The Sustainability of Digital Governance: Can a Smart Contract Serve as a Social Contract?

Abstract

In the current era of digital transformation, technological advances have altered the landscape of information transmission and human interaction. In particular, the rapidly expanding adoption of blockchain technology has introduced the idea of decentralization, with the goal of making systems more equitable and efficient. In the cryptocurrency and digital finance space, this means replacing a centralized authority with pre-coded smart contracts that community members may vote to alter, aiming to further democratize systems of governance. However, the social contract that traditionally informs the way in which governments rule societies today is called into question when the agreement is not between the physical entities of the state and the individual; instead, the hypothetical contract is made between the individual and the smart contract that the individuals have created to govern them. I intend to explore whether or not a successful and sustainable social contract can be found within a decentralized smart contract system that governs the digital world. Through analyzing advantages and disadvantages of decentralized governance and illustrating a working protocol in my case study of Tezos, I dive deep into the digital voting process and how participants interact with it. Additionally, I introduce the relatively new model of quadratic voting that has the potential to improve the governance process and eliminate weaknesses. Finally, I argue that decentralized governance by smart contracts works, and is ultimately sustainable due to its ability to adapt and upgrade in tandem with human participation.