Blockchain utopia? Not so simple.

Blockchains are Governance

A Closer Look at the Innate Governance Models of Blockchain-based Technologies

By Matthew Prewitt

Traditional governance structures (public and private) look unprepared for our technologically-supercharged future. We need better governance for many reasons, not least because it is so vital to ensure that technology works for us, not against us. And blockchains matter because they will multiply the human capacity to govern.

The internet is communication. Blockchains are governance.

Conventional wisdom holds that Ethereum and other smart contract platforms enable “decentralization.” Yet it is often unclear what we are talking about decentralizing. (Nebulous terms like “systems” or “everything” do not answer the question.) What kind of activity, exactly, stands ripe for decentralization by smart contract-based systems?

A compelling answer is governance. We might say someday that blockchains did to governance what the internet did to communication.

Why? To begin with, note the structural parallels between blockchains and governing bodies. Like governments, blockchains are in the day-to-day business of recording events, verifying facts, and enforcing norms. Blockchains are hard to change, thus binding their users in the distant future — much like statutes, charters, and constitutions. Blockchains recognize and interact with special kinds of entities (e.g., addresses and smart contracts), placing those entities within an ecosystem of rules — just as governments do with legal persons. The analogy between governments and blockchains runs too deep to dismiss.

Nor will it remain a mere metaphor. Blockchains actually perform the core functions of governing bodies, and accordingly, will become important recorders, organizers, restrictors, and incentivizers of human activity. They will reach deep into our lives, influence our norms and behavior, and jurisdictionally overlap in ways that previous authorities could not. In short, they will usurp and remake the functions of public and private governing bodies.

Of course, I might be wrong. But I will try to show you why this big claim might be true. With apologies to Robin Hanson and Ralph Merkle, I will make my case from the bottom up, not the top down. In other words, rather than try to describe how blockchains might supplant complex governing bodies like corporations or governments, I will demonstrate that smart contracts could handle “miniature” governance problems — that is, very simple collective action problems. I will then leave it to the reader’s imagination how such smart contracts might combine and aggregate to form more complex governance structures.



Much careful work needs to be done in this area. But it is already possible to imagine well-designed blockchain-based processes leading to better decisions than parliaments and corporate boards.

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