Decentralized Governance of Blockchain Platforms

58 Pages Posted: 19 Mar 2020

See all articles by Yan Chen

Yan Chen

Stevens Institute of Technology - School of Business

Igor Pereira

Florida State University - College of Business

Pankaj Patel

Villanova University - School of Business

Date Written: March 12, 2020

Abstract

Over the past decade, the rise of blockchain technology has led to the emergence of a growing number of decentralized platforms that are governed less by platform owners and more through community efforts. The emergence of blockchain platforms offers a unique opportunity to examine alternative structures for platform governance and to develop a theory around the value of centralized, semi-decentralized, and decentralized governance. Drawing on mechanism design theory, we evaluate the tradeoffs between centralization and decentralization and hypothesize semi-decentralization as a higher-performing governance structure. Empirical evidence from the blockchain industry shows that decentralization has an inverted U-shaped relationship with platforms’ market capitalization, developer attention, and development activity. We further examine factors driving the decentralization of platform governance and find that digital platforms of the infrastructure layer—relative to those of the application layer—have a tendency to become more decentralized. This tendency, nevertheless, can be offset by experienced leaders to achieve semi-decentralization. Overall, this study contributes new insights on the characteristics, antecedents, and consequences of effective platform governance.

Keywords: platform governance; shared governance; decentralization; digital platform; mechanism design; blockchain; bitcoin; ethereum; ripple; libra

Suggested Citation

Chen, Yan and Pereira, Igor and Patel, Pankaj, Decentralized Governance of Blockchain Platforms (March 12, 2020). Stevens Institute of Technology School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=3553382

Yan Chen (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Igor Pereira

Florida State University - College of Business ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States

Pankaj Patel

Villanova University - School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States

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