What is governance and Decentralization

Decentralization refers to a control and coordination structure in which participants are part of a distributed network, and members or entities on the network do not need to rely on the trust of any specific entity. The design purpose of the system is to minimize trust while ensuring that the network functions achieve their goals. Governance is a method to achieve decentralization, usually driven by decision-making processes, operations, and protocol development through smart contracts and tokens held by governance participants.

This article will compare and analyze the different governance solutions of Optimism and other L2 networks (such as Arbitrum, Starknet, and ZKsync).

Figure 1: Typical Decentralization Governance Process

Optimism: Dual Governance Model

The core governance model of (https://optimism.io/) is a non-plutocratic system that prevents any single entity or small group from controlling it. This means that Tokenholders are not the only ones who have decision-making power over protocol upgrades, resource allocation, and innovation. Even if an entity accumulates a large number of OP governance Tokens, it cannot dominate the network value, because Optimism adopts a bicameral structure, with the Citizens' House as a counterbalance to the Token House, and vice versa.[Optimism]

Optimism Collective positions itself as a governance experiment that is designed iteratively because they believe that vision can sometimes be at odds with value creation. The Token Assembly consists of OP governance token holders, who can directly participate in voting through their tokens or delegate their tokens to entities they believe align with their ideals for voting. On the other hand, the Citizen Assembly is composed of individuals who have demonstrated goodwill within the Optimism ecosystem. Citizenship is granted through a soul-bound NFT token and is non-transferable.

In the Token Senate, a single entity can hold massive voting power by holding a large amount of Token. In contrast, in the Citizen Senate, each citizen has only one vote, which further deepens the democratic process. The main responsibility of the Token Senate is to vote on protocol upgrades and project incentives, while the Citizen Senate is mainly responsible for managing 'Retroactive Public Goods Funding' and ensuring that the protocol pursues long-term vision without being controlled by any entity by establishing a people-oriented governance structure. As a check and balance mechanism, the Token Senate can veto the citizenship of the Citizen Senate. The core operating mode of the Optimism Collective is that each chamber has a trap core responsibility and can be vetoed by the other, forming a mutual check and balance.

Arbitrum: Arbitrum DAO, Delegation, and Stake Mechanism

(https://arbitrum.io/) The Layer 2 network is governed by the Arbitrum DAO, which consists of the $ARB Tokenholder community. Holders can propose and vote on changes to the network's technology. Tokenholders can directly participate in governance or delegate their voting power to elected representatives called 'delegates.' The Arbitrum DAO has just passed a proposal (https://www.tally.xyz/gov/arbitrum/proposal/52793687237294107439411688810483120161857085958258363826553939061522164665920) to introduce the $ARB Tokenstake feature, transforming it from a single-purpose governance token to a dual-purpose token. Subsequently, Arbitrum's governance will be based on the flowable stake token called 'stake ARBToken' ($stARB). The motivation behind this proposal is to accumulate value for $ARB and increase governance participation, as $ARB locked in Decentralized Finance protocols is incompatible with governance functionality.[Arbitrum]

Arbitrum hopes to increase governance participation, as only about 10% of the circulating $ARB Token is used for governance. The Arbitrum DAO is implemented in the form of a Smart Contract, responsible for managing the built-in treasury system. It also has a security council mechanism that can bypass governance procedures to execute protocol upgrades in emergency situations. The security council is a critical part of the governance structure, responsible for making decisions in crucial moments, with its members elected by the Arbitrum DAO. Overall, Arbitrum's governance structure is an oligarchy, with $ARB Tokenholders being the primary arbiters of the system.

Starknet: Dual-function Token and Progressive Governance Model

The governance mechanism of (https://www.starknet.io/) is unique in the Layer 2 solution, as it uses a dual-function Token, which is not directly used for voting, but abstracted as a symbol of voting power through wrapping and unwrapping STRK and vSTRK. STRK is the basic Token of Starknet, mainly used for Payment Network fees, so it is not a direct governance Token. To achieve dual-functionality, STRK needs to be wrapped into vSTRK to be used for governance. STRK Token cannot directly participate in governance, only vSTRK can be used to vote on proposals or designate representatives, and has voting power equivalent to vSTRK Token.[Starknet]

vSTRK Token can be unwrapped into STRK, but each wrapping and unwrapping operation will incur Gas fees. Another fundamental difference in the Starknet governance mechanism is the "progressive governance," which continuously drives various components of the network towards complete Decentralization. Based on this principle, Starknet has established multiple entities and councils to guide certain aspects of the protocol, including the Starknet Governance Council, the Builder's Council, and the Starknet Foundation.

ZKsync: Three-Body Governance

ZKsync's governance method revolves around three basic principles: adaptability, decentralization, and alignment with the mission. It ensures that no single entity can have unilateral control over the protocol, thereby promoting long-term stability and community control. The system is decentralized, with decision-making distributed among the Token Council, Security Committee, and Guardians.

The Token Council is composed of Tokenholders and representatives who can propose and vote on protocol changes. The Security Committee is responsible for technical upgrades and has the authority to handle security risks. Guardians ensure that all proposals are consistent with the core values of ZKsync and have the power to veto decisions that do not align with these values. This layered governance structure promotes transparency, security, and consistency with the mission of ZKsync through a system of checks and balances.

Overview of Governance Comparison

Table 1: Governance Comparison Indicators

The table above shows that Optimism, Arbitrum, ZKsync, and Starknet all have emergency powers to make changes bypassing the governance process in emergency situations. These emergency powers are overseen by each protocol's security committee. Similarly, all audited networks have a treasury controlled by the governance process. Optimism and ZKsync adopt non-rich governance structures that weaken the influence of economic power. Having more governance tokens does not necessarily lead to greater influence. Starknet has dual-function tokens, and if a staking proposal is implemented, Arbitrum's governance token may have functions beyond voting in the future. On the other hand, Optimism and ZKsync's governance tokens are still purely governance tokens for now.

Conclusion

This article explores the current governance landscape of the leading Ethereum Layer 2 networks: Optimism, Arbitrum, Starknet, and ZKsync. First, it briefly introduces the concepts of Decentralization and governance, and then analyzes the governance mechanisms of each protocol. The main content is that Optimism adopts a bicameral system, with the power of Tokenholders balanced by the public, and vice versa. Arbitrum's governance is led by Arbitrum DAO, with the dominance of $ARB Tokenholders, emphasizing the importance of holding Token amounts. Arbitrum is attempting to increase participation and create value for governance Tokenholders by introducing a stake mechanism.

Starknet's governance is also based on the rule of the wealthy, with governance Token that has dual functions, while its protocol is shaped by multiple committees and boards. ZKsync's governance system is designed around the principles of decentralization and checks and balances, ensuring that no individual or entity can unilaterally modify the ZKsync protocol.

Although Decentralization is a field, protocols should strive to achieve greater Decentralization to avoid being controlled by censorship or malicious actors. All protocols subject to censorship can further Decentralize their security committees' emergency powers and explore innovative experiments to eliminate these powers, thus putting the community at the heart of governance.

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