Blockchain: the Birth of Decentralized Governance

Benito Arruñada (Pompeu Fabra University and Barcelona GSE)
Luis Garicano (IE Business School, London School of Economics and)

Abstract: By allowing networks to split, decentralized blockchain platforms protect members against hold up, but hinder coordination, given that adaptation decisions are ultimately decentralized. The current solutions to improve coordination, based on “premining” cryptocoins, taxing members and incentivizing developers, are insufficient. For blockchain to fulfill its promise and outcompete centralized firms, it needs to develop new forms of “soft” decentralized governance (anarchic, aristocratic, democratic, and autocratic) that allow networks to avoid bad equilibria.

Download the paper