Can Permissionless Blockchains Avoid Governance and the Law?

Government by Code? Blockchain Applications to Public Sector Governance

“…This is because all provisions are coded into the contract, with execution triggered by real-world data that cannot be manipulated by the contracting parties (De Filippi et al, 2021). In this regard, blockchains promise complete contracting, especially with reference to permissioned (or private) blockchains (Alston et al, 2021). Distributed autonomous organizations (DAOs) further reduce reliance on traditional corporate governance or trusted third parties, as transactions recorded in the blockchain are typically immutable (Werbach and Cornell, 2017).…”

“…Polycentricity is thus a general feature of blockchains (Alston et al, 2021). Any given blockchain network tends to be nested in higher levels of rules and regulations (Frolov, 2021).…”

Blockchain Networks as Knowledge Commons

“…Another Ostromian theme is polycentricity of blockchain networks, including the ways in which "external" rules (laws and regulations) influence any given network's performance (Alston et al, 2021), how quality and feature competition enable users to shop across blockchains to find the one(s) that have characteristics most suitable for their preferred transaction(s) (Alston, Forthcoming), the dynamics of entry and exit from blockchains (Berg and Berg 2020), and the ways that disputes are resolved (Howell & Potgieter, 2021). Additional research highlights resolution of disputes on blockchains (Allen, Lane, and Poblet 2019), including conflict arising from reliance on oracles to interface between the real world of data based on human behavior and the algorithmic world of blockchains (Poblet et al, 2020), and the internal dynamics governing choice of protocols to govern blockchain networks (Cowen, 2019).…”

“…Innovation opportunities depend in part on what regulators and the law enable. Alston et al (2021) refer to this aspect of blockchain networks as superior governance, which refers how blockchains relate to the legal and regulatory apparatus in a nested, polycentric enterprise. In this context, "superior" refers to governance institutions external to blockchains, though in polycentric systems, the divide between external and internal rules is often less important than the interaction between rules arising from a given blockchain network and those which are enforced primarily by governments.…”

“…Contract law is evolving to recognize that transactions on blockchains, including those involving Bitcoin, are legally binding, though for that to occur, it is necessary for the law to say so (Werbach & Cornell, 2017). As to tax law, Bitcoin mining is likely a taxable activity, but principles and practices for applying tax law is unsettled (Alston et al, 2021). Securities law, so far, has not posed a regulatory hurdle for Bitcoin, but the character of the intersection between cryptocurrency and securities law depends largely on how the blockchain application is used, such as in connection with investing activity (Mendelson, 2019).…”