Blockchain: The Birth of Decentralized Governance

Pompeu Fabra University, Economics and Business Working Paper Series, 1608

38 Pages Posted: 11 May 2018

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Luis Garicano

IE Business School; Centre for Economic Policy Research (CEPR)

Date Written: April 10, 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 out-compete 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 Classification: D23, L12, L22, L86

Suggested Citation

Arruñada, Benito and Garicano, Luis, Blockchain: The Birth of Decentralized Governance (April 10, 2018). Pompeu Fabra University, Economics and Business Working Paper Series, 1608. Available at SSRN: https://ssrn.com/abstract=3160070 or http://dx.doi.org/10.2139/ssrn.3160070

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Luis Garicano

IE Business School ( email )

Calle María de Molina, 11
Madrid, 28006
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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