Blockchain Disruption and Smart Contracts

48 Pages Posted: 14 Jun 2017 Last revised: 12 Mar 2019

See all articles by Lin William Cong

Lin William Cong

Cornell University

Zhiguo He

University of Chicago - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2018


Blockchain technology provides decentralized consensus and potentially enlarges the contracting space through smart contracts with tamper-proofness and algorithmic executions. Meanwhile, generating decentralized consensus entails distributing information that necessarily alters the informational environment. We analyze how decentralization affects consensus effectiveness, and how the quintessential features of blockchain reshape industrial organization and the landscape of competition. Smart contracts can mitigate informational asymmetry and improve welfare and consumer surplus through enhanced entry and competition, yet the irreducible distribution of information during consensus generation may encourage greater collusion. In general, blockchains can sustain market equilibria with a wider range of economic outcomes. We further discuss the implications for anti-trust policies targeted at blockchain applications, such as separating consensus record-keepers from users.

Keywords: Anti-trust, Cryptocurrency, Competition, Decentralization, Distributed Ledger, FinTech, Incomplete Contracts, Collusion, Information, Repeated Games.

Suggested Citation

Cong, Lin and He, Zhiguo, Blockchain Disruption and Smart Contracts (December 27, 2018). Available at SSRN: or

Lin Cong (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States


Zhiguo He

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States


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