Decentralized Network Governance: Blockchain Technology and the Future of Regulation

Abstract

Advancements in the digital domain, for example, in blockchain technology, big data, and machine learning, are increasingly shaping the lives of individuals, groups, organizations, and societies. These developments call for effective governance to protect the basic interests and needs of these actors. Simultaneously, the very nature of governance is also changing. Policy-making is increasingly moving away from top-down governance by the state toward more horizontal modes of governance. This paper reviews the literature on governance theory in order to conceptualize governance as a mode of decentralized, networked regulation. We argue that the current dominant modes of governance are inadequate in understanding governance in the digital domain and are poorly equipped to conceptualize novel forms of governance such as decentralized autonomous organizations (DAOs). Therefore, this study proposes a new mode of governance based on the regulation of new power relationships between the state and actors in the digital domain. This model further explores the role that blockchain technology can play in what we term decentralized network governance.

Decentralized Autonomous Organization

“…Various authors have pointed out that DAOs could be used to further economic and political decentralisation in ways that may enable a more democratic and participatory form of governance (Swan, 2015;Atzori, 2015;Allen et al, 2017;Tapscott & Tapscott, 2017). However, as the limitations of blockchain-based governance came into light, especially in the aftermath of the aforementioned TheDAO hack (DuPont, 2017;Reijers et al, 2018;Mehar et al, 2019), the public discourse around DAOs has shifted from describing DAOs as a technical solution to a governance problem (Jentzsch, 2016;Voshmgir, 2017) to a discussion on how DAOs could change the nature of economic and political governance in general (Davidson et al, 2016;Beck et al, 2018;Zwitter & Hazenberg, 2020;De Filippi et al, 2020).…”

A fork in the road: Perspectives on sustainability and decentralised governance in digital institutions

“…Hsieh et al also recognise that governance of blockchain-based networks and organisations can happen in various ways; by decentralised communities, by centralized corporations, or jointly by both as hybrids (Hsieh et al, 2018: 50). Further to this, Zwitter and Hazenberg (2020) show how decentralised network governance can take three forms: (1) platform strategy, (2) private strategy and (3) legal strategy (Zwitter and Hazenberg, 2020: 9). In scenario (1), on-and off-chain stakeholders interact, and off-chain parties -with state support -can influence on-chain activity.…”

The Dissensus Protocol: Governing Differences in Online Peer Communities

“…Consensus algorithms, voting, staking, and forking are broadly understood to be the way governance is actualized in and enabled by blockchain technology (Pelt et al, 2021). These point to a general understanding that governance occurs in an "official capacity"-that is, governance is actions that can be recorded, and that once enacted, are what drives change in the system (Zwitter and Hazenberg, 2020;Pelt et al, 2021). These mechanisms largely work "on-chain," which means that their actions take place on the given blockchain, and what is decided as a consequence of these actions is immutable (or at least until the next governance action overrules it).…”