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.