Two years.

That's how long Bitcoin argued about changing a single number in the code: the block size limit.

Imagine working on a project where you can't make a decision for two years.

Not because the problem is complex. Because you can't get everyone to agree.

You're stuck. Colleagues take jobs elsewhere. The work piles up. Competitors move ahead. No one can do anything until this argument is resolved.

That's what Bitcoin's Block Size War felt like.

Developers couldn't ship updates without picking a side. Companies couldn't plan infrastructure without knowing which chain would survive. Users observed fees rise from pennies to $50 per transaction while the network became increasingly slow.

Everyone knew something had to change. But they were at gridlock.

The cost wasn't just time. It was everything that didn't get built during the fight. Projects abandoned. Developers who left. Opportunities lost.

Bitcoin eventually split into two separate chains. Not because one side won the argument. Because neither side could force the other to back down.

This is what off-chain governance looks like when it breaks. The absence of a formal decision-making process means that disagreements persist until the community fractures.

Ethereum faced its own crisis with the DAO hack. $60 million stolen. The community had to decide: reverse the theft or let it stand?

The debate was resolved in thirty days instead of two years. Why? Vitalik Buterin's voice carried enough weight to break the gridlock. He had no formal authority. No CEO title. But when he said "we should hard fork," the community followed.

The decision was made. Fast.

But Ethereum's solution didn't match the cypherpunk ideal either. It relied on concentrated influence: one person whose voice mattered more than everyone else's.

Two crises. Two lessons.

Bitcoin showed that informal governance without leadership is time-consuming and messy.

Ethereum showed that speed comes from concentrated influence.

Subsequent blockchains examined these failures and asked: What if we formalized governance? Built voting into the protocol itself. Made the process transparent and automatic.

This is the on-chain governance model.

Let's look at two platforms that tried it and what they traded to make it work.

Tezos launched in 2018 with a promise: governance crises like Bitcoin's Block Size War would never happen here.

The solution was "self-amendment." Build the upgrade process directly into the blockchain. When changes are needed, token holders vote. If the proposal passes, the blockchain automatically implements it.

No contentious forks. No community splits. Just a structured process.

Tezos is an experiment in making the blockchain its own constitution: self-amending through formalized on-chain governance.

Tezos uses a five-stage governance process:

1. Proposal Period - Developers submit proposed changes to the protocol

2. Exploration Vote - Bakers vote on whether to test the proposal

3. Cooldown Period - Testing phase to identify bugs or issues

4. Promotion Vote - Bakers vote on whether to make the change permanent

5. Adoption - If it passes, the blockchain automatically upgrades

The entire process takes about 18-20 days.

Compare that to Bitcoin's two years.

In Tezos, the people who vote are called "bakers."

Bakers do two jobs:

To become a baker, you need to lock up 6,000 XTZ tokens. That's currently worth approximately $6,000-$ 7,000. In return, bakers earn transaction fees and new XTZ tokens as rewards (roughly 5-6% annual return). They also need to run a server that stays online 24/7.

This creates a clear structure: bakers secure the network AND make governance decisions.

Tezos has undergone multiple successful upgrades without chain splits.

The Seoul upgrade in September 2025 went through the full five-stage process. Proposal submitted; two votes conducted; testing completed; upgrade deployed. Total time: 18 days. No community fracture. No competing chains. The process worked exactly as designed.

Tezos solved Bitcoin's speed problem.

But speed came at a price.

Plutocracy.

Since bakers need 6,000 tokens to participate, voting power is concentrated among the wealthy. If you own 60,000 tokens, you can run 10 baker nodes and get 10 votes. Someone with 6,000 tokens gets 1 vote. Voting power scales directly with wealth.

Low participation.

Most regular token holders don't participate in governance. They don't have enough tokens to become bakers. They don't have the technical knowledge to run servers. They can delegate their tokens to a baker to vote on their behalf, but most don't bother. This means a small group of large bakers makes most decisions.

Tezos gained speed by formalizing governance. But formalization concentrated power among those wealthy enough to participate. Their governance model works well, but it doesn't align with the cypherpunk vision of eliminating trusted authorities. Power still concentrates. Just among wealthy bakers instead of core developers.

Polkadot saw Tezos's plutocracy problem and tried something different.

If simple token voting concentrates power among the wealthy, what if we distributed power across multiple governing bodies?

Polkadot is an experiment in distributing governance across specialized bodies, so no single group can dominate decisions.

Polkadot created a complex governance system with checks and balances, drawing on elements of the U.S. government structure: elected representatives (Congress), appointed experts (Supreme Court), and direct democracy (ballot measures).

The Council (13-24 elected representatives)

Token holders elect council members. The council can fast-track important proposals or veto dangerous ones. The idea: prevent whales from dominating through sheer wealth.

The Technical Committee (experts appointed by the council)

These are technical experts who can fast-track urgent fixes. After watching Ethereum struggle with the DAO hack, Polkadot wanted a way to act quickly when the code breaks.

Public Referenda (anyone can propose)

Regular token holders can propose changes. Everyone votes. This keeps the system democratic alongside the council and technical committee.

The design philosophy:

Polkadot successfully distributed power across multiple bodies. No single group controls decisions.

The system allows expert input on technical matters while maintaining the community's voice in major decisions.

Compared to Tezos, Polkadot is much more democratic. Wealthy token holders can't simply outvote everyone else.

Paralysis.

Polkadot's 2025 Strategic Development Report revealed deep frustration within the community. They described being "too decentralized" to act decisively. Multiple bodies need to coordinate. Proposals move slowly through the process. Many decisions simply don't get made.

The treasury problem.

Polkadot has approximately $188 million in its treasury (as of the 2025 report). This funding is intended to support ecosystem development, pay developers, and support projects that build on Polkadot. But most of it sits unused. Deploying treasury funds requires governance proposals. Proposals go through the complex multi-body system. Most get stuck in debate or don't attract enough engagement to pass.

Complexity barrier.

The governance interface (Polkadot-JS) is notoriously difficult to use. Most token holders don't understand how the multi-body system works. The complexity that prevents plutocracy also prevents participation.

The 2025 report captured the contradiction: the community wants "official action," but "the absence of official presence is keenly felt by everyone." They designed the system to prevent any single entity from having official authority. And it worked. But now they can't act decisively when needed.

Polkadot solved Tezos's plutocracy problem. But created paralysis instead.

Polkadot isn't the only attempt to solve plutocracy. Two experimental models are worth knowing about.

Quadratic voting.

Each additional vote costs exponentially more tokens. Your first vote costs 1 token. Your second costs 4. Your third costs 9. This makes buying votes prohibitively expensive for whales while preserving participation for smaller holders. The math levels the playing field in a way that simple token voting never could.

Futarchy.

Governance decisions are made through prediction markets. Instead of voting on proposals, participants bet on outcomes. The theory: people with real money at stake make better decisions than voters with nothing to lose.

Both remain largely experimental. Neither has been adopted at scale.

Tezos prioritized speed in blockchain governance. Simple token voting, defined timelines, and automatic implementation. It delivered: 18-day upgrades with no community splits. The cost: voting power concentrates among wealthy bakers.

Polkadot prioritized distributed power. Multiple governing bodies, elected representatives, expert committees, and public referenda. It delivered: no single group controls decisions. The cost: coordination across multiple bodies creates paralysis.

Where Tezos built a streamlined process, Polkadot engineered a digital separation of powers. The difference in design philosophy produced starkly different outcomes in speed, participation, and who ends up in control.

But both cases reveal that governance is not an engineering problem.

You can design elegant mechanisms. You can formalize voting, distribute power across bodies, and add checks and balances. But you cannot design away voter apathy. You cannot engineer legitimacy. You cannot write code that resolves the tension between the need for rapid decisions and the desire that everyone's voice matters.

These aren't flaws in Tezos or Polkadot specifically. They show up in every system humans build to coordinate at scale.

Which is exactly why crypto governance matters beyond crypto. These experiments are the first time these trade-offs have been made fully visible, formally encoded, and tested publicly with real stakes.

In the next essay, we look at what these experiments reveal about coordination, power, and organization far beyond the blockchain.

Tezos Governance

Messari State of Tezos Q3 2025

Polkadot Governance

Polkadot 2025 Strategic Development Report

On the impossibility of on-chain plutocracy governance