Institutions, Middleman, and Blockchains – Shuffle and Re-Start
15 Pages Posted: 29 Aug 2017 Last revised: 9 Sep 2021
Date Written: August 27, 2017
Blockchains have the potential to disrupt many of the assumptions that we hold about market transactions. As a result of the new technology, different forces will come into play, providing both opportunities and challenges for market agents who will be forced to redesign their interactions with each other. While due to its novelty discussions have predominately centred on the technical aspects of the technology, it is important to recognise that the impending diffusion of Blockchains will challenge well-established theories, namely the Institutional Theory, Transaction Cost Theory, and Agency Theory. The aims of this paper are to understand how Blockchains will alter the forces involved in market transactions and fill gaps in comprehensive research within this area. Specifically, we aspire to uncover Blockchains’ potential implications to institutions and middlemen in an era where residual transaction costs are vast. The research highlights that Blockchains will dramatically reduce these transaction costs by extensively reducing the need for a middleman, creating significant issues for many service companies that act as transaction mediators. We also presented a discussion as to why we consider Blockchains semi-informal institutions and why Blockchains follow a very specific group of settings, that we coined as the Blockchain Market concept. We see this research in progress as a starting point for a new field of research that we term organisational democratisation, which embodies careful analysis of the effect on different institutional and organisational frameworks.
Keywords: Blockchains, Institutions, Middleman, Transaction Costs, Agency Theory, Bitcoin, Autonomous Organisations, Decentralization, Disintermediation
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