Blockchain governance is a complex system including rules, processes and operating mechanisms to ensure the operation, upgrade and sustainable development of a decentralized network. According to analysis from the team of experts at Tan Phat Digital, blockchain governance is different from traditional enterprise structures based on hierarchy; it distributes decision-making power to a diverse set of stakeholders, including developers, miners, node operators, token holders, and the user community. This system is not simply software source code but is also a deep integration of cultural norms, legal frameworks and economic drivers.
The need for governance arises from the dynamic nature of technological systems; No protocol is perfect from the start, and every system needs the ability to adapt to new security threats or market volatility. Without a solid governance structure, projects face the risk of hard forks, stagnation in development, or manipulation by powerful minorities.
Definition and Evolution of Blockchain Governance
In academic and practical contexts, blockchain governance is understood as the totality of power structures and decision-making processes that influence the development of the protocol. Its basic principles originate from the theory of "Governance of common resources", emphasizing the role of self-governing rules established and enforced by the community itself.
Main evolutionary stages:
Blockchain 1.0 (Bitcoin): Governance mainly takes place off-chain, informally. The enforcement mechanism is based on social consensus between developers and miners through software updates or Hard Forks.
Blockchain 2.0 (Ethereum): Marks the emergence of Decentralized Autonomous Organizations (DAOs) and token-based governance. Decisions are made through voting and enforced by smart contracts.
Blockchain 3.0 (Tezos, Cardano, Polkadot): Switch to official on-chain governance with self-amending capabilities. Direct voting mechanism allows automatic updates of source code without manual intervention.
Enterprise Blockchain (Hyperledger): Governance based on permissioned coalitions. Enforcement is based on strict access policies and Member Service Providers (MSPs).
Goal and Core Pillars of Governance
The ultimate goal is to maintain a balance between security, scalability, and decentralization. Tan Phat Digital identifies three foundational pillars to achieve this including:
Transparency and Immutability: Every proposal and vote is recorded on a public ledger. Immutability ensures decisions cannot be arbitrarily overridden once adopted.
Decentralization and Censorship Resistance: Disperse power to prevent single points of failure. Censorship resistance ensures that valid proposals are always considered regardless of opposition from influential minorities.
Security and Resilience:Protects the network from governance attacks, while being flexible enough to respond quickly to serious security incidents.
On-chain Governance
Governance on-chain is a fully digital model where decision-making processes are integrated directly into the protocol. Token holders use the functions available in the blockchain to vote on changes.
Features of the On-chain model:
Advantages:
Absolute transparency: Every vote is publicly recorded on the chain.
Automated execution: Minimizes the risk of humans not complying with the results thanks to the open contract
Mitigate deadlock: The process has a clear deadline, forcing a final decision.
Disadvantages:
Plutocracy risk: Control may fall into the hands of "whales" holding large amounts of tokens.
Rigidity: Difficult to handle emergency situations that require social flexibility or complex nuance.
Voter apathy: Participation rates are often low, unintentionally concentrating power in a small group.
Off-chain Governance
Off-chain governance is based on interactions between people and social structures that lie outside the source code. This is the traditional model of Bitcoin and Ethereum. Decisions are made through discussion on forums like Reddit, GitHub, or developer mailing lists.
EIP and BIP Process: Proposals like Bitcoin Improvement Proposals (BIP) or Ethereum Improvement Proposals (EIP) provide structure for innovation. After technical discussions reach consensus, developers integrate it into the source code. However, the real power still lies with miners and node operators—the people who decide whether to run new software or not.
See more: Trustless is What?
Governance Tools: The Role of Tokens and Smart Contracts
Governance Tokens (Governance Tokens) represent political power. Owning more tokens means having a greater say in changing system rules.
Governance Token functions:
Vote on technical parameters such as transaction fees or interest rates.
Treasury management, deciding how to spend reserve funds for project development.
Electing representative councils or appraisers (validators).
Smart contracts act as "neutral enforcers", automatically checking the number of votes and making source code changes as soon as conditions are satisfied.
Modern Voting Mechanisms
To solve the shortcomings of the "one token - one vote" model, many advanced mechanisms have been applied:
Quadratic Voting (Quadratic Voting): The cost per vote increases as a square function, helping to limit the power of whales and protect the will of the majority.
Liquid Democracy: Allows votes to be delegated to experts but can be revoked by the user at any time.
Conviction Based Voting Voting):Vote weight increases with the time commitment, giving priority to those with a long-term vision.
Reputation-Based Governance: Decision-making power is given based on actual contributions instead of solely on finances.
See more: What is Web1 – Web2 – Web3
Governance versus Management
This distinction is extremely important in Tan's professional-oriented Web3 operation Digital Broadcast:
Governance: Focus on long-term strategy, setting policies, standards and risks. Answer the "Why" and "What" questions. The subject is usually the token community or the board of directors.
Management: Focuses on short-term execution, operating processes, daily tasks and ensuring system performance. Answer the "How" and "When" questions. The subject is the developer or DevOps teams.
Case Analysis: The DAO Event (2016)
The DAO hack was an important milestone, creating two opposing management philosophies:
Immutability: Maintaining the "Code is Law" perspective. If the code allows withdrawals, it is not a hack. The result is the existence of Ethereum Classic (ETC).
Pragmatists: Believe that the community has the right to correct errors if it causes great harm to the majority. The result is the birth of the current Ethereum (ETH) network after a Hard Fork.
Progressive Decentralization Roadmap
An important trend that Tan Phat Digital focuses on is the gradual decentralization process consisting of 3 stages:
- Decentralization): Complete transfer of control and funds to DAO, minimizing legal risks and dependence on the founding team.
Blockchain Governance in Vietnam: The Legal Era 2026
Vietnam is making strong strides in terms of policy to become a regional blockchain center.
New legal framework: As of today On January 1, 2026, the Digital Technology Industry Law officially took effect, recognizing the legal status of digital assets for the first time. This allows blockchain projects in Vietnam to have a legal basis to officially carry out governance, taxation and custody of encrypted assets.
National Strategy to 2030: The Government has issued a blockchain development strategy with 5 key tasks, including building national infrastructure, training human resources and promoting blockchain applications in digital identification (DID), health and education. education.
VBSN Network: Vietnam has launched Vietnam Blockchain Service Network (VBSN), a multi-chain infrastructure that helps domestic businesses be autonomous in core technology and protect national digital sovereignty.
Answers to 10 Frequently Asked Questions (FAQs)
What is the core difference between Governance and Management?
Governance focuses on setting strategic direction, policies and long-term vision (answering the "What" and "Why" questions). In contrast, governance focuses on executing operational plans, processes, and tools to achieve those goals on a day-to-day basis (answering the "How" and "When" questions).1
Why is "Voter Apathy" dangerous for DAOs?
When voting participation is low (usually less than 10%), a small group of individuals or organizations hold the majority. tokens can easily manipulate important decisions. This loses decentralization and can turn the network into a plutocracy.
How does Quadratic Voting solve the whale problem?
In this mechanism, the cost to increase the number of votes increases with a square function ($Capital = Votes^2$). This means that to have 1 more vote, the cost will be much more expensive for those who hold a lot of money, thereby balancing the power for those who hold few tokens but have a large number.4
What does the "Code is Law" philosophy mean and how is it controversial?
This philosophy believes that everything written in the source code (smart contract) is the supreme law and cannot be changed. However, it is controversial when hacks occur due to source code errors (like The DAO incident); The pragmatist believes that the community should intervene to fix errors, while the conservative believes that intervention will destroy the immutability of the blockchain.5
What steps does Jesse Walden's "Progressive Decentralization" roadmap include?
This process includes 3 stages: (1) Finding the right Product (Product/Market Fit) under centralized leadership; (2) Attract community participation through contribution activities; and (3) Achieve Full Decentralization where the community owns and operates the entire network.
How does the EU MiCA regulation affect the issuance of governance tokens?
MiCA requires projects issuing tokens in the EU to have a clearly represented legal entity, publish a full whitepaper and comply with transparency standards. This means that anonymous token issuances or without a responsible organization will no longer be officially allowed to operate in this region.
What is Meta-governance?
This is the act of a DAO participating in the governance process of another DAO through holding that DAO's tokens. For example, DAO A can hold DAO B's tokens to vote on proposals that benefit DAO A's ecosystem.
What is the main goal of Vietnam National Blockchain Strategy to 2030?
The goal is to make Vietnam the leading country in the region in blockchain technology, form 20 reputable brands, establish at least 3 testing centers (sandboxes) in major cities and put at least one training facility in the top 10 in Asia.
How is Liquid Democracy different from traditional voting?
Liquid democracy allows token holders to have rights vote directly or delegate their voting rights to experts they trust. A special feature is that this authorization is very flexible, the representative can be revoked or changed at any time. 7
How do DAO projects encourage members to participate in voting more actively?
Projects often apply reward models (such as receiving additional tokens when participating in voting), Reputation-based voting mechanisms to honor real contributors, or use voting tools off-chain (like Snapshot) to save on gas costs for users.
Challenges and Future Trends
Despite rapid development, blockchain governance still faces problems such as voter apathy and the risk of vote bribery attacks. To overcome this, new trends are gradually emerging:
AI in Governance: Using AI to summarize proposals, analyze risks, and support automated voting agents helps reduce the load on humans.
ESG Standards: Networks are shifting to energy-efficient consensus mechanisms (like PoS) to comply with environmental commitments and attract investments from traditional financial institutions.
Digital identifier (DID): Combine DID with governance to convert to a "one person one vote" model, completely solving the problem of tycoon in DAOs.
Tan Phat Digital believes that, with the completion of legal frameworks such as the Digital Technology Industry Law of 2026 and the integration of AI technology, blockchain governance will become more transparent and effective, serving as the backbone for the future digital economy.
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