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panek @panekkkk
, 8 tweets, 2 min read Read on Twitter
1/ Great post about on- vs off-chain governance!

One contention:

I’m not certain exit costs from blockchains are low.

To explain we need to define two types of exits:

1. Individual user exit
2. Group exit by forking
2/ In individual exit, costs are lower but not necessarily “low”.

There needs to be another option. And that option needs to hold enough of the fundamental properties that you value to exit.

And what about network effects?
3/ In a potential future where an SC protocol like #Ethereum hosts 1000s of apps, exiting may mean exiting the entire ecosystem.

Interoperability b/w chains may lower this cost and the cost is lower still for non-SC “currency only” chains, but the cost is not necessarily “low”.
4/ For group exit, while forking is an option...

- The technical skill to fork and maintain the fork is high
- Trust, security (eg hashrate or stake/market cap), and network effects including real-world integration points are not easily carried over
5/ For a SC chain, forking means convincing some or all of the ecosystem to join or provide support for your fork!

The cost of forking is extremely high as it risks fragmenting network effects.
6/ The above applies to base layer protocols only.

The costs of individual exit or forking of dapps is even lower and I suspect we’ll see plenty of hostile takeovers at that layer.

Finally, I agree that on-chain gov will probably prove inferior but it’s too early to say!
7/ To add context:

For individual exits, I’m referring to a scenario where an individual holds a reasonable proportion of their net worth in the underlying protocol—not a scenario where they are simply interacting with the app layer. Exit costs will be much lower there.
8/ Something as simple as taxes may prohibit exit beyond network effects etc.

But I could be totally wrong on this. In 10 years we may live in a world of seamless chain/asset interoperability where entry and exit is fluid (and not taxed!).
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