Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesEarnWeb3SquareMore
Trade
Spot
Buy and sell crypto with ease
Margin
Amplify your capital and maximize fund efficiency
Onchain
Going Onchain, without going Onchain!
Convert & block trade
Convert crypto with one click and zero fees
Explore
Launchhub
Gain the edge early and start winning
Copy
Copy elite trader with one click
Bots
Simple, fast, and reliable AI trading bot
Trade
USDT-M Futures
Futures settled in USDT
USDC-M Futures
Futures settled in USDC
Coin-M Futures
Futures settled in cryptocurrencies
Explore
Futures guide
A beginner-to-advanced journey in futures trading
Futures promotions
Generous rewards await
Overview
A variety of products to grow your assets
Simple Earn
Deposit and withdraw anytime to earn flexible returns with zero risk
On-chain Earn
Earn profits daily without risking principal
Structured Earn
Robust financial innovation to navigate market swings
VIP and Wealth Management
Premium services for smart wealth management
Loans
Flexible borrowing with high fund security
Buterin Explores Plutocracy Risks in Token-Based Governance

Buterin Explores Plutocracy Risks in Token-Based Governance

CoineditionCoinedition2024/09/18 16:00
By:Abdulkarim Abdulwahab
  • Vitalik Buterin discusses the complexities of coordination in decentralized systems.
  • He emphasizes the need for hybrid governance models that blend economics and politics.
  • Buterin regrets not communicating the importance of “unbalanced coordination” more clearly.

Ethereum co-founder Vitalik Buterin admitted not effectively communicating the complexities of “unbalanced coordination” in decentralized systems. Looking back at two blog posts he wrote in 2020 and 2021, he explores the connection between coordination and crypto-economics in blockchain governance.

Coordination in Crypto-economics

In his blog posts, Buterin highlighted the difficulties of coordination within decentralized systems. He stressed that while coordination is crucial for collective decision-making, not all forms are positive. Unbalanced coordination—where small groups collaborate at the expense of larger ones—can damage decentralized ecosystems.

Also, Buterin’s posts examined how crypto-economics, the economic principles underpinning blockchain networks, often struggles with governance issues. Specifically, he pointed out that systems dominated by token holders, like decentralized autonomous organizations (DAOs), can suffer from plutocracy, where a small group with more tokens holds outsized power.

The Pitfalls of Plutocracy

In decentralized systems, where governance is often tied to token ownership, those with more tokens can wield disproportionate control over decisions. This creates a risk that governance becomes skewed toward the interests of a small, wealthy group rather than reflecting the needs of the entire community.

Buterin explained that such systems can lead to suboptimal governance outcomes, as decisions are made based on financial incentives rather than the long-term well-being of the system. The concentration of power in the hands of a few also raises the risk of collusion, where groups work together to manipulate outcomes for their own gain.

The Need for Hybrid Governance Models

To address the limits of cryptoeconomics, Buterin, in the blog posts, advocated for hybrid governance models that combine economic incentives with political decision-making structures. 

He argued that relying solely on token-based voting isn’t enough to prevent harmful coordination and collusion. Instead, decentralized systems should incorporate governance mechanisms to safeguard against these risks.

Buterin suggested a governance model that includes a council made up of representatives from various stakeholder groups. This council helps ensure that decisions are made in the best interest of the entire ecosystem. This approach balances economic incentives with political governance, reducing the risk of plutocracy and improving the overall stability of the system.

The Future of Blockchain Governance

Looking ahead, Buterin’s reflections suggest that the future of blockchain governance will involve a mix of crypto-economic principles and traditional political structures. While crypto-economics has enabled new forms of decentralized coordination, it also has limitations that can be addressed through hybrid governance models.

Buterin maintains that crypto-economic systems need to adapt to prevent plutocracy, promote broad participation, and protect against collusion.

Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

PoolX: Earn new token airdrops
Lock your assets and earn 10%+ APR
Lock now!

You may also like

New spot margin trading pair — HOLO/USDT!

Bitget Announcement2025/09/12 07:46

FUN drops by 32.34% within 24 hours as it faces a steep short-term downturn

- FUN plunged 32.34% in 24 hours to $0.008938, marking a 541.8% monthly loss amid prolonged bearish trends. - Technical breakdowns, elevated selling pressure, and forced liquidations highlight deteriorating market sentiment and risk-off behavior. - Analysts identify key support below $0.0080 as critical, with bearish momentum confirmed by RSI (<30) and MACD indicators. - A trend-following backtest strategy proposes short positions based on technical signals to capitalize on extended downward trajectories.

Bitget-RWA2025/09/12 06:14
FUN drops by 32.34% within 24 hours as it faces a steep short-term downturn

OPEN has dropped by 189.51% within 24 hours during a significant market pullback

- OPEN's price plummeted 189.51% in 24 hours to $0.8907, marking its largest intraday decline in history. - The token fell 3793.63% over 7 days, matching identical monthly and yearly declines, signaling severe bearish momentum. - Technical analysts cite broken support levels and lack of bullish catalysts as key drivers of the sustained sell-off. - Absence of stabilizing volume or reversal patterns leaves the market vulnerable to further downward pressure.

Bitget-RWA2025/09/12 06:14
OPEN has dropped by 189.51% within 24 hours during a significant market pullback

New spot margin trading pair — LINEA/USDT!

Bitget Announcement2025/09/11 10:04