Securing Digital Rights for Communities (Game Theory and Governance of Scalable Blockchains for Use in Digital Network States)

Chapter 4 – What a Social Blockchain’s Layer 1 Should Do

The Layer 1 should be as simple and as boring as it possibly can be. That’s what scales

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Introduction

Layer 1, also known as the Base Layer is the basis for immutability. Here is where decentralization takes place due to the node system. It also includes block time, the consensus mechanism deployed, programming languages, and rules pertaining to the network's core operations.

Layer 1 is the foundational tier of a censorship-resistant, community-governed blockchain. It underpins all core functions such as account creation, historical data storage, governance voting, and transactions that must remain immutable and easily retrievable by anyone. The guiding principle is to keep Layer 1 as simple and lightweight as possible, so it can:

Be run by many independent operators without prohibitive hardware.
Scale to accommodate network growth without becoming unmanageably large.
Remain easily fork-able so a community can remove or “zero out” abusive oligarchs or malicious stakeholders by super majority consensus, however that consensus may be reached for each blockchain.

This approach contrasts with many other chains that overburden their base layers, often leading to high fees, low throughput, or compromised decentralisation. Below is an outline of which features belong on Layer 1 and why.

4.1. Data Availability (Text-Based Data Only)

Long-form text storage on the base Layer 1s a powerful tool. By limiting Layer 1 to text data (instead of storing large files like videos or images, or conducting compute and DeFi operations), nodes remain:

lightweight: Operators can more easily store and playback an ever-growing blockchain if it is mostly text-based.
Censorship-Resistant: A truly decentralised, text-based layer where the node operators and token holders are spread across multiple countries ensures people cannot be silenced by corporate or state actors.

When each node stores the same text ledger, no single entity can remove or change that record. This guarantees data availability for governance, on-chain reputations, and community discussions. Higher-bandwidth content and operations such as large media files and computation should live off-chain or on a Layer 2 specifically designed for larger data.

4.2. State Recall and Historical Record

A secure Layer 1 must provide historical state recall a full record of the chain’s progression from inception to the present. Due to the fact that all text-based data remains accessible on-chain on such a blockchain, anyone can:

Verify past actions (posts, votes, transfers, etc.).
Reconstruct an account’s exact history, ensuring transparency.
Detect attempts to rewrite or delete historical events.

In effect, this “table of truth” is essential for accountability. If the chain experiences a hostile takeover, honest community members can use the historical record to fork away and preserve legitimate balances, reputations, and activities.

4.3. Table of Truth and Custom JSON

A table of truth is the immutable text ledger storing transactions and events. Sometimes, communities want to store structured data for example, metadata about a post or a custom vote type. This is enabled by:

Custom JSON Operations on Layer 1: A feature allowing non-standard data fields to be written on-chain.
Indexing Layer: A mechanism (often run by specialized nodes) that filters or organizes these custom JSON entries for easy query.

Although the base blockchain only sees text fields, custom JSON can represent many actions or data points (game moves, specialized votes, community tags, etc.) if those actions are still validated by the chain’s consensus.

If this is followed to its natural conclusion, the result is that the chain can incentivise real world actions that benefit the community. This enables the chain and community to distribute value to valuable actors in the community that are doing real world actions. It becomes a Value for Value exchange that, if design correctly, can become accessible for the vast majority of people to involve themselves with, making earning crypto from a neutral layer accessible without the user having to know how to do technical activities such as crypto currency mining.

Ultimately, it makes newly created cryptocurrency accessible to all people, meaning everyone has the right to earn, regardless of their technical competency.

4.4. Accounts and Resource Management

Accounts are a core function of Layer 1. In a truly decentralised system:

No user should be forced to rely on a centralised provider to create an account.
Users can create public keys, store them locally, and sign transactions independently.

Additionally, an on-chain resource management layer (e.g., “resource credits”) can replace transaction fees. By staking tokens, users gain the right to make a certain number of daily transactions for free rather than paying each time. This approach:

Keeps transactions fee-less at the user level.
Deters spam by requiring staked resources.
Helps scale usage without imposing gas or high-fee structures.

4.5. On-Chain Actions: Posting Content and Commenting

Social content like text posts, comments, or community updates can be fully on-chain if the system is optimized for text. This:

Preserves speech that cannot be retroactively edited or removed by a central party.
Empowers front-end applications to display or filter content but not to delete it at the ledger level.
Supports immutable communities where membership, discussions, and follower relationships are historically documented.

While full text records may sound large, modern compression and incremental storage can keep it manageable, especially when storing only text and not high-bandwidth media.

4.6. Communities and Followers list

Layer 1 can also track:

Which accounts immutably “follow” which others.
Community memberships or roles.

When these relationships live on-chain, centralised web2 style front ends cannot arbitrarily ban or eliminate entire groups. A user’s social graph (followers/following) is secure, and competing interfaces can tap into the same data. This is a huge leap forward from centralised social networks that can wipe your entire audience or content with a policy change.

The application of this technology means that no central party has the ability to delete or regulate online communities any longer.

Securing Digital Rights for Communities (Game Theory and Governance of Scalable Blockchains for Use in Digital Network States)

4.7. Governance Voting (Details in Later Chapters)

To remain secure, a decentralised network needs a mechanism for the community to vote on:

Infrastructure providers (elected witnesses or validators).
Protocol-level changes (hard forks, parameter updates, token minting schedules and moderating inflation rates).
Resource distributions (proposal funding, development grants, etc.).

All governance actions, voting, proposals and rank ordering should be recorded in the base chain’s text ledger. Governance on Layer 1 ensures the entire community can see and react to proposals, fosters accountability, and allows forks if a sizeable super-majority disagrees with major stakeholders.

4.8. Infrastructure Incentivisation (Micro-Payments for Node Operators)

Incentivizing core infrastructure (like witness/validator/block producer nodes) is critical. By awarding block rewards or newly created tokens to elected operators, you avoid requiring them to form centralised businesses or rely on external VC funding. This:

Keeps infrastructure neutral by letting the community elect whom they trust.
Provides a steady reward for performing consensus, storing data, and serving it to the network.
Minimizes external pressure or constraints that often lead to censorship or central control.
Allows anonymous infrastructure operators to compete against large corporate entities that intend to outcompete them by cutting costs and fees, or running at a loss, knowing that they can put the individual, independent operator out of business over time. Other chains such as Bitcoin only incentivise their miners, but they do not incentivise their other critical infrastructure such as lightning Nodes or NOSTR relays from the Layer 1, neutrally created new currency. This leaves them susceptible to such a long term hostile attack from large corporate entities that comply to anti-freedom government regulations, prioritising those above the values of the community.

4.9. Transactions / Transfers

Finally, token transactions and transfers are fundamental on Layer 1. Users should be able to move assets from one account to another with:

Instant finality or short confirmation times.
Fee-less or low-friction operations if they have sufficient staked resources.
Full immutability, forming the basis of the economy.
All top witnesses (a small group of top community elected miners that run the community’s preferred code) in the consensus should process all transactions, lest they be unelected by the community. This guarantees the rights of all users to transact.
This is more efficient than small block Proof of Work systems, where all miners have to process all transactions. This makes such layers slow and not suitable for low fee, large scale micro transactions.

4.10. Balancing Block Production with Efficiency in Voting and Operation

It is in the community’s best interest to elect witnesses that are among the top 20 or so most skilled operators of the code while also best reflecting the social ideology of that community. 20 is a minimum recommended number, each having equal weight in the governance decisions on the chain, regardless of their stake size. This means that witnesses are not only technically skilled, but they have to have a deep understanding of the social implications of the code they run, from setting interest rates, voting parameters, new token minting schedules and reviewing code to make sure upgrades meet community requirements and are secure.
The top 20 witnesses are also the primary Block Producers (BP’s) on the chain: they are responsible for the decision of which code to run and that code decides which transactions are recorded on the chain. These are the transactions and data which fill blocks of the blockchain and form the immutable, unchangeable history which the blockchain records. This is the heart of the blockchain: the block production process. Providing there is no centralising party, no ICO or pre-mine, there is a fair token distribution mechanism and no company behind the blockchain, this process is what decentralises the storage of data on a PoS or DPoS chain and makes it un-censorable or tamper-proof. As a result the community members can operate permissionlessly on the chain with certain guaranteed digital rights, such as property rights, free speech rights, voting rights and others.
The incentives paid from the chain to the BP’s must be high enough that they are incentivised to remain as honest actors and not susceptible to corruption.
The intuitive approach is that the more BP’s a chain has the more decentralised it is and the more censorship resistant it is. However, things are not always as simple as this and counter intuitive approaches often apply.

4.10.1 Block Producer Rotation and Back-Ups:

Often chains choose to have a top elected group of the best BP’s as their witnesses and then have one or several rotating back up BP’s. Having back up BP’s means that:
- there is a chance for more entities to earn and so more people run nodes
- if an incumbent BP becomes malignant, they can always be elected out and a back up is ready to step in immediately
- it keeps the other BP’s on their toes, as those in the rotation positions are hungry to prove themselves and move up the rankings.
- collaboration between the incumbents is more risky for those incumbents. A small group of elected BP’s can be more easily held to account and replaced, if the community so wishes, by always on line back up BP’s.
Some chains choose only to have one back up BP, resulting in a top 20+1, where the back up is rotated in to the block production schedule at random, other chains have many hundreds or even thousands as future advancements in the technology are developed and tested.

4.10.2 Pros of Having Many Block Producers:

More difficult to get a super majority to agree to censor transactions or speech
More competition for top spots, keeping incumbents on their toes
More difficult for a government to force their will on a community to censor transactions

4.10.3 Cons of having many block producers:

More difficult to coordinate for forks or upgrades to technology
More difficult to tell if all BP’s are all individuals or just one entity running many nodes
Where ICO’s or companies are involved in the inception stage of a project, they naturally gain a centralising influence over the BP pool making the chain seem more decentralised than it actually is
Each BP gets paid less, as there is less money to go around per BP and so the chances of dishonest BP’s increases since they have more to gain by coordinating with other BP’s to corrupt the chain and steal funds. Alternatively, the more BP’s there are, the more of a chain’s inflation must be dedicated to them in order to pay them enough to remain honest actors
Can reduce efficiency, speed and scalability of a blockchain.

4.10.4 Optimising for Reality:

The reality is that each community must strike a balance between too large an amount of BP’s and too small a number. On social or community driven chains using DPoS or similar technology, the BP’s build their on-chain reputations over time. This means that there is a theoretical optimum number of top class BP’s with which a community can operate in an adequately decentralised, censorship resistant way which is resistant to Sybil attack, while not being so small that it can be easily co-opted by government, other types of attack or become easily corrupted.
Over time, as the market capitalisation of a chain grows, it can afford to incentivise more BP’s and should look to incorporate modern technologies to allow for an increase of BP numbers while not sacrificing the scalability and speed of the chain.
Based on the experience of the fork away from Steem that created the Hive Blockchain, it seems that a top 20 is an adequate number of BP’s. It allows coordination when it makes sense to block a transaction, but makes it difficult enough to get consensus that such measures won’t be taken lightly. In cases where there is one entity that can easily elect all of the top 20, this of course does not work, so attention must be paid to this issue on a chain by chain basis. Communities with lopsided token distributions are often better having a much larger BP pool, however, in the cases where a small group of entities control the majority of the tokens they are often known to run the majority of the BP’s anyway. This means that just because a chain has a large number of BP’s it does not necessarily mean it can’t be pressured into unfairly blocking transactions or other unfair actions, that centralise the chain in critical moments when decentralisation and censorship resistance is needed most. The issue often comes about as a result of whether or not the chain had an ICO or Pre-mine. If there was a Pre-mine, then a lopsided distribution is normally present and so even chains with large numbers of BP’s are often easily pushed into making decisions that effectively centralise the chain, particularly in times of need, such as in hacks, takeovers or when subject to government pressure or regulation.
It is unclear as to how much more secure a chain is based on an increased number of BP’s. After all a government can just as easily pursue a top 200 as a top 20 to achieve the censorship it wants. It seems that only once the number of BP’s increase by an order of magnitude does increasing the number of BP’s start to have a significant affect. This however, increases the cost to the chain of incentivising these BP’s to remain honest actors. Communities should design their systems to suit their own situation based on these factors.
A serious defence against an organised attack would be where many thousands of BP nodes could easily be spun up by community members at any time for almost no cost, in a similar way to how torrent sites evade shut down but re spawning a new version of the site shortly after the original site was legislated out of existence.

4.10 Why Keep Layer 1 Minimalist?

Scaling: The more complicated the base chain, the more likely it becomes bloated, expensive to run, and difficult to fork.
Forking: A simpler, smaller codebase is easier for the community to adopt in a fork, safeguarding against hostile actors or “rich whales” who attempt takeovers.
Performance: Text-based data alone can be compressed and synchronized efficiently, making it accessible for diverse operators in many regions without requiring specialized hardware.

Everything heavier like complex smart contracts, large file storage, or advanced application logic should move to a Layer 2 or specialized network that references the trusted state from Layer 1. This architecture avoids turning the core ledger into a single point of failure or bottleneck.

Conclusion and Implications

A well-designed Layer 1 is the bedrock of any censorship-resistant, community-driven blockchain. By keeping it limited to text-based data availability, historical state recall, basic governance mechanics, and secure transactions, you ensure:

High decentralisation and easy operation.
Human-readable transparency for all critical updates, votes, and account histories.
Flexibility to fork when necessary, preserving community rights.
Optimum number of Block Producers and block production alogrithm for the network.

Adhering to these Layer 1 principles lays the foundation for truly self-sovereign digital communities and Network States. Layers above can then innovate with large-scale data, complex smart contracts, or specialized applications without jeopardizing the core security that lives on this minimal, robust base chain.