordained token holders have an incentive to use unsuspecting new users as exit liquidity without first adding any value themselves. Refusing premines and demanding fair open distribution isn't just an ideological stance. It is a practical necessity for any blockchain that aims to be censorship resistant and provide neutrality and, therefore, digital rights to its users ethically aligned with user interest and beyond easy regulatory capture. The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 16. Three pillars of decentralization. Three pillars that all digital communities need for self sovereignty. Introduction. Many projects struggle with decentralization because they focus on the wrong goals or mix too many complex features into their base layer. By contrast, truly censorship resistant and scalable systems can emerge from three core pillars. When these pillars exist at the base layer, the entire ecosystem gains self sovereignty, freedom of speech, and economic resilience. Section 16.1, text based data availability.
Freedom of speech. A system must store text or fundamental data in a globally replicated way. This ensures everyone can freely post or read without a single entity able to delete or block content. Simplicity and cost. Only storing text keeps overhead predictable and minimal. Complex computations or large file storage on the base layer leads to huge cost and limited scaling. Neutral infrastructure. Because text is universal and lightweight, it can be distributed across many jurisdictions. Attempts to censor or alter historical records fail unless the entire network agrees, ensuring true data availability.
Key point, text based storage on the base layer ones, the foundation of free speech and collaboration across any border. Section 16.2, zero fee transaction layer. Skin in the game instead of fees rather than paying every time you transact. You stake, that is lock up tokens to gain transaction bandwidth. This model is often called resource credits or regenerative fees. It eliminates unpredictable cost and fosters global usability for all people, whereas chains with fees on transactions can become prohibitively costly to people without economic means to pay such fees.
High throughput, low friction. When you remove transaction fees, you open the door for real time micropayments and rapid app development. Users do not abandon the network under surge pricing or fee spikes. Expanding ecosystems. Zero or near zero fees makes it viable to build truly decentralized applications on layer twos that reference data from the base layer. Expensive layer ones cannot host decentralized apps effectively because each action that clears from layer two to layer one so that the layer two application gains trustless security becomes too costly. Key point.
A zero fee transaction layer, backed by staking, ensures anyone can use the network, allowing broad adoption and preserving censorship resistance. Section 16.3, on chain stablecoin, essential for daily use. A stable form of payment is critical for real world transactions. If the native token always fluctuates in value, most people will not rely on it for routine expenses, business transactions, or savings, decentralized and backed. An on chain stablecoin can be algorithmically backed by the main governance token. As long as the stablecoin's market cap remains well below that of the base token, the system remains secure.
Self sovereign conversion. Because this stablecoin resides entirely on the base chain, users exchange value without external markets or centralized gatekeepers. True on chain liquidity means no forced reliance on outside exchanges for dollars or stable value exchange. Essentially, this means that the ecosystem can continue to function and provide itself with liquidity without centralized or even decentralized exchanges. Key point. A decentralized stablecoin, fully integrated on the base layer, is the final piece that allows people worldwide to store and transact in stable value without leaving the protocol.
Section 16.4. Why these three pillars matter. Censorship resistance. Text based storage protects free speech. Distributed nodes ensure no single jurisdiction or entity can delete what you say, post, your followers, your community, or its economy. Zero fee transactions. With staked tokens, users bypass unpredictable network fees. This opens the door to everyday usage, microtransactions, and diverse decentralized apps where users do not require gas, a prohibitive hurdle to access in order to interact with the ecosystem. Stablecoin integration.
People need a stable unit of account for commerce. An on chain stablecoin allows real economic activity without centralized intermediaries. Together, these pillars form a self reinforcing network. Free speech, data availability, increases the system's inherent value and communication. Zero fees, encourages participation and app development for all people. A base layer stablecoin, empowers real world trade without needing external exchanges. When combined, they create a truly self sovereign ecosystem, no central point of failure, no single jurisdiction in control, resistant to blockages of own and off ramps, and no reliance on external stablecoins or exchanges.
This model is already demonstrated in systems like the Hive blockchain, which integrates text based data, near feeless transactions through staking, and an on chain stablecoin. By mastering these three pillars, a blockchain can achieve a higher degree of decentralization and practical everyday utility. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 17, algorithmic stablecoins on layer one, a Felis permissionless non banking asset backed layer one, medium of exchange, and liquidity is essential.
Section 17.1. Why we need a truly decentralized stablecoin? Many blockchains rely on centralized stablecoins like Tether or USDC that hold reserves in fiat accounts. These assets can be seized, frozen, or regulated at any time. A censorship resistant blockchain must have an algorithmic stablecoin backed only by digital value that no single entity can control or confiscate. Section 17.2, backing the stablecoin with digital real estate, social tokens, and bandwidth in the ecosystem. A stablecoin has to be backed or collateralized by something in a censorship resistant system.
Backing cannot be gold, dollars in a bank, or any physical good vulnerable to seizure. Instead, it should be backed by a layer one governance token that represents valuable digital real estate or bandwidth to post data on chain relative to other users or apps also wishing to post data to chain. The governance token should grant access to on chain resources, e g, tech storage, zero fee transactions, otherwise known as bandwidth access to upload to the database, payouts in newly minted tokens for community contributions, and proof of stake governance with strong parameters to prevent takeovers.
The digital real estate has fundamental demand because it secures data availability, free speech, and zero fee transactions. The main token can then back or over collateralize an on chain stablecoin algorithmically pegged to the dollar without the need to hold collateralizing assets in a traditional bank, which are subject to seizure or censorship. Section 17.3. How it works? One, pegging to the dollar. The stablecoin maintains a target value of 1 US dollar. It does so by letting holders redeem the stablecoin for 1 dollar's worth of the base token. As long as the base token has a higher market cap, then the total stablecoin supply.
Redemption is secure, and the stable asset remains adequately over collateralized. Two, a haircut rule. To avoid the fate of projects like Terra, Luna, a debt limit or haircut parameter is set, often around 20 to 30%. If the stablecoin supply approaches such a set percentage of the base token's market cap, The chain stops issuing new stablecoins. This prevents the stablecoin's market cap from exceeding its collateral. Three, delayed conversions. Attacks happen when a stablecoin is instantly swapped for the governance token and dumped on the market.
To counter this, conversions take place over a few days. Three point five days is typical. Large conversions face time risk and possible fees, making quick takeovers highly risky for the attacker and most likely unprofitable. Four, fee or haircut on bulk conversions on the base layer. A small fee, e g 5%, can apply to mass conversion, discouraging sudden attacks. Genuine users pay the fee only when moving large sums, while attackers find it prohibitively expensive to destabilize the system. Five, reward pool funding. These stablecoins often emerge via new token minting to a daily rewards pool that the community competes for. The more stake weighted votes your contributions receive, the more of the rewards pool you will receive in turn. Half of the daily rewards go to users in stablecoins and half in the base governance token. This slow steady issuance avoids reliance on centralized reserves.
This slow, steady issuance avoids reliance on centralized reserves. Over time, the stablecoin organically expands alongside the flow of tokens to the community. Section 17.4. Infinite liquidity through base token conversion. Even if centralized exchanges list only small amounts of the on chain stablecoin, true liquidity can be effectively unlimited. A large holder can, one, buy the base token on the open market, purchase the governance token on open markets, two, convert over time. Convert that token supply into stable coins via the protocol's built in mechanism on layer one.
Three, haircut rule enforcement. If the conversion is large, the base token's price likely rises. This increase keeps the ratio below the debt limit, preserving stability. In fact, it may lower the debt limit as the supply of the stablecoin is increased. Since in this scenario, it is likely that the market cap of the base layer token being bought on the open market and used to convert to stablecoins will increase at a higher rate than the increase in supply of the new stablecoins being created by those conversions. This process mirrors how centralized stablecoins work, except there's no single issuer to call for a mint or redemption.
The protocol itself autonomously executes conversions. Section 17.5, example, Hiveback dollars, HBD, noncustodial. No single wallet company or government can KYC freeze HBD or seize its collateral? Three second confirmations. Transactions are nearly instant and effectively feeless thanks to resource staking. Parameter rules, 30% debt limit haircut. If Hiveback dollars nears 30% of the governance token's market cap, Hive. No more HBD is issued. Conversion delay. Conversions from HBD to Hive or vice versa take several days and may incur a fee. Organic expansion.
HBD supply grows through daily new token mints, which are allocated to content creators and community members via decentralized community stake weighted voting systems. If large financial players want millions in decentralized stablecoins, They simply acquire Hive on the open secondary market, then convert day by day into HBD. This pushes Hive's price up such that its market capitalization increases more than the newly minted stablecoins, lowering the debt ratio. Thus, the stablecoin issuance system scales while maintaining an adequate collateral buffer. Section 17.6, resilience against attack, comparisons to failed models.
Unparameterized algo stablecoins like Terra Luna had no effective cap on supply redemptions. When attackers mass converted the stablecoin to Luna when attackers mass converted the stablecoin to Luna, it collapsed the token's value. In contrast, parameterized systems employ haircut thresholds, delayed conversions, and optional conversion fees. These dampen flash maneuvers vastly increase financial risk to the attacker and reduce exploit potential. Fork out option. Even if a large actor gains a huge stake, reputation based, censorship resistant communities can fork the chain and exclude hostile balances.
This threat deters malicious governance attacks. Section 17.7, toward a parallel dollar economy. A reliable layer one stablecoin sets the stage for a true parallel economy, allowing everyday people to transact globally with no KYC, store value in a stable currency, move into or out of local currencies without permission gateways, access zero fee settlement in seconds. Because these stablecoins are algorithmic and fully on chain, they also enable advanced financial instruments, like bonds and collateralized loans, mirroring pristine collateral akin to US treasuries, but free from legacy banking restrictions.
Over time, such systems can mirror or replace major components of traditional euro dollar international finance system without centralized reserves or permissioned intermediaries. Conclusion. No physical reserves. Backing must be purely digital, immune to seizure or control by a single entity. Parameter based algorithm. Enforce haircut rules, delayed conversion, and optional fees to maintain the peg and prevent sudden attacks. Infinite liquidity. As long as the governance token is valuable due to real utility, large amounts of stablecoins can be created by buying the base token, stable parallel currency.
Distributed newly minted tokens and community driven enforcement produce a sustainable on chain dollar for everyday use in financial services. Algorithmic stablecoins on layer one are an essential pillar for any genuinely decentralized block chain ecosystem, powering commerce, savings, and economic growth outside centralized oversight. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 18, off chain data availability layer for non text data, storing more than text. Introduction. A text based storage layer on the base chain is critical for censorship resistant records. But what happens when you need to store large files, like video or software, Storing them directly on a lightweight text focused chain would bloat the network.
Once you move beyond text, you need an off chain data availability layer to keep blockchain nodes lean while still distributing and verifying heavier content. Section 18.1. Why not just put it all on chain? Data density. Large files, videos, high resolution images, or entire software packages are too big for most blockchains to handle without enormous storage overhead, performance bottlenecks. Even if you tried, nodes would become fat and resource intensive, ruining the fast low latency experience needed for high transaction throughput on the base layer. Selective immutability.
Most users do not want every casual comment, e g, LOL, stored immutably forever. It's better to keep the on chain layer for critical text, metadata, and important references. Hence, pushing large files off chain is both practical and efficient. This also helps to deload the base layer, allowing it to focus on storage only of critical information and data links that direct to off chain information. The result is that the base layer can scale far beyond what was originally possible if everything had been stored only on the base layer. Section 18.2, how off chain incentives work. With text on the base layer, you still need secure, censorship resistant ways to store everything else. Think of it as layer two storage, where off chain dedicated storage nodes maintain heavier files but receive on chain incentives.
A widely discussed approach is a separate token based system that pays operators for providing off chain data availability. One, users or apps want to store files. They create an on chain contract specifying the data and how much they will pay to keep it available. Two, nodes run off chain storage. These are community run machines, providing excess hard drive space or bandwidth. Three, proof of storage or access. The network randomly checks if the nodes still hold the data. If they prove it correctly by quickly delivering requested file segments, they earn rewards.
Four, layer two tokenomics. An additional token can fund payouts for storage, encoding, or content delivery. This token's rules are anchored to the main chain, but operate independently for heavy data needs. Section 18.3, the SPEAK network. One model for off chain availability is the SPEAK network, which stores large files like videos via a distributed set of nodes. There is core incentive token. Operators provide bandwidth and disk base for content. They are rewarded by user created contracts, each specifying what files must remain available.
Validator nodes, a lightweight system of 20 community elected validators, should be the route through which all content on the off chain storage system is uploaded. The validators can then take the encoded chunks of data and hash their data footprints. Community storage nodes must download the files from these validators and hash the same data chunks to confirm receipt of the data. The reason this works well is then it does not require all validators running nodes to process and store all files in the network like a proof of work system would do. A parameterized coin voting system, delegated proof of stake for file storage is the optimum solution since it is lighter weight than proof of work.
And with 20 elected validators, it can manage decentralized consensus governance while still being a trustless system, which does not need to count only on the richest members of the community to run its most critical infrastructure, the content validator nodes. Proof of access. The network randomly pings community data storage nodes to confirm they can serve requested data. If they deliver the matching hash chunks back to the validators quickly, that is confirmation that the storage node is storing what they say they are storing. As a result, they earn rewards from the allocated contract pool associated with the contract within which the file is stored.
Video encoding and streaming. In addition to raw storage, a system like SPEAK can incentivize video transcoding and live streaming servers, offloading the heaviest processing from the main chain. Through these incentives, SPEAK aims to replace centralized video platforms back end, storage, streaming, encoding, with a decentralized community owned layer. For further information on the SPEAK network, visit httpscolon//spk.networkslash. Section 18.4, keeping the base layer lightweight. Text is fundamental for an immutable record of governance transactions and high level metadata.
Everything else heavier or more data intensive, such as video, large images, or software, should be stored off chain. By separating duties, layer one stores text data, comments, references, IDs, plus the chain's consensus rules and transaction layer. It remains fast, minimal, and nonfat, uses no fees or very low fees, powered by a daily rewards pool of newly minted tokens. Layer two handles heavy storage with separate economic incentives, runs proof of storage or proof of access to verify hosting. Nodes earn a specialized token, maintains partial immutability.
If a node drops your file, it loses rewards and on chain reputation. Section 18.5. Why separate layers matter? One, scalability. Dividing text based consensus from heavy file hosting prevents the entire chain from bogging down. Two, targeted security. Text on chain enjoys the strongest guarantees, immutable and globally replicated. Multimedia off chain can still be censorship resistant, but doesn't force every blockchain node to store gigabytes of data. Three, flexible cost. On chain data is costly and must remain minimal. Off chain nodes can set custom storage prices, allowing a market based approach for different file sizes and retention durations.
Four, endless services. Beyond video, any large scale process such as music hosting, three d rendering, AI model storage, and many more can be incentivized similarly. Community run nodes provide resources and earn tokens for proven work. Conclusion. Lightweight, on chain core, text data at governments remain on a fearless, parameterized coin voting chain. This ensures immutable text based information and references, reliable transactions, and stable coin minting. Off chain data availability. Parallel networks like SPEAK host non text data under a separate token economy.
Nodes prove accessibility of large files to get paid via the proof of access method, POA. Users, content companies, and content platforms create contracts for any multimedia content. As a result, individual community members can be paid for backing up this content. Mutual reinforcement. The main chain's reputations and incentives ensure honest participation. Layer two nodes trust the base chain for governance, data permanence, and data availability, while the base chain gains broader utility through off chain hosting solutions. This two tier system, immutable text plus incentivized off chain data, balances scalability with censorship resistance.
It stores critical records on the main blockchain and offloads heavier or less crucial files to user powered networks for backup. The result is a robust ecosystem where nodes can specialize, content remains online without centralized servers, and the core chain stays lean and can scale. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 19, Service infrastructure pools, SIP. Paying the community instead of the exchanges. Introduction. A service infrastructure pool, or a SIP, combines elements of a decentralized exchange, a DEX, and a DAO.
Normally, DEX trading fees go to a centralized operator's profit. In a SIP. Those fees are pooled and can be voted on by token holders to fund infrastructure improvements or other community initiatives. Section 19.1, basic concept. Send exchange fees back to the community. Instead of letting a centralized exchange collect trading fees, a SIP aggregates them into one pool. Stakeholders then decide how to use those pooled funds. They might pay infrastructure operators, fund new features, or distribute incentives that benefit the broader network. This is often coupled with a way for the SIP to sell an autonomous product or service, the revenue of which goes directly into providing additional liquidity to the SIP account.
This allows the SIP to grow over time, potentially to a point where the fees generated from token exchanges are able to fund all or most of the infrastructure that is operating on the wider network. Section 19.2, example from the SPEAK network. In SPEAK network, users can buy minting tokens, like Laramix, to improve their share of mining rewards directly from the SIP account. Purchasing these tokens requires locking up dollars, HBD, or similar assets in a liquidity pool. The key points are buyers of tokens place funds into a SIP account. Those funds stay in the pool and can be used for community driven initiatives. The mining tokens give owners more mining weight or resource priority.
If attackers want control, they must buy these tokens from existing holders, effectively paying the community their required rate for taking over the governance, after which the original community will likely fork if the attacker is deemed as non benevolent to the protocol. This setup discourages hostile takeovers because any large purchase of mining tokens raises the token's price benefiting existing holders, and the attacker's funds permanently bolster the ecosystem's liquidity. Section 19.3, combining a DEX and a DAO.
A typical DEX allows people to stake liquidity, earn fees, and withdraw profits. In a SIP, part of, or all the funds remain in the pool rather than returning to individual stakers. The pool's growing liquidity produces trading fees, and those fees can be sent to infrastructure operators, allocated to development teams, distributed for marketing, user incentives, or emergencies. By design, it is like a DAO controlling a permanent liquidity stash with revenue streams continuously replenished by users buying service tokens, e g mining tokens, which improves a user's mining capabilities in the network.
Section 19.4, required technology and combining ecosystem liquidity. As SIPs grow, they can be combined as multisig liquidity and collateral providers stored on the base layer. For additional security, they can employ a massive multisig technology, such as BLS signatures. This allows for a reduction in size of the signature storage required in each block and therefore accommodates 400 up to thousands of keyholders on the main multisig account, SIP, in the ecosystem. This means that much larger amounts of liquidity can be securely stored for various purposes and by various parties on chain who seek increased security for their liquidity providers.
Sanction 19.5, self sustaining ecosystem. Over time, more participants buying tokens for better mining efficiency drives more funds into the SIP. The liquidity pool gradually swells. As it does, it may earn enough in trading fees to pay for infrastructure without relying on external funding. Provide a safety net. If outside market conditions weaken, autonomously finance new ecosystem projects and expansions. The end goal is an ownerless, decentralized pot of liquidity that pays for the chain's operations and growth acting like a shock absorber during market downturns.
Section 19.6, replacing centralized exchanges. Centralized exchanges such as Binance or Coinbase collect trading fees for corporate profit. A SIP, by contrast, directs its fees and other revenue streams into an own chain pool governed by community votes. Rather than benefiting a few large stakeholders, these funds can reward node operators, subsidize new projects or decentralize applications, Remain inside the community, strengthening the protocol overall. This model reclaims revenue streams. This model reclaims revenue streams that would otherwise flow into centralized parties.
Key takeaways, autonomous purchases. When users buy mining or service tokens from the SIP, funds go into the SIP and never leave, creating a permanent increasing liquidity reserve. DAO like control. The community decides how to allocate SIP reserves, ensuring democratic management. Stability and growth. As more people seek the service tokens, the SIP grows, generating fees that can fund infrastructure or offset downturns. Reduced attack vectors. A would be attacker must inject significant capital to gain leverage, thereby strengthening the ecosystem in the process.
Conclusion. Service infrastructure pools blend DeFi liquidity pooling with DAO governance to create sustainable community owned revenue mechanisms. They transform trading fees into collective assets that keep infrastructure running and development funded, all without centralized exchange intermediaries. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 20. Open source makes IP less valuable. A new business model is to accumulate the governance token and give the rest away for free. Introduction. Open source development challenges the traditional value of intellectual property. In a blockchain ecosystem built on open source principles, code can be freely copied, iterated upon, and improved by anyone.
Instead of focusing on proprietary software or brand protection, the emphasis shifts to tokenizing a base layer protocol that gains value from community driven network effects. Section 20.1, why traditional IP models will weaken. Section twenty point one point one, Copy and iterate. In open source projects, anyone can copy the code and iterate upon it. This significantly reduces the powers of patents and copyrights that typically protect software. Once the code is public, forks and variations can proliferate without legal barriers. It also vastly reduces the amount of work required to build a new digital project or product in cases where the original source code are used as the basis for that project.
Section twenty point one point two. No centralized enforcement. Truly decentralized systems are resistant to lawsuits. You cannot sue an amorphous community of contributors and node operators, especially when many use pseudonymous identities. Traditional IP enforcement mechanisms lose their potency. Section 20.2, accumulating the base token instead of IP. Section twenty point two point one, governance rights accumulation as the business model. Because open source leaves little IP rent to collect, Builders accumulate governance or utility tokens in the underlying blockchain as a result of having received community votes for their valuable contributions to code building.
As the ecosystem grows, the quality of products improve. A network effect takes hold in the user base. Adoption increases, and the token's value can rise. Section twenty point two point two, community ownership. Projects no longer rely on proprietary lock in. Instead, they encourage developers to improve the code and create stronger network effects. Holding more of the base layer token gives influence and a direct stake in the ecosystem success, which incentivizes further contributions from developers. Section 20.3, abundance versus scarcity of IP.
Section twenty point three point one, abundant code. In a fully open source environment, code is shared, and even brand elements can be replicated or remixed. This approach prioritizes expanding overall utility rather than controlling a limited pool of IP. Section twenty point three point two, power of the network effect. Section twenty point three point two, power of the network effect. Instead of leveraging a single brand or patent, participants focus on building a stronger community. The most valuable resource becomes the network of users, developers, and infrastructure operators, all benefiting from a thriving token economy.
Section 20.4, brand and community tensions. Section twenty point four point one, forking logos and names. In decentralized context, truly decentralized communities can mimic or adapt a project or brand's logo or name. Traditional lawsuits become impractical since there is no central entity to target. Attempts at enforcement can even backfire by uniting the community against the IP owner. Twenty point four point two. Brands aligning with their community. Companies must adopt new ways to cooperate with decentralized user bases rather than trying to dominate them or see the data they generate as the sole property of the company to mine, sell, and monetize.
Real value lies in fostering community loyalty and participation, giving them skin in the value system via fair distribution of tokens and stake, not in clinging to trademarks or brand identities. Section twenty point four point three, stake for resources. In a well designed decentralized system, users or apps stake the token to gain network bandwidth. Developers build open source apps and receive tokens either by purchasing them on the market or earning them through community rewards for having done something valuable for the community itself.
Section twenty point four point four, intrinsic utility. A well designed decentralized system offers censorship resistant tech storage, fast and fearless transactions, and stablecoin infrastructure. Its core is maintained by distributed contributors who share a common stake in the token of the community. Section 20.5, suing a distributed community. Section twenty point five point one, impossible central target. A fully decentralized network has no headquarters to subpoena. If there is no premine, no foundation, and no single entity, lawsuits over IP infringement have no direct target.
Section twenty point five point two, communities undermining IP laws. As a network becomes more censorship resistant and globally distributed, it becomes harder for IP owners to enforce claims. Communities operating worldwide with pseudonymous digital identities render legal pressures over trademarks and copyrights less effective. Conclusion. Code freedom over IP. Open source software weakens traditional IP claims. Anyone can copy and improve code without significant legal fear. Token based incentives. Instead of profiting from patents, developers accumulate the base layer token, aligning them with long term ecosystem growth, which in most cases, incentivizes further open source contributions from developers and other community members who want their existing stake to grow in value.
Community as strength. Brand and logos can be forked in truly decentralized systems. The most influential brand is the one the community supports, not the one with the most lawyers. No central point to sue. Fully decentralized projects lack a headquarters, owner, central figurehead, or foundation. IP related lawsuits have no clear way to shut them down. Focus on network effects. Real value flows from community collaboration and user adoption. Open source accelerates ecosystem growth by inviting a broad range of contributors and forks.
When open source principles merge with decentralized governance, traditional IP loses its status as a profit center. Economic rewards shift away from proprietary ownership and towards token staking in an ever growing cooperative network. The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 21. Importance of decentralized immutable communities as network states. How network states conform. Section 21.1, defining network states. A network state is a globally distributed community that manages its own governance, has an internal economy, and cannot be easily shut down or censored by external forces.
The idea is often associated with the concept of online nations that develop real world influence. Some may eventually purchase or acquire land and function with true sovereignty and a real world economy, complete with trade deals and international agreements with other states. Achieving this requires immutable ledger and governance, a censorship resistant blockchain or data layer upon which the community operates in the digital realm, Decentralized ownership. No single entity should control the chain, avoiding preminds, ICOs, or foundations.
Sustainable economy. The community must be able to create and maintain its own token, incentivizing contributions, and causing buy demand for some sort of utility that increases proportionately to scaling, network effect, and competition for demand for resources to interact with the community's base layer. As with the resource credit model described in previous chapters, See chapter seven, sustainable economy and decentralized coin distribution for further information on creating sustainable economies with resource credit systems. Unlike typical blockchain projects with initial coin offerings or heavy centralization, genuinely decentralized network states distribute tokens fairly, making it impossible for any single party to dominate.
This fosters a robust, self sustaining digital community. Section 21.2, power of self sovereign communities. When a community reaches critical mass, it can self organize to communicate and collaborate without top down control or an uncensorable, text based, decentralized base layer. Communicate and collaborate without top down control or an uncensorable text based decentralized base layer. Offer real economic incentives for labor and contributions. Print its own token with no reliance on external permission, protect members from censorship as there is no centralized database to shut down.
With an algorithmic stablecoin on the base layer, the community can carry out trade in and conversion to stable value without needing an external decentralized exchange or centralized exchange. Such communities can become de facto nation states. Traditional governments rely on force or laws to secure currency demand. While these blockchain based communities rely on voluntary adoption and network incentives, community members hold their stake because they earned it or purchased it from the open market, not because they were ordained it in a pre mine. If they grow large enough, they can challenge or complement legacy financial and governance systems by making them more efficient and transparent.
Section 21.3, decentralized token distribution on layer two. Many network states will likely form at the layer two level, meaning they build on top of an existing censorship resistant neutral base chain with the following characteristics. Fair token distribution. No large pre mine, no venture capital in the first ICO round, and no single dominating stakeholder. Earning versus preordained. Members earn tokens through valuable work or content creation or buy them on the open market. They are not self gifted tokens at low prices, in a presale, or for funding and development of the project.
Self sustaining model. The token's utility, e g, voting, access, on chain resource bandwidth access, creates ongoing demand with growth of transactions within the community. Communities can thus issue tokens without creating a central point of failure. Over time, these tokens govern the community's own rules, curation and distribution mechanisms, and reward pools. Section 21.4. Sustainable token value and staking incentives. To foster lasting engagement. Voluntary demand. As more people want influence, reputation, or access to blockchain bandwidth, they buy or stake tokens, raising overall liquidity and reinforcing value.
Layer two resource credit models. Community members will have to stake both the layer one governance token and the layer two community token in order to obtain bandwidth or resources to operate in post to, and vote in the level two community or network state. As a network effect takes hold for the community, this will create demand for the token, driving its price up and making the token and community economy sustainable over time. Stake for influence. Members stake tokens to gain voting power, resource allocation, or other utilities, similar to how baselayer staking controls network resources.
Reward for participation, a daily rewards pool funded by newly minted tokens, or other reward mechanisms ensure contributors receive tokens. All of the above turns each community into its own mini economy, encouraging long term commitment rather than short term profit taking. Section 21.5, liquidity pools for each community. Instead of using a centralized exchange that extracts fees and can seize funds, Each community maintains its own layer two community specific decentralized liquidity pool for trading. Key benefits. Fees return to the community.
Rather than paying centralized operators like Binance, trading fees feed back into community development and infrastructure operation. Reduced attack vectors. No custodial risk on centralized exchanges, so tokens remain community owned, sustainable growth. As liquidity pulls deepen, more users participate, which creates a virtuous cycle, increasing liquidity and increasing confidence in the community and its economy. Over time, these pools can become self sustaining, generating enough fees to fund infrastructure or act as shock absorbers during market downturns, subsidizing trusted but unprofitable infrastructure in times of a downturn in the market.
Section 21.6. Community self regulation of content and rewards. Because communities operate socially, they need to manage on chain discussions and incentives. Rewarding quality. Users or apps vote on which post projects or members deserve tokens. Downvoting abuse. Undesirable content can be downvoted or flagged, reducing its rewards or visibility. Consensus based rules. The community sets thresholds for removal, tagging, e g not safe for work or moderating spam. No single corporation is in control. Instead, collective rules, stake based voting, and front end policies govern how content is curated.
Section 21.7, content gateways and validators. On certain architectures, like an off chain video storage layer, validators or gateways can decide which content is acceptable for the community. They are elected or chosen based on stake weighted votes. So the community's values and nuances ultimately guide what gets through via elected content validators. Section 21.8, stake weighted tagging. Members with sufficient stake can force specific tags, e g not safe for work, political, spoiler, onto content if they reach a voting threshold. This allows flexible, community driven categorization without needing a central moderator.
21.9, reward disputes. If there is disagreement on how many rewards a piece of content deserves or someone has gained the system, the community can downvote or reallocate rewards. In advanced setups, a jury process might review disputes to decide whether to restore or remove tokens or rally community support to re upvote content that has been unfairly downvoted. Conclusion. Self sovereign network states, truly decentralized communities form online nations that can potentially buy land or exert real influence without centralized leaders or corporate backing. Fair distribution. To remain censorship resistant, avoid premines or initial coin allocations.
Community staking and fair issuance keep power spread out. Sustainable economies. Internal tokens gain value through utility staked voting power, resource access, and liquidity pools that recycle fees back to the network. Self governance of content. Communities can set up effective content regulation systems on both layer two apps and layer one content storage systems in order to prevent content that does not match the values of the community. The key is that one central entity cannot control censorship own chain. Chapter 22. DAOs and community proposals for self funding. Neutral funding removes compromise and maximizes the neutrality of the technology.
Section 22.1, decentralized and neutral funding. A major advantage of properly designed blockchain ecosystems is the ability to fund projects through truly decentralized, neutral mechanisms. Unlike traditional ventures or ICOs with centralized teams and venture capital, These models allow a community owned treasury to fund ideas and community projects without a controlling entity or CEO. Community members vote on proposals using their stake. And once a proposal meets a threshold, funds are released on chain to the developer, a group that will perform the work.
In a truly neutral environment, there is no single legal entity, foundation, or board that dictates funding. Instead, participants stake their tokens for voting power, propose initiatives, and decide on projects that add value to the network. The key benefit is that funding does not come with the usual strings attached seen in centralized or venture backed deals. Rather, it aligns community incentives towards shared goals. Section 22.2. What is a DAO? A decentralized autonomous organization is a community governed treasury and decision making structure on a blockchain. It generally has on chain funds, often funded from newly minted tokens or fees.
Proposal system. Projects request funding by submitting proposals. Stake weighted voting. Token holders cast votes. If a proposal meets the required threshold, funds are released. A genuinely decentralized DAO has no outside venture capital dictating decision makers. It has no single company or CEO that can override votes and no foundation controlling funds. Instead, the community's stake decides how to allocate resources. Section 22.3, decentralized versus venture capital backed DAOs. Many DAOs appear decentralized, but are, in reality, influenced or controlled by large venture capital allocations, ordained or obtained far below market price at a premine stage early on in the project.
Often before the tokens are traded on the open market, these VCs can concentrate voting power, leading to outcomes favorable to a few stakeholders rather than the entire market. Venture capital firms also usually reside in regulation friendly jurisdictions, making them prone to regulatory pressure that can significantly shape funding decisions. In contrast, a truly community driven DAO has widely distributed tokens. No pre mine, no ICO, and no single party holding a controlling majority stake. The ideal scenario in balance is where, even without the votes of the largest stakeholders, projects can still obtain funding via obtaining votes from the rest of the community.
These are the rare DAOs that cannot be easily shut down, coerced, or dominated by external investors. Their funding decisions reflect actual community interest rather than extractive driven agendas, which do not necessarily serve the community. Section 22.4, returning value to Dells. Because these DOW funded projects do not have strings attached from corporate entities, it is crucial for the community to establish accountability. Milestone based releases. Funds are released only after certain goals are achieved. Monthly or phased payments.
Ongoing work, e g maintenance, is funded incrementally with the community free to remove votes if progress stalls. Open bidding. The community can publish desired task, inviting multiple bids. Stakeholders then vote on the most competent developer with the fairest price. The community expects projects to benefit the ecosystem long term. A neutral DAO often funds tools or protocols that enhance network utility. For example, off chain storage, social features, or scaling solutions. The team's reputation is on the line If they fail to deliver, future proposals are unlikely to pass.
Section 22.5. Example, the Hive blockchain decentralized Hive Fund or DAO and the SPEAK network. On the Hive blockchain, a text based storage layer, the SPEAK network received funding from Hive's decentralized proposal system to build off chain media storage. Speak's work benefits Hive users who want to store large files, videos, and images beyond the scope of the base chain. In return, Speak gains community recognition and support, but has no direct contract with a corporation. In return for this, the project dropped its mining tokens to the entirety of the hive community in a claim drop.
The users who claim tokens are able to mine more efficiently in the network and therefore earn the network's governance token for providing infrastructure operation. Due to DAO funding, there was no need for a pre mine or ICO to fund the project, and therefore the SPEAK network has a highly neutral layer that protects the rights of users and their content storage. The community can stop funding at any time if deliverables fall behind or if the project ceases to align with HIVE's goals by unvoting the proposal and dropping its total votes below the community set threshold of votes required to receive funding.
This model shows how a community can sponsor critical infrastructure without relying on ICOs, venture capital, or centralized companies. It aligns incentives around expanding the chain's ecosystem while preserving user ownership and governance. Section 22.6, alternatives to no strings attached funding. A common concern with free funding is that teams could run off with the money. DOWs can mitigate this by clear scopes of work, publicly outlined task and deliverables, reputation and trust. Developers who leave projects incomplete damage their standing, making future funding unlikely.
Revocable votes. If a project deviates from its stated goals, community members can unvote their support, temporarily or permanently halting further payouts. These checks protect communities from severe losses and ensure ongoing alignment. The outcome is a more transparent, flexible funding environment that encourages collaborative development. Section 22.7, why neutral DAO funding matters. Eliminates venture capital control. No massive early allocations or pressure to chase short term profit. Skills through collective effort. Communities that must fund and maintain the chain themselves learn to optimize and reduce bloat, resist regulatory capture.
Without a centralized owner or foundation, a decentralized treasury cannot easily be forced to censor or comply with unfavorable rules. Protects against exit liquidity behavior. Teams funded by neutral DAOs are less likely to dump tokens or pivot abruptly because they rely on continued community approval and can be dropped governance or mining tokens in exchange for DAO funding, excluding the need for bringing in venture capitalists whose values and reasons for being involved in the project may not align with those of the community, promotes true decentralization.
Everyone with stake can contribute ideas and vote, reflecting widespread consensus rather than corporate edicts. Projects developed under this model become genuinely community oriented. The tokens have higher community trust because there is no hidden pre mine or venture round waiting to sell into unsuspecting community members at higher prices. As a result, DAOs with a broad participatory user base produce ecosystems that are more censorship resistant, equitable, and sustainable in the long run. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 23. A new model for start up funding. A practical way to fund projects without compromising to early venture capital or other centralizing forces. Introduction. Many blockchain projects raise funds through token sales, ICOs, and pre mines, or venture capital leading to centralization and misaligned incentives between founders, investors, and the community. It should be noted that the following is just a suggested way to create more decentralized projects with fewer conflicts of interest and centralizing stakes.
And there may be many other approaches. A more decentralized alternative is to obtain funding from an existing demonstrably decentralized DAO community, airdrop miner or governance tokens to its community, and allow participants to earn governance tokens by running infrastructure or otherwise contributing. This approach avoids early compromising venture capital, ensures a fair launch, and promotes true decentralization by reducing conflicts of interest and centralized control compared to traditional funding models that use precedes, early investor stakes, pre mines, and ICOs.
Section 23.1, DAO, miner tokens, and fixed governance supply. DAO funding, A community DAO decentralized with no single owner can vote to fund your project over a cent period. If you prove the project benefits that DAO's ecosystem, You receive an ongoing allocation. No venture capital or private deals are required. Minor tokens instead of pre mines. Instead of distributing governance tokens directly, you drop a miner token to the DAOs community. Anyone claiming and staking these miner tokens can run infrastructure, storage nodes, validation nodes, etcetera, to earn the system's governance token over time, controlled supply and inflation, field phase.
Governance token minting schedule is set to a minimum feasible amount. In order to discourage massive speculative gains and over rewarding of early adopters. Maturity phase. Once the system matures, the community members which have earned governance tokens by operating infrastructure, often at a loss during the build phase, can vote to raise the token minting schedule to normal levels, allowing wider participation and adoption during the maturity phase. Sustainability phase. After several years and once the project is well established, having reached network effect, the new token minting may taper to a much lower, long term, long tail sustainable rate.
Self funding through the DAO. The start up team relies on DAO proposals for funding while completing the initial build. Once the core is stable, the newly launched project can develop its own internal DAO over time, funded by a portion of its daily minted governance tokens. The community, not a founder, then decides how ongoing maintenance or development is financed. Section 23.2, liquidity and value through minor tokens, autonomous purchase. Anyone wanting to run infrastructure and thus earn governance tokens must acquire miner tokens.
This can be done by claiming an airdrop, receiving them from the DAO community, or buying from individuals who already have them. Staking an infrastructure. Once staked, miner tokens grant mining efficiency, I e, all other things being equal, an infrastructure operator mining with the same equipment, but staking more miner tokens than others, would earn a higher share of governance token rewards than their peers. This aligns incentives with participants who truly support the network with real infrastructure and have paid into the network by buying minor tokens.
Service infrastructure pools or SIPs. A related model can create an autonomous liquidity pool for these minor tokens. When new infrastructure operators buy minor tokens, the funds remain in the pool benefiting the community by creating self sustaining liquidity for the ecosystem in exchange for the minor tokens it issues. Section 23.3, starting a decentralized project. One, find a neutral DAO. Ideally, this DAO is widely distributed with no single controlling whale. Propose your project outlining how it benefits that community. If funded, the community avoids pre mines and having to do corporate deals.
Two, drop miner tokens. Purpose. Dropping the main governance token to everyone can lead to poor incentives. Minor tokens let only those who truly want to participate by running infrastructure or delegating acquire the real governance token. Low early new token minting. Keep governance token inflation minimal in the initial build phase. Early participants gain influence, but not an outsized supply. Ramp up later. Once the technology is proven, ramp up later. Once the technology is proven, the community can vote to increase token minting, letting new contributors earn token and preventing early insiders from dominating. Three, no founder pre mines.
Since the DAO funds your work, you do not need to give yourself or your team a large initial stake. All token allocations occur through mining, staking, or DAO proposals. This eliminates the usual team or founder tokens problem and fosters broader trust. Four, distribute and validate. Encourage many accounts to claim minor tokens. Let them stake minor tokens or run infrastructure nodes to acquire governance tokens. Monitor distribution. If a single account accumulates too much, initiate community driven remedies early on in development to maintain a wide token distribution and decentralization of the network.
Section 23.4, key advantages. Fair, low value start. By keeping token issuance under the radar at first, you avoid hype driven pump and dumps. Tokens slowly gain value organically as the network utility grows instead of purely via speculative investments. Aligned incentives. Those who run infrastructure or actively contribute earn governance power. There is no venture capital or early founder dump. Everyone starts from zero. Voluntary team building Without a massive pre mine for a small group, talented community members step up voluntarily. People who see long term potential contribute rather than working as employees of a central entity.
DAO based accountability. The community can stop funding if milestones are missed. It can monitor distribution, reject bad actors, and ensure the project remains neutral and widely owned. Post launch DAO, eventually, the new network forms its own internal DAO. The start up team can propose further work be funded by this new DAO, but only receive funding if governance stakeholders of the new system approve. This sustains development without centralizing ownership. Section 23.5. Example, the Speak Network on the Hive blockchain. Hive DAO funding.
The Hive community voted to fund Speak Network, which aims to provide decentralized off chain storage, videos, and large files, miner token drop. Hive users could claim speak minor tokens. Those who believed in the project participated and ran infrastructure, while uninterested users simply ignored the claim drop. Build phase. Newly minted governance tokens remained low at first while the project was built out, preventing an unfair early grab by early adopters. Community trust and decentralized ownership grew gradually. Long term vision.
Once stable and utility is demonstrated, Speak Network can create its own DAO. Ongoing funding decisions will again be subject to decentralized vote. Ongoing funding decisions will again be subject to decentralized votes, not founder mandates. This approach kept Speak from needing an ICO or venture round. No founder gained a massive token allocation. In turn, the community remains motivated, the distribution is healthier, and the final platform is more censorship resistant. Section 23.6, best practices and takeaways. Avoid ICOs and pre mines.
Receiving or directing tokens on day one will centralize the chain, making it susceptible to regulation, securities law, and corruption, as well as misaligning the incentives of the founders and the community. Find a neutral decentralized DAO. Dropping value to such communities means that one central stakeholder or entity will not control the governance of the system you're building. Drop miner tokens to the DAO community. Having to stake these tokens and provide a service in order to mine governance tokens means only those who are interested in the project and also provide genuine value to it will have influence over the governance of the new ecosystem being developed.
Monitor for genuine decentralization. Once the minor tokens are dropped and governance tokens are being distributed, the system can be monitored for strong distributions of tokens, nodes, and governance stakeholders. If this tends to centralization, community can take mitigating actions. Limiting influence of early adopters. Starting with a very small governance token inflation initially during the build phase, ramping up inflation once the system goes live and normal operation takes hold, and finally moving to a limited long tail minting schedule after several years of operation allows the system to adequately reward its value creators while keeping fees low or at zero into the long term. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 24, future implications. How power is decentralized via tokenized self sovereign network states in the future. Introduction, The future implications of systems being built that broadly follow the guidelines outlined in this book or detailed below. Decentralized communities and network states that can be created by following the guidelines in this book secure digital rights for all and have profound implications for the future of humanity and its ability to secure its freedom in the digital and then with the adoption and implementation of network states, the real world.
Section 24.1, social media account not owned by Silicon Valley companies, digital self sovereignty, and guaranteed free speech. Accounts on the immutable base layer cannot be deleted or suspended. As long as the network runs, these accounts and their followers remain intact. This gives individuals true ownership over their identities and speech, reducing the risk of being deplatformed. People can express themselves more freely, knowing their accounts will not disappear due to centralized decisions. When the social accounts of community members exist on the base layer of such Web three technology as outlined in this book, Web two social media companies like Facebook, Instagram, Twitter, Google, and others no longer control the keys to your account.
They exist outside of the web two social platforms control. Social platforms become a layer two system that allows the layer one accounts to log in to them. In this way, the social media platforms cannot confiscate, manipulate, or delete your social account any longer. Your social account exists on a neutral layer one, which has its own economy and self funding mechanisms, which is controlled by the community, not private companies. The same is true for your followers list and the communities that you build. They all exist on layer one and therefore cannot be deleted by any individual entity or web two tech company.
Content is served from the layer one because the social platforms all tap into the same content database on layer one. This combined with the sovereignty of your social account now means that free speech and the right to express ideas within a community is already guaranteed for all people online who possess such Web three, delegated proof of stake social accounts without the influence of a company or intermediary. This also means that wherever you log in with your Web three social account, you take your followers list, account history, reputation, community, merits, and achievements with you to each Web three enabled platform you use.
Section 24.2, no longer possible to manipulate history. In addition to protecting speech, such networks preserve all interactions and historical events on chain. Attempts to erase or rewrite the record are virtually impossible once multiple nodes independently store the information. The key outcome of these decentralized system is that history stored on chain cannot be changed or erased. Once data is published, the record stays intact as long as the network operates. This makes it difficult for any authority to revise past events and ensures a permanent record of social, economic, and governance actions and data.
Once existing wikis and encyclopedias begin using such technology to document present affairs, history will be preserved, protected by the community's super majority elected consensus. Section 24.3, impossible to shut down. By design, these networks are highly resilient. When governance and infrastructure are distributed among many participants with no central authority, there is no single point of failure. Even if an outside party tries to take over or attack the network, the original community can fork away and move to a new chain, leaving the attacker alone on the old chain.
Ironically, attempted takeovers often enrich the original community as hostile actors must buy large amounts of tokens on the open market. Section 24.4, money attacks can strengthen communities. If a hostile entity purchases a significant share of tokens to dominate the network, They raise the token price in the process. Original holders can sell at a higher value or fork to create a new chain, leaving the attacker with worthless tokens on the old fork. In this way, an an economic attack can backfire, making the community wealthier, more united, and more motivated, while the attacker ends up holding depreciated assets.
Section 24.5, community holding abusive oligarchs to account. These protocols also allow communities a new, novel, and tested way to deal with abusive large holders who fail to reinvest in the community or who harm the network. If a single individual accumulates an excessive share and exploits users, The community can collectively decide to fork, granting the abusive oligarch zero balance on the new chain. This mechanism avoids traditional violent revolutions by enabling digital secession from exploitative stakeholders. Section 24.6, network state communities and governments.
Over time, many believe governments will begin recognizing these decentralized online network states. Some may cooperate, some will oppose, and others may launch competing versions. Either way, communities that run their own economies distribute governance rights and store data on censorship resistant change could become akin to self sovereign states, operating largely on voluntary participation rather than imposed authority. Section 24.7. Section 24.7, rebalancing of power. Currently, a handful of national governments hold tremendous monetary power through fiat issuance.
Soon, hundreds or even thousands of decentralized digital communities may issue their own currencies, manage their own governance, and command real economic influence. This diffusion of power could reshape global politics and economics. Section 24.8, feeless DeFi. In most existing DeFi, decentralized finance systems, each transaction incurs gas or network fees. On high traffic chains, these fees can be prohibitively expensive. By contrast, Felis models allow users to stake tokens based on them possessing resource credits instead of paying a gas token for every transaction.
This creates more inclusive finance where people can trade, lend, or provide liquidity without constant fees. Systems such as Honeycomb and VSC build on layer two systems on the Hive blockchain. For further information and definitions of these two systems, see Annex I, Glossary of Terms and Acronyms. Systems such as Honeycomb and VSC are already developing fee less DeFi and smart contract capabilities. Section 24.9, competition with traditional models. Fee based chains may struggle to serve a global user base for everyday transactions. As fee less alternatives mature, they could challenge established DeFi ecosystems by significantly reducing barriers to entry and increasing user adoption.
Conclusion. Emerging blockchain architectures, where communities store data, govern themselves, and issue tokens, signal major shifts in how people will organize in the future. They enable immutable records. History and accounts cannot be altered or deplatformed. Social account self sovereignty. Accounts are owned outside of Silicon Valley web two company control. Free speech. Text communication is stored publicly on a neutral consensus base layer one, which is almost impossible to shut down or modify without community super majority fork for anomalous situations.
Autonomous communities. Groups can run their own decentralized infrastructure and economies without being shut down or regulated by centralized entities. Resistance to takeovers. Hostile actors enrich original participants, but rarely succeed in capturing the network. Evolving global order. Network states may coexist with or challenge traditional governments and financial systems. In some cases, they will demonstrate how they can improve existing governmental systems and provide them with renewed legitimacy. Feel less finance.
Decentralized finance without high transaction cost can boost accessibility and everyday utility. In short, these technologies are poised to disrupt power structures, incentivize more equitable governance models, and grant greater self sovereignty to digitally native communities. The economic, political, and social implications are vast and still unfold. The digital community manifesto, digital rights game theory and governance of scalable blockchains for use in network states, chapter 25, examples of self funded communities and initiatives.
Already, so much is being done in the physical world. Section 25.1, increased security. Beyond the examples below, there are countless others, and such independently funded initiatives will only continue to grow. An important note is that where this technology continues to exist, people with basic services and infrastructure where their governments have failed due to corruption or incompetence, any attempt to shut down or oppose such will likely be met with resistance from local people who benefit from the services it provides.
The result is that neutral blockchains that carry out such work not only help local communities, but they increase the distribution of their own tokens by benevolent means, which indirectly strengthens the protocol and its security against hostile shutdown by governments. It is difficult to attack or shut down a system that is legitimately helping people who were not previously served by their existing systems. Section 25.2, Ghana borehole projects. In Ghana, local groups have successfully utilized decentralized autonomous organizations, DAOs, to fund the construction of boreholes, providing clean water to communities lacking direct access.
By submitting proposals and documenting their progress on chain, they have secured community support and funding. As of the date of publishing, the Ghana Water Borehole Project has installed 21 water wells for villages that previously did not have access to fresh water. Key points, transparent direct funding. Budgets and construction processes are documented on chain, ensuring transparency without a facilitating charity accepting donations and taking a cut of the funds to cover its own operational cost. Funds are sent directly from the blockchain to local trusted people who have built reputation on chain over time. Community trust.
Successful projects build trust, enabling further funding for subsequent initiatives. Real world impact. Access to clean water improves health and daily life for thousands. This approach bypasses traditional charitable institutions, which often have high administrative cost, by using on chain reputation and proof of work content to ensure donations reach intended projects. Section 25.3, Ghana health checks. Building on the success of the Ghana borehole initiative, the same groups in Ghana have organized dental and health checkups for remote villagers who do not have access to such services.
Securing DAO funding and maintaining transparency through on chain documentation, they provide free health care services to underserved communities. Key points, health care accessibility, offering free dental and health services to communities in need, reputation growth, consistent project delivery fosters community support, enables larger scale funding. Section 25.4, Venezuela, street acrobatics and infrastructure. In Venezuela, groups have obtained funding for equipment, shows, and community building efforts. They promote their activities through various channels, bringing attention to decentralized funding models.
Key points. Grassroots development. Small teams receive on chain funding to purchase merchandise and organize events. Local empowerment. Initiatives benefit individuals with limited economic opportunities. Section 25.5, Cuba and Mexico. Paying utility bills with content rewards. In points of Cuba and Mexico, individuals create on chain content to earn rewards, which they can convert into local currency or use to pay utility bills. This system is particularly impactful in regions with limited banking services or where remittances incur high fees and restrictions.
Key points, daily necessities. Users generate content such as blog posts or community updates to earn tokens, real bills paid. Services exist to convert these tokens directly into utility payments, reducing reliance on traditional banks. By circumventing conventional financial gatekeepers, these users demonstrate how decentralized currencies can provide tangible benefits in areas with restrictive or expensive financial systems. Section 25.6, why it matters, improve security. Providing grassroots, locally operated services and infrastructure where the government was not able to increases token distribution, social image, local support, and therefore security of the network.
Neutral decentralized funding. No single corporation controls the treasury. Funds are allocated through community approved proposals based on reputation and transparent reporting, direct accountability. All spending is documented through immutable on chain post, allowing donors and voters to see exactly how funds are utilized, reducing corruption and mismanagement, real world impact. From building water wells to supplying medication and paying essential bills, on chain funding models deliver concrete results in underserved regions, incentivize community participation.
Individuals who provide high quality work and transparent reporting enhance their own chain reputation, attracting more votes and social trust for future initiatives. Scalable model. These projects can inspire similar initiatives worldwide, with each region adapting decentralized tools to address local challenges. Conclusion. These examples illustrate how self funded, reputation based blockchain communities can achieve what traditional charities and governments often struggle with. Direct, efficient delivery of aid, physical infrastructure and services, whether providing clean water in Ghana, supporting community initiatives in Venezuela, or assisting families in Cuba and Mexico with utility payments.
On chain funding brings transparency and accountability. By eliminating intermediaries and enabling communities to vote directly on proposals, these projects build lasting trust and deliver impact. In a world where many lack basic infrastructure or face restrictive financial systems, decentralized initiatives offer a promising glimpse into the potential of blockchain governance and funding in the future.
The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. First edition, May 2025. From the Call Me Dan and Stalkers. Chapter one. Preword. The legacy economic system only responds to legitimate parallel competition that treats people better. Introduction. The text lays the foundation for a book we hope will become the go to reference for understanding and achieving true decentralization in blockchain and digital network states. We believe in a model with no pre mines, no ICOs or initial coin offerings, no companies or CEOs, and no early venture capital.
Instead, the community should guide the technology and governance, maintaining the neutrality of the base layer, thus ensuring freedom and participation for everyone. We will explore the game theory of network attacks, attack vectors, guiding principles, a realistic vision for the future, and the best technical stacks for censorship resistance and governance. You will find an in-depth discussion of reputation and governance mechanisms, tokenomics and immutable communities, DAOs and new funding models, and future implications. Throughout, we emphasize how these decentralized approaches may reshape society.
We plan to illustrate our concepts with real world examples of communities that have implemented them. This is a fully open source community driven work, freely available to anyone who wants to replicate or expand upon these principles. Our ultimate aim is to document the how and why of proper and principled decentralization, including the deeper implications for human freedom. In a world often controlled by entrenched power structures, hostile to genuine decentralized and therefore neutral systems. This knowledge is recorded immutably and preserved on the Hive blockchain, one of the most principled, battle hardened, and proven communities in decentralization.
Why document this now? The community forming what has become the backbone of the Hive blockchain has endured years of conflict, evolution, and defense against multiple takeover attempts, yet it remains decentralized. The ability to remain decentralized over almost a decade at the time of publishing means there is a noteworthy knowledge to be gained and lessons to be learned from dissecting how Hives community achieved this resilience. In doing this, we reveal the critical requirements and pass on an industry standard for any other community network and network state hoping to stand the greatest chance of true decentralization, remain censorship resistant, and thrive economically and socially.
The next 25 chapters, you're listening to chapter one, are the product of twenty plus months of filming, writing, systematic breakdown of underlying principles and technology, and continuous reflection. Each topic builds on the last culminating in a holistic framework for decentralized governance and secure digital communities. For those of you interested in understanding more about how this book was created, go to httpscolonbackslashbackslashhive.blogbackslash at networkstate to see the discussions and conversations that went into the creation of this work as well as see the immutable text version stored on the blockchain so that it cannot be erased from our consciousness.
This is a new field of human understanding, and so we invite your input. Constructive dialogue helps refine these ideas and is essential to the understanding of the principles required for this burgeoning field, which is essential to the maintenance of digital freedom and digital rights into the future. It is long overdue that we share these methods in a digestible, publicly documented way so others may replicate them and maximize their own decentralization. Scope and purpose. Decentralization is a term widely misunderstood in the crypto industry.
Many projects, including Ethereum and most other leading reputed crypto projects are not actually fully decentralized. Launched with conflicts of interest from ICOs, founder stakes, and premines, amongst many other conflicts, such mechanisms often embed weaknesses that undermine genuine decentralization in the long run. We will contrast such pitfalls with a more robust formula for censorship resistant design. In particular, we show how projects can thrive without centralized corporate structures or seed investors. By removing these single points of failure, communities can achieve self sovereign token economies, immutable social layers, and user owned governance and reputation systems.
This work aims to become both an industry and societal standard on decentralization for social and network state type communities. By explaining the precise steps and technologies, we hope everyone can more easily understand and, if they choose, build their own censorship resistant networks, taking many of the foundational, timeless lessons explored in the following paragraphs about true decentralization and what is required to achieve, maintain, attack and defend, apply, and expand it. You must know your worth before you can be worth anything.
The Hive community has a history of being one of the only blockchain communities which successfully defended itself against centralized takeovers, removed exploitative stake, and fortified governance, and so sets a vital precedent which can be studied and replicated. These successes and the underlying lessons can serve the entire world as it searches for more equitable, secure ways to operate. We believe there is a specific method for achieving and sustaining decentralization, an approach offering genuine freedom and a more enlightened path on Earth.
In a world where established power structures often oppose truly decentralized systems, it is crucial to document, debate, and preserve the knowledge gleaned from this tech storage based blockchain community. Make a value for value donation to support this work. If you found the information in this work valuable, please do consider returning some of your value back to the author's way with some value for value. Value for value is a monetization model, a content format, and a way of life. It is about freedom and openness, connection, and free speech, sound money, and censorship resistance.
Time. Your time and attention are valuable. Spending them is valuable in and of itself. Talent. It doesn't have to be money. Whatever your skills, there are many ways to give back. Treasure. Thanks to lightning, hive back dollars, and other forms of monetary transfer, value can now be exchanged permissionlessly, instantly without friction and completely outside of the legacy economy. You can donate lightning to network state at sats.vforv.app or donate HBD, that is Hiveback dollars, to at network state. Contributors, the voice for the audiobook is Aloha Ed.
The cover graphics are from at Reuben Kress. Content assistance is from at Eddie Spino. And technical input, Thanks to various high blockchain community members over the years for teaching this stuff. We invite anyone to challenge the ideas in this book at the official blog spot, httpscolonbackslashbackslashecency.combackslash@networkstate. We will incorporate your ideas in future editions and mention your usernames in this contributor's part. Our hope is that this book clarifies what real decentralization means, shows how to maintain it practically, establishes a replicable model for future projects, and assist the reader to participate in discussions about whether or not a project is actually decentralized.
No single person or company can define freedom in a decentralized ecosystem. It must emerge from the community itself. These chapters will detail our experiences, analyses, and guidelines to ensure your community can thrive, defend itself, and stay decentralized for generations to come. In freedom and in defense of it, let us begin. Signed, at they call me Dan and at Starkers, May 2025. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter two, vision and implications of decentralization for network states, a peaceful way to opt out of past, present, future, and increasingly oppressive legacy economic systems.
Introduction. What is a network state? Decentralized technology extends far beyond the realm of digital payments. It gives communities the tools to form autonomous network states online. As these groups gain genuine self sovereignty, they can voluntarily exit failing systems and design their own economies and governance structures. This chapter examines how decentralized communities can evolve into fully realized digital sovereignties, ultimately achieving the kind of real world recognition once reserved exclusively for traditional nation states.
Section 2.1. What is a network state? The network state is in contrast to the nation state. Here we have a governance system that is based upon where one is geographically born. That is how citizenship is established. The rules of the land are based upon where one is physically. In comparison, the network state is dependent upon which digital ecosystem or community one interacts and associates. This is paralleling the idea of nations and networks. From the definition in the book, the network state by Balaji Srinivasan. Network state is a highly aligned online community with a capacity for collective action that crowdfunds territory around the world and eventually gains diplomatic recognition from preexisting states.
Section 2.2, voluntary migration to an alternative parallel economy. Section two point two point one. Why an alternative parallel economy? In the current centralized model, true power rests with large institutions, governments, megacorporations, and global financial conglomerates. These entities operate in a system which is set up to extract more from everyday people than it returns, leading to an erosion of personal freedom. Technological advancements should have simplified our workloads and enhanced autonomy, but in practice, they primarily enrich a narrow elite, controlling both infrastructure and money supply.
As individuals, we lack genuine alternatives and often find our freedoms and free time dwindling while technology continues to improve. Section two point two point two. New options for opting out of oppressive economies. Decentralized economies offer a peaceful and genuinely empowering exit route. They allow people to own digital assets outright. No single authority can block access or seize your holdings. Speak freely. Immutable social layers ensure no corporate or governmental power can censor your voice. Retain more value. Distribution models are built to reward contributors to the community rather than siphoning gains off to distant headquarters or political cronies.
Initially, people may adopt these technologies alongside legacy systems. But as self sovereign tools become more accessible and the central system's constraints grow intolerable, A larger exodus is likely. When you can genuinely own your voice, your currency, and your data, why remain in a structure that limits them? Section 2.3, communities achieving self sovereignty. Section two point three point one, the historical town square context. In the past, small towns or local tribes held autonomous decision making power, yet they were confined by strict borders or overshadowed by strong neighboring states.
Modern digital platforms like Facebook, Twitter, and YouTube tried to become the virtual town square, but they're run by CEOs and police by regulations. Voicing wrong opinions can lead to an instant ban, removing your ability to participate. The essence of genuine community self sovereignty had nearly vanished in the digital world until decentralized infrastructures offered a fresh solution. Section two point three point two, building digital self sovereignty. Using decentralized networks helps communities recapture the autonomy once found in small self governing bodies, immutable accounts.
Neither governments nor corporations can suspend these financial or social profiles. Self run infrastructure, network witnesses, or validators elected by the community maintain the chain. The project continues even if some nodes drop out. Flexible governance. Communities can choose any model for governance and distribution of value, socialist, liberal, libertarian, anarchistic, capitalist, economically conservative, culturally conservative, or a fusion depending on their collective decisions on the blockchain. Currently, if there is no large corporate backer or centralized founder stake, No single entity can sell or infiltrate the entire project.
The community itself provides the real defense against hostile takeovers. It is the layer zero and is what the ecosystem ultimately derives its value from. Section 2.4, creating one's own self sovereign economy. Section two point four point one, why self sovereign economies? Local currencies have long been tested examples ranging from town based scrip to the Brixton pound. Authorities typically shut these down swiftly to preserve their monopoly on money. However, digital tokens can escape such crackdowns because they are global in nature.
No single jurisdiction can fully ban them. Programmatically distributed. People earn tokens based on value added, nonmonetary contributions to the community rather than political connections or inherited privileges. Section two point four point two, mechanics of a community economy. One, a neutral base layer. Blockchain without major corporate investors or large founder allocations avoids centralized tampering with a consensus driven token minting schedule or token supply control. Two, value for value distribution. Contributors to development, social engagement, and infrastructure receive tokens.
This system fosters genuine fairness. No middlemen or external gatekeepers. Three, stablecoin integration. An over collateralized algorithmic stablecoin. For instance, HBD on the Hive blockchain. For further information, see Annex I, glossary of terms and acronyms, shields community members from volatile price swings. This gives day to day stability crucial for broader economic usage. Four, transparent governance, a decentralized autonomous organization, a DAO or a a DAO. For further information, see Annex I, glossary of terms and acronyms, might hold community funds with decisions made via stake weighted or reputation based voting.
Proposals get funded if the consensus views them as beneficial. By minting and managing its own currency, a community breaks free from external authorities and their restrictive policies. Goods, services, and ideas flow within a network governed by its own participants. Section 2.5. From online community to recognized network state. Two point five point one, path to recognition. Decentralized group with credible infrastructure can resist shutdown. It has no CEO, a registered office, and no large chunk of tokens in a single wallet for regulators to freeze, develop real liquidity Through stablecoins and decentralized exchanges, its internal currency becomes practical for everyday transactions.
Fund infrastructure and social projects. A DAO can build community water wells, finance social ventures, create its own Wi Fi networks and physical infrastructure, or support local commerce, much like a small municipality, improve physical and societal quality of life in locations traditionally difficult for government to reach. Local people can take direct action where governments have found it impossible to in the past. Locals can campaign for funding from the blockchain community they are part of and build valuable transparent initiative in their local areas directly.
Provide local governments a tool with which to gain transparent legitimacy. The transparent nature of blockchains and especially those designed for social interaction can allow local governments to contribute to society in a much more transparent way and dispel assumptions of corruption. This can lead to reestablishment of legitimacy over time. As these digital societies exhibit tangible benefits, economic productivity, peaceful collaboration, and mutual aid, external governments may start cooperating. Governments might find it financially worthwhile to trade with or even formally acknowledge these emerging network states.
Over time, major global powers could sign treaties or agreements, conferring a form of legitimacy once unimaginable for an online community operating on the legacy web two social platforms. Section two point five point two, governments joining new parallel economies. Some governments may not only recognize but also actively engage by exchanging reserves, converting part of their natural reserves into blockchain assets, earning yields or governance rights, leveraging on chain reputations. Public officials might validate their own standing within the transparent governance protocols used by the community, direct cooperation, through joint infrastructure projects, or social programs aligning the interest of both the digital state and traditional government.
Revolutionary conflict becomes less likely when there are clear incentives for collaboration. By demonstrating tangible value, network states can secure legal stature and self determination without resorting to conflict. Conclusion. A shift toward voluntary digital native economies is already in motion. Individuals are seeking alternatives where freedoms like unhindered speech and genuine financial autonomy are safeguarded, which the conventional system often fails to provide. As these decentralized communities expand, they, claiming self sovereignty, control their own technical, financial, social, and eventually physical architecture and infrastructure, issue their own currencies, rewarding true contributors rather than serving centralized interest, evolve into network states, gaining recognition from established nations, and forming global partnerships.
What begins as a small collective of idealistic individuals can develop into a thriving society with a unique currency and governance model, potentially culminating in formal diplomatic acknowledgment. Far from being a fringe movement, these new network states could offer humanity's best chance at equitable prosperity and authentic self governance in the digital age. Chapter three, the underlying principles. When it comes to digital freedom, it is principles that matter most. Economy is always a counterintuitive second.
Introduction. Most blockchains claim to be decentralized, yet many have fallen short of delivering actual censorship resistance or meaningful digital rights. In this chapter, we explore the fundamental principles that support genuine decentralization, why it is so hard to achieve, and how certain historical freak events accidentally resulted in the correct structural design. We also introduced the concept of the petri dish cultivation model, where an ecosystem evolves organically rather than being designed from the top down. Section 3.1, why true decentralization is difficult.
Section three point one point one, profit versus principles. Most project leaders focus on profit and convenience. They raise venture capital, preordain themselves tokens from the first day of the project in the form of large pre mines or ICOs, or form legal entities. While these strategies may somewhat help to fund development, they inevitably compromise on decentralization. Regulators can easily target corporations, foundations, or high profile founders. For more details on preminds and ICOs, see chapter 15, censorship and the morality of preminds.
Section three point one point two, censorship resistance is binary. Either your system can be controlled by external parties or it cannot. If a chain has a headquarters, a known CEO, or a large pre mine stake in the hands of a few insiders with self ordained pre mines or ICO stakes. There are clear points of failure. True censorship resistance requires that no single entity or small colluding group can seize control. Section three point one point three, counterintuitive choices. Many of the decisions that yield true decentralization look bad on paper.
For example, not raising money or not giving a founder a large token allocation seems unprofitable, yet these moves are necessary to avoid creating central points of attack. At almost every juncture, founders who are profit driven do so at the cost of decentralization and so undermine censorship resistance. The key is in striking the balance to adequate decentralization for the application in question. When dealing with digital rights and maintaining neutral decentralized layers, this means putting counterintuitive decision choices ahead of profit.
Section three point one point four, freak events and serendipity. History shows that blockchains achieving genuine decentralization rarely follow a neat logical plan. Often, the original builders did not fully grasp what they had created. In retrospect, the intuitive right features that are typically chosen, such as certain lockup periods for founders or adding a centralized treasury, turned out to be weak points in a future, which compromised neutrality and decentralization of the community. Repeating a sequence of events that are counterintuitive and principled enough in order to ensure decentralization and digital rights is extremely difficult to deterministicly plan for and orchestrate deliberately.
Section 3.2. Everyone did it wrong except a few. Section three point two point one. What Bitcoin got right. Bitcoin avoided pre mines, ICOs, and corporate sponsors. Satoshi Nakamoto disappeared, leaving no formal leadership. While Bitcoin's proof of work is excellent for store value and permissionless access to liquidity and a permissionless transaction layer for those that can afford fees, its high fees and limited throughput make it ill suited for scalable social or governance ecosystems. Section three point two point two, what most proof of stake chains got wrong. Many proof of stake projects launched with large ICOs, venture backing, or corporate structures.
They also adopted high fees and layer one smart contracts. For further information on smart contracts, see annex I, glossary of terms and acronyms, creating a rich get richer environment where governance is dominated by two or three naturally occurring large staking pools. Over time, these chains tend towards de facto centralization. A few pools or validators control the system, and regulators can target them. This model is useful, useful, however, for earning yield where social nuance is not an issue. And many DeFi, decentralized finance applications, benefit from a financial passive earning system where the one with the largest stake has the most to lose from unfair treatment of users.
For further information on DeFi and staking, CNXI, glossary of terms and acronyms, section three point two point three, Steam and the emergence of Hive. The Steam blockchain, later forked into the Hive blockchain, provides a rare illustration. Steam originally had a NinjaMind founder stake controlled by the company Steemint Inc. Unexpectedly, that stake was sold to a high profile buyer, Justin Sun, founder of the Tron blockchain, sparking a hostile takeover attempt. The community, through its DPOS, delegated proof of stake, mechanism, managed to fork away and create Hive, zeroing out the founder's stake.
This forced event removed the largest point of centralization and left the chain truly community owned and operated. See chapter 11.4, de governance, for further information on delegated proof of stake. See chapter thirteen point four point two for more information on forking away from an abusive well stake. Section three point two point four. Why the Hive blockchain is a freak event. Founder exit. The principal developer left early, taking minimal continuous control. Hostile takeover. The attempt to seize the chain triggered the community to unify and fork out the hostile stake.
No ICO, no VC, no foundation. Without a formal entity or a large pre mine, Hive has no single point of regulatory or financial capture, community focused mechanics, a thirteen week power down of stake locked for governments disincentivizes large custodial accounts from staking user deposits, making exchange led takeovers far more difficult. This prevents exchanges from using custodial stake to vote against the interest of users who have deposited with the exchanges for purposes of trading. Additionally, a new investor has to wait for thirty days in order to carry out governance votes after having staked their tokens to vote.
In cases where the stake is large enough to affect the governance of the chain directly, the thirty days gives the community time to find out whether or not the new investor is a benevolent force and will act in the interest of the community before they are able to carry out malicious votes. This also gives the community time to act and take defensive measures where it cannot establish a benevolent intent from the new investor. Section 3.3, petri dish cultivation model. Section three point three point one, the need for organic growth.
A petri dish offers nutrients in the right environment, but you cannot force which organisms thrive. Similarly, a censorship resistant chain must set the right parameters, like consensus rules, lockup times, and governance models so that a truly decentralized community can take root and expand. Section three point three point two, value for value incentives. When participants receive rewards for providing meaningful contributions, whether running infrastructure or creating valuable content, they build reputations and earn tokens without needing technical credentials or large initial investments.
Users would stake earn when they vote on content. These votes direct tokens from a daily communal rewards pool to the content that is voted for. Over time, this democratizes token distribution and reinforces a healthy middle class of stakeholders. Section three point three point three, voluntary participation. No chain can cause people to stay. Individuals stay with the community if they see real benefits, like guaranteed speech, secure transactions, fairness, and sustainable token economics. Change with poor governance, oppressive or extractive structures drive away genuine participants, lose credibility, and remain small or centralized.
Section three point three point four, hard to replicate events. Forking away from a centralized founder stake or orchestrating a widespread volunteer development effort is extremely difficult and risky. Forks represent delicate moments in the history of a chain where communities can easily fracture due to ideological disagreements and misalignments. Most new chains attempt to engineer a community through funding rounds or marketing, whereas genuinely decentralized ecosystems often emerge from unexpected crisis that unify participants around a single set of core principles.
Section 3.4, universal digital human rights, UDHR. Section three point four point one, digital self sovereignty. True decentralization grants individuals irrevocable rights to their accounts, data, and tokens. If a chain's foundation or CEO can be pressured by authorities, it cannot guarantee those rights. Neutral, leaderless systems are what enable globally uniform digital rights. Section three point four point two, immutable speech and transaction. A robust delegated proof of stake or similar parameterized consensus ensures no small group can censor or freeze accounts. By having a predictable transparent on chain governance, users know that no arbitrary decision from a corporate board or government office will invalidate their actions.
Section three point four point three, beyond the reach of a single country. When a chain is fully decentralized, no headquarters, no corporate registration, no founder stake, jurisdictional bans fail to shut it down globally. Any country that outlaws it simply loses the talent and economic benefits migrating to friendlier jurisdictions. Section 3.5, key lessons of the required principles. Section three point five point one, no single control point. Avoid pre mines, ICOs, or founder stakes. Do not rely on a CEO or legal entity for development. Section three point five point two, parameterized consensus.
An example of a parameterized consensus is delegated proof of stake with a fixed number of elected validators can offer high throughput and strong security, ideal for social interactions and governance of community social nuance, if carefully designed, since the top validators can be elected and unelected by the community itself. Long unstaking periods for stake tokens for governance, for example, thirteen weeks, Discourage exchanges from powering up custodial user tokens and using them to vote against the interest of the users themselves. Section three point five point three, distribute tokens broadly.
Encourage in distributing freshly mined tokens to nontechnical users through rewarding positive, provable social actions or value for value rewards. A wide distribution prevents a few insiders from hoarding the majority of supply, leading to a more easily, regulatable, or corruptible system. Section three point five point four. Freak events often trigger real decentralization. True censorship resistance has historically emerged from crisis, founder exit, hostile takeover, or unexpected forks. Trying to design a perfect system upfront often fails because profit motives have been shown to override long term security.
Section three point five point five, censorship resistance as a social phenomenon. Technology alone is insufficient. A dedicated community that believes in censorship resistance and has the tools and social impetus to enact it is crucial. Reputation based engagement and transparent on chain governance foster collective responsibility. Conclusion. Arriving at genuine decentralization is counterintuitive and rarely driven by immediate profit. Most chains chose easy funding routes, free mines, ICOs, large outside investments, and now face takeover risk or regulatory capture.
History shows that robust digital rights grow from systems that lack a single controlling entity and operate on a truly neutral base layer, forcing communities to self govern. The petri dish metaphor captures this perfectly. You can provide the right conditions, no corporate ownership, fair token distribution, parameterized governance, but you cannot fabricate real decentralization just by declaring it. It requires a community voluntarily standing behind censorship resistance and self sovereignty with the right digital tools, often galvanized by crisis or unexpected forks.
In the chapters ahead, we will detail how to maintain these principles technically and in practice, examining the deeper mechanics of consensus design, token distribution, and ongoing governance models that reinforce genuine network autonomy. Only by embedding these ideas deeply into the chain structure can we realize universal digital human rights that no centralized forces can override. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter four, what a social blockchain's layer one should do. The layer one should be as simple and as boring as it can possibly be. That's what scales.
Introduction. Layer one, also known as the base layer, is the basis for immutability. Here is where decentralization takes place due to the node system. It also includes block time, the consensus mechanism deployed, programming languages, and rules pertaining to the network's core operations. Layer one is the foundational tier of a censorship resistant community governed blockchain. It underpins all core functions such as account creation, historical data storage, governance voting, and transactions that must remain immutable and easily retrievable by anyone. The guiding principle is to keep layer one as simple and lightweight as possible so that it can be run by many independent operators without prohibitive hardware, scale to accommodate network growth without becoming unmanageably large, remain easily forkable so a community can remove or zero out abusive oligarchs or malicious stakeholders by supermajority consensus.
However, that consensus may be reached for each blockchain. This approach contrasts with many other chains that overburden their base layers, often leading to high fees, low throughput, or compromised decentralization. Below is an outline of which features belong on layer one and why. Section 4.1, data availability. Text based data only. Long form text storage on the base layer one is a powerful tool. By limiting layer one to text data, instead of storing large files like videos or images or conducting compute and DeFi operations, nodes remain lightweight.
Operators can more easily store and playback an ever growing blockchain if it is mostly text based, censorship resistant. A truly decentralized text based layer where the node operators and token holders are spread across multiple countries ensures people cannot be silenced by corporate or state actors. When each node stores the same text ledger, no single entity can remove or change that record. This guarantees data availability for governance, on chain reputations, and community discussions. Higher bandwidth content and operation, such as large media files and computation, should live off chain or on a layer two specifically designed for larger data.
Section 4.2, state recall and historical record. A secure layer one must provide historical state recall, a full record of the chain's progression from inception to the present. Due to the fact that all text based data remains accessible on chain on such a blockchain, anyone can verify past actions, post, votes, transfers, etcetera, reconstruct an account's exact history, ensuring transparency, detect attempts to rewrite or delete historical events. In effect, this table of truth is essential for accountability. If the chain experiences a hostile takeover, honest community members can use the historical record to fork away and preserve legitimate balances, reputations, and activities.
Section 4.3, table of truth and custom JSON. A table of truth is the immutable text ledger storing transactions and events. Sometimes communities want to store structured data, for example, metadata about a post or a custom vote type. This is enabled by custom JSON operations on layer one, a feature allowing nonstandard data fields to be written on chain. Indexing layer, a mechanism often run by specialized nodes that filters or base blockchain only sees text fields, custom JSON can represent many actions or data points, game moves, specialized votes, community tags, etcetera, if those actions are still validated by the chain's consensus.
If this is followed to its natural conclusion, the result is that the chain can incentivize real world actions that benefit the community. This enables the chain and the community to distribute value to valuable actors in the community that are doing real world actions. It becomes a value for value exchange that, if designed correctly, can become accessible for the vast majority of people to involve themselves with, making earning crypto from a neutral layer accessible without the user having to know how to do technical activities, such as cryptocurrency mining. Ultimately, it makes newly created cryptocurrency accessible to all people, meaning everyone has the right to earn regardless of their technical competency.
Section 4.4, accounts and resource management. Accounts are a core function of layer one. In a truly decentralized system, no user should be forced to rely on a centralized provider to create an account. Users can create public keys, store them locally, and sign transactions independently. Additionally, an on chain resource management layer, e g resource credits, can replace transaction fees. By staking tokens, users gain the right to make a certain number of daily transactions for free rather than paying each time. This approach keeps transactions feeless at the user level, deters spam by requiring state resources, helps scale usage without imposing gas or high fee structures.
Section 4.5, on chain actions, posting content, and commenting. Social content like text post, comments, or community updates can be fully on chain if the system is optimized for text. This preserves speech that cannot be retroactively edited or removed by a central party, empowers front end applications to display your filter content, but not to delete it at the ledger level, supports immutable communities where membership discussions and follower relationships are historically documented. While full text records may sound large, modern compression and incremental storage can keep it manageable, especially when storing only text and not high bandwidth media.
Section 4.6, communities and followers list. Layer one can also track which accounts immutably follow which others, community memberships, roles, when these relationships live on chain. Centralized Web two style front ends cannot arbitrarily ban or eliminate entire groups. The user's social graph, followers and following, is secure, and competing interfaces can tap into the same data. This is a huge leap forward from centralized social networks that can wipe your entire audience or content with policy change. The application of this technology means that no central party has the ability to delegate or regulate online communities any longer.
Section 4.7, governance voting. Details in later chapters. To remain secure, a decentralized network needs a mechanism for the community to vote on infrastructure providers, which are elected witnesses or validators, protocol level changes, hard forks, parameter updates, token minting schedules, and moderating inflation rates, resource distributions, proposal funding, development grants, etcetera. All governance actions, voting, proposals, and rank ordering should be recorded in the base chain's text ledger. Governance on layer one ensures the entire community can see and react to proposals, fosters accountability, and allows forks if a sizable super majority degrees with major stakeholders.
Section 4.8, infrastructure incentivization, micropayments for node operators. Incentivizing core infrastructure like witness, validator, or block producer nodes is critical. By awarding block rewards or newly created tokens to elected operators, you avoid requiring them to form centralized businesses or rely on external VC funding. This keeps infrastructure neutral by letting the community elect whom they trust, provides a steady reward for performing consensus, storing data, and serving it to the network, minimizes external pressure or constraints that often lead to censorship or central control, allows anonymous infrastructure operators to compete against large corporate entities that intend to outcompete them by cutting cost and fees or running at a loss, knowing that they can put the individual independent operator out of business over time. Other chains such as Bitcoin only incentivize their miners, but they do not incentivize their other critical infrastructure, such as lightning nodes or nostril relays from the layer one, mutually created new currency.
This leaves them susceptible to such a long term hostile attack from large corporate entities that comply to anti freedom government regulations, prioritizing those above the values of the community. Section 4.9, transactions and transfers. Finally, token transactions and transfers are fundamental on layer one. Users should be able to move assets from one account to another with instant finality or short confirmation times, feeless or low friction operations if they have sufficient staked resources, full immutability, forming the basis of the economy, all top witnesses, a small group of top community elected minors that run the community's preferred code, in the consensus should process all transactions, lest they be unelected by the community.
This guarantees the rights of all users to transact apart from in special circumstances. When the chain is under attack and an existential threat of a hostile takeover where the community may be supportive of some witnesses blocking transactions that threaten the chain's security, This is more efficient than small block proof of work systems, where there are many more block producers who are effectively voting with their infrastructure. This makes such layers slow and not suitable for low fee, large scale microtransactions. Section 4.1, balancing block production with efficiency in voting and operation.
It is in the community's best interest to elect witnesses that are among the top 20 or so most skilled operators of the code while also best reflecting the social ideology of that community. 20 is a minimum recommended number, each having equal weight in the governance decisions on the chain regardless of their stake size. This means that witnesses are not only technically skilled, but they have to have a deep understanding of the social implications of the code they run, from setting interest rates, voting parameters, new token minting schedules, and reviewing code to make sure upgrades meet community requirements and are secure.
The top 20 witnesses are also the primary block producers on the chain. They are responsible for the decision of which code to run, and that code decides which transactions are recorded on the chain. These are the transactions and data which fill blocks of the blockchain and form the immutable, unchangeable history which the blockchain records. This is the heart of the blockchain, the block production process. Providing there is no centralizing party, no ICO or pre mine, there is a fair token distribution mechanism, No company behind the blockchain.
This process is what decentralizes the storage of data on a proof of stake or delegated proof of stake chain makes it uncensorable or tamper proof. As a result, the community members can operate permissionlessly on the chain with certain guaranteed digital rights, such as property rights, free speech rights, voting rights, and others. The incentives paid from the chain to the block producers must be high enough that they are incentivized to remain as honest actors and not susceptible to corruption. The intuitive approach is that the more block producers a chain has, the more decentralized it is, and the more censorship resistant it is.
However, things are not always as simple as this, and counterintuitive approaches often apply. Section four point ten point one, block producer rotation and backups. Often chains choose to have a top elected group of the best block producers as their witnesses and then have one or several rotating backup block producers. Having backup block producers means that there is a chance for more entities to earn, and so more people run nodes. If an incumbent block producer becomes malignant, they can always be elected out, and a backup is ready to step in immediately.
It keeps the other block producers on their toes as those in the rotation positions are hungry to prove themselves and move up the rankings. Collaboration between the incumbents is more risky for those incumbents. A small group of elected block producers can be more easily held to account and replaced if the community so wishes by always online backup block producers. Some chains choose only to have one backup block producer, resulting in a top 20 plus one, where the backup is rotated into the block production schedule at random. Other chains have many hundreds or even thousands as future advancements in the technology are developed.
Section four point ten point two, pros of having many block producers. More difficult to get a super majority to agree to censor transactions or speech or competition for top spots, keeping incumbents on their toes. More difficult for a government to force their will on a community to censor transactions. Section four point ten point three, cons of having many block producers. More difficult to coordinate for forts or upgrades to technology, more difficult to tell if all block producers or all individuals or just one entity running many nodes, Where ICOs or companies are involved in the inception stage of a project, they naturally gain a centralizing influence over the block producer pool, making the chain seem more decentralized than it actually is.
Each block producer gets paid less as there is less money to go around per block producer. And so the chances of dishonest block producers increases since they have more to gain by coordinating with other block producers to corrupt the chain and steal funds. Each block producer gets paid less as there is less money to go around per block producer, And so the chances of dishonest block producers increases since they have more to gain by coordinating with other block producers to corrupt the chain and steal funds. Alternatively, the more block producers there are, the more of a chain's inflation must be dedicated to them in order to pay them enough to remain honest actors.
Can reduce efficiency, speed, and scalability of a blockchain. Section four point ten point four, optimizing for reality. The reality is that each community must strike a balance between too large an amount of block producers and too small a number. On social or community driven chains using delegated proof of stake or similar technology, the block producers build their own chain reputations over time. This means there is a theoretical optimum number of top class block producers with which a community can operate in an adequately decentralized, censorship resistant way, which is resistant to civil attack while not being so small that it can be easily corrupted by government.
Other types of attack will become easily corrupted over time as the market capitalization of a chain grows. It can afford to incentivize more block producers and should look to incorporate modern technologies to allow for an increase of block producer numbers while not sacrificing the scalability and speed of the chain. Based on the experience of the fork away from Steam that created the Hive blockchain, it seems that a top 20 is an adequate number of block producers. It allows coordination when it makes sense to block a transaction, but makes it difficult enough to get consensus that such measures won't be taken lightly.
In cases where there is one entity that can easily elect all of the top 20, this, of course, does not work. So attention must be paid to the issue on a chain by chain basis. Communities with lopsided token distributions are often better having a much larger block producer pool. However, in the cases where a small group of entities control the majority of the tokens, they are known to run the majority of the block producers anyway. This means that just because a chain has a large number of block producers, it does not necessarily mean it can't be pressured into unfairly blocking transactions or other unfair actions that centralize the chain in critical moments when decentralization and censorship resistant is needed most.
The issue often comes about as a result of whether or not the chain had an ICO or a premine. If there was a premine, then a lopsided distribution is normally present. And so even chains with large numbers of block producers are often easily pushed into making decisions that effectively centralize the chain, particularly in times of need, such as in hacks, takeovers, or when subject to government pressure or regulation. It is unclear as to how much more secure a chain is based on an increased number of block producers. After all, a government can just as easily pursue a top 200 as a top 20 to achieve the censorship it wants.
It seems that only once the number of block producers increase by an order of magnitude does increasing the number of block producers start to have a significant effect. This, however, increases the cost to the chain of incentivizing these block producers to remain honest actors. Communities should design their systems to suit their own situation based on these factors. A serious defense against an organized attack would be where many thousands of block producer nodes could easily be spun up by community members at any time for almost no cost. In a similar way to how torrent sites evade shutdown, but respawning a new version of the site shortly after the original site was legislated out of existence.
Section 4.11. Why keep layer one minimalist? Scaling. The more complicated the base chain, the more likely it becomes bloated, expensive to run, and difficult to fork. Forking. A simpler, smaller code base is easier for the community to adopt in a fork, safeguarding against hostile actors or rich wells who attempt takeovers. Performance. Text based data alone can be compressed and synchronized efficiently, making it accessible for diverse operators in many regions without requiring specialized hardware. Everything heavier like complex smart contracts, large file storage, or advanced application logic should move to a layer two or specialized network that references the trusted state from layer one. This architecture avoids turning the core ledger into a single point of failure or bottleneck.
Conclusions and implications. A well designed layer one is the bedrock of any censorship resistant community driven blockchain. By keeping it limited to text based data availability, historical state recall, basic governance mechanics, and secure transactions, you ensure high decentralization and easy operation, human readable transparency for all critical updates, votes, and account histories, flexibility to fork when necessary, preserving community rights, optimum number of block producers, and block production algorithm for the network.
Adhering to these layer one principles lays the foundation for truly self sovereign digital communities and network states. Layers above can then innovate with large scale data, complex smart contracts, or specialized applications without jeopardizing the core security that lives on this minimal robust base chain. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter five, zero fee structure. Zero fees means the masses can use it, and the complex operations can remain trustless.
Introduction. Transaction fees on a blockchain can make or break its usefulness in decentralization. Many projects overburden their layer one with features that dramatically raise fees or force it to become overly complex and resource heavy. This leads to two typical problems. High fees that discourage on chain activity, making the network exclusive to wealthy users that can afford the fees, and especially when carrying out the large volumes of microtransactions required in social communities. High volume and throughput FAT nodes where only smaller numbers and groups of well funded operators can run the chain's infrastructure, reducing community self sovereignty.
Below, we explore how to address spam, infrastructure incentives, and why a fee less or low fee layer one model best serves a truly decentralized community when it comes to social interaction and network states. Section 5.1, spam limitation and resource credit systems. A common objection to free transactions is, won't it be spammed? The answer is to require staked resources, sometimes called resource credits, instead of charging individual fees per transaction. Section five point one point one, requiring users or apps to stake. To transact, an account should lock up a small amount of the chain's native token.
The larger your stake, the more daily or hourly resource credits you receive. The more free on chain transactions one can carry out per day. Section five point one point two eliminates per transaction fees. Each operation, a post, a vote, or a transfer, consumes a small portion of these credits, but does not charge you a fee. Resource credits recharge at a certain daily rate, say 20% per day. Meaning, if an account executes enough transactions in a particular day that the resource credits drop below 80%, it will take more than twenty four hours for the account to regenerate to a 100%.
Once credits recharge, you can transact again at no extra cost. Section five point one point three, deter spam. Malicious spammers must stake substantial tokens to sustain large scale attacks, making spam expensive. Honest users who do not overshoot transaction limits continue accessing the network without paying fees. Section five point one point four fosters app level staking. Applications can stake and delegate tokens and their associated resources in bulk so their end users can transact for free using the resources of a larger stakeholder. The token or resource delegation happens in such a way that the delegator's tokens are never at risk of being stolen by the account receiving the delegation.
Resource delegations can be withdrawn at any time. See chapter 7.3, making spam costly and creating competition for resources, increasing buy pressure with increasing network effect for further information on delegation of resources. This further democratizes access because everyday users do not need to buy or hold tokens personally. Apps become holders of last resort, maintaining large stakes to serve their communities. See more information on this matter in chapter 12.11. Decentralized apps and services as holders of last resort. This approach banks the unbanked.
People in low income regions can post, comment, or transfer value without paying fees so long as the application or sponsor account stakes enough to cover them. Section 5.2, incentivizing community run nodes and infrastructure. In a genuinely decentralized model, elected community members run the nodes, not giant corporate data centers or venture funded teams. To make that viable, five point two point one, paying infrastructure operators from the protocol. The base chain's inflation or block rewards should fund node operators directly.
This prevents infrastructure operator Sol Reliance on businesses' models or venture capital. Five point two point two, reputation and community voting. The community votes for reputable infrastructure operators. The community votes for reputable infrastructure operators. Elected operators receive predictable rewards to maintain servers, store data, and confirm blocks. This does not need, however, to be the full daily rewards pool, but only a portion of it. The remaining rewards can be distributed to other types of value creators and infrastructure operators in the ecosystem.
If they fail or behave maliciously, they lose votes and therefore rewards. Five point two point three, freedom to be anonymous. Operators can receive block rewards from the chain without revealing their identities. This protects them from external pressure, enabling truly neutral infrastructure, which creates the foundation for protection of digital rights for all users. Combining fee less end user transactions with direct infrastructure rewards ensures the network remains inclusive, while node operators have the incentive to keep running services that benefit everyone.
Section 5.3, why high fee layers are bad for communities. Many blockchains impose high fees, especially if they store everything on one layer, heavy code, complex smart contracts, or large data, or have limited throughput that forces bidding wars for transaction space. Five point three point one, high fees calls. Exclusion. Everyday users, especially in low income areas, can afford consistent on chain activity. Stunted growth. Apps cannot embed frequent transactions or user generated data if each operation is expensive. Centralization.
Only wealthy entities can transact heavily or run specialized infrastructure. When base layer fees become high, communities cannot harness the blockchain for everyday speech, social features, or microtransactions. Instead, usage reverts to speculative DeFi and whales who can afford to pay high fees, undermining the vision of broad censorship resistant participation for the widest possible user base. High fee layers also mean that layer two systems cannot clear to the layer one security layer very frequently due to having to constantly pay layer one fees in order to do so. The result is that one has to trust layer two with the information until it clears to the finality layer, layer one.
On a feeless blockchain, this is not an issue since one can always afford to clear to layer one as long as it has enough stake in the ecosystem to control the resource credits necessary to clear to layer one on a continuous basis proportional to its usage. Section 5.4. Why a low fee or fee less layer one is preferred. A fee less or near zero fee system on layer one is crucial for five point four point one, universal access. Anyone can create content, transfer funds, or engage in governance without cost barriers. This ensures that economic class does not dictate who can speak on chain.
Five point four point two, circular economies. When transactions are free at the user level, the network can become a platform for day to day exchanges, enables sending small tips, micropayments, or publishing social post, fosters a vibrant on chain community rather than a speculative click. Five point four point three, stronghold incentives for decentralized applications. Applications stake tokens to cover user interactions. They must keep these tokens staked long term to serve their audience. This effectively locks supply out of circulation, providing floor demand and lending intrinsic value to the token.
This means that the majority of DApps or decentralized applications won't sell their stake at any price since if they did, their DApps would stop being able to post a chain through lack of resource credit. This means dApps or holders of last resort and thus create an intrinsic value and floor price to the token, providing resource credit staking in the ecosystem. See more information on this matter in chapter 12.11, dApps and services as holders of last resort. Five point four point four, equitable distribution for everyday users.
Fee less usage makes it far easier to distribute tokens to everyday participants. Example, rewarding posted content or community contributions, real world documentable actions in a low cost environment. Conclusion. Fee policies shape who can use your chain and how. If you want mass adoption, true censorship resistance, and a community run architecture for social based network state systems, you must ensure staked resource credits instead of per transaction fees, on chain incentives for node operators, allowing them to remain independent, lightweight, mostly text based layer one, so many people can run it without specialized hardware.
Simplicity, that keeps the system forkable and avoids centralization by complexity. With a fee less or near zero fee model, you empower a global user base far beyond crypto speculators to store text, engage in social communities, and exchange value via cheap or zero fee utility systems, not speculation alone. The change neutral funding of infrastructure ensures longevity and true decentralization, preventing regulatable corporate takeover or excessive corporate influence, leaving the community to be governed and regulated by itself. This is the bedrock for building scalable, censorship resistant network states where anyone can join and freely transact without gatekeepers.
The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter six, what a social blockchains layer two should do. It's not that difficult to understand why trying to put everything on layer one is a fruitless task. Introduction. The second layer, or layer two, refers to the secondary layer or protocol that is built on top of a blockchain. These are designed to enhance the scaling of the ecosystem, far above what can occur at the base layer. Blockchains tend to be limited in the number of transactions they can process.
There are also memory concerns since individual nodes have limitations. A well designed layer two is where most application logic, heavy data, smart contracts, and computationally intensive operations should live, while still relying on layer one for security, finality, and account management. By keeping layer one lightweight, mainly storing text based data, social actions, and essential governance. Layer two can handle large scale application services, smart contracts, and non text data without bogging down the base chain. This division lets the community run layer one remain forkable, scalable, and fee efficient, while layer two delivers complex functionality to end users.
This chapter explains what layer two should do and how it can build upon a secure, fee less, or low fee base layer. Section 6.1, application operation and services. Section six point one point one, offloading heavier logic. Instead of stuffing all computation into layer one, the business logic runs on layer two. This keeps the base chain from becoming overloaded with code or inflated transaction fees. Section six point one point two, front end interactions. Social platforms, smart contracts, games, collaborative editing tools, or advanced finance products can store heavier data or run specialized computations off chain or partly off chain, and only anchor key results and checks to layer one when needed. Section six point one point three, data efficiency.
Large media files or high volume data like videos, images, or complex transaction logs are better suited for layer two networks or off chain storage solutions. Layer one records essential references, for example, pointers or hashes, to ensure immutability and censorship resistance for crucial metadata. This synergy lets layer one remain nimble and secure, while layer two fosters rich application ecosystems. Section 6.2, rely on the security and account system of layer one. Section six point two point one leverages layer one accounts. User identities and private keys are established on the base chain.
Layer two applications rely on these same accounts, ensuring a single source of truth for ownership. Section six point two point two anchors the critical state. Key events like finalizing token transfers or verifying integrity are committed back to layer one to prevent manipulation. With a zero fee base layer, this can happen instantly, all day long, providing the layer two has the required amount of resources, staked on layer one. This minimizes trust in layer twos, as they can affordably and instantly clear to the base layer, or L one, security for finalization.
Section 6.2.3 avoids duplicating security on layer two. Layer two should not require a separate miner or validator set to replicate the entire chain security. Reduces complexity and resource consumption while maintaining trust in the layer one consensus. Because layer twos can inherit the reliability and user attendee from layer one, each new application or service does not have to solve security from scratch. This means layer two builders can focus resources and what they're good at, and not on having to replicate layer one blockchain features and maintaining operation of a decentralized network.
Section 6.3. If done correctly, layer two does not need layer one security. Section six point three point one. Minimal on chain dependencies. Layer two can store ephemeral or detailed data on specialized distributed off chain storage systems, such as the SPEAK network, referencing only final states or signatures on layer one. See chapter 18, off chain data availability layer for non text data. Layer one, therefore, functions as a final settlement layer rather than a global CPU or data warehouse. Section six point three point two, reduced attack surface.
Since layer two uses layer one only for account identity, finality, and minimal checks, the base layer remains robust. Layer two systems can therefore innovate freely without risking or having to replicate the entire network stability. Section six point three point three, separate upgrades. Layer two services can evolve at their own pace, and scale independently without putting load on the entire chain. Boost flexibility while preserving layer one continuity and neutrality. Section 6.4, smart contracts, heavy data such as non text, and computation. Section six point four point one, smart contracts, complex scripting logic, DeFi protocols, advanced NFT mechanics, or multistep financial flows operate off the base layer one chain, keeping the layer one light and scalable.
While modularized layer two systems can scale individually based on demand and usage, as a result, not putting additional load on the base layer. Only essential confirmations, like final balances or contract triggers, settle on layer one. Intercomputational information can be kept on the layer two until computation reaches points at which it needs layer one security. Section six point four point two, heavy media and non tech storage. Videos, large documents, or images do not belong on the base layer, and can be stored on layer two storage systems. Layer two or other off chain networks, e. G, IPFS, and the SPEAK network store these files, referencing them via hashes or pointers on layer one.
This allows the layer one to scale significantly more. Any non essential action or piece of data can be stored on layer two instead of on the base layer. Section six point four point three, computationally intensive operations. Simulations, gaming logic, aggregator queries, or batch updates can operate on layer two nodes, or specialized side chains. Summarized or finalized results are recorded on the base layer. This prevents layer one from becoming bloated and requiring centralized super nodes. Section 6.5, tokens, wrapping, and decentralized finance, or DeFi.
Section six point five point one, custom tokens. Communities can create layer two tokens representing digital assets, reward points, or governance stakes pertaining to that community only. Such tokens can be managed by layer two logic, but recognized or mapped at layer one. For authenticity and security, Section 6.5.2, instant low cost swaps and wrapping external or cross chain tokens can be wrapped into layer two equivalents. Multi signature or bridging mechanisms facilitate this process. Fast, feeless transfers mean that liquidity can be held on both chains by the layer two smart contract multi signature system, and thus instant low fee swaps can be facilitated.
Section six point five point three, Felis decentralized finance. Decentralized exchanges, lending protocols, and yield forms operate on layer two. They frequently specialize in DeFi lending and a value token swap transactions, which require low cost execution, making a zero fee layer two the ideal environment for such systems. By relying on layer one for final settlement and accounts, layer two tokens or DeFi remain trustless, auditable, and tamper resistant. Section 6.6, implications, efficiency, scale, and user experience. Section six point six point one, lower fees.
Using this layer one, two division of responsibilities approach, layer one can optimally reduce its load from computations and other high intensity transaction types. Layer one transactions can therefore more easily remain near zero fee or resource credit based when the chain operates at scale. Layer two handles heavy transaction flow. This flow can be modularized per layer two smart contract, meaning the cost of demand does not have to be passed to the whole community, as it does on many other chains, where layer one executes almost everything, including smart contracts and compute.
This results in a general reducing of cost across the network, And cost raise only in areas where demand is high, not for all end users, as with many of the early blockchains. Section six point six point two. Fast, rich applications. Layer two is able to offer real time updates, large data sets, and interactive dApps at scale, whereas layer one can focus on being the security and finality layer. This means dApps can specialize in making their user experience top quality and not have to worry as much as with traditional blockchain tech stacks about operating at scale.
Section six point six point three, protection of the base chain. If something goes wrong with a layer two app, the underlying chain remains intact. Financial risk assets and operations can be minimized on layer one, and risk taking can be moved to the layer two systems that specialize in generating high economic yield to users for risk taking. This reduces risk on the community base layer, layer one, and isolates mistakes and over leverage to layer two, helping to protect and preserve the layer one in times of financial uncertainty. Section 6.7, BLS multisigs on layer one and escrow and liquidity pools on layer two. Section 6.7.1 BLS and escrows.
This type of feature allows two parties to lock funds or assets until certain conditions are met, at which point the funds can be released. These are governed by layer two logic, often with multisigs with final release transactions on layer one. If the collateral involved in such transactions is large, in the tens or hundreds of millions of dollars, the community may opt to use BLS threshold signatures on the layer one, where a multisig in which a preferred method of on chain fund release requires many hundreds of signatures to be obtained in order for funds to be released from liquidity pools or escrow systems.
Section six point seven point two, layer two liquidity pools. Layer two automated market makers, AMMs, or multi asset pools can handle continuous swaps and yield strategies away from layer one. High frequency operations stay on layer two, reducing contract calls on layer one where finality clearances happen. Some communities may wish to create their own dedicated layer two liquidity pools separate to the layer one, reducing risk of hacks on layer one. Conclusion. Layer two is the engine for advanced functionality, heavy data, and day to day decentralized application logic By leaning on the secure, fee less, or low cost layer one, accounts and final settlements remain tamper proof.
Smart contracts, heavy storage, and complex computations stay off the base chain. Tokens in DeFi gain flexibility without increasing layer one congestion. Communities and DApp operators can expand freely, confident their basic user identities and transaction proofs are anchored in an unbloated decentralized base layer. This complementary design empowers vast application ecosystems, such as community social tokens, advanced financial instruments, and data rich content platforms, while preserving true decentralization and for capability at the root.
By separating what layer two should do from what layer one must do, you maximize scalability, lower cost, and open the door to censorship resistant digital communities at real world scale. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter seven, sustainable economy and decentralized coin distribution. Distributing tokens fairly and making it sustainable is among history's most difficult challenges. Introduction. A sustainable economy in a decentralized blockchain hinges on properly distributing the coin supply so that no single entity or small group can dominate, unlike many existing, more centralized models that rely on large pre mines, ICOs, or purely profit driven validation, a truly censorship resistant system needs a continuous community driven distribution that rewards actual value creation.
Section 7.1, token distribution methods. Current main distribution methods include mining or validating, earn by providing infrastructure, proof of work or proof of stake, DAO proposals on chain, fund work or community projects through inflation or treasury as voted by stakeholders, direct trading. People buy the coin from existing holders, though this alone does not ensure fairness or broad distribution. Incentivized stakeholder distribution, ISHD, also called proof of brain, where community members are incentivized with a portion of the daily rewards pool when they vote tokens to those producing valued content or services.
For further information, see Annex I, Glossary of terms and acronyms. Most blockchains rely on a narrow set of these, often resulting in whales accumulating large amounts of the supply. A robust model should leverage multiple mechanisms, ensuring that miners, validators, content creators, infrastructure operators, and general contributors can all earn. Section 7.2, incentivize stakeholder distribution, ISHD, or proof of brain. ISHD awards tokens based on recognized value creation. That is publishing, curating, developing, marketing, or performing tasks that the community deems worthwhile.
Stakeholders vote, and the protocol mints new tokens to reward both creators and voters. This aligns incentives. People who have a stake in the network by staking tokens benefit from finding and rewarding good content or valuable work invites broad participation. Nontechnical users earn most of the newly minted tokens by contributing ideas, media, or organizational help, rather than being limited to buying or having to do prohibitive technical mining by running infrastructure. This model counters the typical pay to play approach, letting anyone enter permissionlessly, and earn if they provide real value to the community.
Section 7.3, making spam costly and creating competition for resources, increasing buy pressure with increasing network effect. A major problem with public blockchain systems is spam. The chain can easily become clogged up with data of users who are attempting to drain bandwidth on the chain and make it difficult for others to post their own data. The problem is that if fees are charged on each transaction, this can become highly costly and a prohibitive barrier to entry for many users. Each user now requires additional tokens that they must first obtain from an exchange so that they can pay the transaction or gas fees in order to post to chain. In social media systems, this becomes prohibitive to users, especially where there are thousands of tiny micro interactions each day in replies, likes, and distributions of rewards.
This can be solved by making a competition for resources on chain. This may manifest in users being required to stake small amounts of the token. The users who stake the most get access to the most free transactions each day. In order to help new users onboard, an existing user may wish to delegate some of their tokens such that new users can access zero fee transactions to post a change straight away. A delegation is a process whereby an existing user can delegate the power or resources of their tokens to a new user without actually giving them their own tokens. This means that the new user cannot steal the tokens of the existing user, but they can access the chain for free with some of their resources, stinking for access to resources on chain.
Transactions, processing, storage, voting, curating, etcetera, brings about a sustaining buy pressure for the token as long as a network effect takes hold and demand to post information to chain grows over time. This results in a sustainable token price, which is proportional to the network effect of the chain, as well as the number of new users signing up. Section 7.4, social distribution as a Trojan horse. Social content distribution can serve as the entry point for far broader decentralized ecosystems. Ongoing token flow. Every post comment or contribution that gains upvotes injects new tokens into many individual wallets, forming a de facto distribution engine to those who contribute and create value. Moving beyond lunch post.
Over time, the community can prioritize content related to actual value, e. G. Building projects, marketing the chain, developing infrastructure. This becomes a Trojan horse for encouraging real productivity and value creation, not just social media. By starting as a user friendly content system, the ecosystem indirectly bootstraps mass token distribution and engagement, ensuring the coin doesn't end up in just a few technically capable hands, but rather also in the hands of many regular people who add value to the network in their own ways.
Section 7.5, distribution to multiple parties and ongoing issuance. A single distribution path, e. G. Only validators or only an ICO, creates central points of control. Instead, section seven point five point one, multiple mechanisms of distribution to validators and infrastructure providers, social and curation rewards, DAO and treasury proposals, developer bounties, and community sponsorships. Section seven point five point two, continuous controlled new token minting. The protocol can continuously mint tokens at a strictly controlled rate controlled by the community consensus, directing them toward contributors who deliver recognizable value.
Zero founder or early stake. Founders should earn tokens alongside everyone else with no large pre mine that cements early dominance. Founders are more aligned with their community members. To add value instead of using them is exit liquidity, as is often seen in many of today's decentralized blockchains. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines. Ongoing issuance means many new participants and future contributors can still obtain tokens without purely buying in. This fosters dynamic growth and social mobility. It also means that new participants do not have to take risk to earn stake in the community.
They can just contribute and earn from community votes. Continuous new token minting means the community can continuously reward users for contributing value, and it can also direct some of this supply to subsidizing transaction fees, keeping them as low as possible into the future. As long as the value created via the incentivization with freshly minted tokens exceeds the value of freshly minted tokens that are distributed, it is possible to achieve a sustainable growing token price into the future. Section 7.6, the importance of earning your tokens.
Many blockchains feature founders of venture capital firms, VCs, receiving large stakes via ICO or pre mine, which often centralizes control, eventually invites regulatory scrutiny as an unregistered security turns users into exit liquidity. Early insiders sell off tokens, depleting value for later entrance. By contrast, in a free permissionless system, tokens are earned by contribution, documented value creation, e. G, infrastructure operation, marketing, code, or social content is rewarded. Founders earn from zero tokens fairly like everyone else.
Community recognition determines ongoing rewards. Avoiding scams. Often tokens that are scamming their users will inevitably bring the conversation around to buy our token. However, in ecosystems that are not scams, users should be able to earn their tokens from a neutral CEO less protocol. As such, one can do beneficial actions for the community, earn stake from the protocol itself, and thereby not take any financial risk at all. This significantly lowers the possibility of users being scammed for their money. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines.
All parties starting at zero tokens and having an equal opportunity to earn tokens from a neutral protocol ensures that no party can claim an unfair proportion of tokens by fiat or capital alone. This aligns the incentives of all members of the community in that they must first add value before they can take any out as profit, be it by building of code, purchasing the tokens on the open market, running infrastructure, creating valuable content, documenting their usage of the system, or running events to promote the community. Amongst other things, all participants can contribute and earn a stake in the system, as long as what they are doing adds value. This minimizes extractive behavior in blockchain systems where founders have large pre mines and ICO stakes that they have obtained by decree without adding value, and therefore unfairly compared to the other participants in the system. For more information on premines and ICOs, see chapter 15, censorship and the morality of premines.
Section 7.7, keeping inflation in check. Unlike Bitcoin's cap supply, a content or community focused chain might retain continuous tail inflation, but at a controlled rate, starting higher, e. G. 15% per year, to bootstrap distribution, gradually decline annually until stabilized at a nominal rate, e. G. One to 2%. Consensus governance adjustments, community consensus driven adjustments to inflation based on needs. In contrast to a capped inflation schedule, like on the Bitcoin blockchain, where fees will remain high in order to pay for the security budget of the chain. A chain with a long tail emission can keep fees very low or free, which is more applicable to social layer with high interaction and transaction volumes on chain. The real test is whether the community's total value output, value creation and demand, outweighs the value of new token minting.
Section 7.8, what you want to see versus what you don't. What you want to see, no pre mine, no ICO, multiple distribution paths, small controlled consensus driven inflation, broad middle class growth or path to it, permissionless entry, Ability for low tech users to earn stake without taking financial risk. What you do not want to see. Massive founder stake controlling a disproportionate supply. Single distribution channel, funneling all tokens to only a few, often technically capable entities, excessive open ended new token minting, leading to token devaluation, stagnant social mobility, preventing smaller holders from growing even when they voluntarily add value to the community.
Section 7.9. No compromise on free speech and censorship resistant. Projects aiming to secure digital human rights cannot allow pre mine central control, easily coerced by governments or powerful interest, CEO or company structures. Single legal entities are direct regulatory targets. They're also more coercable than anonymous individuals operating on such systems who are mobile and can move jurisdiction when pressured. A neutral ownerless base layer ensures speech and user accounts remain unstoppable. Conclusion. A sustainable coin economy arises from continuous and equitable distribution to those providing recognized value.
Systems relying on single distribution channels, large pre mines, or purely fee based mining tilt toward centralization in truly censorship resistant networks. ISHD, proof of brain, must be a major pillar of governance, token distribution. Low inflationary tokenomics prevents excessive dilution while funding future participants for providing value to the community. Strict vigilance against centralizing whales or external money attacks that do not align with the values of the community. No founder pre mines for chains protecting digital rights. By following these principles, a blockchain fosters a self reinforcing, sustainable economy while remaining resilient to both internal power grabs and external regulatory pressure.
The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter eight. Reputation. How do you know who to trust when you are under attack? Introduction. Most blockchains rely on pseudonymous wallet addresses, long strings of letters and numbers that do not clearly reveal who you are, how much you contribute, or whether others in the network find you trustworthy. By contrast, named account systems such as those used by the Hive blockchain let you appear under a human readable name, e g, Starkers, or they call me Dan.
This approach opens the door to reputation. Not only can people see your own chain actions, they can also develop a subjective sense of who you are and what you contribute to the network. It should be noted that it is the user's own choice as to whether or not they reveal their true identity. Reputation in decentralized systems functions on two layers, tangible on chain reputation, measurable community votes, account history, and stake related indicators, intangible, human to human reputation, subjective assessments by community members. Over time, when combined, these give each user an identity within the network.
It takes a user a significant amount of time to build both tangible and intangible reputations and relationships on chain. As a result, the value of these reputations to the user often means more than the token balance in their accounts. This has interesting improved escrow and trust implications as will be discussed below. Section 8.1, why reputation matters. Section eight point one point one, social trust over trust in code. Blockchains pride themselves on code is law. But in crisis scenarios, takeovers, chain splits, people look to trusted individuals.
A strong group of reputed accounts can be more decisive than any purely technical solution during an attack or a time of crisis. Section eight point one point two, accountability and skin in the game. If you spend years building a good reputation, it becomes very costly to betray the community. Losing a high trust status can hurt more than even losing tokens you hold. Section eight point one point three, support of nuanced complex social interactions. Named accounts with recognized reputations enable user to user escrow, collaborative proposals, delegated voting, and similar advanced features. The intangible trust you build through honest interactions and consistent contributions underpins these unwritten social contracts.
Reputed users can provide on chain legitimacy to real world physical locations such as businesses, with the user carrying out an action in a trusted business such as making a purchase with a time stamp, product purchased, photograph of the purchase, price, geolocation, amongst other information, this allows proof of person systems to be built using trusted real world locations. These locations are identified based on the reputation of certain trusted users within the community. Section 8.2, two types of reputation in decentralized systems.
Section eight point two point one, on chain numeric reputation, often tracked via reputation score or stake based metric. Every upvote, downvote, or curated activity leaves a digital trail. Over time, these accumulate into a visible on chain record and reputation. This numeric score is transparent. Anyone can inspect an account's history and voting record. Section eight point two point two, intangible, human to human reputation. Beyond metrics, people form personal judgments about your character, reliability, and expertise. This intangible layer allows you to gain influence even if your numeric on chain reputation score is moderate, Because active community members may appreciate your attitude, problem solving, social, or code contributions.
Both layers reinforce each other. Good numeric signals usually reflect consistent quality, which boost intangible reputation, and intangible credibility often translates into stronger numeric endorsements from top stakeholders. Section 8.3, building reputation. Section eight point three point one, consistent value creation. Write informative post, produce helpful tools, run infrastructure, or moderate community forums. Over time, repeated value added behavior raises your standing in the community. Being active, responsive, and transparent goes a long way.
Section eight point three point two, stakeholder validation. On such delegated proof of stake systems like the Hive blockchain, large stakeholders can give upvotes that significantly affect an account's on chain reputation and earnings. If recognized stakeholders repeatedly endorse you, it signals broader trust in your work. Section eight point three point three, social presence and visibility. Engage in discussions, help onboard newcomers, run meet ups or digital events. People gradually learn you are reliable. Reputation is earned.
The more you prove yourself and carry out actions that benefit the community, the more intangible weight your account carries. Section 8.4, reputation based trust and account value. Section eight point four point one, account reputation as an escrow. If you hold significant stake in a solid reputation, others can safely entrust you with temporary custody of tokens, e g for trades or proposals. Because your intangible reputation often exceeds the face value of your tokens, you have enormous incentive not to risk losing community trust. Eight point four point two, increasing account valuation.
Your personal intangible capital can exceed the raw dollar value in your wallet because it reflects long term engagement, verified contributions, and community goodwill. You might even help resolve disputes or coordinate tasks purely on the strength of your good name. Section 8.5, reputation based delegation and voting. Section eight point five point one, why users delegate. Not everyone has the expertise or time to actively vote on governance proposals or curation. They choose to delegate their voting power to accounts they trust. This helps with distribution of tokens and allows the trusted delegate to earn stake from curation rewards whenever they vote.
Such delegations of voting power often goes to accounts with high own chain and intangible reputation. Section eight point five point two, scaling influence. As your reputation grows, people may delegate more stake to you, amplifying your decision making influence in governance or curation pools. Over time, this can make you a de facto community leader. If you misuse that power, your entire social investment in the community may collapse. Section eight point five point three, defense against attacks. Section eight point five point three, defense against attacks.
High reputation delegates are less likely to act maliciously because losing that reputation is worse than any short term gain. Attackers might buy tokens, but without trust, they cannot easily sway user delegations in the face of well established, reputable entities. Section 8.6, reputation in times of crisis or forking. Section eight point six point one, communities rally around known leaders. In a split scenario, the question isn't just what code do we run, but also which people do we follow? Named, reputable figures can mobilize a critical mass for a successful fort. Section eight point six point two, long term commitment.
Reputed long term token holders typically have spent years building trust. The personal cost of abandoning the chain or acting maliciously is enormous, which helps anchor community stability. Newcomers, even with large token balances, lack that intangible goodwill from the community, so they can't match the social capital of long standing high reputation contributors. See chapter thirteen point four point two for more information on forking away from an abusive or a malevolent well stake. Conclusion. Reputation is the social lifeblood of censorship resistant, decentralized systems.
It transcends the purely mechanical realm of token balances and block production. When crisis hits or when the community needs leadership and integrity, people turn to those with established, trustworthy track records. By embedding both numeric, on chain, and intangible, human based reputation layers, Digital communities following such a model as described in this book can incentivize long term behavior that consistently benefits the community, Enable advanced trust mechanisms, such as escrow and delegation. Foster a resilient culture where usernames, histories, and reputations matter just as much, if not more, than raw token stakes.
Identify trusted real world business networks where reliable trade and proof of person systems can be built. Ultimately, combining strong tokenomics with healthy social dynamics via reputation creates far more robust ecosystems than code alone can provide. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter nine. Why free open source software, FOSS, is needed for security. If it's free and open source software, eradicating it is like playing whack a mole. Introduction. As decentralized ecosystems grow in scope, especially those aiming to preserve individual freedoms, resist censorship, and protect digital human rights, Free and open source software, or FOSS, proves indispensable.
When projects rely on proprietary code, they introduce single points of failure and compromise transparency, directly weakening collective security. Below, we delve into why FOSS is central to reliable blockchain governance and how it upholds the deeper principles of decentralization and self sovereignty. Section 9.1, ensuring transparency and trust. Visible code base, enhanced accountability, making the full code base public forces developers to maintain high standards. It becomes infinitely harder to hide malicious backdoors or unauthorized special privileges.
Community verification. Users are no longer forced to trust the word of a core developer or a single entity. Instead, they can rely on the global community of developers, researchers, and even curious laypeople to confirm the absence of hidden flaws. Verification instead of blind faith. The many eyes principle. Open source code benefits from a wide pool of auditors, from security professionals to part time hobbyist. More people scrutinizing the code leads to quicker bug detection and fixes. Immutable ledger and transparent software.
A blockchain's immutability rings hollow if the software itself is opaque. False ensures that every aspect of a system designed to be trustless can genuinely be trusted. Why this matters? True decentralization hinges on the absence of privileged actors. FOSS inherently levels the playing field. All participants can access the rules, confirm they're applied uniformly, and hold each other accountable. Section 9.2, long term sustainability and fork resilience. No single point of failure. Avoiding lock ins. Closed source projects become hostage to the company or individual controlling the code. If they abandon it or forced offline, the project stalls or dies.
Seamless continuity. By contrast, open sourcing the code frees the community from sole reliance on a particular maintainer. If key developers leave or face pressure, others can immediately step in, code in hand. Forking and evolution. Necessity of forks. Healthy blockchain ecosystems sometimes need to fork, whether to thwart a hostile actor or adopt new beneficial novel features. With FOSS, forking the entire project is effortless when compared to doing this where the core code is held in the hands of a corporate entity whose intentions may not fully align with the community.
Censorship resistance. Censorship resistance. Because code is publicly replicated, targeting or shutting down one repository or developer does little. Another team can rehouse the code, redeploy the network, and ensure continued functionality. See chapter thirteen point four point two for more information on forking away from an abusive well stake. Community ownership. Decentralized upgrades. When nobody owns the code's rights, no single authority can demand licensing fees or deny others the ability to enhance or customize. Collective responsibility.
Collective responsibility. Everyone in the community has the autonomy to push improvements. This promotes a sense of stewardship, where users and developers become co owners, not passive consumers. Why this matters? Blockchains are designed for permanence and resilience. Proprietary code contradicts these aims by tying crucial operational elements to a central gatekeeper. FOSS, on the other hand, cements the system's self sufficiency and the community's role in directing its own destiny via open source code, maintenance, operation, and development.
Section 9.3, mitigating legal and regulatory risk, reduced central targets, choke points removed. A proprietary code base can be legally coerced, leading to potential sabotage or closure. By distributing the code and its rights across the community, no single party can be easily bullied. Ecosystem continuity. Because the code is in the wild, attempts to suppress the network by targeting individual developers or maintainers becomes largely futile. No patents or licensing traps. Permissionless by nature. A decentralized network thrives on open participation, enforcing patents from restrictive licenses, contradicts the collaborative ethos of blockchain technology, neutral infrastructure, a platform that withholds core software or demands fees, cannot claim to be neutral or fully community driven.
Why this matters? Censorship resistance extends beyond the technical sphere. It also includes defense against legal or regulatory maneuvers. FOSS disperses liability and control, putting the community rather than a single entity in the driver's seat. Section 9.4, enhancing community innovation, permissionless contribution, global developer pool. When code is public, any skilled developer worldwide can contribute bug fixes, implement new features, or build complimentary applications. Vibrant decentralized application ecosystem. Lively innovation drives the creation of decentralized exchanges, games, marketplaces, social platforms, and more, all of which extend the blockchain's value, faster iteration, parallel experimentation.
Multiple developer teams can work on improvements simultaneously. Competing ideas drive healthy innovation, agile decision making. If the network stakeholders prove a change, it can merge swiftly, stagnation is minimized, and the project remains competitive in the fast evolving blockchain sector. Why this matters, innovation and network effects often determine which blockchains endure. Free, open source software invites a global tapestry of creativity, making the system more adaptable and faster to incorporate new technology or user demands.
Section 9.5, security through community collaboration, crowd source security audits, sophisticated attack vectors. Modern blockchains face advanced exploits from consensus attacks to smart contract vulnerabilities. An open code base means thousands of potential auditors. Rapid response. When a flaw is detected, public collaboration typically fixes it in hours or days rather than waiting on a closed source entity to do the right thing in private, behind the scenes, lower attack incentives, minimal payoff. Compromising a closed source repository can yield total control.
In contrast, free, open source software based systems can be mirrored or restarted. The cost to benefit ratio for attackers worsens significantly. Redundant architecture. Because everyone could host, study, and tweak the code, an attacker cannot stealthily modify it to gain lasting advantage. Why this matters. Security in decentralized systems hinges on distribution of data, governance, and development. Free open source software intensifies this distribution. The software's design fosters anti fragility, becoming stronger as it endures challenges. Conclusion.
For blockchains to achieve true decentralization, where no single party can unilaterally alter the chain or silence users, free and open source software is indispensable. It underpins transparency and trust. No hidden code can undermine the community's confidence in governance or operations. Community resilience. Quick forks and replacements become possible if a lead developer leaves or is compromised. Legal safeguards. Distributing code among many stakeholders thwarts attempts at legal, corporate takedowns. Active innovation. A worldwide developer community can rapidly iterate, preventing stagnation.
Ultimately, free and open source software lifts a blockchain project from a vulnerable, centralized product to a collectively owned public good, Coupled with robust governance mechanisms and globally distributed infrastructure, open source technology stands as a cornerstone of secure, scalable blockchains, empowering digital network states to flourish without fear of censorship or capture. The Digital Community Manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 10, bridge to decentralized governance.
Why effective consensus mechanisms are essential? Introduction. Every blockchain, no matter how it's structured, ultimately needs a way for people to agree on what the chain's rules are, how to update them, and who owns which assets. This process of collective decision making, often called governance, is how a decentralized project remains stable and evolves over time. In practical terms, governance answers questions such as, how do we decide on changes to the protocol, like bug fixes or new features? Which individuals or entities have a say in these changes?
How do we resolve conflicts when the community is split on major issues? Understanding why governance matters and what forms it can take is crucial for anyone interested in building or contributing to scalable blockchains that uphold genuine digital self sovereignty and censorship resistance. Section 10.1. What is decentralized governance? Definition. Governance is the process by which a community makes decisions about shared rules and resources. In a blockchain setting, these shared resources include the digital ledger, the record of all transactions, and the underlying software, the protocols that define how transactions are processed and validated.
Consensus as the foundation. Because blockchains distribute data across many computers worldwide, there must be a consensus mechanism, a way for all participants to confirm the state of the ledger, historical data, current balances, etcetera. Governance is the umbrella under which this consensus mechanism operates, ensuring everyone agrees on not just daily updates, but also fundamental protocol changes over time, why you cannot avoid it. Some projects claim no governance or governance free systems. However, any distributed database that requires updates, whether bug fixes, performance improvements, or new features, relies on humans to come to an agreement. This agreement must be structured in a way that is decentralized as possible, or else the system risk being dominated by a small group. Section 10.2, why you need governance in decentralized systems.
One, resolving protocol updates. Blockchains are not static. They need software upgrades, security patches, and new features. Governance decides how and when to implement these changes so that the chain can grow without abruptly splitting the community or becoming vulnerable to attacks. Two, handling emergencies. When crisis arises, such as hacks or hostile takeovers, communities must act quickly to defend the network. Governance mechanisms allow participants to coordinate a response, possibly forking, that is copying and modifying, the chain to exclude an attacker's influence, or fix a critical bug.
See chapter thirteen point four point two for more information on forking away from an abusive whale stake. Three. Funding and collective projects. Fully decentralized blockchains often rely on some form of own chain funding, like a DAO for development, community initiatives, and infrastructure. Governance determines who receives that funding, on what terms, and how to track accountability. Four, maintaining long term vision. Without a structured process, short term profit motives can overshadow the chain's long term mission of free speech or censorship resistance.
Proper governance gives the community a voice, preventing a single founder or entity from unilaterally controlling the chain's direction. Section 10.3, data availability and agreement. Data availability layer. A blockchain's data availability layer stores all the historical records, transactions, smart contract states, social post, etcetera. These records must be reliably accessible worldwide. If only a handful of nodes retain full history, the system becomes centralized and prone to data loss or manipulation, and decentralized governance becomes compromised.
Distributed around the globe. To remain censorship resistant, multiple independent operators, often called validators, witnesses, or minors, hold copies of the ledger. This distribution ensures no single party can erase or alter historical data without everyone noticing. If one server goes offline or gets compromised, many others still have the verified history. Coming to an agreement. Every time new information is added, like a batch of transactions, these independent operators must agree on its validity. They use consensus rules, e g, delegated proof of stake, proof of work, or another protocol.
Governance is the higher level process that can tweak or overhaul those consensus rules if needed, but only with broad community support. Section 10.4, forms of consensus and voting. All systems have consensus. Regardless of ideology, be it coin voting, node infrastructure voting, or something else, a blockchain must converge on a single truth about who owns what. This single truth emerges from a vote of some kind, coin voting. Users stake tokens to influence upgrades or select block producers, traditionally known as proof of stake or POS. Infrastructure voting. Users with specialized hardware or reputations decide the chain's next block, traditionally known as proof of work or POW.
For further information on proof of work, see Annex I, glossary of terms and acronyms, reputation or hybrid systems, parameterized coin voting. Some networks might incorporate identity or other parameters to weight votes, known as delegated proof of stake or DPoS. Parameterizing on chain governance. No single voting method is perfect. For social networks and network states, the art of governance lies in parameterizing how votes are cast and counted. This allows for social nuance to be built into the community decision making process. An example of a parameter put on voting may be where a chain wants to prevent large exchanges from dominating the voting with custodial stakes that it did not earn itself.
The blockchain might require a long unstaking period, e g thirteen weeks, before someone can use newly acquired tokens for governance. These parameters can drastically change the power dynamics within the network. Section 10.5, potential governance models. One. One token, one vote. Pros. Aligns influence with financial stake. People who invest more have a bigger say. Collateral provision accountability. The user with the most tokens also has the most to lose if being used in a collateral provision or DeFi system. Cons.
Wealthy participants can accumulate disproportionate control, risking centralization. Two. One account, one vote. Pros. Every user with an account is treated equally, in principle. Cons. Difficult to enforce. Requires identity verification that can reintroduce central control. Newly joined uninformed users have the same weight as long term contributors, and it's prone to bot farm attacks if not carefully managed, where one user can control multiple accounts. Three, reputation based voting. Pros, encourages long term commitment and trust building. People who add proven value over time gain more say.
Cons, hard to quantify reputation objectively and might still require coin or identity layers for synergy. Four, hybrid approaches. Pros, combines financial stake, reputation, and possibly time locked tokens, like a power down period to balance power distribution. Cons, more complex to implement and explain. Possibly confusing for newcomers, but it can address many pitfalls of simpler models. Five, top elected infrastructure operator voting, many delegated proof of stake chains. In order to take into account social nuances of communities, elect their top 20 validators or witnesses who run the software of the chain.
They elect them, usually using stake weighted voting. These witnesses then become social representatives of the community, running only the code they are elected to represent. This code contains all of the governance systems that best reflect the community's value. See chapter 11.4 for further details on top witness voting. Section 10.6, governance and the human element. Social coordination is key. Even the most elegant on chain mechanisms ultimately rely on human agreement. If a large fraction of the community rebels against a proposed update, they can fork the chain.
Technology does not settle disputes. It only provides pathways. People must use those pathways wisely. Reputation and trust. Social governance also hinges on intangible social factors like reputation. Leaders who have consistently acted in the network's best interest earn community trust over time. At crisis moments, such leaders can guide the network to fork or adopt specific policies. Without this social cohesion, governance devolves into chaos or central authority. Conclusion. Governance in a decentralized blockchain isn't an optional add on. It's the backbone that coordinates consensus, updates, and community direction. Even if a project tries to minimize human decision making, it still depends on individuals to maintain code and respond to emergencies, recognizing that all distributed systems require some form of structured governance is the first step in building blockchains that remain truly open, censorship resistant, and capable of scaling into digital network states. Key takeaways: governance underpins consensus.
Whenever multiple nodes hold the ledger, they need a method to agree on updates and fixes. Two, no one size fits all voting. Different chains use different models. Coin stake, node infrastructure, reputation. Each has strengths and weaknesses. Three, parameters shape power dynamics. Lock up times, voting weights, and reputation scoring can prevent unhealthy centralization. Four, human community is inseparable. Technology alone does not ensure freedom. Dedicated people defending open source, decentralized processes are vital. Five, crucial for network states.
As communities evolve into fully fledged digital sovereignities, robust, social nuanced governance becomes the cornerstone of self rule and stability. By grasping these governance fundamentals, communities can design systems that genuinely live up to the promise of decentralized power resisting censorship, welcoming newcomers, and fostering the trust needed to build entire online nations. The digital community manifesto. Chapter 11. D governance. Where consensus meets human judgment. Introduction. Blockchains inevitably require a consensus mechanism, some form of governance to decide how data is validated, how upgrades occur, and who ultimately exerts control.
Yet many projects misunderstand governance, defaulting to simplistic models that invite centralization. This chapter examines three major paradigms, proof of work, proof of stake, and delegated proof of stake, while highlighting how true decentralization for communities and social systems requires more refined parameterized voting systems. We then show why neutral, ownerless blockchains must avoid founders, VCs, and preminds, and how community driven governance can act as a counterbalance against takeover attempts and regulatory threats.
Section 11.1. Governance is unavoidable. Why we need it. No matter how hands off a blockchain claims to be, someone must decide on software patches, security fixes, and emergency measures. Even code is law projects have humans writing and changing that code. When attackers strike or improvements are needed, effective governance enables swift community backed decisions rather than letting one party, like a founder or corporation, take over. De governance. Some blockchains say they have no governance or minimal governance, but that usually means governance is hidden or de facto centralized.
True decentralization conducts its governance out in the open and spreads it among stakeholders rather than pretending it can be removed entirely or conducted on a separate web two layer, such as Reddit, which is often the case in existing blockchain systems. Section 11.2, proof of work, otherwise known as infrastructure voting. In proof of work, computational power, energy plus hardware, is the mechanism to secure the chain. Nodes around the world expend resources to compete for block rewards, effectively voting with their electricity bills, security versus limitations, advantages of proof of work, highly resistant to censorship.
If enough miners operate globally, it is difficult to fake mining since you need real hardware and energy expenditures. Good for large amounts of permissionless liquidity and collateral. It allows everyone access to liquidity as long as they can afford the high fee, global infrastructure, and high security. The sheer capital required to replicate or outvote the network discourages attacks, Censorship resistance. Dispersed mining pools and hardware prevent easy shutdown or forced compliance. In theory, disadvantages of proof of work.
Centralizing tendencies. Over time, mining typically coalesces into a handful of pools, e g, two or three major ones. Smaller participants must join these pools, eliminating the grassroots democratic element. Limited governance flexibility. Proof of work is primarily designed to confirm transactions and maintain an immutable ledger. It does not inherently solve on chain governance. It cannot easily upgrade network rules or incorporate dynamic features for social media or consensus driven proposals. Scaling constraints. Storing large volumes of data or performing fast transactions under proof of work is cumbersome.
Blocks with high throughput require more computational and energy overhead. Miners rarely want to expand block sizes indefinitely because it increases node storage demands and can hamper decentralization exclusive to elites only, exclusive to those elites who can afford the fee by design. It must be high fee to preserve the security budget since there is no other way to incentivize this with the dominant proof of work chain present, Bitcoin, having a cap supply, centralized mining. Mining typically centralizes into large pools or in it being expensive to operate a validator.
Since everyday people can't afford specialized infrastructure, validators not accountable to community. The validators are not accountable to the community since they vote themselves into consensus with their own hardware power. 51% attacks cost money to defend. During a money attack, a 51% hashing rate takeover, there is no way to fork away from the attacker without it costing the community money since the defender must outcompete the attacker and gain back 51% of the hashing power on the new fork. You also cannot identify the attacker since you cannot see who they are due to the fact there is no on chain reputation system.
Replicating Bitcoin scale. Bitcoin success in censorship resistant rest on a massive expensive global mining network. Starting a new proof of work chain at that scale is nearly impossible today because you'd have to attract billions in a hardware investment. Smaller proof of work chains can be 51% attacked more easily by the main chain unless they can convince proof of work miners to switch to their own hashing algorithm. There is, therefore, most likely only one winner in proof of work mining. Using the most expensive hardware with the most resource intensive hashing algorithm to secure the network can can 51% attack the new fork if it was seen as a threat.
Section eleven point two point one, mitigations for proof of work attacks. Non custodial layer two options. Make sure layer twos are non custodial. Since layer one fees will be so high, there will be a tendency for exchanges and layer two systems to custodialize funds. With enough custodial funds collaborating and unsuspecting people operating on them, it is possible for the custodial stakes to fork the original chain and dictate which version of Bitcoin will be accepted on their custodial systems. Section eleven point two point two, longer term accumulation attacks on a proof of work chain. In a proof of work chain, a small group of people who collaborate with a large amount of the total stake can collude with other major stakeholders, exchanges, and businesses to create a new fork of the original chain and dictate which version, their version during an attack, that the on and off ramps will use, excluding the original and legitimate fork. This can be more easily defended against on delegated proof of stake chains, where human readable named accounts that have built reputation via long term stake, distribution, and voting mechanisms, can form a popular community fork made up of reputed community members, regardless of their total stake size, around which the legitimate community can gather to continue on away from the attackers.
Conclusion. Proof of work is a powerful security solution, analogous to a panzer tank, but is less flexible and not easily repurposed for rapid governance, high volume social use, or swift on chain decision making. Section eleven point two point three, attacking the largest Bitcoin block producers. There are only a few large block producers on Bitcoin, and most of the hashing power that secures the chain is centralized. Coordinating governments could physically cut the honest actors of those block producers off from the network, write legislation that prohibits them, or force them to operate under mining licenses, While setting up competing government compliant block producers, small free block producers could then try to pop up, but the larger governments would potentially overpower them.
Section eleven point two point four. Why we call proof of work infrastructure voting. This system should also be referred to as infrastructure voting, since the community recognizes the longest chain when forks split the consensus. The longest chain is normally formed only by the group which has been able to deploy the most infrastructure and thereby the most computing power to secure the consensus. Eventually, infrastructure operation becomes expensive and resource intensive, making it economically viable only to those who have the money to invest in large amounts of expensive equipment. Such a system is only therefore able to account for liquidity and collateral, but not the social nuances of communities and social governance.
Section 11.3, proof of stake, section eleven point three point one, otherwise known as unparameterized coin voting. In basic proof of stake, whoever holds the most tokens wields the most influence. Stakeholders lock coins to validate transactions or produce blocks. Over time, large holders typically become even larger, leading to potential centralization around wealthy interest. Section eleven point three point two, the fundamental idea. Pure proof of stake equates the proportion of tokens owned to governance power. Each stakeholder's influence stems solely from the size of their balance. On paper, this creates a skin in the game scenario.
Attacking the network undermines the value of one's own stake. However, early real world implementations of proof of stake often introduce no parameters, no rules to prevent or discourage centralizing forces, large token holders, or custodial services, exchanges, or pulling services quickly dominate, rendering the chain effectively controlled by a few whales. This makes proof of stake systems excellent for financial services and liquidity systems where there is no social nuance involved in making decisions. Money and yield are generally nonpolitical and do not directly affect culture and social systems.
Having the top validators in a finance system, those who have the most to lose, is one of the best ways to make sure your financial yield stays neutral. For further information on proof of stake and unparameterized coin voting, see Annexi, glossary of terms and acronyms, section eleven point three point three. Why unparameterized coin voting or proof of stake tends to centralize. In unparameterized coin voting, staking pools become inevitable pulling of user funds. The paradox with proof of stake is that you do not want too many validators as it can necessarily overburden the network.
And validators with small stakes are not really contributing to security of the block production with such small skin in the game. Therefore, often, a minimum staking for governance threshold is set, where if users stake above this amount, they can earn when mining in the network. On Ethereum, for example, the limit is set to 32 e for 80 k. Therefore, often a minimum staking for governance threshold is set, where if users stake above this amount, they can earn when mining on the network. However, this results in people who want to run validators, but don't have enough to stake, and so they pull their stakes into mining pools in order to share mining rewards.
Most small participants lack enough tokens or technical know how to run a validator node. They deposit stake into large third party pools, which then yield better returns through economies of scale. Eventually and naturally, one to three major pools emerge, dominating block production, making the chain far more centralized than it appears. Staking to vote delays. Without mandatory waiting periods, exchanges can temporarily power up user funds to vote in governance without users' explicit consent. This has happened historically on certain chains, allowing custodian led attacks or hostile takeovers.
For further information on powering up and powering down, see annex I, glossary of terms and acronyms. Both delegated proof of stake and proof of stake chains must have lock up delays for governance voting when staking to vote in order to defend against custodial stake attacks by entities such as centralized exchanges. The same issues are true for hostile attackers with large stakes. The idea is that the delay for voting after staking to vote, often one month, allows the community time to determine if the entity staking significant amounts is hostile and then take action to protect the chain.
Proof of stake, long lockups. Proof of stake and delegated proof of stake chains that do not have long lockups when staking to vote often are susceptible to takeover by those holding custodial stakes, such as large centralized exchanges. This is because exchanges can use custodial user funds that are deposited into their accounts for trading and stake them for short periods of time without the permission of the depositors in order to take control of the chain's governance and carry out a hostile takeover. There have been several instances of this occurring in the past, so this threat is very real.
Exchanges can do this since they can use a short unstaking period to make depositors whole in a timely manner when they request to withdraw funds. With long lockup periods for governance, this type of attack is not possible. Proof of stake chains that are not susceptible to this type of attack typically have three to six months lockups for governance. Coin voting is amazing if parameterized correctly. Unparameterized coin voting is lazy. It centralizes over time into massive staking pools that overshadow smaller individual stakeholders and somewhat centralize the network.
Section eleven point three point four, mitigations for proof of stake attacks. In order to avoid centralizing governance issues, users should be encouraged not to stake with large staking validators or exchanges and be informed on which forks that suit them ideologically in order to follow their best suited fork. Section eleven point three point five, danger of centralization. Staking pools dominate. Users often stake through third party pools, like Lido Finance, which end up resembling the pool dominance also seen in proof of work mining, VC and founder advantage.
Early insiders can hoard tokens cheaply, keeping governance under their control, high fees, and slow upgrades. Many proof of stake chains aim for general purpose, layer one smart contracts, processing not only transactions, but also computation on the layer one. This often results in high fees to reward infrastructure operators and stakers, making day to day usage expensive and discouraging broad adoption. Fat nodes, a common occurrence in blockchain, where the operation of smart contract processing as well as transaction processing on all baselayer nodes becomes the norm. This makes the standard on the chain the operation of large, heavy duty, and therefore expensive, unprofitable nodes that have to be kept afloat by constantly minting new tokens.
Inflation, due to the chain charging artificially low fee transactions on the base layer. The point here is that most such chain validators are uncompetitive. And as they scale, they have to charge proportionately higher fees, which over time cannot compete against systems that keep the base layer simple and lightweight and move the computation layer to the layer two, section eleven point three point six, the necessity of guardrails. To avoid these pitfalls, proof of stake needs constraints, time locks, minimum validator counts, voting delays, and so forth. We'll see in the next section how delegated proof of stake introduces precisely these guardrails to preserve the core skin in the game feature while preventing consolidation into a handful of players.
Section 11.4, delegated proof of stake or parameterized coin voting. Otherwise known as parameterized coin voting, delegated proof of stake starts with the premise staked coins equal skin in the game. Then it adds parameters to prevent the pitfalls of raw proof of stake. Delegated proof of stake can be considered an evolution of coin voting rather than letting raw stake automatically produce blocks. One, named validators. Stakeholders elect a fixed number of block producers, commonly called witnesses or validators. They are elected by the community using stake weighted voting.
Not one account, one vote. And the top 20 or 21 block producers are paid for securing the network and upholding consensus. Two, parameter constraints, stake lockups. Voters must stake tokens for a certain duration, e. G. Thirteen weeks. This prevents custodial wallets, such as exchange accounts holding users' funds, from freely flipping user deposits into governance attacks. This process is known as powering up on some delegated proof of stake chains. Unstaking is known as powering down. For further information, see Annexi, glossary of terms and acronyms.
Voting delay. The chain might enforce a waiting period, say one month, before newly staked tokens can actually cast votes. This gives the community time to spot potential aggressors powering up a suspiciously large stake. Minimum validator requirement. The protocol guarantees multiple active validators, e. G, 20 block producers, instead of an unlimited or undefined number. The chain can then sustain high throughput, thanks to a limited set of block producers, but remain decentralized enough to prevent collusion. Three, community accountability.
Stakeholders can remove validators at any time if they fail or collude. This fosters an ongoing immune system against malicious actors. Four, many elected equally weighted top validators. A top 20 elected validator set are more akin to having 20 equally weighted staking pools. Even though each validator can have a different stake size in the ecosystem, they are elected in. And so, for example, the largest account in the ecosystem, at best, has equal influence to the other 19 elected validators, even though their stakes are likely much smaller in comparison. This is in contrast to most chains using other consensus mechanisms that accumulate into two to three more centralized staking pools, staking custodial stake on behalf of users, and thus becoming overbearing forces on governance while having provided no value to earn such a position.
Section 11.4.1, community reputation and named accounts. A key feature of many delegated proof of stake systems is human readable account names. This fosters a social aspect. Users earn reputations. Engaging in core development, running reliable infrastructure, or promoting the ecosystem can earn community trust, which translates into witness votes. Social, community driven. Instead of the richest account wins, smaller players can rally around a witness candidate who has proven contributions but may not hold much stake personally. The entire system becomes more social and less purely financial as a result.
Section eleven point four point two, advantages over basic proof of stake, battle tested against exchange attacks. By requiring lockup periods or a period of time before vote, the chain can detect malicious power ups, like large exchanges powering up user deposits to sway governance, faster and cheaper transactions. With a limited predictable set of elected block producers, block times can be short, phase minimal or nonexistent, which is critical for social networks or content based decentralized applications. Continuous distribution.
Many delegated proof of stake systems reward users for content creation, running infrastructure, enabling them to acquire stake organically. This counters a rich get richer scenario. Faster block production. A fixed number of well equipped witnesses can confirm transactions quickly. Neutral Probably the most important Probably the most important distinction is that reputable people with smaller stakes or even no stake at all can rise to validator positions without having the largest stake because the community can delegate tokens to them or vote for them.
This adds social nuance to the raw coin vote model, where the user or mining pool with the largest stake is the most influential in the network. No minimum staking threshold. In contrast to proof of stake, delegated proof of stake does not need a minimum staking threshold for voting and governance. Instead, witnesses are ordered in relevance to the block production process based on the amount of stake weighted voting they receive from the wider community. Since the chain dedicates a certain amount of newly minted tokens to pay witnesses, there is a limited amount of them that can operate profitably.
After this limit, witnesses operate at a loss or voluntarily. It is up to the chain to make sure it is cheap as possible for a community member to run a node in order to maximize the number of backup witnesses. However, the advantage of this is that it makes the staking pools that are so common in proof of stake pointless and ensures that the chain forms into a minimum sized top witness set of 20 each with equal voting weight, regardless of their own stake or the state voting for them, as long as they get enough votes to reach the top 20. This means that delegated proof of stake chains really are like having a minimum of 20 equally weighted staking pools, where proof of stake and proof of work naturally settle to two to three major staking or mining pools, which is far more centralized when it comes down to defending against an attack. Section eleven point four point three, disadvantages of delegated proof of stake.
Voter apathy. If the active stake that is voting is not the majority of stake in the ecosystem, then the ecosystem is subject to takeover. The community should therefore monitor to make sure at least 51% of the voting stake is constantly voting, preventing voter apathy. A potential risk is that once voters pick witnesses, they leave their votes unchanged indefinitely. Some change solve this by witness vote decay, an automatic reduction of vote weight over time, forcing users to reconfirm votes periodically. This refresh cycle fosters dynamic governance, ensuring people stay informed and new voices can emerge.
Large stakeholder risk. The biggest stakeholder may accumulate a significant enough stake as to become a security risk when it comes to voting. The community should move to mitigate any such risk. Long term takeover. Susceptible to long term, slow accumulation of stake where the top elected witnesses are slowly replaced over time without the community taking note, and the new top witnesses operate code that is not in the best interest of the community. To mitigate this, the community should note the state of witnesses from a time when the chain operated in a way that reflected the ideals of the community and fork to return to this more representative validator set. Section 11.5, the importance of parameterization.
Why parameters matter? Without guardrails, simple proof of stake quickly centralizes around whales or single staking pools. Parameters act like traffic rules or guardrails on a winding road. Each parameter, e. G. Minimum validator count, witness vote decay, lock up times, is a protective measure so that real world attacks don't succeed. Examples of useful parameters. One, minimum validator count. Ensures at least a set number, e g, 20, of independent validators must coordinate, preventing one or two major pools from dominating. Two, lock up before voting.
Newly staked tokens must wait weeks, giving the community time to spot suspicious activity, e g an exchange powering up customer deposits. Three, vote decay. Stakeholders must periodically renew their votes, preventing potential voter apathy and forcing validators to remain accountable. Four, time delayed unstaking prevents attackers from quickly exiting after a hostile maneuver. They risk their own stake being stuck if the community florks out hostile funds. Distribution first. Even the best governance parameters fail if most tokens sit with early insiders or VCs.
A broad token distribution, ideally through value for value earning mechanisms, is vital for meaningful decentralization. Having people worldwide earn tokens from a neutral layer one by contributing something valuable rather than buying at scale helps create a large middle class of voters. Section 11.6. Why no founders, no ICO, and no VCs? Central attack points. Founders and CEOs, a single visionary becomes a legal or regulatory target. Governments can coerce them into compliance, leading to censorship or policy changes. VC pre mines and early sales.
Venture capital often demands a controlling stake, undermining decentralized governance. Unsuspecting retail users later serve as exit liquidity, and the interest of the founders and the late entry users are often therefore misaligned. Formal companies. If a blockchain company holds trademark or controls critical code, lawsuits and cease and desist orders can force compliance. Community built and ownerless. A true decentralized chain has no formal owner or headquarters, making legal threats difficult to enforce. This was illustrated by the Hive community when a mining company attempted legal action over the Hive brand name.
With no single entity to serve or respond to a lawsuit, it was later dropped. Section 11.7. Voting models are everywhere. All consensus is voting, whether proof of work, miners vote via computational work, proof of stake, largest stake votes, or delegated proof of stake, parameterized stake votes. Every system is some form of voting. Pretending code is law, eliminates humans, is naive. People choose how code upgrades, and they enforce or reject forks in emergency. The distinction lies in, what do you vote with? Mining power, tokens, or delegated tokens?
Which parameters ensure fair distribution? Lock ups, whitelist, minimum validators, etcetera. How do you handle staked reputations, backups, or emerging crisis? Delegation and politicians. Delegation allows a less technical holder to transfer voting power, not ownership, to a trusted witness or community leader. This replicates the concept of political representatives. Accountability. If a delegate misuses votes, the original stakeholder can revoke delegation. Reputation building. Ambitious or service oriented community members can gather delegated stake by proving themselves helpful, honest, and aligned with the network's ethos.
In this way, stakeholders can delegate votes to witnesses or proxies, much like electing politicians. This ensures smaller holders, or those without technical knowledge, can still influence governance through trusted representatives. Reputation systems help identify benevolent proxies. Section 11.8, accountability and preventing AI and big tech takeover. Human element. Some blockchains incorrectly assume purely algorithmic approaches can settle disputes. Real communities need human judgment. The chain social layer must be able to override purely technical missteps. Delegated proof of stake excels here because stakeholders can intervene if an actor or an AI accumulate stake maliciously.
As artificial intelligence matures, AI sock puppet accounts could appear credible in online communities, slowly accumulating stake. However, a chain that places value on long standing history, accounts building trust over years, are less likely to be AI, particularly if they started prior to AI's rise. Community based identity. Reputations, subjectively determined by real humans, can guard against an AI that merely posts content, participate in proof of person systems, where a known, trusted, and reputed real person holding an on chain account identifies a business, such as a shop.
Users who buy products and document the purchase on chain can prove they are a person without having to KYC. Know your customer. For further information, see annex I, glossary of terms and acronyms. This interplay of parameterized coin voting, reputation, and human oversight forms a bulwark against AI driven infiltration. New AI accounts will lack such historical footprints, letting the community discount them in governance decisions. Section 11.9, defining web 2.5. Most self proclaimed web three protocols still rely on centralizing venture capital.
Early token tree mines or private sales create small powerful clicks controlling governance. High fee layer one, forcing developers onto layer two solutions that are often themselves centralized, corporate entities. A chain might have an official company or foundation that can be targeted or regulated, leading to partial superficial decentralization. These projects are best categorized as web 2.5. They adopt some blockchain elements, but remain vulnerable to corporate or government pressure. Big tech versus web 2.5. Traditional corporations, web two point o, profit from user data and can easily create web 2.5 solutions.
Semi centralized blockchain based services where they still hold keys or run crucial servers. True web three demands protocols incentivize independent infrastructure globally Without a genuine neutral layer, convenience monsters, like large platforms, can undercut smaller operators and reintroduce central points of failure. Section 11.1, achieving true web three. A truly decentralized system has, one, no pre mines or founder stakes. The network is community owned from inception, so no single authority can be coerced into compliance or censorship.
Two, parameterized coin voting. Long lockups, minimum validators, well tested distributions, and social reputation layers prevent accidental or malicious centralization. Three, community accountability. Voting is frequent or reevaluated. Large custodial wallets cannot quietly hijack consensus. Four, neutral incentive driven infrastructure. Nodes and decentralized application operators are rewarded from the protocols minting of new tokens or fees, reducing reliance on corporate business models or KYC requirements. Key point, if a blockchain surrenders to large scale pre mines, venture capital dominance, or minimal parameters, it drifts into Web 2.5.
Realizing the full promise of Web three requires structural safeguards and widely distributed stake, combined with robust governance that no single entity can subvert. Section 11.11, putting it all together. One, proof of work, effective for base security at mass scales, like Bitcoin, but lacks governance, flexibility, speed, low cost transactions, and is nearly impossible to replicate in new projects, ideal for large permissionless liquidity and collateral provision. Two, basic proof of stake. Uncheck stake accumulates power, quickly centralizes around whales, venture capitalist, or exchanges, ideal for financial yield systems.
Three, delegated proof of stake, parameterized coin voting. Builds on stake equals skin in the game while adding crucial guardrails, lockups, vote decay, minimum validator sense, reputation, etcetera, to foster true decentralization, ideal for socially nuanced communities and network states. Four, web 2.5 versus web three. Many crypto platforms remain significantly centralized. True decentralization emerges when no founder, company, or small click can capture the chain, and governance decisions arise from a fair, widely distributed stake, informed by real human reputations, crucial tenets.
No founders, no pre mine, no VC. Remove single points of control. No one to coerce or to sue. Open infrastructure incentives. Protocol must pay community run nodes and developers. Avoiding web two business models, a large and active voting base. Broad token distribution and user engagement protect the chain from hostile takeovers, reputation, and human oversight. Genuine communities rely on trust built over time. When code fails or AI tries to infiltrate, humans must step in. Long voting stake lockups, multi week or multi month stake lockups to vote, minimum number of top validators, and transparent reputation for block producers.
Everyone can earn. Users with small stakes to earn stake through proven contributions, content creation, infrastructure, etcetera. Voting decay and ability to delegate votes. Healthy revoting and proxy delegation to reduce voter apathy and ensure dynamic leadership. Conclusion. Dedovernance is not about removing governance. It's about removing centralized governance and replacing it with a robust, multiparameter system that's hard to capture. Proof of work provided a censorship resistant foundation for Bitcoin, but it's impractical to recreate and offers little room for social or high throughput applications.
Unparameterized proof of stake tends to centralize around large holders or exchanges and makes the person or mining pool with the most stake, the most powerful, and most rewarded on the network. Delegated proof of stake or more generally, parameterized coin voting add social nuance, reputation, timed lockups, witness vote decay, stability, minimum node counts, and open development funding, and allows even the people with the smallest accounts to rise to the top of the witnesses and gain significant influence on the chain, provided they carry out the wheel of the community.
Under these conditions, communities can sustain vibrant digital ecosystems, censorship resistant social networks, governance systems, economies which are truly owned and operated by the people who rely on them. This is the vision of a scalable, democratic, and resilient blockchain, finally delivering what many call Web three. By enforcing decentralization at the protocol level through no founders or companies, fair distribution, and layered defenses against collusion, These systems can achieve genuine freedom from censorship and regulatory strangleholds.
The result is an ownerless, community driven blockchain that stands the greatest chance of scaling into a fully fledged digital network state where rights are coded and guarded by human consensus. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Introduction. Once a blockchain community agrees on parameterized coin voting, often called delegated proof of stake or DPOS, It must also define how the ecosystem's voting power is distributed and exercised.
These coin voting parameters determine everything, from how long stake must remain locked when powered up, protective time delays for stablecoin token swaps on the base layer, to how new tokens are issued or taxed, as well as many other variables. Each parameter serves as a safeguard against centralized takeovers and short term manipulation, while also incentivizing community members to hold, build, and coordinate in the long term. This chapter details key parameters, such as lockup durations for governance, stablecoin security rules, token minting and inflationary controls, and more.
It explains why collectively they form the backbone of secure, censorship resistant, on chain economies. Section 12.1, importance of long lockups for governance participation. Why locking matters? When stakeholders lock or power up tokens for an extended period, they reveal genuine skin in the game. Someone who can instantly withdraw has far less risk and can more easily perform a short term attack or manipulate votes. By contrast, a locked in stakeholder must carefully choose who or what they vote for because they can't exit quickly if they cause harm or fail to benefit the community, preventing custodial attacks.
Long lockups also prevent custodial wallets, like centralized exchanges, from freely using other people's tokens to hijack governance. If tokens must remain staked for months, it's much harder for an exchange to suddenly vote without telegraphing its move. The community gains time to see large power ups and respond if malicious behavior appears. Time as a security factor. Time itself becomes an integral part of security. With a multi month lock up requirement, any new well is effectively on probation for that period before it can fully influence governance. This discourages opportunistic short term attackers who want to buy in, vote, then sell.
Section 12.2, one month voting delay, seeing attackers coming. A voting delay is a specific parameter stating that even after you lock your tokens, for say three months, so that you can vote in governance decisions, You must still wait an additional period, e g one month, before you can cast those governance votes. This delay means the community can observe and reach out to new large stakeholders and see if they're legitimate or a threat. Any suspicious movement of funds from, for example, a major exchange's wallet becomes immediately visible, and keeping monitored in case it's going to be used in an attack on the community.
Critical defense had such a voting delay existed on certain delegated proof of stake chains in the past. Major hostile takeovers by custodial exchanges would have been thwarted or significantly hampered. See the Steam blockchain takeover. The extra time window lets defenders rally. They can withdraw support from compromised witnesses or even prepare a hard fork to nullify an attacker's stake if it's obviously stolen or the intention is to use stake against the super majority's will, which represents the community's consensus. Section 12.3.
Why a three month lock up? Why three months? Three months is a good lock duration for governance participation, but similar lengths are good as well. It strikes a balance, long enough to deter drive by attackers, but not so long as to alienate ordinary users. During this period, stakers cannot instantly sell their tokens, so they share in the chain's volatility and remain committed. Potential attackers must accept that if they sabotage the system, their funds remain at risk to volatile price movements and community consensus driven mitigations for months.
Future variations. Some ecosystems might experiment with different lengths or even tiered lockups with longer commitments, giving even greater voting power. The core idea is consistent, time bound staking cements accountability and weeds out short term exploiters. Section 12.4, stablecoin security. Why a decentralized stablecoin is crucial for an on chain economy to function, especially one prioritizing censorship resistance. Users need a stable unit of account that doesn't rely on centralized issuers or banks. A purely speculative chain with a volatile native token won't serve everyday commerce or wages.
Algorithmic stablecoins fill this gap by maintaining a peg, usually $1, but it could be pegged to some other stable asset, commodity, or basket of the same, should the community consensus wish it so, relying on on chain mechanics, free of direct fiat banking, allowing users to buy goods, save money, or transact in a familiar unit instead of an unfamiliar, volatile priced asset, collateralized by the base token. The main token is often 20 to 30 times larger than the stablecoin which it collateralizes. There should be multiple controls built into the base layer protocol, which ensures the stable asset is always vastly over collateralized by the main token.
A robust Algo stablecoin typically uses the chain's main token as collateral. For example, if you hold 1 Hive back dollar or HBD, you can always convert it into $1 worth of Hive, the main token, provided certain parameters remain healthy to prevent runaway issuance. The chain includes haircut rules and time delays on large token swaps, ensuring the stablecoin supply can't surpass the market capitalization of the underlying collateral in a way that threatens the peg. An example of where these rules were not followed, ending in inevitable disaster, was Terra Luna, which incorporated none of the above mitigations into its protocol, resulting in a hyperinflationary collapse.
Section 12.5, haircut rules, preventing over issuance. A haircut rule puts a hard cap on how large the stablecoin's total market can be relative to the base token's market cap, for example, 30%. If the stablecoin ever or approaches this threshold, one, the chain can stop creating additional stablecoins, e g, halting certain reward distributions in stable form. Two, it may devalue the internal stable coin peg to 90¢, 80¢, etcetera, to ensure overall system solvency by prioritizing the limitation of the creation of new main governance slash collateral tokens during conversions back from stable coins at the cost of the stable coin peg value.
This prevents a hyperinflationary event of the main collateral token, protecting the ecosystem, albeit at the cost of a temporary depegging of the stablecoin assets price, adaptive mechanism. This dynamic protects both the stablecoin and the chain from a bank run, where too many stablecoins chase too little collateral over time. Once conditions improve and the chain's base token regains value, the stable coin's internal peg and issuance can return to normal. This cyclical approach allows algorithmic stablecoins to recover from market dips without collapsing irreversibly.
Section 12.6, time delay on bulk token swaps. Slow conversions, more safety. If large holders could instantly swap massive amounts of tokens into stablecoins or vice versa, they could destabilize the market or execute rapid attacks by building short positions in the main token and then instantly converting large amounts of stablecoins to the main token. This causes massive inflation of the main token and devalues it, resulting in large payouts for the attacker's short positions. Imposing a three day or similar delay on major conversions gives the community consensus driven protocol time to adjust supply and internal pricing, alerts the community to suspicious behaviors well before the conversion finalizes, creates a highly risky situation for the attacker, who now has to wait for three days with a large short position that can be liquidated by a move higher in the base layer asset, causing a huge short squeeze against their position.
This makes the potential losses to the attacker infinite, and the inherent risk of such an attack far greater than carrying out such an attack without out the time delay on internal stablecoin conversions mitigation in place, avoiding system shocks. A delayed swap mechanism prevents sudden surges in the stablecoin or base token supply, reducing manipulative volatility. This resembles capital controls, ensuring a healthy conversion pace rather than abrupt floods that can crash markets. Section 12.7, inflation control. Steady, transparent token issuance.
Blockchains commonly issue or mint new tokens as inflation. Distributing them to infrastructure operators, also called validators, or to individuals providing value, for example, content creators, developers, or liquidity providers. However, the inflation rate must remain carefully managed. Too high, and the token's value dilutes, undermining long term growth, inflating it away to zero. Too low, and the chain can't adequately fund community projects or incentivize widespread distribution at the token. Community defined parameters. Many delegated proof of stake systems use scheduled token minting curves, e. G, starting at 12% and then dropping to 0.5% per year until 0.5%, or allow consensus decision by governance voting to adjust annual rates.
The key is that no central party arbitrarily mints unlimited tokens. When stakeholders collectively control inflation, they align it with network health. Section 12.8, importance of transaction taxes. Note, some chains opt for resource credits instead of explicit transaction fees, but the concept is similar. Prevent spam. Tiny taxes or resource credit cost in zero transaction fee systems on each transaction deter malicious actors from flooding the network with meaningless transactions. If designed properly, transaction fees can be channeled into a decentralized community fund, financing infrastructure upgrades, marketing, or development without relying on external VCs.
Trade off. High fees can stifle usage, pushing users to centralize layers or competitor chains. Lower zero fee designs risk spam unless you stake tokens to earn resource credits. The right solution typically involves parameterized resource models that scale usage based on staked token amounts. Section 12.9, backing the token with community interactions. Real economic activity. A chain's main token gains lasting value, not through speculation alone, but from genuine utility. If people need to stake tokens long term in order to post or comment, run apps, vote on governance proposals, earn stablecoins or other rewards, then they compete for access to on chain resources in exchange for holding and staking those tokens.
As network effect takes hold and the community grows, The demand for transaction grows, and thus competition for access on chain resources grows with it. This usage is what backs the token's worth. Far more stable than mere hype, speculation, and venture capital backed market makers. Circular incentives. Users earn tokens for creating valuable content, running infrastructure. They then stake, I e, lock those tokens to gain influence or resource credits, enabling them to access more on chain activity, which further enriches the ecosystem. This positive feedback loop cements real demand for tokens that pure speculation cannot match.
Section 12.1, rewards for holding and locking in, Staking benefits. Counterbalance short term traders. Incentivize early believers and builders. Foster and favor a middle class of stakeholders who have earned their tokens from the protocol over time, over whales that merely buy big positions on day one. Proof of commitment. These hold and earn or stake and earn models on social blockchains, where community stake weighted voting of capable content show that one can support the chain's vision long enough to shape its governance responsibly.
In many systems, staked accounts also receive a portion of newly minted tokens or content curation rewards over time. This incentivizes long term stakeholders with skin in the game to continue to contribute to the community while earning additional stake as a result of their value added contributions. Section 12.11. Decentralized applications and services as holders of last resort. Why they don't sell. Applications build atop a chain. Social media platforms, games, DeFi protocols need guaranteed access to transactions, bandwidth, and resource credits for their users.
They must lock large amounts of the base token. If they become distressed sellers and sold under times of price pressure, their entire app would cease to be able to post to chain and thus lose much of its functionality. This creates a class of holder of last resort entities who keep tokens no matter how low the price dips in order that they can continue to operate their applications on chain. Intrinsic value floor. When multiple serious decentralized applications stake substantial amounts of tokens, You get a demand floor, an intrinsic value to the token.
Even in market crashes, these services can't afford to offload their stake. This underpinning helps prevent token value from hitting zero, purely from panic sales. Section 12.12, anonymous accounts versus known accounts, freedom versus trust. A truly censorship resistant chain lets users create accounts without government issued IDs or personal details. However, if people want to build public reputations or operate recognized infrastructure, they may choose to dox themselves, revealing their identity. Both approaches matter. Anonymous or pseudonymous users enjoy privacy, crucial for free speech in hostile regimes.
Known users gain trust more quickly and may have official track records. Hybrid ecosystem. Chains typically end up with a mix. Some top validators or developers might be pseudonymous, while others are open about who they are. Reputations can form around handle names, proven over time by consistent participation. Section 12.13, importance of locally run desktop apps for censorship resistance. Web apps are vulnerable. If an application only exists as a website, e. G. Something.com, governments or ISPs can block the URL. Domain registers can seize or censor it, pressuring the app to follow local regulations, desktop clients.
By contrast, user installed desktop or mobile clients directly query the blockchain's node infrastructure. No single domain or centralized server can be shut down. Even if a front end's website disappears, the community run blockchain remains accessible through these locally operated apps. True decentralized access. Desktop clients shift control back to users. They choose which API nodes to connect to or even run a node themselves. This fosters unstoppable digital communities, no domain takedown, or corporate compliance order can erase the chain's content or access to it. Conclusion.
Coin voting parameters might seem like small technical rules, but collectively they fortify an ecosystem against takeover, ensure broad participation, and maintain the stablecoin foundation crucial for everyday transactions. Long lockups and voting delays deter short term money attacks, while stablecoin haircut rules and time delayed swaps prevent systemic collapse. Transaction fees or resource credits control spam and fund public goods, and decentralized applications become holders of last resort, sustaining demand for the base governance slash collateral token. Whether your account is anonymous or publicly known, these governance parameters allow a robust, censorship resistant environment where individuals can operate desktop apps, earn tokens from the rewards pool, and shape policy over time.
By weaving all these elements together, economic, technical, and social blockchain communities can grow into truly self sovereign digital network states, immune to the centralizing forces and quick profit motives that undermine so many freedom slash self sovereignty based projects. The Digital Community Manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 13. Defending decentralized delegated proof of state communities. Attack vectors, security mechanisms, and the power of layer zero. Introduction, decentralized ecosystems, promise censorship resistance, transparent governance, and community ownership. Yet these aspirations come under threat the moment someone attempts to gain disproportionate control.
Whether through direct purchase of tokens, stealthy accumulation, or coordinated influence, attackers seek to seize the reins of power, or at the very least, disrupt the shared values that hold the community together. As a result, the community must be highly vigilant to monitor its systems for signs of centralization and be ready to defend itself at all times. This chapter explores the key attack vectors in delegated proof of stake blockchains, the defenses that resilient communities employ, and how reputation, distribution, and circular economies become powerful shields against hostile takeovers.
Section 13.1, understanding the direct 51% attack. A 51% attack in the context of many blockchains typically refers to controlling the majority of mining hashing power in proof of work blockchains or the majority of total stake in proof of stake. In a delegated proof of stake chain, the equivalent is controlling over 51% of the active voting stake, not necessarily 51% of total tokens in existence. A large fraction of tokens may be nonvoting, dormant, or held by long term investors who choose not to participate in governance. So the threshold to seize decision making power might be lower, e g 30 to 40% of total tokens, if it translates to half of the actively voted stake. The goal of gaining 51% of the voting stake in either proof of work or delegated proof of stake governance systems is to control or change the underlying consensus software of the blockchain.
The group which controls 51% of the active voting stake has the power to nullify balances, change the rules to carry out any number of wide ranging, nefarious actions, which may act against the best interest of the wider community. Some of these actions may even be subtle and hard to detect without deep knowledge of the base code. Section thirteen point one point one, calculating the threshold in practice, dormant or apathetic stake. Many investors do not wish to use their governance rights. Some have lost access to keys. Others simply hold tokens passively.
Others are ill informed as to the importance of maintaining activity of their tokens in governance decisions. Voting delays. Delegated proof of stake platforms often include powering up requirements and waiting periods, also known as staking. For example, once tokens are staked or powered up, an attacker must wait, e g thirty days, before being able to vote for witnesses, the block producers. Community immune response. During peaceful times, only 30 to 40% of total supply might be actively voting. Under attack, additional dormant stake frequently awakens, pushing the actively voted stake higher.
An attacker who has purchased 30 to 40% of the total tokens might suddenly face 50 to 60% of active stakeholders voting against them when these voters were apathetic before their attack. Section thirteen point one point two, over the counter, OTC acquisitions. Attackers sometimes attempt shock acquisitions, buying large stakes through private, over the counter deals with major token holders to avoid moving markets. Even so, a month long lock or similar delay feature grants the broader community critical time to observe the build up, approach the new party about their intentions, and organize a defense if necessary.
Section 13.2, indirect or slow accumulation attacks. An alternative method is the slow stealthy approach, gradually buying tokens over a long period so that no sudden price surges draw suspicion the attacker attempts to outpace inflation and avoid spooking community members. This is often described as a red queen race or game where the attacker has to keep running, constantly purchasing stake to maintain or grow their position because, one, inflation issues new tokens to existing stakers, continuously diluting outsiders attempting to accumulate stake over the long term for an attack. Two, community awareness can lead to counter buys.
If accumulation becomes obvious, others may accumulate too, driving up price and making the attack prohibitively expensive. In practice, truly stealthy long term accumulation on a healthy, delegated proof of stake network proves extremely difficult because continuous buying raises a token's profile. It can also raise the price, creating a negative feedback loop that the attacker has to outpace. Section 13.3, distribution and security. Well distributed token ownership is the most fundamental defense against takeover attempts in delegated proof of stake.
If a small group of large holders controls the majority of tokens, an attacker may simply collude or purchase those stakes. Conversely, if significant token supply rest in the hands of numerous mid level stakeholders, dolphins or orcas in some ecosystems, No single OTC deal can guarantee majority control. One, a healthy middle class. A broad middle class of token holders ensures that a handful of whales cannot single handedly decide governance. Two, ongoing community allocation, continuous reward mechanisms, e g, content creation rewards, infrastructure rewards, gaming, or curation.
Spread tokens widely among active participants, reinforcing decentralization. Three, fair launch or post launch distribution. Token systems with large pre mines or concentrated early investors may face outsized risk of governance capture. Over time, these chains must actively work on distributing tokens to genuine, productive community members. Otherwise, they undermine their own security model. For more information on preminds in ICOs, see chapter 15, censorship and the morality of premines. Section 13.4, how to defend against attacks.
Section thirteen point four point one, the immune response. In the event of an attempted 51% attack, a delegated proof of stake community often springs into action, much like a biological immune system. Dormant stakeholders rally to vote. Whales who had previously been indifferent secure the network to protect their own investment. The sudden rise in active voting power can defeat or mitigate the attacker's advantage. The lower the level of dormant or apathetic voting stake during times of normal operation, the more of a deterrence it is to an attacker.
Section thirteen point four point two, forking, the ultimate escape hatch. Even if an attacker somehow takes control of the main chain, forking remains a final check on malicious power, copying state and excluding attackers. Communities can duplicate the blockchain's history, but exclude or freeze the attacker's stake. Everyone else's balances are preserved on the new fork, where the community will move in order to isolate an attacker on the old fork, migrating to a new brand. Though the original chain may keep its name under the attacker's control, the real community can move to a new chain complete with code and state continuity.
In this case, the community should do everything it can to communicate what the new brand is, where to find the new chain, and what changes the new chain has made in order to mitigate the attack on the previous fork. Failure to do this is often as bad as not forking away from a hostile attacker. Winner takes all. In most scenarios involving delegated proof of stake chains, which are being attacked, the community led fork becomes the de facto chain. The attacker holding no tokens on the new fork discovers you cannot buy a community. Without people to give the token utility, the original chain withers.
Forking therefore holds large token holders accountable, compelling them to act benevolently toward the community. If whales push too hard or threaten the ecosystem's values, the rest of the network can simply leave. This veto power ensures that smaller stakeholders, though individually less wealthy, collectively hold enormous influence, which far outweighs that of any of the whales, the large stakeholders in the ecosystem. Section 13.5. You can't buy a community. Centralized start ups or traditional corporations may be acquired by buying out a single entity or board of directors in a community governed ecosystem.
No single gatekeeper can sell the heart or values of the community. If an attacker attempts a hostile takeover, rebellion, the moment members sense motives detrimental to the network, they organize resistance, fork off. Communities fork away if necessary, taking the developer talent, user engagement, and brand loyalty with them. Moral imperative. Decentralized communities often coalesce around values like censorship resistance or autonomy. Members who have already tasted digital freedom or notoriously unwilling to forfeit control, or make a deal with a hostile attacker, especially when the overlord's intentions are questionable.
Section 13.6. The community is the layer zero. In blockchain architecture, we often hear about layer one, the core protocols, consensus, and data availability. And layer two, applications, smart contracts, dApps. Missing from many discussions is layer zero, the community of people who participate, build, and govern. Ultimate source of value. DApps transactions and social engagement bestow real world relevance and demand upon a token. Without active users and developers, the network is merely code, immune response. Layer zero unifies in times of crisis, bringing otherwise dormant stakeholders to defend the chain, collective veto, When whales or outside attackers threaten the ecosystem, it is the community, layer zero, who can coordinate a new fork, rendering any hostile stakes worthless.
In proof of stake systems, which usually lack engaged community members, due to the typical nature of the passive earning for staking model and proof of stake systems, a wealthy minority can capture governance outright with no recourse for remediation for the majority individual members of the community. By contrast, well distributed delegated proof of stake networks rely on their engaged vigilant user base. The crucial layer zero to monitor, maintain control decentralized, and fight for it digitally when necessary. Section 13.7, reputation building and trust.
When under attack, it is almost impossible to know who the honest acting block producers or witnesses are unless their accounts are named with human readable identifiers and already have reputation that has been built over many years of reliable operation. This is the only way to reliably identify who your adversaries and allies are during an attack and why reputation in a group of top witnesses who are known entities, even when they are pseudo anonymous, is so important. Why would one move to a fork of unknown or unidentifiable witnesses after all? Additionally, having reputed elected witnesses signaling which version of the blockchain's code they're running from the open source repository is far more secure than in cases where a small number of people communicate this on Twitter or other censurable Web two social platforms.
As is the case with the vast majority of top blockchain today, one of the questions to be asked when deciding for oneself whether or not a community will defend your digital rights is how many of the top elected witnesses will not bend the knee to state pressure. And if they do, will the community quickly elect backup witnesses into place? While one cannot know the answer to this directly, one has to use judgment to decide which chain has the technical ability and back up witnesses to cope with pressure and external attacks best. Their actions and how they acted in pressing times will be on chain forever for history to judge.
As long as a community requires censorship resistance, demand for competent, honest witnesses and block producers who are loyal to the community and exist outside areas from which government pressure arises will increase during attacks. In cases where incumbent witnesses submit to unjust or forced government requirements, Demand for backup witnesses will increase as the wider community will incentivize those who preserve censorship resistance. Section thirteen point seven point one. The value of on chain reputation. Reputation in decentralized systems combines intangible social capital, trust among peers, and tangible on chain achievements, e g track records of contributions, proposals funded, or community voted post, transparent history, actions such as authorship, writing new code to improve the base system, identification and curation of valuable or infrastructure operation are typically logged publicly on chain, making it easier to verify a participant's long term involvement.
Community voting. Projects can highlight individuals through initiatives like community member of the month, distributing tokens or issuing badges and NFTs to credible contributors. Section thirteen point seven point two, reputation damage. Acting against communal interest, voting in malicious witnesses, or exploiting and gaming the system to unfairly extract community rewards can destroy an individual's reputation. In a small tight knit community, reputation damage is often irreversible. One cannot easily hide or rebrand to escape on chain records. In many ways, on chain accountability can be more powerful than any legal or centralized penalty.
Section 13.7.3, NFTs for reputation. Non fungible tokens can also reflect reputational milestones. For example, earn contribution badges. Testing, bug hunting, or evangelizing a new application might earn you a a unique NFT that can be displayed on many of the ecosystems front end platforms as banjos of honor and status, long term involvement, an account that has built up multiple such NFTs over the years, signals genuine commitment to the community and the continuation of its values. Fork coordination. In a contentious fork, it becomes easier to identify trusted participants who have proven social and achievement based track records positive contributions, shown through their NFT collections, or verifiable participation.
Because forging an entire history of valuable actions is expensive and time consuming, NFTs serve as an additional line of defense. Attackers trying to infiltrate the community would have to do real beneficial work for years to build up a similar standing, an ironic deterrent that strengthens the network. They aim to subvert. Section 13.8, infrastructure operation and security. Distributed blockchain stands or falls on the breadth and redundancy of its infrastructure, validators and witnesses, and delegated proof of stake. The top 20 community elected block producers secure the network.
Decentralizing their ownership and distribution of block rewards curtails single points of failure. Node operators. More community operated nodes ensure that malicious actors cannot easily shut down or censor the network. Funding and incentives. Systems that autonomously reward node operators through new token minting or block rewards, help maintain a wide base of infrastructure providers without relying on trust in third parties. When the community invest in multiple forms of off chain infrastructure storage solutions, front end interfaces, decentralized identity, and proof of person systems, it becomes substantially harder for an attacker to sabotage the ecosystem in one fell swoop. Section 13.9, achieving circular economies.
Circular economies arise when members not only earn tokens for contributions, but also spend tokens within the same network. Real world examples include contractors and service providers willing to accept the ecosystem's stablecoin as payment. Local projects, e g, well drilling, community parks, funded directly in the native token. Cross border use, where members send tokens internationally without KYC friction, using them for day to day transactions. Physical shops accepting the currency in daily commerce, paying employees with it, and accepting it as payment, and providing clients with benefits, such as cash back for using the currency.
A robust circular economy means a token is no longer just a speculative asset. Instead, it becomes an everyday medium of exchange, weaving itself into the fabric of local businesses and communities. At that point, attacking or banning the token outright becomes politically and practically difficult. Governments risk backlash if they disrupt livelihoods of projects that rely on blockchain funding, commerce, or censorship resistant transactions. Section 13.1. You can't attack a system that's helping people. When a blockchain funds initiatives that truly improve lives, such as building water wells in underserved regions, supporting food drives, or financing local commerce, the optics of any crackdown becomes dire.
Governments or wealth driven attackers have little more high ground to justify shutting down an entity providing essential services. People defending the chain can credibly argue that any ban or hostile takeover punishes those most in need, galvanizing countrywide as well as global sympathy, garnering political pushback. Section thirteen point ten point one, benevolent acts and resilience. By design, delegated proof of state communities can sponsor benevolent acts through their own chain decentralized autonomous organizations, DAOs.
The transparency of these charity like distributions where every transaction is visible reduces or even completely removes suspicion of corruption. The result is both concrete impact, Villages gaining clean water, clinics improving medical supply chains, or impoverished regions finding alternative commerce channels, strategic strength. A network doing widespread good is more difficult for bad actors to undermine without resisting huge reputational fallout. Section 13.11, bringing governments into the ecosystem. Beyond passively tolerating blockchain projects, governments may be invited to participate in ways that align with community values, such as issuing community bonds on the blockchain or adopting tokens for local governance or budgeting.
Once governmental bodies see tangible benefits and even cost savings from decentralized transparent record keeping, The incentive to ban or attack the platform drops further. In some scenarios, municipal bonds on a blockchain. A city might raise funds from the global community by issuing interest bearing tokens with repayment schedules transparently tracked on chain, local tax initiatives. Governments might accept partial taxes in tokens if they see that usage benefits the region. Such measures weave state level actors into the community itself, transforming potential antagonists into stakeholders who would defend the network and giving incumbent political actors tools to build genuine community supported legitimacy for their blockchain documented good deeds to the communities they serve. Conclusion.
Delegated proof of stake ecosystems. Delegated proof of stake ecosystems are uniquely positioned to fend off attacks from dramatic 51% takeover bids to subtle, stealthy infiltration, provided they uphold a core set of principles. One, widespread token distribution. A thriving middle class of stakeholders dilutes takeover risk and empowers the broader community. Two, robust immune response. Dormant voters wake up when threatened, forming a collective shield. Three, forking as the final safeguard. The community's ability to abandon a compromised chain neutralizes the power of malicious whales.
Four, reputation and trust. Social capital, verifiable on chain contributions, and NFTs that certify long term engagement make infiltration extremely expensive. Five. Benevolence breeds resilience. Funding real world projects fosters local loyalty and global goodwill, making the chain even tougher to suppress. Six, embracing circular economies and government partnerships. Widespread daily usage in state level integration in the real economy render token based services indispensable and resistant towards hostile interference. Ultimately, no one can simply buy a community.
While an individual institution might acquire tokens, the heart of a decentralized ecosystem resides in its people. When those people champion transparency, freedom of speech, and open collaboration, that create a formidable system that cannot be so easily captured or coerced. In this way, layer zero, the community itself remains the bedrock of genuine decentralization and, indeed, the ultimate guardian against all forms of attack. The digital community manifesto. Digital rights, game theory, and governance of scalable block chains for use in network states. Chapter 14.
Balancing scalability and censorship resistance. Disproving the scalability trilemma. How to achieve high throughput without sacrificing security or decentralization. Introduction. The so called scalability trilemma asserts that a blockchain must compromise on either security, decentralization, or scalability. It seemingly cannot excel in all three. This idea, widely attributed to certain high profile developers, has shaped much of the industry's design choices, often leading to high fees, heavy layer one smart contracts, or alliance on centralized second layers.
However, the trilemma itself is based on flawed assumptions. By distinguishing data availability from computation, optimizing for truly low fee base layers, and ensuring fair token distribution. We can build systems that are both highly scalable and censorship resistant without sacrificing security. Section 14.1, why the scalability trilemma is misleading. Section fourteen point one point one, security and decentralization are the same goal. A core claim of the trilemma is that security, decentralization, and scalability are three separate pillars that a blockchain must juggle. Yet in reality, security in a censorship resistant blockchain derives from decentralization.
If a network can be censored, it is not secure. Hence, these two pillars are really just one. A network's degree of decentralization determines its censorship resistance, which determines its security. Any framework that treats security and decentralization as separate categories is already conflating the same property in two forms. This conceptual redundancy leads many projects astray. Section fourteen point one point two, mixing computation with data availability. Many protocols that attempt to handle everything, including smart contract computation and data storage at the base layer end up with high fees.
Because on chain computation is both expensive and socialized, unpredictable throughput, any popular app such as CryptoKitties, an early meme ecosystem that bloated all Ethereum transaction fees when it attempted to scale with its popularity can clog the network, driving fees sky high for everyone else. These symptoms are not inevitable, but arise if you force every node to perform all heavy computations on every block. By separating the roles, leaving text based data availability to the base layer while pushing complex computations to layer two systems, blockchains can avoid the trade offs that the trilemma insist upon.
Section 14.2, rethinking scalability. Scalability often means the network can handle many transactions per second. But ironically, many scalable chains impose high base layer fees or complex layer one logic that undermines widespread usage and results in fat nodes that are uneconomic to operate without passing excessive cost onto the user base. Section fourteen point two point one, lightweight base layer for true layer twos. A truly scalable layer one should focus almost exclusively on being a data availability layer with near fee less or staked resource transactions.
Layer two solutions, which rely on that base layer security, can then run intensive computations or store large non text based data off chain, referencing the base chain for its immutability requirements. If the base layer one is too expensive to write to, then any purported layer two will come centralized because it cannot afford to commit its data or proofs back on chain on a regular enough basis without having to trust the layer two system. This undermines the trustlessness that blockchain technology was supposed to minimize. Example, Bitcoin's lightning network.
Channels are expensive to open close, so users rely on a few large node operators, which form transaction hubs through which most of the network's traffic passes. Decentralization suffers as a result. Lightning effectively forms a small cluster of well funded custodians. Lightning nodes are not forced to process all transactions, and therefore, there is a level of censorship built in without having to risk losing mining rewards from the Bitcoin layer one. High fee smart contract chains. When layer two operators cannot frequently submit data on chain due to high layer one transaction cost, they must store it off chain, losing the guaranteed immutability from the layer one.
They turn into trusted centralized services as a result. Section fourteen point two point two, resource credits versus fee auctions. Standard blockchains often rely on fee auctions. Users outbid each other, so the chain always chooses the highest paying transaction first. This leads to spikes in fees whenever demand surges, I e, the CryptoKitties problem, poor user experience, and unpredictability, making it impossible for typical apps to guarantee stable transaction cost to their user bases. By contrast, a resource credit or stake based model requires users or applications to stake tokens to gain an allotment of daily transactions, credits.
No one else's willingness to pay can steal your bandwidth. As long as you hold enough stake, you can transact or store text data at minimal cost. This approach remains stable even during high usage because your right to transact is locked in by your stake, not by ephemeral variable fees, which always increase in times of high demand, when the user needs to transact the most. Result. By applying a feeless resource credit model, you get a chain that can handle large volumes of traffic without punishing normal users with unpredictable fee changes.
Section 14.3, censorship resistance equals security. If a project claims to solve the trilemma by scaling up, yet remains easily censorable, it fails on security. Real security means no single entity can freeze accounts or remove data. This is only feasible if one, token distribution, is broad enough that no whale foundation, venture capital firm, or centralized exchange can unilaterally dictate governance. Two, block production is parameterized, so a fixed amount of top independent validators, each accountable to the community and replaceable by stake weighted election, remain spread worldwide.
Three, low fees or staked resources ensure that usage doesn't centralize around large corporate infrastructure. Section fourteen point three point one, unparameterized proof of stake versus parameterized coin voting. Proof of stake systems without guardrails, unparameterized coin voting, often devolve into a handful of two to four large staking pools, e. G, Lido Finance, controlling consensus. Unless carefully designed, this leads to high centralization, where the votes of one or two large pools overshadow smaller validators. Easy regulatory targeting, since large staking surfaces become choke points for governments or corporations.
A better approach, especially for social and highly nuanced community governance, It's parameterized coin voting, e g, delegated proof of stake with a fixed number of validators and mandatory stake lockups. This ensures no single entity can spin up infinite validators and manage to have them all simultaneously elected into the consensus by the community's votes. Full transparency if anyone attempts to buy excessive influence. Time lock stakes for governance voting creates real accountability. People can't just vote maliciously and dump.
Section 14.4, governance and stake distribution, the most difficult and most crucial element. A proof of stake or delegated proof of stake blockchain can only be censorship resistant if its tokens are meaningfully and widely distributed. If a small group of venture capitalists, founders, or preminers holds the majority of tokens, they can override governance or be legally pressured into compliance that ultimately represents a takeover of a community, causing it to operate against its own best interest. Achieving broad distribution typically requires, one, no pre mines and no ICOs.
Nothing seeds an imbalance in centralization more than giving a few insiders large shares at launch. Two, low barriers to entry and to earning. Anyone, anywhere should be able to earn tokens by providing value running infrastructure, creating content, building apps, or other socially beneficial actions. Three. Long term engagement. Communities that improve everyday life, e. G, enabling people in countries where their currencies experience high levels of inflationary devaluation. To save in a currency which is pegged to a stable value, attract organic users who value and hold the token, forging deeper loyalty and distribution, and as a result, increase security for the communities, economy, and governance.
Section 14.5, zero knowledge roll ups for scaling and privacy. Scaling blockchain networks for mainstream use has been challenging due to network congestion and high transaction cost on layer ones. Zero knowledge z k roll ups, a layer two solution, addresses these issues by moving computation off the layer one chain and validating transactions with compact proofs on layer one, reducing congestion and cost. Z k proofs work essentially by allowing someone to prove that they have access to information without actually showing that information to the party asking for proof. For example, if the information that they possess allows them to correctly solve a complex mathematical problem over numerous iterations and adjustments in input variables, so that expected outputs are received in return.
Then after a number of repeated correct responses in a row, the party asking for the proof can be satisfied that the party with the information actually has it, even though they do not know what the information is and do not need to reveal it. A simple example of a z k proof is where you ask a friend to tweet out a word from a Twitter account that they say that they control. They oblige, and a few minutes later, you see the Twitter account in question has posted the word you requested. There is now a good chance that your friend is proven to be the owner of the account. But to be sure, you ask them to repeat the process several times, each time posting a different word that you have specified.
After several correct tweets, you have enough evidence to be convinced that your friend controls the password to that Twitter account. Your friend does not need to reveal to you the password to their Twitter account to prove to you that they do in fact have the keys to the account. This is a zero knowledge proof. The process of z k roll ups is where the computation to carry out and verify transactions is not done on the blockchain layer one, but on a z k capable layer two. Z k roll ups on such a layer two can batch or roll up many thousands of transactions. Then a z k proof can be published to the layer one for final clearing and security, verifying the correctness of the transactions in the process.
The important thing to note here is that these z k proofs are far smaller than complete layer one transaction data, making the layer one far less congested when it uses z k proofs to scale, while not adding to the cost of transactions. Because of their zero knowledge nature, these proofs can be adapted to enable layer one block producers to validate layer two transactions without needing the transaction information itself. This makes the transactions private, obscuring information from both the layer one block producers, third party observers, and even the person receiving the transaction.
Section 14.6, real world example, community forks. The evolution of certain delegated proof of stake systems shows how distribution often arises from unexpected events, like hostile takeovers or forks, rather than neat plan token sales. When a community must set aside its internal differences and unify to fork out a malicious actor stake, distribution can become more organic. Many previously inactive holders in voting become active voters to defend the chain, like an immune system kicking in. It increases the inherent security of the chain by reducing apathetic voters. Founder stakes or investor stakes get nullified if they attack the community.
The result is a large class of committed stakeholders who align around genuine and continued decentralization. See chapter thirteen point four point two for more information on forking away from abusive well stake. Conclusion. The so called scalability trilemma posits that a chain must sacrifice security, decentralization, for scalability or vice versa. In practice, this trilemma stems from conflating data availability with computation and ignoring the power of parameterized coin voting combined with a widely distributed token. Key lessons.
One, separate computation from the base layer. Keep layer one minimal, text data availability, and lightweight transactions. Push heavy smart contract logic, large media storage, or advanced computations to layer two. This allows near fee less base layer transactions, crucial for censorship resistant usage. Two, resource credit or stinking models. Eliminate high, unpredictable base layer fees, so layer two solutions and normal users can reliably store data or do basic transfers. Guarantee that the success of one application doesn't undermine the cost of transactions on others through universal fee auctions. Three, ensure no single entity can dominate.
Avoid pre mines, large ICOs, or central staking pools that accumulate majority control. Parameterized consensus, e g, a fixed set of elected replaceable block producers, and lock up stakes for governance. For more information on tree mines and ICOs, see chapter 15, censorship and the morality of preminds. True security equals decentralization. Security is not separate from decentralization. A chain is only secure if no single party can impose censorship or freeze assets. Five, broad distribution is non negotiable. Let anyone earn the token from real value added activities, such as building, content creation, or infrastructure support.
Community forks or freak events often achieve fair distribution more effectively and organically than any top down designs. By following these principles, a blockchain can deliver robust throughput and maintain censorship resistance, disproving the notion that one must compromise security versus decentralization versus scalability. Properly built systems show these are not mutually exclusive trade offs, but rather aspects of a carefully designed, parameterized network where no single dimension has to be sacrificed. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 15, censorship and the morality of premines.
How premine tokens enable centralized control and why true decentralization demands fair distribution. Section 15.1, understanding the moral and practical issues of a premine. Section fifteen point one point one, defining a premine. A premine occurs when a blockchain's token supply is minted, sold to, or allocated to specific insiders, founders, VC funds, early investors, before it becomes available to the broader community. This may happen in an ICO, private sale, or seed round. Moral concerns, unearned privilege. Those who receive a large portion of tokens at negligible or no cost gain disproportionate power over governance, essentially buying out a community that doesn't even exist yet.
Misalignment of incentives. Early insiders can exit, dump on future participants who then become de facto exit liquidity. The project's community and the insiders do not have the same goals as a result. Regulatory exposure. If the same small group has significant control, e g 20% plus of the supply, that project can be classed as an unregistered security under various interpretations. Even if it is not formally regulated by the FEC or CFTC, it remains susceptible to political or legal pressure due to its obvious central points of failure. Section fifteen point one point two, hidden regulation through pressure. Even when regulators officially classify a token as a commodity, where it falls outside of the regulation of the governing bodies, informal leverage still exist.
Centralized owners, large token holders, often operate in major financial jurisdictions. If pressured by authorities, they can be forced to comply or risk legal consequences. Control of infrastructure. On a chain that is majority owned by a handful of entities, governments, or powerful corporate interest can persuade infrastructure operators or coerce them to censor certain users or transactions, particularly if they are operating a significant amount of an ecosystem's infrastructure under one corporate entity. No official crackdown needed.
The project appears unregulated, yet it's quietly controllable by anyone who can influence those few wells or well funded validators or infrastructure operators. This is the case with most blockchain projects operating today, particularly those with the largest market capitalizations. Key point, pre mines hand regulators and large stakeholders a built in attack vector. They can shape the change rules or impose censorship indirectly because the underlying distribution is centralized. Section 15.2, how premines undermine censorship resistance.
Section fifteen point two point one, coin voting without parameters. Many chains use unparameterized proof of stake, which is effectively coin voting with no strict guardrails. If preminers hold large stakes, they can dominate every decision without having earned their positions of influence on a fair basis. Legitimate community members hold far less influence and cannot effectively resist if these big holders choose to censor certain addresses or content. Section fifteen point two point two. Tying in to centralized nodes. Large token holders often fund massive infrastructure, especially when the chain's nodes are expensive to run, e g requiring high end hardware.
This fosters a network of large centralized validators often operating in regulation friendly jurisdictions. If governments demand blacklisting or freezing, this small circle of validators will likely comply no matter how officially decentralized the chain claims to be. Section 15.3, moral arguments against preminds, fairness and earning. A chain that launches without pre mines or large ICO allocations forces every participant to earn their position, whether by early mining, meaningful contributions, buying tokens on the open market, or earning social value for value rewards, this fosters alignment. All holders have sacrificed time, labor, or resources, so they want the system to be robust and censorship resistant where there is no pre mine or ICO.
Even if the stakeholder wants to buy and exit quickly, they will at least have already added value to the ecosystem in some way where they obtained their tokens by pre mine. This is not always the case since no value was added when the stakeholder was ordained tokens. Since they added little to no value to obtain that stake, avoiding exit liquidity and exploitation. When venture capital or founders hold a massive early stake, they can and often do sell those tokens after hype builds, leaving later arrivals holding devalued coins. This dynamic cripples trust and channels wealth to insiders rather than distributing it among actual and organic community builders. Why would you run a validator on a chain, which is clearly owned by others?
This means that all of your efforts and works are going into supporting increasing the value of other people who didn't actually earn that value fairly since they obtained their tokens preordained in a pre mine. Most chains with pre mines are making it look like many people run validators. Whereas in reality, no person who genuinely values freedom would run a node in a chain that was pre mined by someone else as you are working for them by proxy. Once premines were removed from a community or on projects where there is no premine from inception of the project, often more open source contributions are observed from community members since they know that the value of the work they do is not going back to a corporation, owner, founder, CEO, or early venture capitalist firm. True decentralization from day one. If no single party holds, say, more than 7% of tokens, there is less risk that an external hostile force can capture the network by coercing that party or obtaining their tokens in an over the counter private purchase.
The network's governance emerges naturally. Participants vote proportionally to how much effort or value they have added, not how cheaply they acquired tokens at launch, or even ordained tokens at zeroed cost as happens in some cases. Section 15.4, censorship implications of centralized coins. The more centralized a blockchain is, the more likely it is to succumb to corruption, regulation, and shutdowns. The following are some of the ways centralized entities can corrupt a seemingly decentralized ecosystem given just enough centralized control to tip the balance of power in their favor. One, layer one manipulation.
Given enough stake and coordination from centralized exchanges that hold significant amounts of custodial stake, or large stakeholders can simply impose code changes and only reorganize the chain or block addresses that centralized entities who do not have the best interest of the community at heart, if so demanded by a regulating agency, users have no recourse. The change rules can be rewritten without broad consensus in this scenario. A change users must be vigilant, always monitoring for such vulnerabilities and attack vectors taking place or forming on the chain and in its governance token distribution.
Early venture capital, pre mine, ICO, or company backed chains will appear decentralized under normal operational periods. However, in times of defending against catastrophe, when the community needs the chain to be the most censorship resistant, the ability for these centralizing entities to censor transactions often becomes overwhelmingly clear. Even in times when the chain is not undergoing catastrophic attack, such as during a hack or when new more restrictive government regulation is released, code changes can be passed that go completely against the community's wishes.
In such cases, community has little recourse. Censorship on layer two. If the base chain is compromised, then so are layer two apps. Artificially imposed high fees by bad actors on layer one or central gatekeepers hamper true censorship resistance because it can become expensive to clear to layer one for immutability. In such cases, many layer two solutions rely on layer one stablecoins, which may become controlled by a few large token issuers. Again, pre mined or prefunded, authorities can freeze or reverse transactions on these assets easily in such scenarios.
No grassroots defense. In truly decentralized systems, communities can fork out malicious large holders. But if the majority stake belongs to a handful of powerful investors or exchanges holding custodial stake, That can be used for governance voting. Forking to remove them is nearly impossible. The entire infrastructure effectively obeys or is operated by the largest stakeholders. Section 15.5, case studies and real world consequences. The steam hive fork. When Steamit Inc, the company behind the Steam blockchain, sold its large NinjaMine stake to an external buyer.
That buyer, Justin Sun, attempted to dominate chain governance and stated that the ecosystem's decentralized applications would now be migrating across to another chain. Without first getting approval from the decentralized applications in question, the community quickly forked steam, creating the Hive blockchain, which removed the hostile NinjaMine stake on the new fork. Since there was one identifiable hostile stakeholder and many opposing wells and community members that supported the community, The New Fork was sufficiently decentralized after having forked out the hostile entity, and so the High Fork was a success.
However, had there not been sufficient decentralization of large stakeholders, It may have been the case that the New Fork created a situation in which a new group could easily form an alliance to dominate and dictate the New Fork's governance, making it a failure. Key lesson. If a chain can unify and remove an overbearing founder stake by forking, it avoids permanent capture, but only if distribution is already broad enough to resist takeover on the new fork. Ethereum's regulatory gray area. Ethereum presold tokens in its initial coin offering, yet it still ended up under partial regulatory capture because it is big enough and has signaled compliance.
EG censored Tornado Cash transactions at the protocol level based on regulatory body actions, causing compliance among major validators. Key lesson. Even if not formally labeled a security, the chain is still vulnerable to censorship demands because large validators and infrastructure operators, especially those who obtain their stake by being sold cheap tokens by the founders in a pre mine, can be pressured indirectly by regulatory and government bodies, highly centralized chains. Some networks remain so heavily premined that a founder or VC sees almost all future community participants as exit liquidity.
They seldom resist censorship, or they bow out to regulation if it threatens the early insiders' majority stake. Section 16.5. How a premine hurts everyday users. Misaligned incentives. Insiders may not care about genuine freedom of speech or censorship resistance. They often care only about short term return on investment. They will normally comply with any authority if it sustains token price or personal safety. No real vote, even if the chain claims to have on chain governance. Smaller user stake is dwarfed by whales who are self ordained pre mines and who never earn their tokens, making community voting largely symbolic.
Susceptibility to attacks. A single compromised entity, venture fund or centralized exchange, can pivot chain policy, effectively turning the network into a lightly disguised corporate product. Section 15.7, Moving forward without premines, founderless, or no ICO launch. It is critical to allow people to mine or contribute from day one without privileged allocations on a fair basis so that as many people, technical and nontechnical alike, can mine the token from a neutral base layer. The result is a much wider organic distribution where the goals and interest of the vast majority of players are aligned.
And people trying to exit have already added value in some form. Stake distribution. Encouraging value for value earn models, so tokens flow to users who actually run nodes, create valuable content, or provide valuable services, rather than early self ordained pre mine holders. Long lockup periods and other distribution and voting constraints make it harder for one group to seize control. Community watchdog. If any large entity accumulates too much power and becomes hostile or is perceived as a security risk, the community is prepared to fork or vote them out. This is impossible if premines gave them a large enough majority stake.
Then the community becomes fragmented following the defensive fork. The community needs, therefore, to self regulate this dynamic and make sure it does not become susceptible to such a situation. Conclusion. Free lines are more than a funding shortcut. They are a structural vulnerability that undermines the very decentralization many blockchains claim to champion. By empowering a small elite or large investors from inception, Such projects paved the way for censorship, regulatory capture, and moral hazards. No matter what the official legal label might be, key takeaways.
One, moral misalignment. Pre mined coins let a handful of insiders profit off later participants. Two, regulatory pressure. Even if not formally classed as securities, largeholders can be coerced to implement censorship or comply with government mandates. Weak community defense. When a chain is top heavy, resisting takeovers or forks that remove corrupt actors is nearly impossible. Four, true freedom requires fair distribution. Launching without pre mines or ICOs compels all to earn tokens proportionately to contributions. Building a naturally decentralized governance system in which all have a fair chance to build stake and participate without serving someone else who has not already added value to the ecosystem themselves.
Five, misalignment of incentives. Early preordained token holders have an incentive to use unsuspecting new users as exit liquidity without first adding any value themselves. Refusing premines and demanding fair open distribution isn't just an ideological stance. It is a practical necessity for any blockchain that aims to be censorship resistant and provide neutrality and, therefore, digital rights to its users ethically aligned with user interest and beyond easy regulatory capture. The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 16. Three pillars of decentralization. Three pillars that all digital communities need for self sovereignty. Introduction. Many projects struggle with decentralization because they focus on the wrong goals or mix too many complex features into their base layer. By contrast, truly censorship resistant and scalable systems can emerge from three core pillars. When these pillars exist at the base layer, the entire ecosystem gains self sovereignty, freedom of speech, and economic resilience. Section 16.1, text based data availability.
Freedom of speech. A system must store text or fundamental data in a globally replicated way. This ensures everyone can freely post or read without a single entity able to delete or block content. Simplicity and cost. Only storing text keeps overhead predictable and minimal. Complex computations or large file storage on the base layer leads to huge cost and limited scaling. Neutral infrastructure. Because text is universal and lightweight, it can be distributed across many jurisdictions. Attempts to censor or alter historical records fail unless the entire network agrees, ensuring true data availability.
Key point, text based storage on the base layer ones, the foundation of free speech and collaboration across any border. Section 16.2, zero fee transaction layer. Skin in the game instead of fees rather than paying every time you transact. You stake, that is lock up tokens to gain transaction bandwidth. This model is often called resource credits or regenerative fees. It eliminates unpredictable cost and fosters global usability for all people, whereas chains with fees on transactions can become prohibitively costly to people without economic means to pay such fees.
High throughput, low friction. When you remove transaction fees, you open the door for real time micropayments and rapid app development. Users do not abandon the network under surge pricing or fee spikes. Expanding ecosystems. Zero or near zero fees makes it viable to build truly decentralized applications on layer twos that reference data from the base layer. Expensive layer ones cannot host decentralized apps effectively because each action that clears from layer two to layer one so that the layer two application gains trustless security becomes too costly. Key point.
A zero fee transaction layer, backed by staking, ensures anyone can use the network, allowing broad adoption and preserving censorship resistance. Section 16.3, on chain stablecoin, essential for daily use. A stable form of payment is critical for real world transactions. If the native token always fluctuates in value, most people will not rely on it for routine expenses, business transactions, or savings, decentralized and backed. An on chain stablecoin can be algorithmically backed by the main governance token. As long as the stablecoin's market cap remains well below that of the base token, the system remains secure.
Self sovereign conversion. Because this stablecoin resides entirely on the base chain, users exchange value without external markets or centralized gatekeepers. True on chain liquidity means no forced reliance on outside exchanges for dollars or stable value exchange. Essentially, this means that the ecosystem can continue to function and provide itself with liquidity without centralized or even decentralized exchanges. Key point. A decentralized stablecoin, fully integrated on the base layer, is the final piece that allows people worldwide to store and transact in stable value without leaving the protocol.
Section 16.4. Why these three pillars matter. Censorship resistance. Text based storage protects free speech. Distributed nodes ensure no single jurisdiction or entity can delete what you say, post, your followers, your community, or its economy. Zero fee transactions. With staked tokens, users bypass unpredictable network fees. This opens the door to everyday usage, microtransactions, and diverse decentralized apps where users do not require gas, a prohibitive hurdle to access in order to interact with the ecosystem. Stablecoin integration.
People need a stable unit of account for commerce. An on chain stablecoin allows real economic activity without centralized intermediaries. Together, these pillars form a self reinforcing network. Free speech, data availability, increases the system's inherent value and communication. Zero fees, encourages participation and app development for all people. A base layer stablecoin, empowers real world trade without needing external exchanges. When combined, they create a truly self sovereign ecosystem, no central point of failure, no single jurisdiction in control, resistant to blockages of own and off ramps, and no reliance on external stablecoins or exchanges.
This model is already demonstrated in systems like the Hive blockchain, which integrates text based data, near feeless transactions through staking, and an on chain stablecoin. By mastering these three pillars, a blockchain can achieve a higher degree of decentralization and practical everyday utility. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 17, algorithmic stablecoins on layer one, a Felis permissionless non banking asset backed layer one, medium of exchange, and liquidity is essential.
Section 17.1. Why we need a truly decentralized stablecoin? Many blockchains rely on centralized stablecoins like Tether or USDC that hold reserves in fiat accounts. These assets can be seized, frozen, or regulated at any time. A censorship resistant blockchain must have an algorithmic stablecoin backed only by digital value that no single entity can control or confiscate. Section 17.2, backing the stablecoin with digital real estate, social tokens, and bandwidth in the ecosystem. A stablecoin has to be backed or collateralized by something in a censorship resistant system.
Backing cannot be gold, dollars in a bank, or any physical good vulnerable to seizure. Instead, it should be backed by a layer one governance token that represents valuable digital real estate or bandwidth to post data on chain relative to other users or apps also wishing to post data to chain. The governance token should grant access to on chain resources, e g, tech storage, zero fee transactions, otherwise known as bandwidth access to upload to the database, payouts in newly minted tokens for community contributions, and proof of stake governance with strong parameters to prevent takeovers.
The digital real estate has fundamental demand because it secures data availability, free speech, and zero fee transactions. The main token can then back or over collateralize an on chain stablecoin algorithmically pegged to the dollar without the need to hold collateralizing assets in a traditional bank, which are subject to seizure or censorship. Section 17.3. How it works? One, pegging to the dollar. The stablecoin maintains a target value of 1 US dollar. It does so by letting holders redeem the stablecoin for 1 dollar's worth of the base token. As long as the base token has a higher market cap, then the total stablecoin supply.
Redemption is secure, and the stable asset remains adequately over collateralized. Two, a haircut rule. To avoid the fate of projects like Terra, Luna, a debt limit or haircut parameter is set, often around 20 to 30%. If the stablecoin supply approaches such a set percentage of the base token's market cap, The chain stops issuing new stablecoins. This prevents the stablecoin's market cap from exceeding its collateral. Three, delayed conversions. Attacks happen when a stablecoin is instantly swapped for the governance token and dumped on the market.
To counter this, conversions take place over a few days. Three point five days is typical. Large conversions face time risk and possible fees, making quick takeovers highly risky for the attacker and most likely unprofitable. Four, fee or haircut on bulk conversions on the base layer. A small fee, e g 5%, can apply to mass conversion, discouraging sudden attacks. Genuine users pay the fee only when moving large sums, while attackers find it prohibitively expensive to destabilize the system. Five, reward pool funding. These stablecoins often emerge via new token minting to a daily rewards pool that the community competes for. The more stake weighted votes your contributions receive, the more of the rewards pool you will receive in turn. Half of the daily rewards go to users in stablecoins and half in the base governance token. This slow steady issuance avoids reliance on centralized reserves.
This slow, steady issuance avoids reliance on centralized reserves. Over time, the stablecoin organically expands alongside the flow of tokens to the community. Section 17.4. Infinite liquidity through base token conversion. Even if centralized exchanges list only small amounts of the on chain stablecoin, true liquidity can be effectively unlimited. A large holder can, one, buy the base token on the open market, purchase the governance token on open markets, two, convert over time. Convert that token supply into stable coins via the protocol's built in mechanism on layer one.
Three, haircut rule enforcement. If the conversion is large, the base token's price likely rises. This increase keeps the ratio below the debt limit, preserving stability. In fact, it may lower the debt limit as the supply of the stablecoin is increased. Since in this scenario, it is likely that the market cap of the base layer token being bought on the open market and used to convert to stablecoins will increase at a higher rate than the increase in supply of the new stablecoins being created by those conversions. This process mirrors how centralized stablecoins work, except there's no single issuer to call for a mint or redemption.
The protocol itself autonomously executes conversions. Section 17.5, example, Hiveback dollars, HBD, noncustodial. No single wallet company or government can KYC freeze HBD or seize its collateral? Three second confirmations. Transactions are nearly instant and effectively feeless thanks to resource staking. Parameter rules, 30% debt limit haircut. If Hiveback dollars nears 30% of the governance token's market cap, Hive. No more HBD is issued. Conversion delay. Conversions from HBD to Hive or vice versa take several days and may incur a fee. Organic expansion.
HBD supply grows through daily new token mints, which are allocated to content creators and community members via decentralized community stake weighted voting systems. If large financial players want millions in decentralized stablecoins, They simply acquire Hive on the open secondary market, then convert day by day into HBD. This pushes Hive's price up such that its market capitalization increases more than the newly minted stablecoins, lowering the debt ratio. Thus, the stablecoin issuance system scales while maintaining an adequate collateral buffer. Section 17.6, resilience against attack, comparisons to failed models.
Unparameterized algo stablecoins like Terra Luna had no effective cap on supply redemptions. When attackers mass converted the stablecoin to Luna when attackers mass converted the stablecoin to Luna, it collapsed the token's value. In contrast, parameterized systems employ haircut thresholds, delayed conversions, and optional conversion fees. These dampen flash maneuvers vastly increase financial risk to the attacker and reduce exploit potential. Fork out option. Even if a large actor gains a huge stake, reputation based, censorship resistant communities can fork the chain and exclude hostile balances.
This threat deters malicious governance attacks. Section 17.7, toward a parallel dollar economy. A reliable layer one stablecoin sets the stage for a true parallel economy, allowing everyday people to transact globally with no KYC, store value in a stable currency, move into or out of local currencies without permission gateways, access zero fee settlement in seconds. Because these stablecoins are algorithmic and fully on chain, they also enable advanced financial instruments, like bonds and collateralized loans, mirroring pristine collateral akin to US treasuries, but free from legacy banking restrictions.
Over time, such systems can mirror or replace major components of traditional euro dollar international finance system without centralized reserves or permissioned intermediaries. Conclusion. No physical reserves. Backing must be purely digital, immune to seizure or control by a single entity. Parameter based algorithm. Enforce haircut rules, delayed conversion, and optional fees to maintain the peg and prevent sudden attacks. Infinite liquidity. As long as the governance token is valuable due to real utility, large amounts of stablecoins can be created by buying the base token, stable parallel currency.
Distributed newly minted tokens and community driven enforcement produce a sustainable on chain dollar for everyday use in financial services. Algorithmic stablecoins on layer one are an essential pillar for any genuinely decentralized block chain ecosystem, powering commerce, savings, and economic growth outside centralized oversight. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 18, off chain data availability layer for non text data, storing more than text. Introduction. A text based storage layer on the base chain is critical for censorship resistant records. But what happens when you need to store large files, like video or software, Storing them directly on a lightweight text focused chain would bloat the network.
Once you move beyond text, you need an off chain data availability layer to keep blockchain nodes lean while still distributing and verifying heavier content. Section 18.1. Why not just put it all on chain? Data density. Large files, videos, high resolution images, or entire software packages are too big for most blockchains to handle without enormous storage overhead, performance bottlenecks. Even if you tried, nodes would become fat and resource intensive, ruining the fast low latency experience needed for high transaction throughput on the base layer. Selective immutability.
Most users do not want every casual comment, e g, LOL, stored immutably forever. It's better to keep the on chain layer for critical text, metadata, and important references. Hence, pushing large files off chain is both practical and efficient. This also helps to deload the base layer, allowing it to focus on storage only of critical information and data links that direct to off chain information. The result is that the base layer can scale far beyond what was originally possible if everything had been stored only on the base layer. Section 18.2, how off chain incentives work. With text on the base layer, you still need secure, censorship resistant ways to store everything else. Think of it as layer two storage, where off chain dedicated storage nodes maintain heavier files but receive on chain incentives.
A widely discussed approach is a separate token based system that pays operators for providing off chain data availability. One, users or apps want to store files. They create an on chain contract specifying the data and how much they will pay to keep it available. Two, nodes run off chain storage. These are community run machines, providing excess hard drive space or bandwidth. Three, proof of storage or access. The network randomly checks if the nodes still hold the data. If they prove it correctly by quickly delivering requested file segments, they earn rewards.
Four, layer two tokenomics. An additional token can fund payouts for storage, encoding, or content delivery. This token's rules are anchored to the main chain, but operate independently for heavy data needs. Section 18.3, the SPEAK network. One model for off chain availability is the SPEAK network, which stores large files like videos via a distributed set of nodes. There is core incentive token. Operators provide bandwidth and disk base for content. They are rewarded by user created contracts, each specifying what files must remain available.
Validator nodes, a lightweight system of 20 community elected validators, should be the route through which all content on the off chain storage system is uploaded. The validators can then take the encoded chunks of data and hash their data footprints. Community storage nodes must download the files from these validators and hash the same data chunks to confirm receipt of the data. The reason this works well is then it does not require all validators running nodes to process and store all files in the network like a proof of work system would do. A parameterized coin voting system, delegated proof of stake for file storage is the optimum solution since it is lighter weight than proof of work.
And with 20 elected validators, it can manage decentralized consensus governance while still being a trustless system, which does not need to count only on the richest members of the community to run its most critical infrastructure, the content validator nodes. Proof of access. The network randomly pings community data storage nodes to confirm they can serve requested data. If they deliver the matching hash chunks back to the validators quickly, that is confirmation that the storage node is storing what they say they are storing. As a result, they earn rewards from the allocated contract pool associated with the contract within which the file is stored.
Video encoding and streaming. In addition to raw storage, a system like SPEAK can incentivize video transcoding and live streaming servers, offloading the heaviest processing from the main chain. Through these incentives, SPEAK aims to replace centralized video platforms back end, storage, streaming, encoding, with a decentralized community owned layer. For further information on the SPEAK network, visit httpscolon//spk.networkslash. Section 18.4, keeping the base layer lightweight. Text is fundamental for an immutable record of governance transactions and high level metadata.
Everything else heavier or more data intensive, such as video, large images, or software, should be stored off chain. By separating duties, layer one stores text data, comments, references, IDs, plus the chain's consensus rules and transaction layer. It remains fast, minimal, and nonfat, uses no fees or very low fees, powered by a daily rewards pool of newly minted tokens. Layer two handles heavy storage with separate economic incentives, runs proof of storage or proof of access to verify hosting. Nodes earn a specialized token, maintains partial immutability.
If a node drops your file, it loses rewards and on chain reputation. Section 18.5. Why separate layers matter? One, scalability. Dividing text based consensus from heavy file hosting prevents the entire chain from bogging down. Two, targeted security. Text on chain enjoys the strongest guarantees, immutable and globally replicated. Multimedia off chain can still be censorship resistant, but doesn't force every blockchain node to store gigabytes of data. Three, flexible cost. On chain data is costly and must remain minimal. Off chain nodes can set custom storage prices, allowing a market based approach for different file sizes and retention durations.
Four, endless services. Beyond video, any large scale process such as music hosting, three d rendering, AI model storage, and many more can be incentivized similarly. Community run nodes provide resources and earn tokens for proven work. Conclusion. Lightweight, on chain core, text data at governments remain on a fearless, parameterized coin voting chain. This ensures immutable text based information and references, reliable transactions, and stable coin minting. Off chain data availability. Parallel networks like SPEAK host non text data under a separate token economy.
Nodes prove accessibility of large files to get paid via the proof of access method, POA. Users, content companies, and content platforms create contracts for any multimedia content. As a result, individual community members can be paid for backing up this content. Mutual reinforcement. The main chain's reputations and incentives ensure honest participation. Layer two nodes trust the base chain for governance, data permanence, and data availability, while the base chain gains broader utility through off chain hosting solutions. This two tier system, immutable text plus incentivized off chain data, balances scalability with censorship resistance.
It stores critical records on the main blockchain and offloads heavier or less crucial files to user powered networks for backup. The result is a robust ecosystem where nodes can specialize, content remains online without centralized servers, and the core chain stays lean and can scale. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 19, Service infrastructure pools, SIP. Paying the community instead of the exchanges. Introduction. A service infrastructure pool, or a SIP, combines elements of a decentralized exchange, a DEX, and a DAO.
Normally, DEX trading fees go to a centralized operator's profit. In a SIP. Those fees are pooled and can be voted on by token holders to fund infrastructure improvements or other community initiatives. Section 19.1, basic concept. Send exchange fees back to the community. Instead of letting a centralized exchange collect trading fees, a SIP aggregates them into one pool. Stakeholders then decide how to use those pooled funds. They might pay infrastructure operators, fund new features, or distribute incentives that benefit the broader network. This is often coupled with a way for the SIP to sell an autonomous product or service, the revenue of which goes directly into providing additional liquidity to the SIP account.
This allows the SIP to grow over time, potentially to a point where the fees generated from token exchanges are able to fund all or most of the infrastructure that is operating on the wider network. Section 19.2, example from the SPEAK network. In SPEAK network, users can buy minting tokens, like Laramix, to improve their share of mining rewards directly from the SIP account. Purchasing these tokens requires locking up dollars, HBD, or similar assets in a liquidity pool. The key points are buyers of tokens place funds into a SIP account. Those funds stay in the pool and can be used for community driven initiatives. The mining tokens give owners more mining weight or resource priority.
If attackers want control, they must buy these tokens from existing holders, effectively paying the community their required rate for taking over the governance, after which the original community will likely fork if the attacker is deemed as non benevolent to the protocol. This setup discourages hostile takeovers because any large purchase of mining tokens raises the token's price benefiting existing holders, and the attacker's funds permanently bolster the ecosystem's liquidity. Section 19.3, combining a DEX and a DAO.
A typical DEX allows people to stake liquidity, earn fees, and withdraw profits. In a SIP, part of, or all the funds remain in the pool rather than returning to individual stakers. The pool's growing liquidity produces trading fees, and those fees can be sent to infrastructure operators, allocated to development teams, distributed for marketing, user incentives, or emergencies. By design, it is like a DAO controlling a permanent liquidity stash with revenue streams continuously replenished by users buying service tokens, e g mining tokens, which improves a user's mining capabilities in the network.
Section 19.4, required technology and combining ecosystem liquidity. As SIPs grow, they can be combined as multisig liquidity and collateral providers stored on the base layer. For additional security, they can employ a massive multisig technology, such as BLS signatures. This allows for a reduction in size of the signature storage required in each block and therefore accommodates 400 up to thousands of keyholders on the main multisig account, SIP, in the ecosystem. This means that much larger amounts of liquidity can be securely stored for various purposes and by various parties on chain who seek increased security for their liquidity providers.
Sanction 19.5, self sustaining ecosystem. Over time, more participants buying tokens for better mining efficiency drives more funds into the SIP. The liquidity pool gradually swells. As it does, it may earn enough in trading fees to pay for infrastructure without relying on external funding. Provide a safety net. If outside market conditions weaken, autonomously finance new ecosystem projects and expansions. The end goal is an ownerless, decentralized pot of liquidity that pays for the chain's operations and growth acting like a shock absorber during market downturns.
Section 19.6, replacing centralized exchanges. Centralized exchanges such as Binance or Coinbase collect trading fees for corporate profit. A SIP, by contrast, directs its fees and other revenue streams into an own chain pool governed by community votes. Rather than benefiting a few large stakeholders, these funds can reward node operators, subsidize new projects or decentralize applications, Remain inside the community, strengthening the protocol overall. This model reclaims revenue streams. This model reclaims revenue streams that would otherwise flow into centralized parties.
Key takeaways, autonomous purchases. When users buy mining or service tokens from the SIP, funds go into the SIP and never leave, creating a permanent increasing liquidity reserve. DAO like control. The community decides how to allocate SIP reserves, ensuring democratic management. Stability and growth. As more people seek the service tokens, the SIP grows, generating fees that can fund infrastructure or offset downturns. Reduced attack vectors. A would be attacker must inject significant capital to gain leverage, thereby strengthening the ecosystem in the process.
Conclusion. Service infrastructure pools blend DeFi liquidity pooling with DAO governance to create sustainable community owned revenue mechanisms. They transform trading fees into collective assets that keep infrastructure running and development funded, all without centralized exchange intermediaries. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 20. Open source makes IP less valuable. A new business model is to accumulate the governance token and give the rest away for free. Introduction. Open source development challenges the traditional value of intellectual property. In a blockchain ecosystem built on open source principles, code can be freely copied, iterated upon, and improved by anyone.
Instead of focusing on proprietary software or brand protection, the emphasis shifts to tokenizing a base layer protocol that gains value from community driven network effects. Section 20.1, why traditional IP models will weaken. Section twenty point one point one, Copy and iterate. In open source projects, anyone can copy the code and iterate upon it. This significantly reduces the powers of patents and copyrights that typically protect software. Once the code is public, forks and variations can proliferate without legal barriers. It also vastly reduces the amount of work required to build a new digital project or product in cases where the original source code are used as the basis for that project.
Section twenty point one point two. No centralized enforcement. Truly decentralized systems are resistant to lawsuits. You cannot sue an amorphous community of contributors and node operators, especially when many use pseudonymous identities. Traditional IP enforcement mechanisms lose their potency. Section 20.2, accumulating the base token instead of IP. Section twenty point two point one, governance rights accumulation as the business model. Because open source leaves little IP rent to collect, Builders accumulate governance or utility tokens in the underlying blockchain as a result of having received community votes for their valuable contributions to code building.
As the ecosystem grows, the quality of products improve. A network effect takes hold in the user base. Adoption increases, and the token's value can rise. Section twenty point two point two, community ownership. Projects no longer rely on proprietary lock in. Instead, they encourage developers to improve the code and create stronger network effects. Holding more of the base layer token gives influence and a direct stake in the ecosystem success, which incentivizes further contributions from developers. Section 20.3, abundance versus scarcity of IP.
Section twenty point three point one, abundant code. In a fully open source environment, code is shared, and even brand elements can be replicated or remixed. This approach prioritizes expanding overall utility rather than controlling a limited pool of IP. Section twenty point three point two, power of the network effect. Section twenty point three point two, power of the network effect. Instead of leveraging a single brand or patent, participants focus on building a stronger community. The most valuable resource becomes the network of users, developers, and infrastructure operators, all benefiting from a thriving token economy.
Section 20.4, brand and community tensions. Section twenty point four point one, forking logos and names. In decentralized context, truly decentralized communities can mimic or adapt a project or brand's logo or name. Traditional lawsuits become impractical since there is no central entity to target. Attempts at enforcement can even backfire by uniting the community against the IP owner. Twenty point four point two. Brands aligning with their community. Companies must adopt new ways to cooperate with decentralized user bases rather than trying to dominate them or see the data they generate as the sole property of the company to mine, sell, and monetize.
Real value lies in fostering community loyalty and participation, giving them skin in the value system via fair distribution of tokens and stake, not in clinging to trademarks or brand identities. Section twenty point four point three, stake for resources. In a well designed decentralized system, users or apps stake the token to gain network bandwidth. Developers build open source apps and receive tokens either by purchasing them on the market or earning them through community rewards for having done something valuable for the community itself.
Section twenty point four point four, intrinsic utility. A well designed decentralized system offers censorship resistant tech storage, fast and fearless transactions, and stablecoin infrastructure. Its core is maintained by distributed contributors who share a common stake in the token of the community. Section 20.5, suing a distributed community. Section twenty point five point one, impossible central target. A fully decentralized network has no headquarters to subpoena. If there is no premine, no foundation, and no single entity, lawsuits over IP infringement have no direct target.
Section twenty point five point two, communities undermining IP laws. As a network becomes more censorship resistant and globally distributed, it becomes harder for IP owners to enforce claims. Communities operating worldwide with pseudonymous digital identities render legal pressures over trademarks and copyrights less effective. Conclusion. Code freedom over IP. Open source software weakens traditional IP claims. Anyone can copy and improve code without significant legal fear. Token based incentives. Instead of profiting from patents, developers accumulate the base layer token, aligning them with long term ecosystem growth, which in most cases, incentivizes further open source contributions from developers and other community members who want their existing stake to grow in value.
Community as strength. Brand and logos can be forked in truly decentralized systems. The most influential brand is the one the community supports, not the one with the most lawyers. No central point to sue. Fully decentralized projects lack a headquarters, owner, central figurehead, or foundation. IP related lawsuits have no clear way to shut them down. Focus on network effects. Real value flows from community collaboration and user adoption. Open source accelerates ecosystem growth by inviting a broad range of contributors and forks.
When open source principles merge with decentralized governance, traditional IP loses its status as a profit center. Economic rewards shift away from proprietary ownership and towards token staking in an ever growing cooperative network. The digital community manifesto. Digital rights, game theory, and governance of scalable blockchains for use in network states. Chapter 21. Importance of decentralized immutable communities as network states. How network states conform. Section 21.1, defining network states. A network state is a globally distributed community that manages its own governance, has an internal economy, and cannot be easily shut down or censored by external forces.
The idea is often associated with the concept of online nations that develop real world influence. Some may eventually purchase or acquire land and function with true sovereignty and a real world economy, complete with trade deals and international agreements with other states. Achieving this requires immutable ledger and governance, a censorship resistant blockchain or data layer upon which the community operates in the digital realm, Decentralized ownership. No single entity should control the chain, avoiding preminds, ICOs, or foundations.
Sustainable economy. The community must be able to create and maintain its own token, incentivizing contributions, and causing buy demand for some sort of utility that increases proportionately to scaling, network effect, and competition for demand for resources to interact with the community's base layer. As with the resource credit model described in previous chapters, See chapter seven, sustainable economy and decentralized coin distribution for further information on creating sustainable economies with resource credit systems. Unlike typical blockchain projects with initial coin offerings or heavy centralization, genuinely decentralized network states distribute tokens fairly, making it impossible for any single party to dominate.
This fosters a robust, self sustaining digital community. Section 21.2, power of self sovereign communities. When a community reaches critical mass, it can self organize to communicate and collaborate without top down control or an uncensorable, text based, decentralized base layer. Communicate and collaborate without top down control or an uncensorable text based decentralized base layer. Offer real economic incentives for labor and contributions. Print its own token with no reliance on external permission, protect members from censorship as there is no centralized database to shut down.
With an algorithmic stablecoin on the base layer, the community can carry out trade in and conversion to stable value without needing an external decentralized exchange or centralized exchange. Such communities can become de facto nation states. Traditional governments rely on force or laws to secure currency demand. While these blockchain based communities rely on voluntary adoption and network incentives, community members hold their stake because they earned it or purchased it from the open market, not because they were ordained it in a pre mine. If they grow large enough, they can challenge or complement legacy financial and governance systems by making them more efficient and transparent.
Section 21.3, decentralized token distribution on layer two. Many network states will likely form at the layer two level, meaning they build on top of an existing censorship resistant neutral base chain with the following characteristics. Fair token distribution. No large pre mine, no venture capital in the first ICO round, and no single dominating stakeholder. Earning versus preordained. Members earn tokens through valuable work or content creation or buy them on the open market. They are not self gifted tokens at low prices, in a presale, or for funding and development of the project.
Self sustaining model. The token's utility, e g, voting, access, on chain resource bandwidth access, creates ongoing demand with growth of transactions within the community. Communities can thus issue tokens without creating a central point of failure. Over time, these tokens govern the community's own rules, curation and distribution mechanisms, and reward pools. Section 21.4. Sustainable token value and staking incentives. To foster lasting engagement. Voluntary demand. As more people want influence, reputation, or access to blockchain bandwidth, they buy or stake tokens, raising overall liquidity and reinforcing value.
Layer two resource credit models. Community members will have to stake both the layer one governance token and the layer two community token in order to obtain bandwidth or resources to operate in post to, and vote in the level two community or network state. As a network effect takes hold for the community, this will create demand for the token, driving its price up and making the token and community economy sustainable over time. Stake for influence. Members stake tokens to gain voting power, resource allocation, or other utilities, similar to how baselayer staking controls network resources.
Reward for participation, a daily rewards pool funded by newly minted tokens, or other reward mechanisms ensure contributors receive tokens. All of the above turns each community into its own mini economy, encouraging long term commitment rather than short term profit taking. Section 21.5, liquidity pools for each community. Instead of using a centralized exchange that extracts fees and can seize funds, Each community maintains its own layer two community specific decentralized liquidity pool for trading. Key benefits. Fees return to the community.
Rather than paying centralized operators like Binance, trading fees feed back into community development and infrastructure operation. Reduced attack vectors. No custodial risk on centralized exchanges, so tokens remain community owned, sustainable growth. As liquidity pulls deepen, more users participate, which creates a virtuous cycle, increasing liquidity and increasing confidence in the community and its economy. Over time, these pools can become self sustaining, generating enough fees to fund infrastructure or act as shock absorbers during market downturns, subsidizing trusted but unprofitable infrastructure in times of a downturn in the market.
Section 21.6. Community self regulation of content and rewards. Because communities operate socially, they need to manage on chain discussions and incentives. Rewarding quality. Users or apps vote on which post projects or members deserve tokens. Downvoting abuse. Undesirable content can be downvoted or flagged, reducing its rewards or visibility. Consensus based rules. The community sets thresholds for removal, tagging, e g not safe for work or moderating spam. No single corporation is in control. Instead, collective rules, stake based voting, and front end policies govern how content is curated.
Section 21.7, content gateways and validators. On certain architectures, like an off chain video storage layer, validators or gateways can decide which content is acceptable for the community. They are elected or chosen based on stake weighted votes. So the community's values and nuances ultimately guide what gets through via elected content validators. Section 21.8, stake weighted tagging. Members with sufficient stake can force specific tags, e g not safe for work, political, spoiler, onto content if they reach a voting threshold. This allows flexible, community driven categorization without needing a central moderator.
21.9, reward disputes. If there is disagreement on how many rewards a piece of content deserves or someone has gained the system, the community can downvote or reallocate rewards. In advanced setups, a jury process might review disputes to decide whether to restore or remove tokens or rally community support to re upvote content that has been unfairly downvoted. Conclusion. Self sovereign network states, truly decentralized communities form online nations that can potentially buy land or exert real influence without centralized leaders or corporate backing. Fair distribution. To remain censorship resistant, avoid premines or initial coin allocations.
Community staking and fair issuance keep power spread out. Sustainable economies. Internal tokens gain value through utility staked voting power, resource access, and liquidity pools that recycle fees back to the network. Self governance of content. Communities can set up effective content regulation systems on both layer two apps and layer one content storage systems in order to prevent content that does not match the values of the community. The key is that one central entity cannot control censorship own chain. Chapter 22. DAOs and community proposals for self funding. Neutral funding removes compromise and maximizes the neutrality of the technology.
Section 22.1, decentralized and neutral funding. A major advantage of properly designed blockchain ecosystems is the ability to fund projects through truly decentralized, neutral mechanisms. Unlike traditional ventures or ICOs with centralized teams and venture capital, These models allow a community owned treasury to fund ideas and community projects without a controlling entity or CEO. Community members vote on proposals using their stake. And once a proposal meets a threshold, funds are released on chain to the developer, a group that will perform the work.
In a truly neutral environment, there is no single legal entity, foundation, or board that dictates funding. Instead, participants stake their tokens for voting power, propose initiatives, and decide on projects that add value to the network. The key benefit is that funding does not come with the usual strings attached seen in centralized or venture backed deals. Rather, it aligns community incentives towards shared goals. Section 22.2. What is a DAO? A decentralized autonomous organization is a community governed treasury and decision making structure on a blockchain. It generally has on chain funds, often funded from newly minted tokens or fees.
Proposal system. Projects request funding by submitting proposals. Stake weighted voting. Token holders cast votes. If a proposal meets the required threshold, funds are released. A genuinely decentralized DAO has no outside venture capital dictating decision makers. It has no single company or CEO that can override votes and no foundation controlling funds. Instead, the community's stake decides how to allocate resources. Section 22.3, decentralized versus venture capital backed DAOs. Many DAOs appear decentralized, but are, in reality, influenced or controlled by large venture capital allocations, ordained or obtained far below market price at a premine stage early on in the project.
Often before the tokens are traded on the open market, these VCs can concentrate voting power, leading to outcomes favorable to a few stakeholders rather than the entire market. Venture capital firms also usually reside in regulation friendly jurisdictions, making them prone to regulatory pressure that can significantly shape funding decisions. In contrast, a truly community driven DAO has widely distributed tokens. No pre mine, no ICO, and no single party holding a controlling majority stake. The ideal scenario in balance is where, even without the votes of the largest stakeholders, projects can still obtain funding via obtaining votes from the rest of the community.
These are the rare DAOs that cannot be easily shut down, coerced, or dominated by external investors. Their funding decisions reflect actual community interest rather than extractive driven agendas, which do not necessarily serve the community. Section 22.4, returning value to Dells. Because these DOW funded projects do not have strings attached from corporate entities, it is crucial for the community to establish accountability. Milestone based releases. Funds are released only after certain goals are achieved. Monthly or phased payments.
Ongoing work, e g maintenance, is funded incrementally with the community free to remove votes if progress stalls. Open bidding. The community can publish desired task, inviting multiple bids. Stakeholders then vote on the most competent developer with the fairest price. The community expects projects to benefit the ecosystem long term. A neutral DAO often funds tools or protocols that enhance network utility. For example, off chain storage, social features, or scaling solutions. The team's reputation is on the line If they fail to deliver, future proposals are unlikely to pass.
Section 22.5. Example, the Hive blockchain decentralized Hive Fund or DAO and the SPEAK network. On the Hive blockchain, a text based storage layer, the SPEAK network received funding from Hive's decentralized proposal system to build off chain media storage. Speak's work benefits Hive users who want to store large files, videos, and images beyond the scope of the base chain. In return, Speak gains community recognition and support, but has no direct contract with a corporation. In return for this, the project dropped its mining tokens to the entirety of the hive community in a claim drop.
The users who claim tokens are able to mine more efficiently in the network and therefore earn the network's governance token for providing infrastructure operation. Due to DAO funding, there was no need for a pre mine or ICO to fund the project, and therefore the SPEAK network has a highly neutral layer that protects the rights of users and their content storage. The community can stop funding at any time if deliverables fall behind or if the project ceases to align with HIVE's goals by unvoting the proposal and dropping its total votes below the community set threshold of votes required to receive funding.
This model shows how a community can sponsor critical infrastructure without relying on ICOs, venture capital, or centralized companies. It aligns incentives around expanding the chain's ecosystem while preserving user ownership and governance. Section 22.6, alternatives to no strings attached funding. A common concern with free funding is that teams could run off with the money. DOWs can mitigate this by clear scopes of work, publicly outlined task and deliverables, reputation and trust. Developers who leave projects incomplete damage their standing, making future funding unlikely.
Revocable votes. If a project deviates from its stated goals, community members can unvote their support, temporarily or permanently halting further payouts. These checks protect communities from severe losses and ensure ongoing alignment. The outcome is a more transparent, flexible funding environment that encourages collaborative development. Section 22.7, why neutral DAO funding matters. Eliminates venture capital control. No massive early allocations or pressure to chase short term profit. Skills through collective effort. Communities that must fund and maintain the chain themselves learn to optimize and reduce bloat, resist regulatory capture.
Without a centralized owner or foundation, a decentralized treasury cannot easily be forced to censor or comply with unfavorable rules. Protects against exit liquidity behavior. Teams funded by neutral DAOs are less likely to dump tokens or pivot abruptly because they rely on continued community approval and can be dropped governance or mining tokens in exchange for DAO funding, excluding the need for bringing in venture capitalists whose values and reasons for being involved in the project may not align with those of the community, promotes true decentralization.
Everyone with stake can contribute ideas and vote, reflecting widespread consensus rather than corporate edicts. Projects developed under this model become genuinely community oriented. The tokens have higher community trust because there is no hidden pre mine or venture round waiting to sell into unsuspecting community members at higher prices. As a result, DAOs with a broad participatory user base produce ecosystems that are more censorship resistant, equitable, and sustainable in the long run. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 23. A new model for start up funding. A practical way to fund projects without compromising to early venture capital or other centralizing forces. Introduction. Many blockchain projects raise funds through token sales, ICOs, and pre mines, or venture capital leading to centralization and misaligned incentives between founders, investors, and the community. It should be noted that the following is just a suggested way to create more decentralized projects with fewer conflicts of interest and centralizing stakes.
And there may be many other approaches. A more decentralized alternative is to obtain funding from an existing demonstrably decentralized DAO community, airdrop miner or governance tokens to its community, and allow participants to earn governance tokens by running infrastructure or otherwise contributing. This approach avoids early compromising venture capital, ensures a fair launch, and promotes true decentralization by reducing conflicts of interest and centralized control compared to traditional funding models that use precedes, early investor stakes, pre mines, and ICOs.
Section 23.1, DAO, miner tokens, and fixed governance supply. DAO funding, A community DAO decentralized with no single owner can vote to fund your project over a cent period. If you prove the project benefits that DAO's ecosystem, You receive an ongoing allocation. No venture capital or private deals are required. Minor tokens instead of pre mines. Instead of distributing governance tokens directly, you drop a miner token to the DAOs community. Anyone claiming and staking these miner tokens can run infrastructure, storage nodes, validation nodes, etcetera, to earn the system's governance token over time, controlled supply and inflation, field phase.
Governance token minting schedule is set to a minimum feasible amount. In order to discourage massive speculative gains and over rewarding of early adopters. Maturity phase. Once the system matures, the community members which have earned governance tokens by operating infrastructure, often at a loss during the build phase, can vote to raise the token minting schedule to normal levels, allowing wider participation and adoption during the maturity phase. Sustainability phase. After several years and once the project is well established, having reached network effect, the new token minting may taper to a much lower, long term, long tail sustainable rate.
Self funding through the DAO. The start up team relies on DAO proposals for funding while completing the initial build. Once the core is stable, the newly launched project can develop its own internal DAO over time, funded by a portion of its daily minted governance tokens. The community, not a founder, then decides how ongoing maintenance or development is financed. Section 23.2, liquidity and value through minor tokens, autonomous purchase. Anyone wanting to run infrastructure and thus earn governance tokens must acquire miner tokens.
This can be done by claiming an airdrop, receiving them from the DAO community, or buying from individuals who already have them. Staking an infrastructure. Once staked, miner tokens grant mining efficiency, I e, all other things being equal, an infrastructure operator mining with the same equipment, but staking more miner tokens than others, would earn a higher share of governance token rewards than their peers. This aligns incentives with participants who truly support the network with real infrastructure and have paid into the network by buying minor tokens.
Service infrastructure pools or SIPs. A related model can create an autonomous liquidity pool for these minor tokens. When new infrastructure operators buy minor tokens, the funds remain in the pool benefiting the community by creating self sustaining liquidity for the ecosystem in exchange for the minor tokens it issues. Section 23.3, starting a decentralized project. One, find a neutral DAO. Ideally, this DAO is widely distributed with no single controlling whale. Propose your project outlining how it benefits that community. If funded, the community avoids pre mines and having to do corporate deals.
Two, drop miner tokens. Purpose. Dropping the main governance token to everyone can lead to poor incentives. Minor tokens let only those who truly want to participate by running infrastructure or delegating acquire the real governance token. Low early new token minting. Keep governance token inflation minimal in the initial build phase. Early participants gain influence, but not an outsized supply. Ramp up later. Once the technology is proven, ramp up later. Once the technology is proven, the community can vote to increase token minting, letting new contributors earn token and preventing early insiders from dominating. Three, no founder pre mines.
Since the DAO funds your work, you do not need to give yourself or your team a large initial stake. All token allocations occur through mining, staking, or DAO proposals. This eliminates the usual team or founder tokens problem and fosters broader trust. Four, distribute and validate. Encourage many accounts to claim minor tokens. Let them stake minor tokens or run infrastructure nodes to acquire governance tokens. Monitor distribution. If a single account accumulates too much, initiate community driven remedies early on in development to maintain a wide token distribution and decentralization of the network.
Section 23.4, key advantages. Fair, low value start. By keeping token issuance under the radar at first, you avoid hype driven pump and dumps. Tokens slowly gain value organically as the network utility grows instead of purely via speculative investments. Aligned incentives. Those who run infrastructure or actively contribute earn governance power. There is no venture capital or early founder dump. Everyone starts from zero. Voluntary team building Without a massive pre mine for a small group, talented community members step up voluntarily. People who see long term potential contribute rather than working as employees of a central entity.
DAO based accountability. The community can stop funding if milestones are missed. It can monitor distribution, reject bad actors, and ensure the project remains neutral and widely owned. Post launch DAO, eventually, the new network forms its own internal DAO. The start up team can propose further work be funded by this new DAO, but only receive funding if governance stakeholders of the new system approve. This sustains development without centralizing ownership. Section 23.5. Example, the Speak Network on the Hive blockchain. Hive DAO funding.
The Hive community voted to fund Speak Network, which aims to provide decentralized off chain storage, videos, and large files, miner token drop. Hive users could claim speak minor tokens. Those who believed in the project participated and ran infrastructure, while uninterested users simply ignored the claim drop. Build phase. Newly minted governance tokens remained low at first while the project was built out, preventing an unfair early grab by early adopters. Community trust and decentralized ownership grew gradually. Long term vision.
Once stable and utility is demonstrated, Speak Network can create its own DAO. Ongoing funding decisions will again be subject to decentralized vote. Ongoing funding decisions will again be subject to decentralized votes, not founder mandates. This approach kept Speak from needing an ICO or venture round. No founder gained a massive token allocation. In turn, the community remains motivated, the distribution is healthier, and the final platform is more censorship resistant. Section 23.6, best practices and takeaways. Avoid ICOs and pre mines.
Receiving or directing tokens on day one will centralize the chain, making it susceptible to regulation, securities law, and corruption, as well as misaligning the incentives of the founders and the community. Find a neutral decentralized DAO. Dropping value to such communities means that one central stakeholder or entity will not control the governance of the system you're building. Drop miner tokens to the DAO community. Having to stake these tokens and provide a service in order to mine governance tokens means only those who are interested in the project and also provide genuine value to it will have influence over the governance of the new ecosystem being developed.
Monitor for genuine decentralization. Once the minor tokens are dropped and governance tokens are being distributed, the system can be monitored for strong distributions of tokens, nodes, and governance stakeholders. If this tends to centralization, community can take mitigating actions. Limiting influence of early adopters. Starting with a very small governance token inflation initially during the build phase, ramping up inflation once the system goes live and normal operation takes hold, and finally moving to a limited long tail minting schedule after several years of operation allows the system to adequately reward its value creators while keeping fees low or at zero into the long term. The digital community manifesto, digital rights, game theory, and governance of scalable blockchains for use in network states.
Chapter 24, future implications. How power is decentralized via tokenized self sovereign network states in the future. Introduction, The future implications of systems being built that broadly follow the guidelines outlined in this book or detailed below. Decentralized communities and network states that can be created by following the guidelines in this book secure digital rights for all and have profound implications for the future of humanity and its ability to secure its freedom in the digital and then with the adoption and implementation of network states, the real world.
Section 24.1, social media account not owned by Silicon Valley companies, digital self sovereignty, and guaranteed free speech. Accounts on the immutable base layer cannot be deleted or suspended. As long as the network runs, these accounts and their followers remain intact. This gives individuals true ownership over their identities and speech, reducing the risk of being deplatformed. People can express themselves more freely, knowing their accounts will not disappear due to centralized decisions. When the social accounts of community members exist on the base layer of such Web three technology as outlined in this book, Web two social media companies like Facebook, Instagram, Twitter, Google, and others no longer control the keys to your account.
They exist outside of the web two social platforms control. Social platforms become a layer two system that allows the layer one accounts to log in to them. In this way, the social media platforms cannot confiscate, manipulate, or delete your social account any longer. Your social account exists on a neutral layer one, which has its own economy and self funding mechanisms, which is controlled by the community, not private companies. The same is true for your followers list and the communities that you build. They all exist on layer one and therefore cannot be deleted by any individual entity or web two tech company.
Content is served from the layer one because the social platforms all tap into the same content database on layer one. This combined with the sovereignty of your social account now means that free speech and the right to express ideas within a community is already guaranteed for all people online who possess such Web three, delegated proof of stake social accounts without the influence of a company or intermediary. This also means that wherever you log in with your Web three social account, you take your followers list, account history, reputation, community, merits, and achievements with you to each Web three enabled platform you use.
Section 24.2, no longer possible to manipulate history. In addition to protecting speech, such networks preserve all interactions and historical events on chain. Attempts to erase or rewrite the record are virtually impossible once multiple nodes independently store the information. The key outcome of these decentralized system is that history stored on chain cannot be changed or erased. Once data is published, the record stays intact as long as the network operates. This makes it difficult for any authority to revise past events and ensures a permanent record of social, economic, and governance actions and data.
Once existing wikis and encyclopedias begin using such technology to document present affairs, history will be preserved, protected by the community's super majority elected consensus. Section 24.3, impossible to shut down. By design, these networks are highly resilient. When governance and infrastructure are distributed among many participants with no central authority, there is no single point of failure. Even if an outside party tries to take over or attack the network, the original community can fork away and move to a new chain, leaving the attacker alone on the old chain.
Ironically, attempted takeovers often enrich the original community as hostile actors must buy large amounts of tokens on the open market. Section 24.4, money attacks can strengthen communities. If a hostile entity purchases a significant share of tokens to dominate the network, They raise the token price in the process. Original holders can sell at a higher value or fork to create a new chain, leaving the attacker with worthless tokens on the old fork. In this way, an an economic attack can backfire, making the community wealthier, more united, and more motivated, while the attacker ends up holding depreciated assets.
Section 24.5, community holding abusive oligarchs to account. These protocols also allow communities a new, novel, and tested way to deal with abusive large holders who fail to reinvest in the community or who harm the network. If a single individual accumulates an excessive share and exploits users, The community can collectively decide to fork, granting the abusive oligarch zero balance on the new chain. This mechanism avoids traditional violent revolutions by enabling digital secession from exploitative stakeholders. Section 24.6, network state communities and governments.
Over time, many believe governments will begin recognizing these decentralized online network states. Some may cooperate, some will oppose, and others may launch competing versions. Either way, communities that run their own economies distribute governance rights and store data on censorship resistant change could become akin to self sovereign states, operating largely on voluntary participation rather than imposed authority. Section 24.7. Section 24.7, rebalancing of power. Currently, a handful of national governments hold tremendous monetary power through fiat issuance.
Soon, hundreds or even thousands of decentralized digital communities may issue their own currencies, manage their own governance, and command real economic influence. This diffusion of power could reshape global politics and economics. Section 24.8, feeless DeFi. In most existing DeFi, decentralized finance systems, each transaction incurs gas or network fees. On high traffic chains, these fees can be prohibitively expensive. By contrast, Felis models allow users to stake tokens based on them possessing resource credits instead of paying a gas token for every transaction.
This creates more inclusive finance where people can trade, lend, or provide liquidity without constant fees. Systems such as Honeycomb and VSC build on layer two systems on the Hive blockchain. For further information and definitions of these two systems, see Annex I, Glossary of Terms and Acronyms. Systems such as Honeycomb and VSC are already developing fee less DeFi and smart contract capabilities. Section 24.9, competition with traditional models. Fee based chains may struggle to serve a global user base for everyday transactions. As fee less alternatives mature, they could challenge established DeFi ecosystems by significantly reducing barriers to entry and increasing user adoption.
Conclusion. Emerging blockchain architectures, where communities store data, govern themselves, and issue tokens, signal major shifts in how people will organize in the future. They enable immutable records. History and accounts cannot be altered or deplatformed. Social account self sovereignty. Accounts are owned outside of Silicon Valley web two company control. Free speech. Text communication is stored publicly on a neutral consensus base layer one, which is almost impossible to shut down or modify without community super majority fork for anomalous situations.
Autonomous communities. Groups can run their own decentralized infrastructure and economies without being shut down or regulated by centralized entities. Resistance to takeovers. Hostile actors enrich original participants, but rarely succeed in capturing the network. Evolving global order. Network states may coexist with or challenge traditional governments and financial systems. In some cases, they will demonstrate how they can improve existing governmental systems and provide them with renewed legitimacy. Feel less finance.
Decentralized finance without high transaction cost can boost accessibility and everyday utility. In short, these technologies are poised to disrupt power structures, incentivize more equitable governance models, and grant greater self sovereignty to digitally native communities. The economic, political, and social implications are vast and still unfold. The digital community manifesto, digital rights game theory and governance of scalable blockchains for use in network states, chapter 25, examples of self funded communities and initiatives.
Already, so much is being done in the physical world. Section 25.1, increased security. Beyond the examples below, there are countless others, and such independently funded initiatives will only continue to grow. An important note is that where this technology continues to exist, people with basic services and infrastructure where their governments have failed due to corruption or incompetence, any attempt to shut down or oppose such will likely be met with resistance from local people who benefit from the services it provides.
The result is that neutral blockchains that carry out such work not only help local communities, but they increase the distribution of their own tokens by benevolent means, which indirectly strengthens the protocol and its security against hostile shutdown by governments. It is difficult to attack or shut down a system that is legitimately helping people who were not previously served by their existing systems. Section 25.2, Ghana borehole projects. In Ghana, local groups have successfully utilized decentralized autonomous organizations, DAOs, to fund the construction of boreholes, providing clean water to communities lacking direct access.
By submitting proposals and documenting their progress on chain, they have secured community support and funding. As of the date of publishing, the Ghana Water Borehole Project has installed 21 water wells for villages that previously did not have access to fresh water. Key points, transparent direct funding. Budgets and construction processes are documented on chain, ensuring transparency without a facilitating charity accepting donations and taking a cut of the funds to cover its own operational cost. Funds are sent directly from the blockchain to local trusted people who have built reputation on chain over time. Community trust.
Successful projects build trust, enabling further funding for subsequent initiatives. Real world impact. Access to clean water improves health and daily life for thousands. This approach bypasses traditional charitable institutions, which often have high administrative cost, by using on chain reputation and proof of work content to ensure donations reach intended projects. Section 25.3, Ghana health checks. Building on the success of the Ghana borehole initiative, the same groups in Ghana have organized dental and health checkups for remote villagers who do not have access to such services.
Securing DAO funding and maintaining transparency through on chain documentation, they provide free health care services to underserved communities. Key points, health care accessibility, offering free dental and health services to communities in need, reputation growth, consistent project delivery fosters community support, enables larger scale funding. Section 25.4, Venezuela, street acrobatics and infrastructure. In Venezuela, groups have obtained funding for equipment, shows, and community building efforts. They promote their activities through various channels, bringing attention to decentralized funding models.
Key points. Grassroots development. Small teams receive on chain funding to purchase merchandise and organize events. Local empowerment. Initiatives benefit individuals with limited economic opportunities. Section 25.5, Cuba and Mexico. Paying utility bills with content rewards. In points of Cuba and Mexico, individuals create on chain content to earn rewards, which they can convert into local currency or use to pay utility bills. This system is particularly impactful in regions with limited banking services or where remittances incur high fees and restrictions.
Key points, daily necessities. Users generate content such as blog posts or community updates to earn tokens, real bills paid. Services exist to convert these tokens directly into utility payments, reducing reliance on traditional banks. By circumventing conventional financial gatekeepers, these users demonstrate how decentralized currencies can provide tangible benefits in areas with restrictive or expensive financial systems. Section 25.6, why it matters, improve security. Providing grassroots, locally operated services and infrastructure where the government was not able to increases token distribution, social image, local support, and therefore security of the network.
Neutral decentralized funding. No single corporation controls the treasury. Funds are allocated through community approved proposals based on reputation and transparent reporting, direct accountability. All spending is documented through immutable on chain post, allowing donors and voters to see exactly how funds are utilized, reducing corruption and mismanagement, real world impact. From building water wells to supplying medication and paying essential bills, on chain funding models deliver concrete results in underserved regions, incentivize community participation.
Individuals who provide high quality work and transparent reporting enhance their own chain reputation, attracting more votes and social trust for future initiatives. Scalable model. These projects can inspire similar initiatives worldwide, with each region adapting decentralized tools to address local challenges. Conclusion. These examples illustrate how self funded, reputation based blockchain communities can achieve what traditional charities and governments often struggle with. Direct, efficient delivery of aid, physical infrastructure and services, whether providing clean water in Ghana, supporting community initiatives in Venezuela, or assisting families in Cuba and Mexico with utility payments.
On chain funding brings transparency and accountability. By eliminating intermediaries and enabling communities to vote directly on proposals, these projects build lasting trust and deliver impact. In a world where many lack basic infrastructure or face restrictive financial systems, decentralized initiatives offer a promising glimpse into the potential of blockchain governance and funding in the future.
Manifesto begins: purpose, ethos, and open-source origins
Why document Hive now? Lessons from defending decentralization
Scope and purpose: redefining decentralization beyond ICOs and VCs
Value-for-value model and contributor credits
Chapter 2 overview: network states and peaceful exit paths
Building digital self-sovereignty: governance, accounts, and validators
Designing self-sovereign economies and stablecoin integration
Path to recognition: digital societies cooperating with governments
Chapter 3: principles behind true decentralization
Freak events, Bitcoin, Steem-to-Hive, and hard-won neutrality
Petri-dish growth, value-for-value, and voluntary participation
Universal digital human rights and key design lessons
Chapter 4: what a social blockchain’s Layer 1 must do
Data availability, table of truth, and custom JSON
Accounts, resource credits, and immutable social graphs
On-chain governance, incentives for nodes, and transfers
Block production realities: top-20 witnesses and rotations
Optimizing validator count: pros, cons, and attack surfaces
Minimalist Layer 1: scaling, forking, and performance
Chapter 5: zero-fee structures and spam mitigation
Staked resources replace fees; app delegations and inclusion
Paying independent infrastructure; anonymity and neutrality
Why high fees centralize; benefits of low/feeless L1
Feeless design: circular economies and dApps as holders of last resort
Chapter 6: what Layer 2 should handle
L2 leverages L1 identities and cheap finality
Minimal on-chain dependencies and separate upgrade cycles
Smart contracts, heavy media, and computation off-chain
Tokens, wrapping, and feeless DeFi on Layer 2
User experience: speed, safety, and L1 protection
BLS multisigs, escrows, and L2 liquidity pools
Chapter 7: sustainable economies and fair distribution
ISHD (proof-of-brain): broadening who can earn
Spam, resource competition, and organic buy pressure
Social distribution as Trojan horse for real value
Multiple distribution paths and continuous minting
Earning your tokens: align incentives and reduce scams
Inflation discipline and red flags to avoid
No compromise on free speech and neutrality
Chapter 8: reputation—tangible and intangible
Why reputation matters in crises and collaboration
Scores vs. social capital; building durable trust
Reputation as escrow; delegation and defense
Forks and leadership: who communities follow
Chapter 9: why FOSS underpins security and resilience
Forkability, legal risk dispersion, and rapid fixes
Global innovation, crowd-audits, and antifragility
Chapter 10: bridge to decentralized governance
Why governance is unavoidable; data availability basics
Consensus forms: coin, infrastructure, and hybrid voting
Voting models and parameters for social nuance
Human elements: trust, conflict, and network states
Chapter 11: De-governance—parameters over power
Proof of Work as infrastructure voting: strengths and limits
Mitigations, custody risks, and miner centralization
Why PoW is infrastructure voting; practical constraints
Proof of Stake pitfalls and required guardrails
Danger of centralization: pools, VCs, and fat nodes
Delegated Proof of Stake: parameterized coin voting
DPoS advantages: reputation, speed, inclusivity
DPoS risks: apathy, slow capture, and remedies
Why parameters matter: locks, decay, distribution
No founders/ICOs/VCs: avoiding capture
All consensus is voting; proxies and accountability
Guarding against AI and Big Tech takeovers
Web 2.5 vs true Web3; achieving neutrality
Synthesis: PoW, PoS, DPoS, and resilient governance
Chapter 12: coin-voting parameters that secure L1
Long lockups, voting delays, and time as security
Stablecoin safety: haircut rules and delayed swaps
Inflation control, taxes/RCs, and utility backing
Staking rewards and dApps as holders of last resort
Anonymous vs known; desktop clients for censorship resistance
Chapter 13: defending DPoS communities under attack
51% of active voting stake: thresholds and OTC
Distribution as defense and immune responses
Forking as veto: you can’t buy a community
Layer zero: people, reputation, and witness trust
Reputation proof: on-chain history and NFTs
Infrastructure breadth and circular economies
Do good, gain resilience: benevolence as strategy
Inviting governments into transparent ecosystems
Chapter 14: balancing scalability and censorship resistance
Trilemma critique: split computation from data availability
Resource credits vs fee auctions; Lightning’s lesson
Security equals decentralization; parameterized voting
Stake distribution is non-negotiable
ZK rollups: scale and privacy without L1 bloat
Community forks as organic redistributors
Chapter 15: censorship and the morality of premines
How premines enable capture and hidden regulation
Moral case for earning; why validators won’t serve premines
Centralized coins and multi-layer censorship risks
Case studies: Steem/Hive and Ethereum compliance pressures
How premines harm users; paths beyond VCs and ICOs
Refuse premines: fair distribution as a necessity
Chapter 16: three pillars—text, feeless TX, on-chain stablecoin
Zero-fee staking model and global usability
Stablecoin on L1 as the final piece of sovereignty
Chapter 17: algorithmic L1 stablecoins and parameters
Debt limits, delayed conversions, and infinite liquidity
Example: HBD mechanics and resilience vs Terra
Toward a parallel dollar economy: feeless, permissionless
Chapter 18: off-chain availability for non-text data
Incentivized storage: proofs of access and L2 tokens
SPEAK network model: validators, hashing, and streaming
Keeping L1 lean; flexible costs and endless services
Chapter 19: Service Infrastructure Pools (SIP)
DEX fees to DAO: autonomous liquidity and defense
BLS multisigs and pooled collateral at L1
Self-sustaining liquidity replacing centralized exchanges
Chapter 20: open source over IP; stake the base token
Abundant code, network effects, and community brands
No one to sue: decentralization vs traditional IP
Chapter 21: immutable communities as network states
Self-sovereign operations and Layer-2 community tokens
Resource staking, liquidity pools, and social moderation
Gateways, validators, and stake-weighted tagging
Chapter 22: DAOs and neutral, milestone-based funding
Neutral vs VC DAOs; accountability and reputation
Hive DAO x SPEAK: claim-drops without ICOs
Why neutral DAO funding matters for true Web3
Chapter 23: a new startup funding playbook
Miner tokens, phased minting, and SIP-backed liquidity
How to launch: find a neutral DAO and avoid premines
Advantages: aligned incentives and post-launch DAO
Case example: SPEAK on Hive; best practices
Chapter 24: future implications—rights and resilience
Account sovereignty, preserved history, and fork power
Money attacks that strengthen communities
Feeless DeFi and competition with legacy models
Chapter 25: real-world impact—Ghana, Venezuela, Cuba, México
Direct aid without intermediaries: health and water
Grassroots culture, utilities, and why it hardens security
Closing: decentralized funding delivering tangible results
