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Decentralized Governance with Colony




Decentralized Governance with Colony

Colony is a platform for decentralized governance in global communities. The project has been going for over a year and has been highly anticipated, as it provides effective tools for various old and new forms of organizations to work together. The team’s lead engineers Elena Dimitrova and Dr. Aron Fisher presented the inner workings of the project at Devcon2.

Fluid Governance

Colony is an open source project built 100% on Ethereum. It provides governance structures to projects of any kind. Unlike the rigid voting processes witnessed in projects like The DAO, governance in Colony is designed to be highly fluid, mitigating bureaucracy and enabling meritocracy. In essence, Colony distributes authority throughout a community, meaning that no central point of control is required. The vision of Colony is that “thousands of people from all over the world can build, manage and share in the rewards of a common endeavour, without trusting (or even knowing) one another.”

Voting as a Fallback Mechanism

The key to a functioning Colony is a complex, yet elegant voting protocol. Here, the team is solving the traditional problem of voting with digital identities online, especially the issue of Sybil Attacks, an attack wherein a reputation system is subverted by forging identities in peer-to-peer networks. They solve this by introducing a series of voting requirements.

First, users are not allowed to double vote. In Colony, votes are weighted using a reputation score. Reputation is earned by the amount of contributions a user makes. This means the more you vote, the higher your reputation. Reputation itself is a non-transferrable attribute that can only be earned by contributing.

Second, Colony introduces a derivative of a generic token weighted voting system, as an elegant solution to the Sybil Attack double-voting problem. Voting power is distributed using tokens that represent real-world value. Weight is attributed to how many tokens a user owns and not how many accounts a user has divided his tokens in to.

The Colony Voting Protocol

Outlining several scenarios and problems with blockchain based voting systems, the team narrowed their choice down to a sound mechanism that avoids other common issues such as bandwagon voting, or skewed incentives due to the opportunity cost of locking up a valuable token. A basic voting process in Colony looks like this:

1.    The user has tokens

2.    When polls open, users vote by sending masked votes. Votes are masked to ensure independence of votes and prevent bandwagon effects.

3.    Tokens are free to move while the poll is open. This ensures tokens remain liquid and there is no opportunity cost of voting.

4.    User account is locked once the poll closes. However, tokens can still be used to vote in other polls.

5.    Once the poll is closed a user can immediately unlock account again by revealing their vote.


The last two properties of the Colony voting protocol effectively ensure that the system is scalable to an arbitrary number of voters, as well as simultaneous polls. We are still at the forefront of emerging sophisticated governance protocols on Ethereum and Colony seems to be ahead of the crowd. Specifically, game-theoretic and economic implications need to be solved before transferring them into smart contract systems. In the long run, Colony could form synergies with prediction markets like Augur or Gnosis that provide further governance tools through concepts like Futarchy.

Paul Kohlhaas

Paul Kohlhaas has a background in venture capital and consulting. He fell down the altcoin rabbit hole in 2013, happily emerging with Ethereum. He focuses specifically on decentralized applications, token sales and market economics. Paul is a guest writer for ETHNews. His views and opinions do not necessarily constitute the views and opinions of ETHNews.

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