OT: I think it's about time to end this myth. We have the internetz for a few decades and voting machines (supposedly to make it all simpler) yet somehow direct democracy is impossible and we "need" the democracy as done in the 19th century just because ... well, because no single government is willing to give power back.
Is it possible to have a referendum on every political proposal? Yes.
Is it done? No.
We don't need a referendum on every issue, we just need a way to
- change your representative every week or so
- override your representative's vote within a given time window
Part of me wonders whether this would be a good thing. I mean, the best political systems are those where things are difficult to change on purpose, like how in the US the constitution is virtually impossible to change without overwhelming agreement from most involved.
In that sense, having referendums be required on a lot of political proposals may well help kill lobbying, as well as downplay the effects of knee jerk reactions and 'think of the children' style pearl clutching. Require a majority, and well, a lot of things like copyright extensions simply can't get off the ground at all.
What you're talking about here is decentralized consensus, which is very different than just decentralization. Regular old decentralization -- a la Secure Scuttlebutt -- has no such scaling issues.
I want to highlight a technical perspective. That’s the scalability issue of Blockchain. Fully decentralization cannot afford scalability, just as we cannot afford referendum on every polical proposal.
In fact, many technical solutions to scale the Blockchain are using the same principle of your idea of federation.