Polkadot
DOT
, the interoperable blockchain ecosystem conceived by Ethereum
ETH
co-founder Gavin Wood, launched in 2020 to great fanfare. Over the subsequent bull market, DOT became one of the best-performing alt coins, achieving a much-coveted slot in the top ten. However, over the last year or so, DOT has struggled to maintain the same performance as rival alts such as ETH.

Late last year, the project made extensive changes to its organization as part of its ongoing commitment to furthering decentralization — a move that sees more funds directed towards projects in the Polkadot ecosystem.

Here, we discuss what’s behind the changes and how they are really playing out among the grassroots members of the Polkadot community.

Here Comes The Polkassembly

Like many decentralized blockchain projects, Polkadot has several centralized entities that play a significant role in its development and stewardship. Among these is Parity Technologies, the Berlin-based blockchain development company also founded by Gavin Wood. Since Polkadot’s launch, Parity has not only developed the Polkadot code base and architecture, but has also taken a leading role in the project’s ecosystem development and marketing.

However, late last year, the project took the huge decision to further its commitment to decentralization by delegating responsibility for some key non-engineering functions to its community, using Polkadot’s established decentralized governance system, Polkassembly.

Under Polkassembly rules, token holders decide how and where funds are allocated using a system called OpenGov, where DOT ownership equals voting power, in the same way as shareholder voting rights are allocated under company equity rules. The decision was inevitably a difficult one for the staff at Parity, many of whom were unfortunately laid off as a result.

But as Polkadot activist Giotto De Filippi explained to me, the dramatic decision resulted in rapid payoffs for the broader ecosystem: “Parity is absolutely amazing when it comes to its core function — engineering — but there was an opportunity to improve in many other areas. Decentralizing the functions outside of engineering to the community and allowing OpenGov to take charge has been an incredibly powerful catalyst for change and success. The community took charge in a permissionless way, and that change happened very quickly. We went from basically zero marketing a few months ago to having just hired some of the best influencers — all in a completely transparent and decentralized way — thanks to OpenGov.”

Not Just A Quick Fix

Ecosystem participants also believe that there are longer-term benefits to be reaped from the change. William Chen, COO at Talisman wallet, was quick to get his team on board with the bigger picture.

When I reached out to him about the switch, he said, “Parity’s decentralization initiative was initially a big surprise, but we realized that actually a door was opening for us to step up and own an important aspect of Polkadot and directly contribute to future growth. Global blockchain adoption is in its infancy, and as an industry, we will face untold challenges as we grow — decentralization is the understated force that gives true long-term resilience to the network.”

To Chen’s point about resilience, a recent report from the US Commodities and Futures Trading Commission into DeFi risks highlighted the various dimensions on which projects can be decentralized as a way of explaining their resilience to censorship, downtime, and attacks. Although Polkadot is a development platform, the principles still stand true.

By this point in the evolution of blockchain, there are many projects leveraging decentralized governance, some of which have been longer established than Polkadot. However, it’s hard to find cases where projects have made any real inroads into decentralizing aspects of their operations. Even so, the CFTC report also references the decentralization of operations as one of the dimensions on which projects can increase resilience.

When I reached out for comment, governance network The Ivy Collective highlighted the importance of testing the art of the possible when it comes to decentralizing responsibility for ecosystem functions, stating, “Web3 has demonstrated the power of decentralized consensus mechanisms, which are clearly mission-critical but represent only one aspect of a comprehensive system. Polkadot’s move to open governance is enabling the decentralization of other system functions alongside much-needed experimentation.”

Paving The Way

There is another key benefit to decentralizing operational functions like marketing: Increasing diversity.

Ingo Ruebe, founder of KILT identity protocol, told me, “Polkadot’s strategic move to independently fund business development and marketing sectors is a significant milestone that benefits the broader Web3 community, fostering diversity and non-linear communication strategies. By allowing independent agents to propose actions and seek community funding, it encourages decentralized teams to engage and collectively decide on the best course of action, serving as a model for other projects with less developed governance.”

Divergent Approaches

Polkadot’s multi-chain architecture has proven to be one of its biggest strengths when it comes to decentralization, since its inherent scalability means that the ecosystem isn’t subject to the so-called ‘blockchain trilemma’ that has plagued Ethereum as a legacy platform. The Polkadot community is in a position to make seemingly radical decisions about decentralization without compromising platform scalability.

However, a recent radical proposal regarding Ethereum’s scalability demonstrates that the legacy platform still faces significant challenges in solving its trilemma. Vitalik Buterin recently proposed raising the minimum stake to a staggering 4096 ETH, limiting participation to staking pools, which would be decentralized pools under the proposal.

But how such a change could be implemented without compromising on decentralization is entirely unclear. For instance, how would the network limit participation only to decentralized pools without becoming permissioned? How would Ethereum define and measure the decentralization of any given pool?

Although the move has not yet gained any formal traction within the Ethereum community, it would be a far more transformational change than that which Polkadot recently pulled off. It could alienate many of those who’ve committed to Ethereum thanks to its ethos of decentralization. If that happens, Polkadot’s renewed push towards open operations may just make it an appealing alternative.