Polymesh’s approach to on-chain governance

Contentious forks in the chain present significant legal and tax challenges for tokens backed by real assets. Polymesh uses an industry-led governance model to prevent hard forks and guide the evolution of the chain.

The challenge with governance on blockchain 

Governance is a difficult topic for any blockchain. This is especially true for security tokens, where the chain is not only the source of truth for potentially billions of dollars, but must also allow investors, issuers, and capital market participants to fulfill their regulatory obligations. Because of its decentralised nature, when there is a disagreement, a blockchain split or fork into two separate chains, exposing major legal and tax challenges for security tokens.

The Polymesh solution

Polymesh addresses the challenges general-purpose blockchains face with governance by building it into the core of the blockchain. Normally, blockchains are susceptible to forks during upgrades. Polymesh is built on Substrate Framework, which provides Forkless Runtime Upgrades. This allows for seamless upgrades on the chain to avoid the risk of hard forks. Additionally, Polymesh relies on a council of key stakeholders to review Polymesh ImprovementProposals submitted by committees or token holders, find consensus, and chart a path forward for its future development. This provides a means of steering the chain past potential issues or disagreements.

The role of governance


On-chain governance's benefits lie in its rules transparency, the provable inclusion of stakeholders in the decision-making process, and on-chain coordination– things missing in an off-chain governance model

On Polymesh, Governance is on-chain and upgrades unfold by a prescribed process that addresses both the decision-making stage and coordination problem. The process is designed to be compatible with regulatory regimes and provides a solution to the challenges general-purpose blockchains have in the areas of identity, accountability, confidentiality, system governance and evolution.

Governance covers the following areas:

  • the permissioning of operators and CDD providers,
  • certain system primitives, such as inflation and reward rates, fines, and bonding periods, and
  • chain upgrades

This is a permissioned blockchain. Operators can join or leave the network and they are always known entities approved by the network users via the on-chain governance system.


How Polymesh avoids hard forks 

Upgrade Process

Chain upgrades are decided and implemented by certain stakeholders as delineated in the current governance system. Moreover, the node runtime is stored directly on-chain,meaning an upgrade leads to change in the on-chain representation of the runtime. Thus, each node checks if there is a new runtime, and if there is, starts working with that new version automatically. The possibility of non-malicious hard forks is therefore highly unlikely.

Substrate Framework

Polymesh is built on the Substrate Framework. It allows for forkless runtime upgrades, which results in seamless upgrades on the blockchain rather than risking a hard fork, as well as the recording and storing of the governance information on-chain. Any change to the blockchain is recorded directly on it. This is convenient from a chain management standpoint and enables the possibility for users to have a say in chain management through a user-friendly interface, the governance dApp.

WASM

Another aspect of Polymesh that adds to the improbability of hard forks is the choice to use WebAssembly (WASM) for the protocol runtime. WASM bytecode was initially conceived to enable high-performance applications on webpages. For this reason, large software companies maintain WASM compilers and virtual machines for various operating system platforms. This landscape makes the risk of hard forks caused by compiler or platform bugs highly unlikely.

Polymesh Improvement Proposals 

With Polymesh Governance, POLYX holders have the opportunity to influence the direction of the Polymesh blockchain. They can do this by submitting a Polymesh Improvement Proposal (PIP) through Polymesh Governance. Other POLYX holders vote on the proposal, with approved proposals voted on by the Polymesh Governing Council for implementation. Any POLYX holder has the right to submit a  Polymesh Improvement Proposal (PIP) by submitting detailed information regarding the change and bond POLYX to the PIP. 

With MERCAT, issuers on Polymesh are given the option to make transactions with their security token confidential during configuration.
Learn about Pip practices

The governance process

Polymesh bases its governance on a two chamber approach. The first chamber consists of all POLYX token holders. The second chamber is the Polymesh Governing Council.

Governance in Polymesh includes three stakeholders:
POLYX Token Holders

Any POLYX token holder can submit community-curated PIPs, and engage other holders so they signal their approval or disapproval of these PIPs.

Committees

The Committees are groups of individuals with up to 20 members. They are categorized by topics. Committees can submit committee PIPs. These are similar to community-curated PIPs but cannot be signaled on, and they can always be enacted at any time in any order by the Governing Council, the decision-making body.

Governing Council

The Governing Council is a group of individuals or entities. It is the body responsible for decision-making. Currently, membership in the Committees and the Governing Council is not mutually exclusive, i.e. members can be part of both at the same time. Membership for a genesis block, i.e. the first block in the chain, is set ahead of time. The primary role of the Governing Council is to manage the blockchain, find consensus, and chart the general direction of development for the blockchain. It can fast-track proposals to deal with emergency fixes. Another role of the Governing Council is to manage the membership of Committees and of the Council itself.

MORE about polymesh governance