Department of Economics and Business - Universitat Pompeu Fabra

Title:: Blockchain: The birth of decentralized governance
Authors:: Benito Arruñada and Luis Garicano
Date:: April 2018
Abstract:: By allowing networks to split, decentralized blockchain platforms protect members against hold up, but hinder coordination, given that adaptation decisions are ultimately decentralized. The current solutions to improve coordination, based on “premining” cryptocoins, taxing members and incentivizing developers, are insufficient. For blockchain to fulfill its promise and outcompete centralized firms, it needs to develop new forms of “soft” decentralized governance (anarchic, aristocratic, democratic, and autocratic) that allow networks to avoid bad equilibria.
Keywords:: blockchain, platforms, networks, hold‐up, coordination, relational capital, incomplete contracts, decentralized governance
JEL codes:: D23, L12, L22, L86
Area of Research:: Business Economics and Industrial Organization

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