When Permissioned Blockchains Deliver More Decentralization Than Permissionless

Abstract

Permissionless blockchain systems inspired by Bitcoin and related crypto-ecosystems are frequently promoted as the enablers of an open, distributed, and decentralized ideal. They are hailed as a solution that can “democratize” the world by creating a technological imperative favoring open, distributed, and decentralized systems, platforms, and markets. We argue that such claims and expectations, while they may be fulfilled under certain circumstances, are generally exaggerated and often misguided. They illustrate a penchant to associate open access with decentralized control in distributed architectures, an association that while possible is far from guaranteed. When enterprise, social and economic activities are “put on the blockchain” in order to avoid centralized control, permissioned governance may offer a more decentralized and more predictable outcome than open permissionless governance offers in practice..

Keywords: blockchain, governance, decentralization, open-access, permissioned, permissionless

JEL Classification: O3