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Blockchain Governance

In a centralized system, the central authority possesses mostly all the governance rights that allow to shape the norms, rules, and the structure of the system. As the intermediary that offers the platform as a service, the central entity has the decision rights about the future development, applicable rules (e.g. costs or fees for users) or access requirements. Further, due to its intermediary position, a platform leader keeps the accountability for all decisions as it validates transaction, clarifies transaction errors, or enforces completed transactions.

In contrast, Blockchain technology is characterized by a decentralized network establishing trust without a third party. Here, previously agreed rules defined by smart contracts would autonomously enforce the handling of transactions and the alignment between all participants. Such systems can therefore offer potential advantages in governance. These benefits include greater decentralization, data integrity and transparency and at the same time increasing efficiency and reducing operating costs.

However, there is also a disadvantage in the logic of Blockchain. If an error occurs, for example in the smart contract, this error is also stored on all participating nodes in the network. This means that the protocol must be updated on all computers and this requires an agreement and consent on the protocol changes based on all network participants [1].



[1] Heines, R. (2020): A Classificatory Framework for Blockchain-based Applications

Begriff im Definitionsnetz

Begriff im Definitionsnetz

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