I am creating a series of Why Hive, or in my head, Why Hive Wins, and one of the biggest questions I get asked is about governance.
Suppose your goal is to simultaneously have censorship resistance, high performance, and scalability. In that case, you must first have enough decentralization to create censorship resistance, and two, you must reduce your validator count keeping enough to achieve satisfactory protection.
It's important to understand that my talks aim to achieve censorship resistance, not sum unspecified level of decentralization. Ones goal should be to achieve an adequate enough amount of censosrship resistance, such that the base layer is protected sufficiently from attacks.
In practice, PoS networks end up with around 4-5 staking pools that act as the majority consensus validators onchain. The majority consensus means the staking pools will decide what goes onchain and control the network. So if you have 3 majority pools + 10 thousand solo validators on PoS, the 3 majority pools will override the 10 thousand solo validators making their votes virtually obsolete; furthermore, the 3 main pools have the power to slash validator balances if the solo validators tried to rebel.
Hive has a parametered validator count of a minimum of 20 validators, all with equal power.
20 / 5 = 4 x as many validators in practice as compared to PoS networks.
You can get away as a few as a handful of delegated pools to achieve censorship resistance. However, if you are looking for overkill, you would want to go with the extra allotted protection of Hive, offering as much as 4 times more while not sacrificing performance and scalability.
Delegation is most efficient and preferred by the free market, and you can get away with delegating your actual coin, like on PoS networks, and you can still achieve censorship resistance; I am not advocating it, but theoretically, it's possible that you could be protected with the whole coin delegation and as little as 3-4 staking pools, as long as no one entity has control of the entire network.
Again, I don't advocate PoS as a base layer because it is not a well-balanced system in that regard; it's more suitable as a layer 2. You need rotating backups if a validator goes down, onchain voting for seamless vote transfer, and paramtered validator count to ensure adequate censorship resistance.
Less is more when it comes to validator count... to a point; there is a sweet spot. You do not want to have so few validators that the system can easily be taken over, but you do not want so many validators that the network is slow and not as efficient as possible. There is a balance.
The main issue with PoS is that it has the worst of both worlds, you end up with just a few majority validators, and the networks are still less performant than Hive. Hive achieves greater performance with more validators in practice.
As long as you find the sweet spot for validator count, stick to that range as a hard-coded parameter inside the base layer code, meaning you need at least x amount of validators before the network is functional, then you can run immutably. Without a hardcoded parameter, you are essentially the whim of the wind and ultimately end in the hands of a few of pools that harness majority voting rights.
PoS vs. HiveGov (Flavor of DPoS) - Base Layer Governance. I do believe a new name for our governance is needed, DPoS is too broad, and most do it wrong, resulting in a bad perception of what DPoS is. Without the correct parameters, such that Hive has, you will lead DPoS into centralization. Those still debating coin voting vs. PoW have completely missed the boat; let's not waste more time on an irrelevant conversation. TLDR, PoW on BTC will serve its use case; coin voting will dominate the foundation of censorship resistance for dapps to be built. You are not building apps on BTC layer 1, and the lightning network is built to be centralized long-term due to its lack of decentralized incentives. Ok, done with that talk, let's move to the juice.
Let me be clear, I think both forms of coin voting, PoS and HiveGov, are relevant and useful for certain areas. I think PoS makes an excellent layer 2+ - I think HiveGov makes an excellent layer 1, with diminishing usefulness as L2s.
To make things easier, and to paint the picture in another way, we will refer to hive witnesse as staking pools (I know factually they are not, humor me) - they get tens of thousands of votes delegated to them, and when they get enough votes, they can become a validator. That is essentially how PoS works; sure, the small miner gets an acorn every once in a while, but I see that more as a piece of fat on an already cooked steak; it's there, but it's not needed and many times gets in the way. It's best to cut out the fat, to make the network as fast as possible.
PoS ends up with a handful, at best, staking pools that dominate the network, as we all know. Mind you, a staking pool on PoS is simply thousands of people delegating their actual coin to a pool in order to receive a return because they could not do it solo either because there are not enough funds, or expertise, on PoS; when you are wrong you're slashed, its a big deal.
With HiveGov, I can vote, for free, with any amount of HIVE., I simply power up and vote for the up to 30 validators I want, and that's it.
Suppose we get rid of the idea of an individual validator, as that is not going to happen in practice, at least not with any of the parameters we have seen thus far. What we see is a delegation of resources to an upper crusty echelon of entities that run the chain. In Hive is based on your reputation; on PoS, it's based on the mining pool's ability to give ROI, the pools on PoS that payout the highest will ultimately end up at the top. Since there is no safeguard parameter for a minimum threshold of pools needed before the chain can function, you end up with a handful of pools, ultimately.
Comparing Hives validators, they are elected based on stake-weighted voting based on a myriad of factors, most importantly being their reputation. Hive has 20 top validators with 100's backups that are rotated in randomly. Being rotated in randomly keeps backups honest and ready for action. If a top validator on Hive went down, they would instantly be replaced with a backup validator. On PoS networks, if a top staking pool goes down, there is no safe fail backup that auto pickups the slack. Meaning staking pools are much more vulnerable targets without the ability to play whack a mole with their attackers. Too much trust is reliant on top staking pools without an adequate plan B if they were overtaken.
As we see, the networks prefer pooling resources, so instead of building a slower, less inefficient network that ultimately results in staking pools, why not just build the system to be efficient, parametrize fewer validators, and add onchain voting for those validators.
There have been efforts to create "decentralized" staking pools, but without onchain voting and the parameterized minimum needed validator count, you're competing vs. centralized entities, which can offer better liquidity more efficiently, which leaves the decentralized pool high and dry.
I am not saying decentralized staking pools cannot dominate; however, as stated before, without a hardcoded count for the validators on the base layer, even if decentralized pools work, there would be a few at best. Liquidity begets liquidity, and the third largest pool cannot offer better deals than the biggest pool, or they would be the biggest pool. Only one can offer the "best deal," and when that gets crowded, you get a few alternatives at best.
HiveGov has a built-in social distribution of the base layer governance coin, HIVE. This allows for a natural environment for reputation-based distribution to thrive, also allowing for stakehodlers to more easily decipher who they want to vote for. In the face of an attack on the new chain, your reputation transfers over. PoS, reputation is not needed to validate blocks; an "evil" staking pool could still garner enough support to dominate the network if they offered good enough incentives.
To avoid vote buying on HiveGov, we need to look at a few key aspects. The first line of defense is the long lock-up to vote in governance. That means the person buying votes needs to care about the underlying coin's value, or they would be harming themselves finically.
Secondly, top validators on Hive earn from inflation and are voted in by the community, if the community and or other validators saw such an action, the honest voters would vote them out. Voters seen voting for someone trying to buy votes would lose their author rewards, stakeholders would avoid upvoting their content, and furthermore, go out of their way to downvote such bad actors.
Vote buying is not possible to do with larger stakeholders, as the witness would not make enough to justify a larger stakeholder to vote in a bad validator because the stakeholder has much more to lose with the locked up stake than to earn crumbs from a crumby shady validator. So that means the vote buying would be targeted at thousands of smaller accounts; most smaller accounts prefer author rewards and their reputation as a possed to earning pennies from a shady validator. The built-in social distribution of the coin fights back against vote buying via incentivizing the smaller holders to act good in order to earn more from the system than can be ill-gotten off-chain.
In the next section I will discuss why PoS networks are more preferred for layer 2s, and the advantages they have over HiveGov in that regard.
