Blockchain Networks as Constitutional and Competitive Polycentric Orders

33 Pages Posted: 19 Jul 2021 Last revised: 24 Nov 2021

See all articles by Eric Alston

Eric Alston

Finance Division, University of Colorado Boulder

Wilson Law

Baylor University

Ilia Murtazashvili

University of Pittsburgh - Graduate School of Public and International Affairs

Martin B. H. Weiss

University of Pittsburgh - School of Computing and Information

Date Written: July 15, 2021

Abstract

Institutional economists have analyzed permissionless blockchains as a novel institutional building block for voluntary economic exchange and distributed governance, with their unique protocol features such as automated contract execution, high levels of network and process transparency, and uniquely distributed governance. But such institutional analysis needs to be complemented by polycentric analysis of how blockchains change. We characterize such change as resulting from internal sources and external sources. Internal sources include constitutional (protocol) design and collective-choice processes for updating protocols, which help coordinate network participants and users. External sources include competitive pressure from other cryptocurrency networks. By studying two leading networks, Bitcoin and Ethereum, we illustrate how conceptualizing blockchains as competing and constitutional polycentric enterprises clarifies their processes of change.

Keywords: Blockchain, Bitcoin, Governance, Cryptocurrency, Polycentricity, Constitutional governance, Competitive governance, Institutional analysis, Digital currency, Organizations

JEL Classification: B52, P48

Suggested Citation

Alston, Eric and Law, Wilson and Murtazashvili, Ilia and Weiss, Martin B. H., Blockchain Networks as Constitutional and Competitive Polycentric Orders (July 15, 2021). Available at SSRN: https://ssrn.com/abstract=3887701 or http://dx.doi.org/10.2139/ssrn.3887701

Eric Alston (Contact Author)

Finance Division, University of Colorado Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

Wilson Law

Baylor University

Ilia Murtazashvili

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

Pittsburgh, PA 15260-0001
United States

Martin B. H. Weiss

University of Pittsburgh - School of Computing and Information ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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