Does Blockchain Need Governance?
Abstract: Permissionless (or public) blockchain networks provide a new form of decentralized private governance in the digital sphere. The unique nature of permissionless blockchain networks – especially that anyone can participate in them - means the polycentric balance of governance forces to which they are subject merits more granular analysis. We provide a comprehensive typology of the predominant forms of cryptocurrency blockchain governance and discuss their implications for the ongoing development of these novel organizational forms. In our typology, blockchain is governed by blockchain protocol, along with a set of subsidiary, competitive, and superior governance forces. Governance by code includes aspects of the constitution of blockchain. Governance forces subsidiary to the blockchain protocol include distinctions between discrete constituent groups like miners and users, and how protocol choices themselves lead to specific concentrations of power in practice. Moreover, cryptocurrency users have choice in terms of their digital tokens of value, as well as currencies and other liquid stores of value writ large, which means competitive forces also shape governance choices on a given cryptocurrency blockchain. Finally, blockchain is a polycentric enterprise: cryptocurrency users, participants, and exchanges are subject to a variety of governance forces that are superior to a given cryptocurrency network itself; any given individual playing one of those roles is subject to a variety of legal restrictions surrounding property, contract, tax and securities law in whatever jurisdiction they reside, at a minimum. In sum, permissionless blockchains are themselves a discrete form of governance but will nonetheless inevitably be subject to other processes of governance, both subsidiary and superior to the organization whose information is contained on the distributed ledger controlled by a given blockchain protocol.
