Blockchain networks as constitutional and competitive polycentric orders

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.

Government by Code? Blockchain Applications to Public Sector Governance

“…Evidence of the ways that blockchains can benefit from the law is informed by research on ways cryptocurrency regulations improve opportunities for users (Whitford and Anderson, 2021) and analysis of the evolving body of negotiation and enforcement law for blockchains that parallels conventional negotiation law (Allen et al, 2019b). This polycentric view thus sees the performance of any given blockchain as depending on rules internal to a network, those external to it, and competitive pressures and exit options that arise from the overall environment within which blockchains are operating (Alston et al, 2022).…”

Blockchain Networks as Knowledge Commons

“…One theme in Ostromian research on blockchains is their diversity, including differences among public (or permissionless) blockchains, such as cryptocurrencies like Bitcoin and Ethereum (Alston et al, 2022), the tremendous diversity of alternative ways of organizing blockchain networks (Allen, Berg, et al, 2021), and the significance of Ostromian analysis for empirically analyzing the extent to which blockchain networks are self-governing (Bodon et al, 2022). It also recognizes that broad typologies of blockchains, such as public versus private, cannot capture the diversity of blockchain governance within each category, as well as similarities common to public and private blockchains.…”

“…Still, Bitcoin's decentralized character does not eliminate concentrations of power in developers, investors, programmers, and miners with more computing power. Bitcoin's network has been described as operating like a cooperative managed by a small group of individual leaders (core developers and investors) whose decisions ultimately govern the service provided (Alston et al, 2022).…”

“…Blockchains are distributed, append-only ledgers that uniquely combine features of governments, firms, and commons (Davidson et al, 2018). Recent research on blockchain governance, informed by Ostrom's (2005) studies of commons, share the view that blockchain networks require governance and that a diversity of governing arrangements characterizes blockchain networks (Alston et al, 2022). Despite this burgeoning recent research on blockchain governance, there remain questions as to how to analyze the diversity of blockchain networks from the perspective of commons governance.…”

Political, economic, and governance attitudes of blockchain users

“…While we cannot recount all the major positions here (some of which are reflected in the survey itself; see "Methodology"), there is a broad distinction between approaches that emphasize on-chain governance and those that emphasize off-chain governance. A number of academic analyses have studied these different approaches to blockchain governance (Reijers et al, 2016;Zwitter and Hazenberg, 2020;Hofman et al, 2021;Honkanen et al, 2021;Liu et al, 2021;van Pelt et al, 2021;Alston et al, 2022), along with a vastly greater number of industry manifestos and opinion pieces (Szabo, 1996;Zamfir, 2019).…”