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Blockchain as an Economic Optimization Problem: Value, the Firm and the Limits of Decentralization

In: Disintermediation Economics

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  • Dimitrios Psarrakis

    (European Parliament)

Abstract

The technological change that blockchain brings to the economy is not Hicks-neutral. Different choices in the architecture design of a DLT generate different organizational settings and market structures. There is a blockchain organizational continuum that includes blockchain-enabled, blockchain-complete and decentralized-enhanced organizational settings. How far a firm will go into this continuum, is a function of the existing computational capabilities, the architectural efficiency that generates value, as well as transaction and network coordination costs. Though we cannot predict the qualitative and quantitative characteristics of the blockchain adoption and diffusion over time, we believe that any approximation to a blockchain-enhanced organization is constrained by four behavioural and strategic factors: (1) ownership behaviour persists in blockchains, (2) incomplete contracts persist in blockchains, (3) blockchains cannot sustain consensus in perpetuity and (4) short-term behaviours in a blockchain are not necessarily aligned with long-term goals of the economic agents.

Suggested Citation

  • Dimitrios Psarrakis, 2021. "Blockchain as an Economic Optimization Problem: Value, the Firm and the Limits of Decentralization," Springer Books, in: Eva Kaili & Dimitrios Psarrakis (ed.), Disintermediation Economics, edition 1, chapter 0, pages 17-31, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-65781-9_2
    DOI: 10.1007/978-3-030-65781-9_2
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