Open-Source or Open-Slather? Governing Blockchain Applications as Common-Pool Resources

44 Pages Posted: 29 Jul 2019

See all articles by Bronwyn E. Howell

Bronwyn E. Howell

Victoria University of Wellington - School of Management

Petrus H. Potgieter

University of South Africa (UNISA); Institute for Technology and Network Economics

Bert M. Sadowski

Eindhoven University of Technology (TUE)

Date Written: July 26, 2019

Abstract

In the paper, we extend the constitutional catallaxy view of governance on distributed knowledge system (DKS) by including human decision-making concerning ownership and governance of distributed ledger systems (DLS). This allows us to distinguish between institutions that are separate and distinct from ownership and control of the digital elements of the system. We propose that DLS are a specific form of common-pool resource or club good, depending upon whether the DLS is (respectively) permissionless (i.e. anyone or any entity can participate at any level of the institution) or permissioned (i.e. specific criteria must be met to participate in particular areas of institutional decision-making).

Using a polycentric analytic approach and positivist case studies, we conclude that despite promises of decentralised governance of DLS, effective control will be held by a small number of powerful centralised stakeholders determining system software content. Typical DLS end-users exert no greater governance control than customers exercise over the firms they do business with, or the beneficiaries of charities exercise over the trustees. However, permissioned systems with associated formalised governance arrangements typically confer greater decision-making power on node operators than permissionless systems, where higher costs of successful forking increase the larger is the number of nodes, making changes to software-encoded governance rules less likely to occur, even when this may be in end-users’ interests.

Keywords: blockchain, distributed ledger, polycentric governance, club governance, distributed consensus

JEL Classification: L14, L29, L30, L86

Suggested Citation

Howell, Bronwyn E. and Potgieter, Petrus H. and Sadowski, Bert M., Open-Source or Open-Slather? Governing Blockchain Applications as Common-Pool Resources (July 26, 2019). TPRC47: The 47th Research Conference on Communication, Information and Internet Policy 2019, Available at SSRN: https://ssrn.com/abstract=3427166 or http://dx.doi.org/10.2139/ssrn.3427166

Bronwyn E. Howell

Victoria University of Wellington - School of Management ( email )

Wellington 6001
New Zealand
+64 4 463 5563 (Phone)
+64 4 463 5566 (Fax)

Petrus H. Potgieter (Contact Author)

University of South Africa (UNISA) ( email )

P.O. Box 392
UNISA
Pretoria, Gauteng 0003
South Africa
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Institute for Technology and Network Economics ( email )

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South Africa

HOME PAGE: http://www.itne.eu

Bert M. Sadowski

Eindhoven University of Technology (TUE) ( email )

PO Box 513
Eindhoven, 5600 MB
Netherlands
0031402475510 (Phone)

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