Eric Alston (Finance Division, University of Colorado Boulder), Wilson Law (Baylor University),
Ilia Murtazashvili (University of Pittsburgh – Graduate School of Public and International Affairs), and Martin B. H. Weiss (University of Pittsburgh – School of Computing and Information) have posted “Blockchain Networks as Constitutional and Competitive Polycentric Orders” on SSRN. Here is the abstract:
Permissionless blockchains have been described as a novel institutional building block for voluntary economic exchange, with unique protocol features such as automated contract execution, high levels of network and process transparency, and uniquely distributed governance. We argue that conventional institutional economics analysis of blockchain networks is incomplete absent a more robust application of descriptive polycentric analysis. Though the distributed governance that permissionless blockchain protocols provide is novel, these networks nonetheless require ongoing coordination between stakeholders and are subject to competitive pressures much like other private organizations pursuing similar goals for a set of users who can choose among providers. We characterize change on blockchain networks as resulting from internal sources and external sources. These internal sources include constitutional (protocol) design and the related need for collective choice processes to update protocols. In addition to law and regulation, competitive pressure is itself a critical external source of governance. Predominantly through analysis of two leading cryptocurrency networks, Bitcoin and Ethereum, we illustrate how conceptualizing of blockchain as a polycentric enterprise enhances our predictive and descriptive understanding of these networks.