DP13493 Corporate Capture of Blockchain Governance

Author(s):	Daniel Ferreira, Jin Li, Radoslawa Nikolowa
Publication Date:	January 2019
Keyword(s):	blockchain, governance, Industrial Ecosystem, Proof-of-Work
JEL(s):	G30, L13, M20
Programme Areas:	Financial Economics, Industrial Organization
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13493

We develop a theory of blockchain governance. In our model, the proof-of-work system, which is the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the two-way interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. Our main result is that the proof-of-work system leads to a situation where the governance of the blockchain is captured by a large firm.