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The governance of blockchains and system based on distributed ledger technology

Author

Listed:
  • Carlo Gola

    (Bank of Italy)

  • Valentina Cappa

    (Bank of Italy)

  • Patrizio Fiorenza

    (Bank of Italy)

  • Paolo Granata

    (Bank of Italy)

  • Federica Laurino

    (Bank of Italy)

  • Lorenzo Lesina

    (Bank of Italy)

  • Francesco Lorizzo

    (Bank of Italy)

  • Gabriele Marcelli

    (Bank of Italy)

Abstract

This paper deals with the governance of systems based on distributed ledger technology (DLT). This technology enables the creation of a shared electronic archive accessible via the internet, in which information is stored in a secure and irreversible manner. The updating and management of the ledger takes place without resorting to a trusted third party. The absence of traditional organizational and governance structures makes DLT management complex. The work provides the tools to understand DLT technology and analyzes its governance, both for open (permissionless) systems and for those with limited access (permissioned). Different approaches are suggested for the application of governance rules, including for DLT with entirely algorithmic governance. The study shows that the creation of tools known as governance tokens, which incorporate administrative and property rights, facilitates the management and control processes of DLTs. Finally, the governance structure of two DLTs is described: Ethereum and Polkadot.

Suggested Citation

  • Carlo Gola & Valentina Cappa & Patrizio Fiorenza & Paolo Granata & Federica Laurino & Lorenzo Lesina & Francesco Lorizzo & Gabriele Marcelli, 2023. "The governance of blockchains and system based on distributed ledger technology," Questioni di Economia e Finanza (Occasional Papers) 773, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_773_23
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2023-0773/QEF_773_23.pdf
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    References listed on IDEAS

    as
    1. Williamson, Oliver E., 1999. "The Mechanisms of Governance," OUP Catalogue, Oxford University Press, number 9780195132601.
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    3. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    4. Hassan, Samer & De Filippi, Primavera, 2021. "Decentralized Autonomous Organization," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 10(2), pages 1-10.
    5. Carlo Gola & Andrea Caponera, 2019. "Policy issues on crypto-assets," LIUC Papers in Economics 2019-7, Cattaneo University (LIUC).
    6. Oscar Borgogno, 2022. "Making Decentralized Autonomous Organizations (DAOs) fit for legal life: mind the gap," Questioni di Economia e Finanza (Occasional Papers) 718, Bank of Italy, Economic Research and International Relations Area.
    7. Carlo Gola & Johannes Sedlmeir, 2022. "Addressing the Sustainability of Distributed Ledger Technology," Questioni di Economia e Finanza (Occasional Papers) 670, Bank of Italy, Economic Research and International Relations Area.
    8. Paul Laat, 2007. "Governance of open source software: state of the art," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 11(2), pages 165-177, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    blockchain; DLT; corporate governance; algorithmic governance; governance token; crypto-asset; decentralised finance; banking and financial supervision;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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