Rent Seeking in Blockchain Governance: The Awkward Transition From Market Decision Making to Non-market Decision Making

18 Pages Posted: 1 Apr 2021

Date Written: March 8, 2021

Abstract

Blockchains and applications built on blockchains are decentralised ecosystems that are nonetheless built by centralised firms. The typical launch and maturity of a blockchain ecosystem involves the transition from an entrepreneurial institutional arrangement characterised by market decisionmaking to a decentralised one characterised by non-market decisionmaking. This paper considers how to assess rentseeking in the context of blockchain governance. Rentseeking in blockchain implementations and ecosystems occurs when participants seek rewards or privileges in excess what would be considered a market contribution after a certain threshold of decentralisation. The paper considering two controversies in blockchain governance – the Zcash founders’ reward and the SushiSwap developer fund – which involved the intertwining of mechanisms to fund public goods with mechanisms to compensate founders for their entrepreneurial effort. The paper finds that the normative ideal of decentralisation in blockchain governance has a parallel function to the normative ideal of liberal governance in political systems.

Keywords: blockchain, rentseeking, governance

JEL Classification: h41, d71

Suggested Citation

Berg, Chris, Rent Seeking in Blockchain Governance: The Awkward Transition From Market Decision Making to Non-market Decision Making (March 8, 2021). Available at SSRN: https://ssrn.com/abstract=3801103 or http://dx.doi.org/10.2139/ssrn.3801103

Chris Berg (Contact Author)

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

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