Decentralized Governance Design: A Model-Based Approach

Over the past decade, we have seen a trend towards centralized digital platforms, which we define as platforms in which the middleman plays a controlling role and typically takes a significant amount of the profit. While the internet is decentralized, Big Tech companies have introduced centralized digital platforms as a means to extract value from society as a business model. Value extraction is a phenomenon that we observe in centralized structures in society. Centralized platforms may have the ambition to control the global market, and in fact want to have a monopoly in that market. Centralized platforms determine the terms & conditions of their platform, which may lead to undesired situations, such as in the case of a content-driven platform where censorship lies in wait. Decentralized Governance to prevent Value Extraction from Society. From a societal perspective, decentralization is a response to design digital ecosystems in which (1) value extraction is prevented, (2) transparency is achieved, (3) decision making in terms of defining, monitoring, and executing are governed decentralized. In a decentralized design approach there is more than one party in both the operating ecosystem (producing the actual economic value), as well as in governing the digital ecosystem. We position this as decentralized governance, in which the rules of monitoring, decision making and execution are decentralized over multiple parties. If decentralized governance should serve as an alternative for the centralized digital ecosystems, governance should not only be defined in terms of parties, rules, legislation, incentive, and decision-making procedures, but more importantly, should also be supported by technology, to cope with the fast-evolving internet-enabling centralized competitors. Blockchain technology might be a possible solution that may support decentralized governance design. If blockchain technology is used to design a decentralized digital ecosystems, equivalent technology should support the corresponding decentralized governance design. DECENT Software Modeling Toolkit to Design Decentralized Governance. We consider blockchain technology as a tool to support decentralized governance, we argue that with respect to decentralized governance, most blockchain technologies are only in their preliminary phase. To become really useful, decentralized digital ecosystems should support on-chain governance that is comprehensible and transparent by design. We consider governance as a topic of design: there is a clear need for software tooling and a modeling language that can contribute in designing decentralized digital ecosystems. Thus, a model- based design is an effective approach to manage and design these complex digital ecosystems. To provide scholars and system designers with an intuitive model-based approach of decentralized governance we propose the DECENT software modeling toolkit. This allows for design, analysis, and evaluation of governance models for digital ecosystems. DECENT has been developed and assessed with industry strength cases in the domain of Peer-to-Peer Energy Trading, Fractional Reserve Banking and Digital Euro.