by Content Team

16 January 2024

Blockchain

Note

If you are new to the blockchain technology, taking our Introduction to Blockchain Technology self-paced course is highly recommended. Also, for a comprehensive coverage of blockchain development in Ethereum or mastering Solidity programming, taking our below self paced courses is highly recommended:

Recap

In our previous article ( Review of Ethereum Governance for Ethereum Blockchain Development), we discussed Ethereum governance for blockchain application development.
In this article, we learn about the effect of government regulations on Ethereum blockchain development.

Government regulations

Many observers of the cryptocurrency investment felt quite relieved after the United States Securities and Exchange Commission(SEC) issued a no-action letter on April 3, 2019, to confirm that the tokens that were issued during the startup’s Initial Coin Offerings(ICOs) are not securities. As a matter of fact, over 80% of ICOs are Ethereum backend tokens and run on the Ethereum blockchain network. Tightened government rules, policies, or regulations on ICO and cryptocurrency are always viewed as the headwind thought to pose huge challenges regarding the growth of Ethereum, blockchain, and cryptocurrency. It is always debatable. On one hand, it is an effective crowdfunding approach for startups so that they can raise funds for developing innovative products, services, and solutions. Any tight control may put a brake on the innovation and adoption in this space. On the other hand, many also welcome moderate regulations to these emerging investment instruments since it will raise the bar for ICO offering, and hence makes the Ethereum network and cryptocurrency market more robust and much healthier.

Note

Recap

In our previous article ( UI/UX and Design Thinking for Ethereum Blockchain Development), we discussed how to use UI/UX and design thinking best practices while building Ethereum blockchain applications.

In this article, we learn about Ethereum governance for blockchain application development.

Ethereum governance

Good governance is at the heart of any successful business or organization. A good governance framework defines the decision-making process upfront. It has a clear definition of roles and responsibilities in the decision process, defines what decision influences the common objectives, and specifies how the decision outcome is disseminated and tracked. Typically, in a well-run business entity, IT governance is one of the key components of enterprise governance, which governs IT decision-making and investment directions.

The governance process plays a key role in blockchain and Ethereum development. It has three aspects of the decision and governance process. One is like the IT governance process, that is, to have a process to define the future vision, goals, and objectives of the network. In particular, like Ethereum, it is still at the earlier stage of development and so it requires good governance and a decision process to define the future roadmap, as well as shepherd the community to the future. Another one is operations and economic governance, which governs the economic and monetary policies and decisions that are made on the Ethereum network. The third one is DApp and crypto-token governance, which are typically done by the owners themselves, but depends on the underlying platform governance from the other two.

In general, there are four types of governance that are applicable to the blockchain network and community, as shown in the following diagram:

On-chain governance refers to the decision process that leverages the network and code for voting or decision-making. Off-chain governance refers to a blockchain improvement or operations decision that’s made outside the network, usually manually. The decision can be made through a centralized decision authority or in a totally de-central approach.

Although it seems a bit nebulous, Ethereum employs a decentralized off-chain approach for Ethereum platform governance. It is quite effective, according to Vitalik. EIPs are the main avenue for anyone to propose the improvement proposal, and through community voting, they will be prioritized and get assigned to someone to implement. There is some undercurrent that may challenge the current governance model and quite a few contentions in certain Ethereum decisions, but largely, the community is aligned when it comes to major development decisions, especially when it comes to scaling solutions.

In our next article ( Review of Government Regulations for Ethereum Blockchain Development), we discuss the effect of government regulations on Ethereum blockchain development.

This article is written in collaboration with Brian Wu who is a leading author of “Learn Ethereum: Build your own decentralized applications with Ethereum and smart contracts” book. He has written 7 books on blockchain development.

Resources

Free Webinars on Blockchain

Here is the list of our free webinars that are highly recommended:

Free Courses

Here is the list of our 10 free self-paced courses that are highly recommended:

Self-Paced Blockchain Courses

If you like to learn more about Hyperledger Fabric, Hyperledger Sawtooth, Ethereum or Corda, taking the following self-paced classes is highly recommended:

Live Blockchain Courses

If you want to master Hyperledger Fabric, Ethereum or Corda, taking the following live classes is highly recommended:

Articles and Tutorials on Blockchain Technology

If you like to learn more about blockchain technology and how it works, reading the following articles is highly recommended:

Articles and Tutorials on Ethereum and Solidity

If you like to learn more about blockchain development in Ethereum with Solidity, reading the following articles and tutorials is highly recommended:

Articles and Tutorials on Hyperledger Family

If you like to learn more about blockchain development with Hyperledger, reading the following articles and tutorials is highly recommended:

Articles and Tutorials on R3 Corda

If you like to learn more about blockchain development on Corda , reading the following articles and tutorials is highly recommended:

Introduction to R3 Corda Blockchain Development

Articles and Tutorials on Other Blockchain Platforms

If you like to learn more about blockchain development in other platforms, reading the following articles and tutorials is highly recommended:

Introduction to Quorum Blockchain Development

Stablecoins, which we discussed briefly before, may provide a much different perspective than ICOs for government regulators since they design the cryptocurrency governance and regulatory framework. Nothing extraordinary has come out of this yet. However, one thing is probably true, no matter which way the wind blows: solutions in compliance with existing KYC-AML rules, policies, and regulations are always worth investing in.