Bitcoin Governance as a Decentralized Financial Market Infrastructure

36 Pages Posted: 14 Apr 2020

See all articles by Hossein Nabilou

Hossein Nabilou

University of Amsterdam, Amsterdam Law School; The International Institute for the Unification of Private Law (UNIDROIT)

Date Written: March 16, 2020


Bitcoin is the oldest and most widely established cryptocurrency network with the highest market capitalization among all cryptocurrencies. Although bitcoin (with lowercase b) is increasingly viewed as a digital asset belonging to a new asset class, the Bitcoin network (with uppercase B) is a decentralized financial market infrastructure (dFMI) that clears and settles transactions in its native asset without relying on the conventional financial market infrastructures (FMIs). To be a reliable asset class as well as a dFMI, however, Bitcoin needs to have robust governance arrangements; whether such arrangements are built into the protocol (i.e., on-chain governance mechanisms) or relegated to the participants in the Bitcoin network (i.e., off-chain governance mechanisms), or are composed of a combination of both mechanisms (i.e., a hybrid form of governance).

This paper studies Bitcoin governance with a focus on its alleged shortcomings. In so doing, after defining Bitcoin governance and its objectives, the paper puts forward an idiosyncratic governance model whose main objective is to preserve and maximize the main value proposition of Bitcoin, i.e., its censorship-resistant property, which allows participants to transact in an environment with minimum social trust. Therefore, Bitcoin governance, including the processes through which Bitcoin governance crises have been resolved and the standards against which the Bitcoin Improvement Proposals (BIPs) are examined, should be analyzed in light of the prevailing narrative of Bitcoin as a censorship-resistant store of value and payment infrastructure. Within such a special governance model, this paper seeks to identify the potential shortcomings in Bitcoin governance by reference to the major governance crises that posed serious threats to Bitcoin in the last decade. It concludes that the existing governance arrangements in the Bitcoin network have been largely successful in dealing with Bitcoin’s major crises that would have otherwise become existential threats to the Bitcoin network.

Keywords: Bitcoin, Cryptocurrency, Blockchain, Governance, Censorship resistance

JEL Classification: E42, E51, E58, G01; G23; G28; K22; K23, K24

Suggested Citation

Nabilou, Hossein, Bitcoin Governance as a Decentralized Financial Market Infrastructure (March 16, 2020). Available at SSRN: or

Hossein Nabilou (Contact Author)

University of Amsterdam, Amsterdam Law School ( email )

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Amsterdam, Noord-Holland 1001 ND


The International Institute for the Unification of Private Law (UNIDROIT) ( email )

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