Cardano Chang Update
The Cardano Chang Update has entered its first stage, marking a major step toward decentralized governance. At 10:44 p.m. London time on Sunday, Cardano officially began transferring control of the $13 billion blockchain to ADA token holders. According to Frederik Gregaard, CEO of the Cardano Foundation, many in the Cardano community were drawn to the network for its commitment to decentralized governance.
“Every ADA holder can contribute to the evolution of the ecosystem,” Gregaard told DL News. “The community will collaborate, innovate, and govern together.”
Cardano is the first major blockchain to implement a token-based governance system, a transition known as the Cardano Chang Update. This shift moves the network from the Age of Voltaire, named after the French writer and free speech advocate. Previously, Cardano’s development was overseen by Input Output Global (IOG), the Cardano Foundation, and EMURGO, the blockchain’s commercial arm.
While many in the community celebrate the change, decentralization presents challenges. Governance models like decentralized autonomous organizations (DAOs) have faced criticism for inefficiencies, bloated budgets, and control by a few influential actors. The Cardano Chang Update represents a significant commitment to decentralization while aiming to avoid common DAO pitfalls.
Why decentralize?
“Without a central authority controlling the network, it’s much harder for governments or corporations to censor information or transactions,” said Florian Volery, co-founder of Liqwid Labs, the company behind Cardano’s lending protocol, Liqwid. Volery believes the Cardano Chang Update will make the blockchain more attractive to institutions entering decentralized finance (DeFi).
However, competition is fierce. Ethereum, home to the largest DeFi ecosystem, has already drawn major players like BlackRock, a $9 trillion asset manager. According to Pablo Bejarano, CEO of Cardano-based asset manager PBG, Cardano’s governance model will highlight the lack of true decentralization in other blockchains.
“On competing blockchains, decision-making is often centralized among a few actors,” Bejarano told DL News.
Decentralized governance is just one piece of the puzzle. Cardano only enabled smart contracts in 2021, allowing the development of DeFi protocols. It has also struggled with a UTXO issue, where only one user can interact with certain DeFi protocols at a time. Unlike Ethereum and Solana, Cardano’s model can cause transaction failures when multiple users attempt to trade the same tokens simultaneously.
How Cardano avoids DAO problems
While the Cardano Chang Update pushes for decentralization, the network does not want to replicate DAO governance.
“In a DAO, decisions are typically made by governance token holders who vote on proposals, often with only a few checks or balances,” Gregaard explained. Instead, Cardano’s governance model introduces DReps, or Delegated Representatives, who will vote on governance actions on behalf of the community.
These DReps will be part of a tricameral governance system that ensures checks and balances across different stakeholder groups. This structure aims to avoid governance inefficiencies seen in other blockchain ecosystems.
Still, implementing such a system at scale is challenging. Thousands of ADA holders may not fully understand the governance model, leading to potential frustrations regarding their level of control.
While the Cardano Chang Update is already in progress, full decentralization is not yet complete. A second upgrade later this year will unlock the final governance features, bringing Cardano closer to its vision of a fully decentralized ecosystem.
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Fuente: Binance
