The Significance of Decentralized Governance Framework (ft. Initia)

Key Takeaways

• Initia’s recently proposed Governance Proposal #39 includes four major changes aimed at further strengthening the network’s stability and decentralization.

• However, some agenda items—despite being part of the protocol’s original design—were introduced without sufficient communication with stakeholders, leading to mixed reactions within the community regarding the proposal’s approval.

• The Initia team has acknowledged these concerns and is responding constructively, recognizing the need to implement a more suitable governance process going forward.

• Four Pillars emphasizes the importance of establishing a clear governance framework and propose a process aligned with the broader vision of the Initia protocol.

1. Background - Diverging Reactions Among Initia Stakeholders to the Latest Governance Proposal

The community response to Initia’s recent Governance Proposal #39 (Initia Chain Upgrade Proposal #1) has been divided. Coming just over a month after mainnet launch, the proposal reflects the belief that Initia’s initial bootstrapping phase has been successfully completed. It outlines four key changes aimed at further strengthening the network’s stability and decentralization:

• Introduction of Emergency Proposal Submitter Whitelisting

• Adjustment of rollup asset withdrawal and finalization periods

• Recalibration of staking reward parameters

• Improvements to IBC hook functionality

Here’s a closer look at each change:

First, the Emergency Proposal Submitter Whitelisting introduces a mechanism that allows pre-approved validators to submit and process emergency proposals within 5 minutes in the event of a critical network issue. Unlike normal proposals, which require a 7-day voting period, or expedited proposals, which have a 1-day tally time, this mechanism is designed for rapid response in exceptional situations.

Second, the OP Withdrawal Period standardizes and adjusts asset withdrawal and rollup finalization times across the Interwoven rollup environment. This aims to improve the user experience and ensure consistency between rollups, with the adjustments governed at the Initia L1 level.

Third, the Adjusting Staking Rewards suggests normalizing staking rewards to an annual APR of 25%, reducing the total reward pool to 12.5 million INIT. Over the longer term, the goal is to maintain $30 million in TVL and stabilize APR at around 30%.

Lastly, the Miscellaneous section includes technical updates, such as enhancements to IBC Hooks and improvements related to hashed address verification.

While the proposal aligns with the direction previously outlined by the Initia team in its documentation—focusing on chain stability, establishing rollup-driven token demand, and curbing inflation—it has sparked debate within the community. Many stakeholders feel that, despite the proposal’s legitimacy, it lacked open and transparent discussion. Concerns have also been raised about the mismatch between the 21-day unstaking period and the 7-day voting window, which limits the ability of stakeholders to respond effectively to the outcome.

Source: Closely Contested Vote on Initia Governance Proposal #39 | scan.initia.xyz, Twitter, Keplr

Supporters argue that the current governance process is proceeding in accordance with the originally communicated protocol design and should therefore be implemented as intended. They view the proposal as a natural continuation of the protocol’s foundational vision.

Opponents, on the other hand, contend that regardless of whether the steps align with the original design, the proposal affects a wide range of stakeholders and should have been preceded by more extensive discussion regarding both its timing and procedure.

In response, the Initia team has acknowledged and accepted the concerns raised by critics, expressing a willingness to engage more openly in the future development of a robust governance framework. Nevertheless, voting on the proposal remains highly contested, with the outcome still hanging in the balance.

2. Takeaway - The Need to Establish an Appropriate Governance Framework

2.1 The Importance of Introducing a Governance Framework

In the blockchain industry, the term “decentralized” is often used liberally—and governance is no exception. Decentralized governance is typically celebrated for granting autonomy and responsibility to a broad range of network participants, introducing flexibility into decision-making, and empowering each community member to pursue their own utility within the system.

However, crowd psychology suggests that excessive autonomy can lead groups to behave irrationally, often prioritizing emotional reactions over rational decision-making. In the blockchain world, we’ve witnessed multiple cases where decentralized governance, when executed without a proper framework, has not only hindered a project's long-term vision but has also resulted in serious issues like hacks, Sybil attacks, and violations of property rights. These cases underscore a key point: while decentralization remains an ideal, current governance models are still vulnerable to misuse and require more mature and refined systems to fulfill their promise.

Therefore, to realize the still-vague and abstract notion of “decentralized governance” in a meaningful way, a clearly defined vision and a well-aligned governance framework are essential. As Initia continues to build a decentralized ecosystem through initiatives like its VIP program, it must also establish mechanisms that accurately reflect the will of the community—even amid complex stakeholder dynamics.

A sound governance framework should start by clearly defining the relevant participants within the ecosystem and ensuring they have equal access to information and understanding of the proposals at hand. To ensure governance remains both stable and sustainable, the process must also guarantee fair and inclusive participation, avoiding any non-neutral structures that may lead to biased outcomes or favor specific groups.

2.2 Key Considerations When Establishing a Governance Framework

A well-functioning governance framework can be examined through four key lenses:

• Optimization of participants and proposal scope

• Mechanisms to attract qualified participants

• Mitigation of decision fatigue

• Design principles focused on neutrality

2.2.1 Optimization of Participants and Proposal Scope

One of the most fundamental aspects of protocol governance design is to clearly define the scope of proposals based on the protocol’s objectives and to identify the appropriate participants with the expertise required to engage with those proposals. In practice, governance items within blockchain ecosystems span a wide spectrum—from foundational technical matters like network-layer communication standards to more application-level issues that directly impact end users.

Proposals concerning the network layer often involve standards that define the core logic and immutable attributes of a protocol. As such, participants in this domain must possess not only a deep understanding of the protocol’s vision and history but also technical competence in areas like infrastructure architecture and network communication. Naturally, this limits the pool of qualified contributors. Given the continuity and high stakes of such proposals, a flexible and tightly coordinated communication structure is critical. Accordingly, many mainnets opt for off-chain deliberation models or choose to narrow the scope of on-chain governance to create more stable and reliable systems.

On the other hand, application-focused protocols tend to involve a broader and more diverse set of participants, with governance proposals that are often one-off in nature and require less technical background. In these environments, governance can sometimes deviate from its original intent, and low-impact proposals are frequently handled via token-based on-chain voting. When more complex governance is required, proposals are often broken down and delegated to various DAOs or subcommittees staffed with domain experts.

In this context, Initia’s governance will likely cover a wide range of domains—from infrastructure-level concerns to application-layer initiatives like the VIP program. This breadth necessitates a careful delineation of proposal scope and a clear definition of the personas expected to participate in governance. If the scope of governance is too broad and all participants are given equal responsibility without the appropriate structural safeguards, it risks weakening the quality of decision-making. Participants may cast votes without fully understanding the proposals, leading to diluted governance outcomes or decision-making gridlock.

2.2.2 Mechanisms to Attract Qualified Participants

As discussed earlier, effective governance requires not only a well-defined scope but also the engagement of participants who are well-suited to address the issues at hand. However, expecting such contributors to participate purely on their own initiative—without any supporting mechanisms—may be overly optimistic. Relying solely on such luck can, in fact, lead to a more fragile and unstable governance system.

One common solution is the use of economic incentives, which can be a powerful driver of participation. However, without careful design, they may compromise the quality of governance. Because governance contributions and accountability are difficult to quantify, poorly designed incentive systems may attract participants driven solely by short-term gains, undermining the level of consensus within the community.

On the other hand, non-economic, reputation-based incentives may not generate rapid or large-scale participation, but they tend to attract contributors who are more aligned with the long-term vision of the protocol. A notable example is Ethereum’s EIP process, where contributors actively engage without explicit rewards, motivated instead by visibility, recognition, and a sense of shared purpose. More recently, protocols have begun experimenting with scoring on-chain contributions and allocating governance rights based on reputation, which encourages more mission-driven involvement.

Ultimately, both economic and non-economic incentives have their own strengths and weaknesses. Their application should be carefully tailored to the protocol’s goals and governance structure. For instance, Optimism operates two parallel governance systems—one token-based and one reputation-based—each with distinct responsibilities. Lido, meanwhile, is exploring a dual governance model to prevent the concentration of decision-making power under a single token. These approaches aim to balance the trade-offs of different incentive models and contribute to the development of more sophisticated and sustainable governance systems.

2.2.3 Mitigation of Decision Fatigue

Even if the right participants are successfully onboarded into protocol governance, their continued engagement depends heavily on the efficiency of the governance process itself. If the volume of proposals becomes overwhelming or if participation requires a significant time investment, contributors may begin to feel fatigued and gradually disengage. This is where the concept of decision fatigue becomes especially relevant—it refers to the decline in decision quality as individuals are forced to make repeated judgments, a phenomenon frequently observed in blockchain governance environments.

In particular, blockchain governance often involves a high volume of proposals, submitted irregularly, with content that is frequently technical or time-sensitive. This places a constant burden on participants to follow and assess every proposal—regardless of its significance. When information is hard to access or connections to previous decisions are unclear, the mental toll of keeping up increases dramatically.

In addition, governance systems that fail to accommodate participants from diverse linguistic and geographic backgrounds—or those that rely on poor UX/UI—create further friction, discouraging new contributors from joining and making it harder for existing ones to stay engaged.

Therefore, it is not enough for a protocol to simply attract participants; it must also provide a governance architecture that reduces decision fatigue and supports long-term engagement. This includes implementing structured proposal workflows, adopting flexible frameworks tailored to different governance scopes, automating repetitive governance functions, and providing visualized tools—such as governance landscapes—to help participants track proposal history and context. Proactively integrating such tools and practices is essential for maintaining a healthy and resilient governance system.

2.2.4 Design Principles Focused on Neutrality

The question of whether a system must be neutral in order to be trusted by everyone should be evaluated based on multiple factors—its purpose, the nature of the information it handles, and the extent of its influence. That said, in the context of blockchain ecosystems, systems that strive for decentralization are ‘generally’ expected to uphold neutrality by default. This neutrality is essential for accommodating diverse stakeholder interests fairly and for providing consistent, trustworthy interactions to all participants, which is foundational for building sustainable systems.

This principle applies equally to governance systems. A governance framework must be structurally neutral—not designed to favor any specific party—and individual proposals must avoid serving the narrow interests of a few at the expense of the broader fairness and trust of the ecosystem.

For example, proposals #4 and #16 in Juno Protocol called for the confiscation of funds from wallets accused of gaming an airdrop by splitting addresses—actions widely criticized as violations of individual rights. Similarly, Osmosis’ Proposal #320 sought to delete a file that blacklisted 68 Ethereum addresses associated with Tornado Cash. The proposal’s failure meant the protocol continued to enforce OFAC-style censorship standards.

These cases have instilled a sense of unease among users—raising concerns that the protocols they rely on might, at any moment, restrict access or seize assets based on past actions or arbitrary decisions. In systems where autonomy and responsibility should be guiding principles, such breaches of individual rights not only erode trust but actively discourage open participation. As a result, these systems struggle to establish themselves as truly neutral and trusted governance structures.

2.3 Closing Thoughts

Despite having launched less than a month ago, Initia has already made impressive progress by rapidly rolling out a range of community-driven initiatives to activate its ecosystem. However, the pace of this rollout has been so swift that it's still too early to determine whether the ecosystem has matured enough to ensure long-term sustainability.

To continue growing alongside its community, clear and consistent communication will be essential. One encouraging observation during the voting period for this governance proposal was the foundation’s willingness to promptly respond to and incorporate community feedback. If this moment serves as a catalyst for deeper collaboration between the community and the foundation to systematically define and refine the governance framework, it could lay the foundation for a more robust and authentic ecosystem—one where diverse stakeholders can maximize their respective value in a healthy, trust-based environment.

3. Others’ Opinion

3.1 Steve from Four Pillars - “The legitimacy of decentralized governance comes not from the content, but from the process.”

The recent ICUP1 proposal from Initia may invite a reasonable question: “Isn’t it fine as long as the proposal itself is sound?” After all, there’s nothing inherently wrong with the content. The team is simply trying to adjust their tokenomics according to what was outlined in their tokenomics paper.

However, they chose decentralized governance—an approach that is inherently inefficient, yet designed to allow diverse stakeholders to gather, debate, and represent as many interests as possible. In such a governance system, the process is just as important as the content.

If those driving governance decisions unilaterally determine what is “beneficial to the chain” and implement it without adequate discussion, that is not decentralization—it is technocracy. Even if such actions lead to positive outcomes, Initia may no longer be able to claim the mantle of a decentralized network.

Decentralized governance is not meant to be efficient. If Initia had prioritized decision-making efficiency above all else, it should have opted out of decentralized governance altogether. Of course, it’s not easy to say which governance model is “better”—that’s a matter of subjective judgment.

But once Initia chose to adopt a decentralized governance system, it must also respect the processes through which that system earns political legitimacy. That’s the cost of the model they chose.

To be fair, Initia only launched its mainnet less than a month ago. It has enormous potential to evolve and mature over time. We hope that, in time, the network will establish a governance framework that prioritizes procedural legitimacy. As a stakeholder in the Initia ecosystem, Four Pillars is committed to contributing to that effort—helping the network move toward a more mature and participatory model of governance.

3.2 Eren from Four Pillars - “The Path Toward a Orchestration Layer”

Controlling INIT inflation is one of the most critical challenges for Initia. From the early stages of its design, Initia implemented strong policies aimed at managing inflation. This proposal, too, was a necessary adjustment intended to build a sustainable incentive system and the tokenomics to support it, and its necessity is clear.

However, the process through which it was introduced left room for improvement. As mentioned earlier, adjusting a core parameter of the chain requires sufficient prior discussion with relevant stakeholders. Moving forward, a more structured and refined governance process will be essential for decisions related to chain upgrades.

Even so, there is reason to remain optimistic about future improvements in governance and decision-making processes, given that Initia has so far demonstrated a trustworthy approach to communication with the community and stakeholders.

A prime example is the VIP boosting phase, during which Initia increased the VIP allocation from 15% to 25% of the total token supply. To compensate for the reduced security budget resulting from a higher share of community incentives, Initia officially allowed staking of private allocations (held by VCs and early investors). While staking of locked private allocations had been an informal industry practice, Initia chose to make it fully transparent. They applied a reduced reward rate of 2 to 4% per year and imposed a four-year lockup period. The rationale behind these measures was clearly communicated to the community, even though it was a sensitive matter.

This was more than a simple policy adjustment. It was a tangible example of how Initia seeks to realize its vision of an orchestration layer. Going forward, it is essential to remember that coordination is embedded at the heart of Initia’s architecture. Ensuring that governance continues to operate in a transparent and trustworthy manner will be one of the most critical challenges Initia must address.

4. Resource

Related Articles, News, Tweets etc. :

• Initia Forum - Initia Chain Upgrade Proposal #1: Taking Off the Training Wheels

• Keplr Dashboard

• scan.initia.xyz

• Twitter - @FourPillarsFP

• Twitter - @manangouhari

• Twitter - @Edward__Park

• @initia

• @LidoFinance

• @Optimism

• @FourPillars

• @JayLovesPotato

• @Steve_4P

• @G_Gyeomm