Is Blockchain the Next Step in the Evolution Chain of [Market] Intermediaries?

20 Pages Posted: 29 Jul 2019

See all articles by Marcela Gomez

Marcela Gomez

University of Pittsburgh - School of Information Sciences

Pedro Bustamante

University of Pittsburgh - School of Information Sciences, Students

Martin B. H. Weiss

Ilia Murtazashvili

University of Pittsburgh - Graduate School of Public and International Affairs

Michael J. Madison

University of Pittsburgh - School of Law

Wilson Law

Baylor University

Tymofiy Mylovanov

University of Pittsburgh - Department of Economics

Herminio Bodon

University of Pittsburgh

Prashabnt Krishnamurthy

University of Pittsburgh

Date Written: July 26, 2019

Abstract

The blockchain is a decentralized solution for handling transactions where we are concerned (among other aspects) with the accuracy and verification of transactions. One of its main promises is to eliminate the need for centralized entities or intermediaries and legal enforcement. Rather than trusting self-interested human intermediaries, the blockchain provides an alternative that relies on transparent computational protocols (Werbach 2018).

In this paper, we delve into this broker-less claim and analyze whether the blockchain needs an intermediary to allow for widespread access to its functionality and whether the blockchain itself is an intermediary. The latter would turn the blockchain into a new type of middleperson that constitutes a shift in trust from humans or traditional agents to computer code. In other words, the next step in the evolution chain of intermediaries from humans to machines.

The overall goal of this paper is to get the discussion started on the relationship between the blockchain and intermediaries so that we can think of plausible policy, governance, and regulatory measures to address the shortcomings and increase the opportunities for the widespread adoption of the blockchain technology in its different areas of impact. We begin by providing an overview of the workings of the blockchain before shifting our focus to an economic analysis of blockchain, where we argue that the economics literature has yet to explicitly consider blockchain as a transformative intermediary. We then explore situations in which the blockchain acts as a middleperson, as well as those where it requires an intermediary. We conclude by reflecting on the different issues that the blockchain-intermediary link entails in the policy domain.

Keywords: Blockchain, Market Intermediaries, Middleperson Theory

Suggested Citation

Gomez, Marcela and Bustamante, Pedro and Weiss, Martin B. H. and Murtazashvili, Ilia and Madison, Michael J. and Law, Wilson and Mylovanov, Tymofiy and Bodon, Herminio and Krishnamurthy, Prashabnt, Is Blockchain the Next Step in the Evolution Chain of [Market] Intermediaries? (July 26, 2019). Available at SSRN: https://ssrn.com/abstract=3427506 or http://dx.doi.org/10.2139/ssrn.3427506

Marcela Gomez (Contact Author)

University of Pittsburgh - School of Information Sciences ( email )

United States

Pedro Bustamante

University of Pittsburgh - School of Information Sciences, Students ( email )

United States

Ilia Murtazashvili

University of Pittsburgh - Graduate School of Public and International Affairs ( email )

Pittsburgh, PA 15260-0001
United States

Michael J. Madison

University of Pittsburgh - School of Law ( email )

3900 Forbes Ave.
Pittsburgh, PA 15260
United States
412-648-7855 (Phone)
412-648-2648 (Fax)

Wilson Law

Baylor University

Tymofiy Mylovanov

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh
United States

Herminio Bodon

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

Prashabnt Krishnamurthy

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

No contact information is available for Martin B. H. Weiss

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