Blockchain as an Institutional Technology: A Conceptual Framework Examining Technical and Social Coordination Mechanisms in Blockchain Systems

Abstract

A blockchain is a shared distributed ledger with an immutable record of all the collectively validated transactions in a distributed network. Blockchain can be examined as an institutional innovation as well as a technological one. Blockchain can be seen as a governance technology and a new way of coordinating economic activity. The main function of a governance system in blockchain is to define how to make changes to a protocol that strives to be immutable, decentralized and self-executing. The fundamental properties of blockchain should also be realized on the social governance level as well as the operational level for the maximum benefits of the system to be realized.

This thesis builds a conceptual framework that describes blockchain systems from the functional components on the technical level to the social coordination mechanisms on the governance level. This thesis examines the technical side of blockchain by analysing and synthesising existing conceptual frameworks and the social governance side by analysing the institutional rules in four major blockchain implementations that represent a wide variety of different types of blockchains. As the foundation of our analysis we used the SES and IAD frameworks from institutional economics.

The blockchains we examined demonstrated a variety of different innovative technical and social coordination mechanism and configurations that realize the foundational properties of blockchains such as decentralized governance and formalizing governance as code on the blockchain. This study builds pragmatic understanding of the importance and implications of governance in blockchain and sheds new light to blockchain as an institutional technology.