Blockchain Disruption and Smart Contracts

52 Pages Posted: 12 Mar 2018

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: March 2018


Blockchain technology provides decentralized consensus and potentially enlarges the contracting space using smart contracts with tamper-proofness and algorithmic executions. Meanwhile, generating decentralized consensus entails distributing information which 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 anti-trust policy implications targeted to blockchain applications, such as separating consensus record-keepers from users.

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Suggested Citation

Cong, Lin and He, Zhiguo, Blockchain Disruption and Smart Contracts (March 2018). NBER Working Paper No. w24399. Available at SSRN:

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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