The exchange theory of web3 governance (or ‘blockchains without romance’)

16 Pages Posted: 23 Sep 2022

See all articles by Jason Potts

Jason Potts

RMIT University

Darcy W E Allen

RMIT University

Chris Berg

RMIT University

Aaron M. Lane

RMIT University

Trent MacDonald

RMIT University; RMIT Blockchain Innovation Hub; ARC Centre of Excellence for Automated Decision-Making and Society

Date Written: September 5, 2022

Abstract

Blockchains have enabled innovation in distributed economic institutions, such as money (e.g. cryptocurrencies) and markets (e.g. DEXs), but also innovations in distributed governance, such as DAOs, and new forms of collective choice. Yet we still lack a general theory of blockchain governance. James Buchanan once described public choice theory as ‘politics without romance’ and argued instead for an exchange theory of politics. Following Buchanan, we argue here for an exchange view of blockchain governance. The ‘romantic’ view of blockchain governance is collective choice and consensus through community voting. The exchange view, instead, is focused on entrepreneurial discovery of opportunities for value creation in governance space through innovation in protocols (e.g. Curve, Convex, Lido, Metagov, etc) that facilitate exchange of coordination and voting rights, that are newly made possible through tools that enable pseudonymous, composable and permissionless governance actions. The exchange lens on web3 governance also helps illuminate how this emergent polycentric process can generate robustness in decentralised systems.

Keywords: blockchain, governance, public choice, innovation, entrepreneurship

JEL Classification: D02, D72, D82, H40, L26, O31

Suggested Citation

Potts, Jason and Allen, Darcy and Berg, Chris and Lane, Aaron M. and MacDonald, Trent, The exchange theory of web3 governance (or ‘blockchains without romance’) (September 5, 2022). Available at SSRN: https://ssrn.com/abstract=4209827 or http://dx.doi.org/10.2139/ssrn.4209827

Jason Potts (Contact Author)

RMIT University ( email )

Darcy Allen

RMIT University ( email )

440 Elizabeth Street
Melbourne, 3000
Australia

Chris Berg

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

Aaron M. Lane

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

HOME PAGE: http://https://www.rmit.edu.au/contact/staff-contacts/academic-staff/l/lane-dr-aaron

Trent MacDonald

RMIT University ( email )

124 La Trobe Street
Melbourne, VIC 3000
Australia

RMIT Blockchain Innovation Hub ( email )

106-108 Victoria Street
Carlton, VIC 3053
Australia

ARC Centre of Excellence for Automated Decision-Making and Society ( email )

106-108 Victoria Street
Carlton, VIC 3053
Australia

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