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(De)centralization in the governance of blockchain systems: cryptocurrency cases

Author

Listed:
  • Kyungmoo Heo

    (Dong-Ah Institute of Media and Arts)

  • Sangyoon Yi

    (Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology (KAIST))

Abstract

Initially conceived as a security technology, blockchain technology has since gained global interest by spawning decentralized, participatory and trusted network systems. However, despite the great advantages it offers, which have attracted many entrepreneurs and investors, there is growing concern about the intertwined relationship between technology and human governance within a blockchain-related system. This paper aims to discuss the various organizational and technological elements of governance of 10 selected cryptocurrency blockchain systems, focusing on whether their operation and adaptation are (de)centralized. Our analysis shows that the selected cryptocurrency systems are mostly decentralized on the technological aspects. The algorithms or protocols, based on which the systems function, utilize adjacent data or information available in its proximity, located within a single block, and there is no pre-programmed intervention protocol (as a centralized control) to manage conflicts and unexpected situations. In the consensus process, however, some algorithms utilize information distributed throughout the entire network, giving the system a centralized nature. On the other hand, the organizational aspects of their governance are largely centralized. The right or authority to make important decisions (e.g., modification of rules or algorithms) often lies in the hands of a small number of individuals (such as founders). Participation in managerial decision-making is not afforded to every participant of the blockchain system as well. When unforeseen problems occur, problem-solving coordination is usually based on centralized, top-down control and monitoring. We complete our analysis with a discussion on the origins and implications of the dual nature of the governance of cryptocurrency blockchain systems.

Suggested Citation

  • Kyungmoo Heo & Sangyoon Yi, 2023. "(De)centralization in the governance of blockchain systems: cryptocurrency cases," Journal of Organization Design, Springer;Organizational Design Community, vol. 12(3), pages 59-82, September.
    • Handle: RePEc:spr:jorgde:v:12:y:2023:i:3:d:10.1007_s41469-023-00138-w
    DOI: 10.1007/s41469-023-00138-w
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