Daniel Ferreira , London School of Economics, CEPR and ECGI Jin Li , Hong Kong University, CEP Radoslawa Nikolowa , Queen Mary University of London
January 22, 2019
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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.
J.E.L classification codes: G30, L13, M20
Keywords:Governance, Blockchain, Proof-of-Work, Industrial Ecosystem