Understanding Hive Witnesses, Governance, and DPoS

“There are only two industries that call their customers ‘users’: illegal drugs and software.” ~ Edward Tufte

In Douglas Rushkoff's words, digital networks of Web-2 technologies are just the latest media to go from promoting social bonds to destroying them, from fostering humanity to supplanting it. Web-2 gave the elites all the benefits of these technologies and nothing to the masses who use them and also gave the same elites the power to control over masses and make huge profits.

What Hive offers the world is the next evolution of the internet and what I call Web Free. Others call it Web 3.0 or Web-3. The reason I like to call it Web Free is because this new technology frees people from the shackles of corporate greed and gives the control back to people. It empowers them and helps them build real financial equities that they can use them to improve their lifestyle or do whatever else they like to do with them.

For these reasons I do not refer to people of Hive as users, I prefer to call them Hive participants, bees, owners. The reality is, everybody who has an account on Hive with some HP are owners. Owners of their accounts that is. Users don't own their accounts, they are just some name in a centralized database. Their accounts on Web-2 with all of their following and data can be erased with a click of a button with zero regard how they feel about it.

Hive provides true ownership of accounts. There is no entity, or group, or stakeholder that can gain access, remove, or edit anybody's accounts. These accounts come with many features like wallets for financial assets, social interactions data, following, etc. Everything that belongs to the account, belongs to the owner of these accounts. Being an owner on Hive also means, having ownership stake and influence in the network itself.

Since many new participants join this open network at all the time, it is good to talk about the basics of Hive network governance, consensus protocol, and block producers of this blockchain. Let's start with what makes this ownership possible. This kind of true ownership is only possible in truly decentralized system that uses blockchain technology with a consensus algorithm that makes this magic happen. Keep in mind that my knowledge is limited and I might be wrong about certain things. If you find any errors in my statements please share in the comments.

DPoS - Delegated Proof of Stake is the algorithm used to reach consensus and is a built in protocol for the blockchain. This shouldn't be confused with delegated Hive Power. That is not why Hive is DPoS. This happens to be a use of the same terminology for two different purposes.

Some people think rewards distribution is part of governance. I strongly disagree, because rewards distribution has nothing to do with securing the blockchain, accounts/wallets, and funds. Rewards distribution is a different topic and shouldn't be confused with Hive governance. It is not.

Upvotes and downvotes are part of rewards distribution system. They also should not be confused with votes and un-votes used in Hive governance. If you disagree feel free to share your thoughts in the comments. For the purposes of this post, rewards distribution has nothing to do with Hive governance or DPoS.

Blockchain needs block producers. Some chains may call them miners, some call them validators, etc. On Hive block producers are called witnesses. Any account can put forward themselves as a witness candidate and start running witness nodes. There are some guides on how to do that, and also many witnesses are usually very helpful and can direct to the right resources to get started with this process.

Every stakeholder on Hive, doesn't matter how much Hive Power they have, has an ability to vote for these witnesses. We can vote for 30 witnesses. There are no rules who to vote for and why. It is a personal choice. Or we can just don't vote. But the system is set up so that, it is in our best interest to vote for witnesses. Because that is what makes Hive blockchain running. That is what keeps the blockchain and our accounts/wallets secure.

Decentralization doesn't mean democracy. We vote with our stakes. More stakes we have more weight our votes have and more influence we have in electing the top witnesses. When we vote with our stakes for witnesses we are, in essence, delegating these witnesses the task of producing blocks. Our stakes decide who produces how many blocks. Our collective stakes decide who the consensus witnesses are.

In other words, DPoS is a stakes based system that delegates the task of producing or validating blocks. That doesn't mean stakeholders cannot be witnesses. Anybody can. But some stakeholder choose not to. Because being a witness require some technical skills and knowledge. So, it almost like stakeholders hiring experts in this technology to maintain the network, keep it secure, and running. Witnesses get rewarded by the blockchain for their services.

Top 20 witnesses are considered consensus witnesses. Well, it is actually 20+1, one is for a backup witness. There is an order or rotation of producing blocks. Once each of the top 20 witnesses produced a block, the next block is produced by a backup witnesses, someone below top 20 ranks. Since each block is produced every 3 seconds, top 20 witnesses get to produce one block a minute. They get paid for each block produced. You can check the Hive blockchain explorer to see how much and when. I normally use hiveblocks.com to explore the blocks. There might be other options out there.

Backup witnesses - all witnesses ranked 21 and below still produce blocks, but not as many as the top witnesses. Higher you are in the ranks as a backup witness more blocks you would produce. If you are a top 40 witness you would be producing about a block per hour.

Decentralization is not a democracy. One account one vote is not the case here. And one account one vote has so many problems, it wouldn't even work. It has to do with a skin in the game. If something wrong were to happen to the blockchain who would suffer the most financially? Of course those who have invested the most. That's why it is a fair system, more investment means higher influence. Anybody can obtain as much influence they like. It is an open network.

But this is better than democracy. Democracy is slow. With DPoS decentralization actions can be taken fast. There is no election terms for witnesses. They can be voted in to top ranks, and voted out from those ranks just as easily and fast.

At the same times witnesses are not bound with any contract or obligations. They can run any software as they choose. Sometimes there will be slightly updated or patched blockchain software versions that are still compatible with each other to run the blockchain. Witnesses can choose whichever they wont. They can shut down their witness nodes if they like. They have complete freedom to do whatever they like. But if they are doing something that goes against stakeholder interest, they will most likely be unvoted and drop out of the ranks and become irrelevant.

This witnesses and stakeholder relationship makes the magic of DPoS happen and keep everybody honest. Dishonest ones get removed. This keeps our blockchain secure. This keeps our account ownerships intact, our funds safe. All while everybody have complete freedom to take any actions they choose. The end result usually ends up being a win/win for everybody. This is the main part of Hive governance.

Yes, higher stakeholders have higher influence. That doesn't mean smaller stakeholder don't have a say. Every vote counts. Even smaller stakes add up when more small stakeholders take the same actions or vote for the same witnesses. Consider you have 1000 Hive Power. If 1000 Hive owners with 1000 Hive Power voted for a witness, that would be equal to a vote of a whale, 1 million Hive Power worth of a vote.

Moreover, Hive is a social network, where we all regardless of our stakes interact with each other on equal levels, engage in networking. Social networking is a powerful and can influence once opinion. A minnow with some knowledge can influence a whale who wasn't aware of something and affect their governance actions like voting. Doesn't Hive has an awesome governance?

We can also include how Hive Decentralized Fund is used for the governance of Hive. Since these funds don't belong to anybody, distribution of these funds is also done in a similar way we vote for witnesses by stakes. If certain amount of stakeholders like the proposal and it passes the threshold of votes Return Proposal has received, the proposal gets approved and funded. Just like witness votes, these proposals can be un-voted and effectively unfunded anytime. Return Proposal is there to set the level of minimum votes needed for any proposal to get approved. Return Proposal, just like the name suggests returns the funds to the DHF. This level too is decided by the votes of stakeholders.

This is pretty much it about the Hive governance. Now that we understand the Hive governance concepts, let's take a look at what witnesses do and the values presented on https://hiveblocks.com/witnesses mean. Alternatively, you can use https://hive.arcange.eu/witnesses/ by Arcange.

Staked Hive or Hive Power internally in the blockchain has a different name and values. Stakes are called vests. So, all votes are measured in vests. MV stands for megavests, GV stands for gigavests. Blockchain also keeps the record of missed blocks. Missed blocks are when the witnesses node was scheduled to produce a block but wasn't able to do so for various reason. Normally it is not a good thing. But sometimes these missed blocks happen due to not the fault of witnesses.

One of the important roles witnesses play is approving or rejecting hard-fork software candidate. This can be for one or many reasons. Usually a lot of discussions take place on and off chain while these hard-fork changes are being developed and what witnesses feel about them is expressed before hard-forks become available. When final and tested version of hard-fork is ready, witnesses show their approval by running the new software at the scheduled or agreed time. Really skillful witnesses also participate during code testing phase too.

There are also parameters witnesses can configure like price feed, registration fee, bias, APR, block size. For example, let's take a look at the APR. Currently about 14 of the top 20 witnesses have APR at 12%, others have values like 10%, 7%, 15%. Yet we know that HBD is paying 12% APR. So the blockchain uses these parameters. One of the most important parameters is the price feed. Since Hive has HBD, it is important to feed the actual price of the Hive in the market to the blockchain. Blockchain itself has no other way of knowing what the market price of Hive is.

Hive governance is unique and interesting. By participating in governance we make decentralization possible.

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