From design to reality: creating the governance for a blockchain network

December 10, 2018


From design to reality: creating the governance for a blockchain network

Last Tuesday, our team reached a milestone and created a new Foundation—a not-for-profit, based in the Netherlands. The Foundation’s purpose is to govern Corda Network, a blockchain network recently created by R3 — to make it easier to transact. We’re looking for transition board members for the Foundation — more details below!

A screenshot from the official record, with the Dutch Chamber of Commerce

Corda Network is an internet of ‘nodes’ or identities – which enables quick, secure, private transactions via Corda software (both the open source and commercial versions).

As it exists today, the network is aimed for company use, and we see many different industries joining it through pre-formed ‘business networks’ or groups of legal entities they want to transact with. Industries include insurance, syndicated lending, and trade finance— with an interesting variety of other industries likely to also join pretty shortly.

Features of the network include: an identity issuance service (required for participation), a network map, and (at least one) notary cluster which confirms transactions across it. More detail, together with all the Foundation’s technical and business policies, can be found on our interim website and at James Carlyle’s medium post (James is head of Operations and Network at R3).

Why a Foundation… in the Netherlands?

Corda Network will work best for all participants when lots of participants join — otherwise known as the network effect.

But for companies to buy-in and join such a new global business internet, which in reality may process quite crucial transactions for them, they really need to understand and trust its governance, and not feel that control is out of their hands. Our team heard this in many conversations over the past year.

The Foundation was set-up, therefore, because we wanted to show interested potential participants of Corda Network that R3 is not in control of important decisions around it (or many decisions at all).

Instead, participants will sit on its board — or at very least, vote for it. These can be representatives anywhere from a tiny company to huge corporates, and we’ve designed rules to make sure the board is balanced (by geography, industry and size of company). A major driver for choosing the Dutch Stichting structure was its laser focus on governance combined with its inability to disperse profit.

Its board will aim to achieve the Foundation’s goals: facilitate the emergence of a global network of Corda nodes, and keep the network ticking smoothly, while balancing stakeholders’ interests and making decisions in an open way.

Drawing from other foundations

In thinking about areas of governance and the overall design, it was useful to spend time researching other technical yet community-focussed foundations:

  • ICANN, a California-based nonprofit which governs much of the naming structure of the Internet — with useful and clear governance guidelines
  • Mozilla’s and Apache’s foundations, with interesting participation criteria and governance structures
  • the Linux Foundation, which governs (amongst other things) Hyperledger. Both provide members with a range of fee tiers, each of which comes with associated governance access

We took inspiration from their legal documents and organisation structures, including recurring emphases on diversity, transparency and fairness.

Crucially however, we believe Corda Network Foundation is different in two ways: it will govern the network from its inception (more or less), and, in order to be properly independent, will also be charging every participant (low fees) both to take part and transact on the network. More to come on this in future posts.

Who is on the board of the Foundation, and what will they ‘govern’?

The Foundation will soon be comprised of many participants (not shareholders), with the power to both vote for, and stand for, its board of directors.

In steady state, these directors will have three year terms, with the objective solely to govern. Until the network takes off, the Foundation will have a ‘transition state’ board (more of this below).

Simply put, in its current design, Corda Network Foundation’s board directors will mostly be making decisions around:

  • Monitoring the Network Operator — making sure it provides a reliable, stable service and satisfies network participants that it is doing a good job
  • Deciding on pricing for the Network — both participation and transaction prices, to charge members, while keeping prices as low as possible. In fact, the Stichting is proudly designed to be a lean, cost-effective legal entity with zero staff to begin with.
  • Approving (and driving communication of) technical changes — including around network parameters (such as length of messages) and upgrades
  • Governance itself – including for any changes to the Foundation’s structure, voting process and guidelines.

The diagram below shows its initial structure:

How we’re thinking about the organisation design

Call to action: Consider joining the Foundation’s Transition Board

What’s exciting is that right now, applications are open for the Transition Board for the Foundation. We’re hoping to fill this as soon as possible.

As mentioned, we’re seeing companies joining in business networks — smaller groups (who control their own membership, do their own KYC and define rules).

The first three business networks with at least 3 members on Corda Network will form the 9 members of the Transition Board (making 11 in total, together with 2 R3 directors) .

We have some likely contenders, but this list is not closed yet! If relevant and of interest, get in touch via the Corda Network mailing list, or cordanetwork@r3.com

Thanks for reading!