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Blockchain Disables Real-World Governance

Hitoshi Matsushima

No CARF-F-459, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This study indicates that the improper uses of a public blockchain disable real-world governance in organizations and marketplaces. By using any basic application of smart contracts, such as escrow transactions, along with a revelation mechanism outside the blockchain, individuals can execute illegal cartel acts in a self-enforcing and non-judicial manner. Cartel members can then implement collective deviations without help from trusted intermediaries or any requirements on reputation or word-of-honor. We show that a first price auction is vulnerable to cartel threats even if the seller can hide bidders’ prices because bidders take a countermeasure to hidden prices by using blockchain.

New Economics Papers: this item is included in nep-des and nep-pay
Date: 2019-05
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Working Paper: Blockchain Disables Real-World Governance (2019) Downloads
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