Blockchain Disables Real-World Governance

Hitoshi Matsushima

No 1017, KIER Working Papers from Kyoto University, Institute of Economic Research

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.

Keywords: Blockchain; Smart Contract; Cartelization; Economic Governance; Non- Judicial Mechanism; Implementation (search for similar items in EconPapers)
JEL-codes: D44 D82 D86 G20 L86 (search for similar items in EconPapers)
Pages: 20pages
Date: 2019-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Blockchain Disables Real-World Governance (2019)
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