Journal of and / Volume 6, Issue 1, 2017

BLOCKCHAIN AND DECENTRALIZED GOVERNANCE: IS THE STATE STILL NECESSARY?

Marcella Atzori *

* Center for , University College of London, UK

Abstract

How to cite this paper: Atzori, M. The core technology of , the blockchain, has recently (2017). Blockchain Technology and Decentralized Governance: is the State emerged as a disruptive with a wide range of Still Necessary? Journal of Governance applications, potentially able to redesign our interactions in and Regulation, 6(1), 45-62. , politics and society at large. Although scholarly interest in http://dx.doi.org/10.22495/jgr_v6_i1_p5 this subject is growing, a comprehensive analysis of blockchain Copyright © 2017 The Author applications from a political perspective is severely lacking to date. This paper aims to fill this gap and it discusses the key points of This work is licensed under the Creative Attribution-NonCommercial blockchain-based decentralized governance, which challenges to 4.0 International License (CC BY-NC 4.0) varying degrees the traditional mechanisms of State authority, http://creativecommons.org/licenses/b citizenship and . In particular, the paper verifies to which y-nc/4.0/ extent blockchain and decentralized platforms can be considered as ISSN Online: 2306-6784 hyper-political tools, capable to manage social interactions on large ISSN Print: 2220-9352 scale and dismiss traditional central authorities. The analysis

Received: 28.12.2016 highlights risks related to a dominant position of private powers in Accepted: 05.02.2017 distributed , which may lead to a general disempowerment of citizens and to the emergence of a stateless JEL Classification: G18, G28, E5 DOI: 10.22495/jgr_v6_i1_p5 global society. While technological utopians urge the demise of any centralized institution, this paper advocates the role of the State as a necessary central point of coordination in society, showing that decentralization through algorithm-based consensus is an organizational theory, not a stand-alone political theory.

Keywords: Bitcoin, Blockchain, Decentralized Autonomous Organizations, Decentralization, Democracy, , Encryption, Governance, Politics, State, Peer-To-Peer Networks

“To push the antigovernment button is not to as a database that contains all the transactions ever teleport us to Eden. executed in a peer-to-peer network. It consists of a When the interests of are gone, other permanent, distributed digital ledger, resistant to interests take their place. tampering and carried out collectively by all the Do we know what those interests are? nodes of the system. The formidable innovation And are we so certain they are anything better?” introduced by this technology is that the network is Lawrence Lessig open and participants do not need to know or trust each other to interact: the electronic transactions 1. INTRODUCTION can be automatically verified and recorded by the nodes of the network through cryptographic 1.1 The Blockchain Technology and the Era of algorithms, without human intervention, central authority, point of control or third party (e.g. Trust-By-Computation. , banks, financial institutions or other organizations). Even if some nodes are unreliable, In a white paper published in November 2008, dishonest or malicious, the network is able to proposed Bitcoin as the first correctly verify the transactions and protect the electronic payment system based on a decentralized ledger from tampering through a mathematical peer-to-peer network, without the need for a trusted mechanism called proof-of-work, which makes third party. The core technology of this protocol, the human intervention or controlling authority blockchain, is widely acknowledged as a major unnecessary. breakthrough in fault-tolerant distributed The rationale for this protocol is the computing, after decades of research in this field. In decentralized trust or trust-by-computation and its overly concise terms, we can define the blockchain importance can hardly be overstated: indeed, it

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represents “a shift from trusting people to trusting protect its own interests more effectively, by math” (Antonopoulos, 2014), with applicability that replacing the traditional functions of State with goes far beyond the creation of decentralized digital blockchain-based services and decentralized, open currencies. source platforms (e.g. Bitcoin, Ethereum). Driven by As an irreversible and tamper-proof public the enthusiasm for the new possibilities offered by records repository for documents, contracts, , along with a profound , and assets, the blockchain can be used to dissatisfaction with the current political systems, embed information and instructions, with a wide they hence encourage citizens to be part of the range of applications. These include, for instance: blockchain and self-create their own smart contracts, namely automatized, self-executing systems of governance, in which centralization, actions in the agreements between two or multiple coercion and socio-political hierarchies are replaced parties; multi-signature transactions, which require by mechanisms of distributed consensus. the consent of multiple parties for their execution; Broadly speaking, the advocates of smart properties, namely digital ownership of decentralization tend to have in common the same tangible and intangible assets embedded to the dissociative attitude towards centralized institutions blockchain, which can be tracked or exchanged on and the State in particular, questioning its capacity the blockchain itself. to create added value (Paquet & Wilson 2015). The In these cases, the advantage of the blockchain dominant discourse mostly emerged through the consists of removing the need of a trusted third media, and generally dominated by IT specialists party (e.g. a notary) and enforcing the execution of and financial operators, sees governments “as instructions by a cryptographic code, with somewhat of an encumbrance – too slow, too protection of participants against risks of fraud and corrupt, too lacking in innovation, and benefiting a significant reduction of management overheads. too few” (Paquet & Wilson 2015, p. 21). It is Because of the remarkable advantages related to important to note, however, that there exists a automation, , auditability and cost- certain variety of positions towards to the role of the effectiveness, the blockchain may thus represent a State in the blockchain governance, and the dividing disruptive innovation for many varieties of contracts lines between of government and business activities. services, and even are often Other important applications of the blockchain blurred. include for example (Swan, 2015): the creation of Many enthusiasts simply promote the decentralized domain name system resistant to top- blockchain as a more efficient, decentralized and level domains censorship (e.g. ); consensus-driven public repository, which can have decentralized voting systems for tamper-proof a number of applications in order to make citizens ballots and election results (e.g. Bitcongress, less dependent on governments, yet within a society followmyvote.com); decentralized autonomous that is ultimately founded upon the State authority. organization/corporations/societies Techno-libertarians and crypto-anarchists hold (DAOs/DACs/DASs), namely self-sufficient agents instead a more extremist position. They are derived from artificial intelligence and capable to generally inclined to consider the State as an execute tasks without human involvement, for which illegitimate, unnecessary and irremediably obsolete the blockchain can provide additional functionality. depository of power, and they openly encourage the The fields of application of the blockchain use of the blockchain as a liberating force against paradigm are potentially countless, since it allows the very concept of authority. According to this the disintermediation of any digital transaction at view, we are at a stage in history when individuals global level. Accordingly, all kinds of business and can gradually overcome any centralized political human activities are expected to be reconfigured, institution through algorithm-based distributed with a pervasiveness similar to that of the Web consensus and create the conditions for an idealistic (Swan, 2015). For this very reason, the blockchain society of equals, characterized by flat, rather than has been described as fundamental for human hierarchical, structures. progress as the Magna Charta or the Rosetta Stone Although the view about the role of the State (Swan, 2015), and it is often referred to as a “Black may differ, a growing category of political Swan” – namely an accident of major impact in technopreneurs and evangelists of decentralization history that cannot be anticipated, creates surprise have already developed projects for the creation of to the observer and can only be rationalized by cryptonations – namely stateless, do-it-yourself hindsight (Taleb, 2007). governance services entirely based on the blockchain (e.g. Bitnation). The aim of this paper is to critically 1.2 The Emergence of Blockchain-Based examine such proposals, which challenge to varying Governance. degrees the traditional mechanisms of State authority, citizenship and democracy. The blockchain technology potentially allows We would point out that applications of individuals and communities to redesign their blockchain technology are still in a defining stage interactions in politics, business and society at large, and they represent an extremely fast-moving field, with an unprecedented process of disintermediation with little established theory, few recognized experts on large scale, based on automated and trustless and no easy answers. Scholar debate on this subject transactions. This process might rapidly change is still in its infancy and mostly dominated by even the tenets that underpin existing political technical, financial and legal issues related to systems and governance models, calling into Bitcoin. As a consequence, a comprehensive analysis question the traditional role of State and centralized of the impact of blockchain technology on political institutions. Indeed, many blockchain advocates governance and democracy at large is severely claim that the civil society could organize itself and lacking to date. We hope that our paper will increase

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the understanding of problems at stake and they are not exclusively attributable to a specific motivate further study and transdisciplinary author. research in this field, which certainly requires That said, the main principles of blockchain- careful consideration. based governance could be summarized as follows: This paper is organized as follows. After presenting the key principles and (a) Centralized organizations and the problem assumptions related to the blockchain-based of scale. governance (Section II), also in an historical Throughout history, centralized political perspective (Section III), we will assess risks and organizations like State, and benefits of a possible migration of government have been a solution to a services to blockchain-based platforms (Section IV). scaling problem. They have been mostly developed We will then verify the performance of blockchain for the purpose of reaching consensus and and decentralization platforms as hyper-political coordination between heterogeneous or distant tools, capable to manage social interactions on large groups of people, facilitating their mutual scale and dismiss any central political authority interactions. (Section V): the analysis will particularly focus on risks related to a dominant position of private (b) State as a Single Point of Failure (SPOF). powers in distributed ecosystems and on the Although they were built in response to specific possible emergence of a stateless global society. The historical necessities, organizations with top-down paper will also investigate whether and to which centralized coordination and hierarchical structures extent the blockchain governance can mitigate tend to be inherently inefficient: they are based on coercion, centralization and hierarchic structures in coercion and they may lack flexibility and capacity society (Section VI). Although the blockchain to evolve, providing inadequate responsiveness to governance is technically able to disrupt the idea of challenges and to the growing societal demands. In State, conclusions (Section VII) will show that it particular, governments are proved to be cannot be considered a standalone political theory. systematically exposed to significant risks, such as We wish to stress that the purpose of this lack of transparency, , regulatory capture, paper is not to advocate the idea of State a priori, as misuse of power and even regression into an immovable institution. We are aware that the , due to the concentration of power complexity of an increasing interconnected society in the hands of few. Which leads to the classic requires overcoming some limits of the -state, matter: quis custodiet ipsos custodes? (Who will watch and we are hence fully in agreement on the necessity the watchmen?). to promote citizens-based to A centralized authority in any hierarchical the greatest extent: in a true democracy indeed, organization can be defined in computer terms as a citizens should never be just passive recipients of Single Point of Failure (SPOF): if its functioning is not State paternalism (Paquet & Wilson, 2015). And yet, optimal, the whole system and its participants will even if the transformative power of the blockchain be negatively affected by it. Decentralization aims to on society cannot be overrated, an objective analysis reduce or prevent such concentration of power and of its political applications should not be prone it is a fundamental condition for citizens to achieve towards any technological determinism. On the political efficacy, equality, transparency, and contrary, proposals for new models of governance freedom. should be investigated with great care and critically assessed, especially against the risk to promote anti- (c) Distributed architecture and trust-by- political instruments or to conceive politics computation: “Code is ” according to mere market logic. Centralized vertical authority has become the main organizational model in society, simply 2. THE BLOCKCHAIN-BASED GOVERNANCE: because there has not been a better alternative so FUNDAMENTAL PRINCIPLES AND far. For the first time in history, citizens can now reach consensus and coordination at global level ASSUMPTIONS through cryptographically verified peer-to-peer procedures, without the intermediation of a third To date, a comprehensive discussion of possible party. The blockchain technology ushers in a new blockchain-based political models does not yet exist era of decentralization on large-scale, in which at academic level. Since a coherent and consistent human factor is minimized and trust shifts from the body of thought on this subject is missing, for the human agents of a central organization to an open purpose of our research we have collected source code. In such distributed architecture, “code information from a number of sources as accurately is law” (Lessig, 1999; Farmer, 2003): the protocol is as possible, though probably in a non-exhaustive open-source and it can be review by anyone; the manner. Swan (2015) represents a valuable point of network is not owned nor controlled by any single reference for our analysis, since the author offers a entity; data are simultaneously kept by all nodes, detailed and complete overview of possible thus ensuring proper redundancy. Neutrality of the applications of the blockchain technology, including code, distributed consensus and auditability of government services. Some of the assumptions, transactions can significantly reduce or overcome proposals and visions presented below have arisen frictions and failures inherent in decision-making through the within a growing global process of centralized organizations (e.g. lack of network of new technologies supporters, transparency, corruption, coercion, etc.). Many new practitioners and entrepreneurs; other ideas instead decentralized governance models and services can seem to be recurrent themes in conferences, blogs, therefore be implemented and experienced through forums and specialist websites, and for all we know

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the blockchain, without the oversight of (h) Futarchy: Voting for Values, While Betting On governments (Swan, 2015). Belief. Futarchy was proposed by economist Robin (d) Power of individuals and politics by instant, Hanson (2003) as an approach to public atomic interactions. policies. The system essentially consists on While the State bases its action on coercion, the prediction market speculating and betting through blockchain can provide governance services in a and tokens. Citizens first vote on more efficient and decentralized way, without specific political outcomes or targets, then on having to relying on force. This allows a more proposals for achieving them. Finally, they will gain horizontal and distributed diffusion of authority, in or lose tokens, depending of the acceptance or which the source of legitimacy are the individuals rejection of proposals. Discussed as a new possible themselves. Using the blockchain as a permanent, governance model based on Ethereum platform encryption-secured public record repository, (Buterin, 2014b; Swan, 2015), futarchy represents “a humans’ agents as representatives can be replaced quintessential example of the potential by smart contracts and Decentralized Autonomous transformative power of blockchain technology” Corporations (Swan, 2015). The collective (Swan 2015, p. 53). relationship between individuals and the State can About the role of State in the blockchain-based be fully or partially automated by instant, atomic governance, positions are different and may include: interactions (Buterin, 2014a). Under economic and political point of view, direct interactions and (i) A decentralized society still based upon the consensus-based models are more efficient than State authority. pooled-models, since they can provide citizens with To decentralize services through the blockchain a more representative and equitable way of does not mean to dismiss the State, but to foster interacting with reality (Swan, 2015). better governance. The blockchain is not meant to be a tool for promoting lawlessness or : the (e) A do-it-yourself, Starbucks-style public objective is rather to prevent the excessive administration. concentration of power in the hands of the few The blockchain can be used as a permanent (Andreas Antonopoulos, interviewed by Sparkes, public records repository to store all government 2014) and to make legal frameworks more granular legal documents – such as contracts, identification and tailored to the needs of citizens (Swan, 2015). cards, passports, lands deeds, etc. – in a cheaper, more efficient and decentralized way. Any user- (j) A new social contract, characterized by citizen can create his own blockchain nation with an Decentralized Autonomous Societies and the final entirely voluntary, do-it-yourself-public demise of the State. administration (Swan, 2015). Users can opt-in and With the diffusion of blockchain applications, it out at will in accordance with their needs, so will be finally possible for citizens to eliminate the government services can become more granular and need for centralized institutions and design a new “individualized as a Starbucks coffee orders” (Swan social contract based on consensus rather than 2015, p. 46). coercion, for a more transparent, autonomous and “Through simply downloading an app on your innovative global society. The new social contract , you can choose your code of law, your would include systems for decentralized preferred arbitration method, write a smart contract, communication and , as well as and get married, title your land, notarize a will, decentralized arbitration systems in order to resolve incorporate a company, get health , and conflicts through smart contracts, with rules much more, in just a few minutes for a couple of consented by the participants and compatible with dollars. It is backed by an ID and reputation system, common law or (letstalkbitcoin.com, dispute resolution, and an app library where people 2014; reddit.com, 2015). can upload and share or sell their own do-it-yourself In the end, blockchain-based voluntary services governance apps” (Bitnation-blog.com, 2015). will be make the State completely irrelevant and it will simply wither away because of lack of consent (f) Borderless, globalized government services. (Bitnation-blog.com, 2015). Society will be hence Blockchain-based services are able to overcome transformed into a blockchain-based, self- the geographical limits of nation states and uplift sustainable system, run by algorithms and free- their jurisdiction to a global cloud (Swan, 2015). market rules. Considering the growing mobility of individuals “I envisage a situation where governments between borders, one overall provider of aren’t necessary. That the free market will be able to government services is preferable to the current provide all the goods and services to secure your system, which is based on multiple nation states and life, and without having to rely on is therefore inefficient (Swan, 2015). coercion. That’s where this all ultimately leads. The end result is that governments will have less power (g) Systems of . than free markets. Essentially, the free market will Democracy can become more effective through be able to provide justice more effectively and more the direct participation of citizens in the decision- efficiently than the government can. If you think making process. The blockchain technology can about it, what is the reason for government? It’s a implement new models of participation, such as way of reaching global consensus over the theory of Liquid Democracy (http://liquidfeedback.org; Swan, right and wrong, global consensus over who’s guilty 2015) and random-sample elections. and who’s innocent, over who owns what. They’re going to be losing legitimacy as more open, transparent systems are able to provide that

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function without having to rely on force” (Daniel instance, at the very heart of Proudhon's social Larimer, interviewed by Sparkes, 2014). contract – as explained in the General Idea of the Revolution in the Nineteenth Century (1851). But (k) Franchulates. there are also other similarities interesting to note. With the full application of free market rules, The strong and the critic to the blockchain technology may allow the emergence centralized, hierarchical organizations; the State of franchulates, as in Neal Stephenson's novel Snow depicted as an outmoded instrument of oppression Crash (Swan, 2015). Franchulates are a combination and the idea of coercion as a source of all evil; the of “franchise” and “consulate”. In Stephenson's possibility for individuals to finally govern book, they consist of private corporations which themselves, disrupting the current political have replaced the State in all its functions, paradigms; and the gradual, spontaneous demise of competing to each other to provide goods and the state, once a vast majority of people will have services. In this self-regulating society, the reached a certain level of consciousness – all these is disrupted and citizens have no elements are rooted in the anarchic and rights; the State is reduced to a hollow entity with no in the determinism of the Marxist doctrine. real power; private companies behave as government According to , indeed, the State will not be agencies, and citizenship is reduced to business suddenly abolished, but it will simply “wither away”, membership and brand loyalty (Lipschutz, 2010). In once certain conditions are met – in this case, when this anarchic-capitalist scenario, “the citizen- the production processes will be reorganized by the costumer is king” (Lipschutz 2010, p. 92). workers according to principles of freedom and The blockchain technology has the potential to equality. At which point, the Marxism claims that transform our societies in something very similar to “all members of society, or at least a vast majority, Stevenson's vision. For its advocates, the core idea is [will] have learned to administer the state that central institutions should not maintain the themselves”, having reached a sufficient level of exclusive monopoly on government services: they maturity and political consciousness, and they “will should rather act more as , following put the whole state machinery where it will then market rules and offering value propositions and belong–into the museum of antiquities, next to the services to the costumer-citizens, as demanded by spinning wheel and the bronze ax” (Engels, 1884). the different segments of constituents (Swan, 2015). With a gradual and spontaneous process, citizens Further elements useful for discussion: will finally be accustomed to live in a society “without force, without coercion, without (l) Authority floating freely, cognitive dissonance subordination, without the special apparatus of and societal maturity. coercion which is called the state” (Lenin 1917, p. Decentralization through the blockchain 42). technology represents a “natural progression of This seems to be exactly the ultimate purpose humanity” (Andreas Antonopoulos interviewed by of crypto-anarchists – as well as an implicit desire of Sparkes, 2014) and a “natural efficiency process” many advocates of decentralization. In spite of these (Swan 2015, p. 31). Nonetheless, it will take time for interesting similarities, however, there is at least one individuals to fully understand and accept the crucial difference here that should be noted. While principles of decentralization, and the process can for Marxism the demise of the State is the natural create cognitive dissonance for those accustomed to consequence of disruption, for the most trust-based services (Andreas Antonopoulos, 2014). fervent blockchain advocates it is rather the The blockchain changes the way political opposite: it represents the final victory of free governance, authority, independence and markets and self-interested individuals over public participation can be conceptualized and executed, in institutions, in a process of economic liberalization so forcing individuals to reach a new level of which can be more properly defined as anarcho- maturity and understanding (Swan, 2015). Citizens capitalism (Section II, point j, k). have always relied on an external, centralized authority for government services, so it might be 3.2 Decentralization and New Models of initially difficult to accept a new model of Governance governance only based on personal responsibility, peer-to-peer interaction and “authority floating With reference to more recent political dynamics, freely” (Swan 2015, p. 54). Social maturity, however, the drive towards decentralization can be seen as a will possibly develop also in this context, as already part of a wider anti-government phenomenon, which did in other industries such as information (Swan, has progressively emerged in Western 2015). during the last decades, modifying the relationship between citizens and central authority (Paquet & 3. THE BREAKDOWN OF THE STATE: AN Wilson, 2015). According to this new trend, different HISTORICAL OVERVIEW interest groups in society are less inclined than previously to compete against each other for the 3.1 Marxist Determinism and Anarcho-Capitalism control of the State: rather, they cease to recognize its political monopoly, emphasizing its weak

performance and failures, and exploring new The first consideration is that most of principles and possibilities to organizing activities and services in a assertions presented above are all but new in the more efficient way (Paquet & Wilson, 2015). history of modern political thought. The anti- Over the last forty years, various models of government rhetoric which often accompanies the deliberative democracy and decentralized public blockchain advocates, as well as the idea to run governance have been developed to this aim, and in society only through individual contracts is, for

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many aspects the blockchain-based governance stakeholder (Freeman, 1984; Almeida, Getschko & represents the latest development of this trend. Afonso, 2015); decentralized (Shabbir, Cheema & Expressing criticism against the limits of the Rondinelli, 2007); distributed (Abbott, 2000; Paquet, traditional forms of political participation, the 2000); and (Ansell & Gash, concept of deliberative democracy has been 2008; Donahue, 2004). Although meanings and discussed since the 1980's as an ideal of political definitions of this model may change depending on autonomy and self-governance. Based on the core context, they share some basic features, such as a principle that representative democracy should be trend towards deconcentration of hierarchical enhanced by forms of direct civic participation, this structures; a more responsive, transparent and approach has put particular emphasis on values accountable approach to decision-making; and the such as public reasoning, deliberation among equal inclusion of multiple interest bearers in a platform citizens, transparency, and of the of dialogue, in order to find consensus-based decision- making process (Bessette, 1980; Bohman & solutions to common problems. Rehg, 1997). At the same time, the view of the State 3.3 The Role of , Peer-To-Peer monopoly as a Single Point of Failure (SPOF) and the Networks and Encryption search for less state-centric policy instruments have also paved the way to an increased interaction The restless development of information technology, among public, private and nongovernmental the increasing digitization, and the ubiquitous subjects for the fulfillment of public interest nature of connectivity have represented a further activities. The notion of New – catalyst for governance decentralization. Eliminating and thereafter New Public Governance – has been the barrier of communication costs and using a proposed to define such new framework of distributed architecture with multidirectional decentralized governing practices, emerged in the connections among all nodes, the Internet and Western countries since the 1970s. In this context, cyberspace have allowed the emergence of the advocates of a market-oriented approach to public “networked public sphere” (Benkler 2006, p. 212) as policies, such as Osborne and Gaebler (1992), have a great facilitator of freedom of expression. Like claimed that governments should focus on never before in history, citizens have had the “steering” rather than “rowing”, setting priorities possibility – among many other things – to intensify and goals instead of directly deliver services, in interactions between interest groups and social order to better meet citizens' needs. On one side, movements at local and transnational level; express these practices have addressed the growing need to grievances and discontent through non-institutional experiment an entrepreneurial model of leadership, channels; engage in new collaborative processes; and finding innovative solutions to the mismanagement experiment alternative governance models, in a of State and bureaucracy across the traditional climate of greater political awareness, but also organizational and institutional boundaries; on the growing distrust of government actors. other side, however, they have resulted in a All these factors have contributed to a further controversial and socially costly process of public erosion of the old concepts of Westphalian nation expenditure review, and state and territorial-based governance, with its corporatization of public bodies, in the attempt to traditional functions related to sovereignty, improve efficiency and reduce costs of services authority and national boundaries increasingly through neo-liberal policies. called into question. Scholars have described as governance without In this context, even the diffused enthusiasm government (Peters & Pierre, 1998; Rhodes, 1997) towards as a defensive political this emerging pattern of management, characterized instrument has certainly played a crucial role. The by a major shift of power from public to private idea to use strong encryption to protect citizens' sector, and by an increasingly dominant role of the freedom and privacy from governments and big market in public affairs. In this context, researchers corporations can be traced back to the cypherpunk has also given particular emphasis to the power of and crypto - anarchist culture of the late 1970s. The networks to downplay the role of State and core principles of these heterogeneous dominate public policy, due to ability of networks to countercultural movements can be found in the “The self-organize, develop resilience and evade Crypto ” (May, 1988) and in the government control (de Bruijn & ten Heuvelhof, “Cypherpunk's Manifesto” (Hughes, 1993), stating 1997; Kooiman, 1993; Marsh & Rhodes, 1992; Peters that freedom of speech, individual privacy in & Pierre, 1998). communication and transaction systems In the last decade, the effects of are essential conditions for an open society, and have created new pressures on institutions for they should be used to foster social and political further decentralization and more participative change. Especially after September 11, these political practices (Shabbir, Cheema & Rondinelli, principles have led to a growing use of anonymity- 2007). Control and social coordination – which have protecting peer-to peer networks (e.g. Freenet, Free always been essential roles of the State – have Haven), capable to resist censorship and circumvent become far more complex and fractured than in the the oppressive online mass surveillance systems put past, now involving the sharing of authority with a in place by governments and businesses (Farmer, growing number of non-state actors, operative 2003). agencies, stakeholders, and networks at local and global level. Concepts and practices of public governance have evolved accordingly and literature has conceptualized a rich variety of new organizational models, with the discussion of multi-

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3.4. The Final Stage of Decentralization: the 4.1 Security Problems and Technical Weakness of Blockchain-Based Governance. Current Open

All the processes described so far have one major The first problematic aspect is that current public; common thread: they have explored new forms of unpermissioned blockchains as Bitcoin have a highly coordination and interaction between State and speculative nature, with an inherent trade-off society, with a significant shift of power from between dimension of the network and central institutions to individuals and/or markets. decentralization. Scalability leads in fact to a natural The blockchain-based governance can be considered process of centralization of the computing power in as the final stage of this process of decentralization the network, due to the decrease of the number of and disempowerment of institutions, insofar as: miners able to perform the mathematical verification - it proclaims the social benefits of a bottom-up required by the protocol, which has growing costs. approach to politics, emphasizing consensual Bitcoin, for example, is currently run by increasingly forms of self-government and direct centralized farms, which turn out to be participation of citizens to decision-making engaged in secretive, colossal mining operations in process, in a similar way as deliberative China (Franco, 2015) or traded on the stock- democracy (and other alternative models of exchange in Australia (Riley, 2015) with possible governance); risks of collusion or cartelization. Therefore, a - it fails to see any added value in central decentralized Starbuck-style governance (Section II, coordination and it promotes the primacy of point e) based on such a blockchain would over politics, following a logic of dangerously expose citizens' records and essential of government services, as rights to private interests and to unpredictable prompted by the New Public Governance market dynamics (e.g. uncertainty of mining (“governments need to become more like profitability, volatility of prices, discontinuity of business; “markets can do better than the investments, speculative attacks, etc.). State”); Moreover, even if reliant on an apparently - it encourages the political use of strong robust peer-to-peer network, a public blockchain is encryption to enhance citizens' freedom and inherently volatile and it can be forked or dismissed privacy; by the community at any time, because not attractive - it relies on peer-to-peer global networks and or remunerative anymore. It is hence questionable online interest groups, which aim to whether a fully decentralized blockchain like Bitcoin decentralize hierarchical structures, be can be defined as a universal ledger. Since there is independent as far as possible from government no guarantee that it will still be operative or even powers, and challenge their agenda. exist in the future, persistence and preservation of The final result is the idea that public policies contracts and government services may become and government services should be directly susceptible to invalidity because of obsolescence, managed by private networks of individuals, through boredom, or shift towards a new system (DuPont & a decentralized model of governance based on Maurer, 2015). distributed trust and market rules. A further aspect of volatility is that data and In the next sections, we will discuss possible contracts recorded in the blockchain are entirely practical outcomes of this model. reliant on connectivity. In case the network is shut off, or the markets shift to a new, more appealing 4. DECENTRALIZING GOVERNMENT SERVICES technology, there might be no paper-based backup THROUGH THE BLOCKCHAIN: ISSUES AND archiving able to guarantee the existence of data or the execution of contracts (DuPont & Maurer, 2015). CONCERNS And “contracts, by contrast, are all about managing uncertainty” (DuPont & Maurer, 2015). To which extent is it possible to decentralized public There are several other technical issues that administration and government services through the should be carefully assessed, when considering blockchain technology? Can we dismiss State migrating government services to an open, archives, physical ledgers and human notaries, and unpermissioned blockchain. “put a nation on the blockchain”? (Swan 2015, p. 47). Despite the enthusiasm of its advocates, the Undoubtedly, the blockchain has remarkable scientific community generally agrees in stating that properties as a distributed ledger, such as efficiency, Bitcoin and its many clones are based on a still cost-effectiveness, irreversibility, transparency, immature and highly vulnerable technology. A full auditability and censorship resistance. Yet, the analysis of Bitcoin technical weaknesses falls beyond proposal to decentralize government services the scope of this paper, but we will offer a brief through an open, unpermissioned blockchain entails summary of the most relevant researches on this a whole set of unknowns, which may overweight the topic. benefits. Although the blockchain is frequently Concerns have been raised, for instance, about described as a universal and permanent ledger, this the incentive mechanism of Bitcoin mining protocol: claim is somehow overstated, since it does not take a research made by Ittay and Gün Sirer (2014) has enough account of the way it is implemented and demonstrated that a colluding, minority group of the several performance risks at stake. “selfish miners”, consisting of 1/3 of all miners of the network, may in fact be able to strategically control the system and break its decentralized nature. The research has therefore concluded that services and data built on the top of the Bitcoin

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blockchain, such as virtual notaries, are currently at In overall, the benefits of open, unpermissioned risk. blockchains for government services seems to be According to the theory of Programmed Self- offset by several risks, related to: Destruction (Curtois, 2014), fatal engineering - moral hazard, scalability problems, trend mistakes in the Bitcoin architecture will eventually towards centralization and likely dependency of result in a process of programmed decline and self- networks on private , such as miner destruction. Problems outlined in this research corporations, which may rapidly conduct stock include: exchange mergers and acquisitions, gaining - excessively fast erosion of profitability for considerable power on global scale; existing mining machines; - domination of market logic over essential public - enormous investments in hashing services and citizens' rights, which should be infrastructure, still with poor general security of the rather protected by speculations of any kind; system; - possible lack of service continuity and /or - insufficient network neutrality; preservation of data in the medium-long run - lack of reliable data about the volume of with no delineation of liability, due to market transactions and irrational expectations of investors. dynamics and/or serious technical flaws; In particular, the self-destruction of Bitcoin - raising of a dominant techno-elite with growing network could be caused by a fatal combination of supervisory powers over strategic services at four factors: global level, without the necessary formal - inefficiency of the longest chain rule, which legitimacy. leads to unnecessary instability and growing We should thus conclude that e-government risks of attacks to the network; can hardly represent the best area of applicability - deflationary monetary policies; for fully decentralized blockchains, such as Bitcoin. - poor network neutrality and moral hazard; Government services require high performance and - rapid hash power shifting from one coin to high degree of reliability, accessibility and another, due to high . predictability, being not tolerant of any service Although “In Cryptography We Trust” is the interruption or failure: a flaw in the management or motto of many supporters around the world, in the implementation of the network would researches also show that Bitcoin blockchain compromise the security and the civil rights of currently suffers from major vulnerabilities related millions of citizens. Moreover, a formal and to the use of elliptic curve cryptography (ECC), transparent process of legitimization must be which include weak key generation, poor signature strictly required when dealing with government randomness, insufficient entropy and bugs services, in order to avoid the indiscriminate (Bos, Halderman, Heninger, Moore, Naehrig et al., emergence of private powers over public affairs. 2014). Centralized and democratically legitimated In particular, Bitcoin elliptic curve public institutions are therefore crucial to ensure cryptography is not quantum-safe and the accessibility for extremely sensitive data in the long emergence of quantum computers could disrupt it at run and to preserve them from uncontrolled any time. The National Security Agency has recently centralization, market speculations, technical flaws, admitted the limits of ECC and the urgent necessity and private supervisory powers. On the contrary, an of migrating to post-quantum cryptography (iad.gov, indiscriminate process of decentralization and 2015), as also recommended by the renowned “gamification” (DuPont & Maurer, 2015) of public cryptographer Ralph C. Merkle (merkle.com). In this administration through token-based incentives may regard, Bitcoin core developers simply claim that turn out to be an irresponsible choice, with given an appropriate amount of advance warning detrimental effects on citizens' fundamental rights. (such as one month); they may be able to take emergency measures through a centralized authority 4.2 Advantages Of Permissioned, Token-Less and keep the blockchain safe. Centralization would Blockchains For Public Sector be introduced as temporary measure only and then retired after a few years (Buterin, 2013). The If open, unpermissioned blockchains like Bitcoin proposal to fix technical problems through a central have their own inherent limits, permissioned authority or “benevolent dictator”, however, is blockchains may represent instead a valid solution clearly anti-democratic, since it entails the direct for e-government. Applications may include, for power of private entities over government services example, the management of IDs and driving and essential citizens' data, without any formal licenses; land, school, medical records; certificates of legitimacy nor control. Needless to say, history is birth, marriage, and death; tamper-proof and full of “benevolent dictators” who bypassed auditable e-vote systems; collection, and more. procedural legality and gave themselves full powers, Permissioned blockchains are replicated, with the declared noble objective of serving the shared ledgers (Gendal Brown, 2015), which can be community and restore order. But if history has administrated by one or more organizations – e.g. a taught us anything, it is that the question of government agency– in order to guarantee adequate legitimacy is crucial: it should hence be considered levels of network coordination, reliability and with great care, especially by those libertarians who security through human intervention, when genuinely believe in decentralization through the necessary. These ledgers present advantages over blockchain – and through Bitcoin in particular – as a both fully distributed blockchains and traditional new political model to enhance individual freedoms databases. and collective rights. Firstly, they can be separated from speculative verification mechanisms, such as cryptocurrencies or token rewards: they can therefore be used for

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services that are of general interests only, with data as incapable to rapidly react to sudden changes properly protected in the long term and no (Section II, point b), we can argue that the opposite is interference from markets. the case: vertical centralization is definitely better Secondly, they are distributed and suited to deal with rapid technical challenges, synchronized, but their network is restricted to few compared to horizontally-scaled structures. trusted nodes and members, identifiable by Scalability, for example, is a problematic factor. In a controlled access permissions. Since nodes are few, distributed architecture with thousands or millions with no need for neither mining nor computationally of nodes on global scale, to modify a protocol may intensive proof- of-work, validations and propagation result in a complex and time-consuming procedure: of data are much faster than public blockchains it requires wide consensus of core developers, (Buterin, 2015). Networks are also substantially free miners and nodes; consensus can be conditioned by of scalability issues and they are able to offer better reasons of economic expediency; and in the end, the performance if compared to general purpose may fail to respond to unexpected blockchains, since they are engineered for very challenges in a timely . specific functionalities (Kuhlman, 2015). For this very reason, we may conclude that Permissioned blockchain-based architectures through human use and intervention, complex can be designed for specific purposes through systems of software have better chance to be different consensus and verification systems, and effectively managed (DuPont & Maurer, 2015). When different levels of control, security, visibility and citizens rights are concerned, however, it is worth permissioning (Peters & Panayi, 2015). recalling that human agents cannot be hi-tech elites Traditional databases are overall inefficient, who proclaim themselves benevolent dictators: they since they generally use a master-slave, centralized must rather be public officers legitimated through structure for data replication. The master database formal, accountable and transparent procedures. is the only original and authoritative source: any change on data performed on the master is 4.3 Government Services and the Technological propagated to the slave databases, which are kept Imperative of Decentralization synchronized. This kind of architecture, however, may raise problems related to reliability, volume of The assumption that decentralization of services traffic, and latency, since the master database through the blockchain technology represents an performs all the writing operations. A more inescapable future or “a natural progression of advanced system, called multi-master replication, humanity” (Section II, point l) is common between its allows any slave database to perform changes, advocates. Such approach, however, is sometimes sharing updates to each other to remain in sync too deterministic and it does not take enough into (multichain.com, 2015). This entails, however, account possible risks of implementation in a complex strategies to ensure data consistency, in specific context of use. order to prevent and solve possible conflicts Firstly, it is questionable that there is such a between information. thing as a natural progression of humanity: rather, Compared to master-slave databases, the humanity sets priorities and makes choices among distributed architecture of permissioned blockchains many possible options and scenarios, often in a may bring significant advantages to public conflicting way. It is also questionable the idea that administration in terms of efficiency, data security, individuals and societies can be forced by data integrity, availability, reduction of errors and technology to grow into a new level of maturity infrastructural costs. In particular, data integrity – (Section II, point l), since the success of a new which consists of data accuracy, consistency, technology depends much more on social factors provenance and preservation through and interactions than on the superiority of the transformation (Peters & Panayi, 2015) – is technology itself, and in this regard every society particularly important for government services, has different social practice, with unpredictable along with security and availability, and it can be dynamics (Boersma, Meijer & Wagenaar, 2009). significantly enhanced by the blockchain technology. The idea that technological developments are Although they are still at an early stage of inevitable, with fatal, unstoppable and irreversible development, the advantages of permissioned consequences on society, is usually defined as blockchains should be definitely discussed more, “technological imperative” by scholars, and with a view to a possible application in the public interestingly, it tends to grow as technological sector. systems scale up and increase in complexity, Despite their potential benefits, however, becoming more interconnected and interdependent permissioned blockchains are often the target of a (Chandler, 1995). great deal of criticisms, mostly because they are When dealing with essential government centralized, closed systems and they cannot provide services, however, determinism should never be the censorship resistance. They can thus be resisted by driving force behind decentralization. Indeed, the those techno-libertarians who view them as a threat point is not to challenge the centralized model of to the process of decentralization, or as “a desperate governance at any cost, but to consider inherent act of dinosaurish middlemen trying to stay trade-offs of decentralization within a specific relevant” (Buterin, 2015). context of use. While decentralization can be We have already seen, however, that there are functional to , it should not be limits to what public blockchains are suited for, and regarded as an end in itself (Shabbir, Cheema & such limits should be clearly recognized, in order to Rondinelli 2007), nor uncritically embraced in the make reasoned choices. name of anti-government feelings, technological In regard with security, although the dominant imperative or wish for innovation at any cost. narrative tends to consider centralized institutions

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In this regard, it is also worth recalling that and social communities, however, are highly innovation is “the specific tool of entrepreneurs” complex systems, with unpredictable and non-linear (Drucker, 1985): as such, it generally belongs to a connections between parts, and no obvious market-oriented vision of the world, which sets as endpoints (Allenby, 2012). The capacity to priorities , competition and commercial understand the world in all its complexity is context- interests, but it does not necessarily represent the sensitive, and it must entail a strong ethic most desirable characteristic for government dimension, as well as a direct human participation. services, which are primarily connected to Governance is therefore much more than preservation of social, economic and political rights, aggregating votes, keeping databases in sync, and must rather prove security, reliability and long- calculating metrics or enforcing transactions term durability, in the face of societal evolution. through algorithms. Politics cannot be simplistically Decentralization through open, token-based reduced to binary codes, since it is an art that stems platforms mostly means gamification of public from the ethic sphere of human beings and it functions, with the transformation of government belongs to them exclusively, as creatures “endowed services and citizens rights into a new profitable with reason and conscience” (Art.1 of the Universal private business. Given that today the new models of Declaration of Human Rights). We must hence guard governance often proposed by exuberant political against the risk of a gross oversimplification of thinkers are increasingly transforming individual complexity and the indiscriminate application of freedoms into dangerous sources of insecurity automatic procedures. Code developers, for (Marden, 2003), we should recall the main reason example, tend to reduce any human organization to why central coordination of public institutions was the mere combination of two elements: a set of originally created – and why we should keep it: to property, and a set of individuals who follow a protect common good and collective rights in the protocol (Buterin, 2014a), which can therefore be long term from transitory individual interests and automatized. This reductionist approach, however, from any reckless logic of profit. And in this regard, is unmindful of the cultural, social, institutional, and it cannot be ignored that permissioned, token-less ethical complexity of human interactions, and it may blockchains hold a considerable advantage over easily lead to a technological dystopia, if protocols public blockchains. prevails in the way we interact. We must not forget that empathy and 5. BLOCKCHAIN TECHNOLOGY AND THE conscience, for example, are irreplaceable STATELESS components of any social and political interaction, and information efficiency and automation are not necessarily the ultimate purpose of human To which extent can we consider blockchains and communities. decentralization platforms as hyper-political tools, Far from any real political dimension, the capable to manage political interactions on large regression of the concept of democracy to scale and dismiss any central authority, such as the governance-by-computation or Decentralized State? Can we finally overcome traditional political Autonomous Organizations – namely large scale institutions and make a new social contract only automated procedures devoid of life as exclusive based on decentralized platforms, distributed way of interacting– would represent the ultimate consensus, and “authority floating freely” (Section II, triumph of Homo Economicus: an agent renowned point j, l)? for being “autonomous, instrumentally rational, We will discuss reasons why such scenario is psychologically self-sufficient, 'under socialized' and not only problematic, but also undesirable. motivated into action by the utilitarian principle of maximizing pleasure” (Bourque, Harrisson & Széll 5.1 Technocratic Reasoning and the Triumph of 2009, p. 85). In addition, with the bad reputation of Homo Economicus “anthropological monster” (Bourdier, 1997).

The first objection is that the role of governments, 5.2 The Pre-Political Dimension of a politics and representative democracy cannot be Blockchain-Based Society and the Meaning of the reduced to a web of instant atomic interactions, State entirely executable by automated processes (If X,

Then Y). This engineering approach to social In order to better understand the possible dynamics dynamics promoted by technology vendors and of a stateless and algorithm-based society, it can be decentralized platforms developers (Section II, useful retread the logical process of creation of the points d, h) as a way to overcome traditional State according to the natural law theorists, as political institutions is a clear example of outlined by Bobbio (1995). technocratic reasoning and determinism – which In a hypothetical, fully decentralized society scholars claim to be deeply embedded in all Western run through smart contracts, Decentralized modern societies and particularly in the American Autonomous Organizations and market rules, culture (Smith & Marx, 1994). individuals live in a kind of pre-sovereignty Technologists tend to overemphasize the condition: on a case-by-case basis, they self-organize efficiency of encryption and codes as political tools, and cluster around common needs and interests, capable to verifying and aggregating individual which they try to administrate or secure through decisions on large scale without intermediaries. consensus- based automatized procedures, accepted Admittedly, the blockchain technology can greatly by the parties involved. For example, they may use improve structure, management and decision decentralization platforms to manage distribution of making process of specific realities, making them resources, run reputation-based systems or organize less dependable on top-down coordination. Human any kind of services through crowd-funding.

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So why such a society is all but perfect? Simply third party that can be by-passed through a because it is incomplete: it is still primitive or pre- technological disintermediation process: the State is political. Indeed, in this phase individuals are not us, as a result of the first and biggest crowd-funded citizens yet: in spite of the sophisticated project ever existed in history, and it should not be technologies they may use to create contractual defined in opposition to civil society. Far from being arrangements, they are still living in a state of over, this collective project is rooted in our nature, in which the law of might – or the of the and it is connected to the concepts of market – prevails on common good. In this new- public interest, citizens' rights, coordination and tribal scenario, frictions and conflicts will eventually redistribution of resources, which cannot be entirely rise between different networks and interest-bearers devolved to market laws or atomized algorithm- at local and global level, needing negotiation and based interactions. compromise to reach a stable peace. If well- We certainly agree that human society must be intentioned to avoid mutual abuse of power, groups creative, developing a diversified ecology through may create a non-aggression pact to refrain from bottom-up governance models to better approach its violence and seek peaceful solutions in case of problems. Nonetheless, we should also be aware of conflict. This phase in which individuals reach the pitfalls of a technicist attitude, recognizing that consensus and set standards for a common, automation and decentralization have inherent peaceful living is usually called pactum societatis by limits and new forms of social and political fragility contractarian doctrines. may stem from them. This non-aggression pact can be gained In this regard, it is not clear, for example, how through consensus and represents a formal move a fully distributed, blockchain-based society would from the state of nature towards the establishing of regulate conflicts, mediate between opposite civil society. And nonetheless, as Bobbio recalled, interests, or rectify social iniquities, other than reaching consensus is not sufficient and it does not through market adjustments, complex webs of solve conflicts: indeed, the observation of this pact is smart contracts or other sophisticated, automated not ensured in any way and it is not protected from incentive mechanisms. Not only markets are proven external, opposing forces. As a result, society is still to be incapable of creating social justice and quite unstable, dispersed and agonistic. redistribution – in spite of what techno- In the end, the natural need of security and the entrepreneurs may claim (Section II, point j) – but it necessity to avoid fragmentation of social efforts is rather the subjugation of politics to “turbo- lead individuals to establish a permanent point of capitalism” and its financial dictates that bears most control, a neutral Third Party to which delegate the of the responsibility for the problems currently responsibility of maintaining order, coordinate affecting our democracies – from long term activities and resolve future conflicts in a legitimate , poverty, regulatory capture and way, through a pactum subjectionis (or submission to erosion of social capital, to imperialist wars, organized coercion). That moment is crucial and diffused insecurity and fear (Luttwak, 1999; Ziegler, marks the emergence of the idea of State, which can 2002). be deemed as a product of logical thought – as also In fact, it is with the increasing atomization of Kant claimed – rather than an historical event. Most social life, the extreme individualism and the importantly, the symbolic phase in which the general restless rationalization of economic structures that will is created marks the move of human corporate power reinforces and reproduces itself, to communities to a real political dimension, in which a the detriment of individual and collective rights higher level of coordination between conflicting (Boggs, 2000; Marden, 2003). interests is recognized as fundamental, in order to protect consensus once reached. 5.3 Stateless Global Society and “Amoral It is this juridical and ethic process that transforms individuals into citizens. Antipolitics”: The Disempowerment of Many techno-libertarians claim that central Citizens coordination and State are the products of a patriarchal, hierarchical and gerontocratic mindset The major problem of an hypothetical global society that we ought to overcome. The principles behind only run through organizational patterns based on decentralization often echo the values of neo-liberal individualism – namely Decentralized Autonomous politics and individualism, with an emphasis on Organizations, free market rules, and “authority personal responsibility, self-promotion, self- floating freely” (Section II, point l) – is that it would government, and control over one's destiny (Marden, essentially lack legitimate mechanisms to regulate 2003), as opposed to top- down policies, the convergence of the particular into the general, paternalistic central institutions, and “faceless which is the traditional role of centralized political government bureaucrats”. In this regard, however, it institutions. Breaking the collective identity building, is worth recalling that central political institutions citizens may not see themselves anymore as a part have emerged through a complex, historical process of a whole, because the general will is replaced by a of emancipation from private powers and churches, myriad of immediate acts of the individual will. This setting legitimate procedures not only to overcome may entail a serious risk of regression of human problems of scale or to coordinate distant groups communities into a pre-political condition, (Section II, point a), but most of all to protect characterized by “Hobbesian deregulated landscapes general consensus, execution of the laws and the and a retreating State” (Marden 2003, p. 90). individual rights themselves from the inevitable Individuals would not be citizens anymore, but mere chaos of antagonistic interests. service consumers and players, “independent It is therefore clear that the State, as a interest-bearers ... with no agreed-upon norms to guarantor of fundamental rights, is not an unwieldy regulate their interactions as free and equal beings”

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(Urbinati 2006, p. 65); and society would be of natural, individual rights. This perspective, dominated by adversarial private interests and however, is quite objectionable. It does not take into “franchulates” – as described by Stephenson in his account, for instance, that centralization and novel (Section II, point k).Such a scenario falls within coercion are legal means originally designed to gain the concept of amoral antipolitics (Schedler 1997; stability, protection of individual rights and long- Marden 2005): the lines between public and private term cohesion between groups. To see coercion action are blurred and politics is reduced to a solely as an instrument of oppression is another private, strategic power game of homo economicus, typical element of anarchic and Marxist doctrines: based solely on rational choice principles and aimed according to this view, the individual autonomy is to to maximizing the utility of participants. be considered a supreme value and there is no Whether it is moved by misguided libertarian difference between force of authority based upon intentions, naive utopians or investors seeking for the law and mere violence. profit, the idea to create a stateless global society At theoretical level, however, modern Western through an indiscriminate proliferation of private constitutions have already solved the problem of decentralized platforms seems to be far from ideal: finding a balance between centralized, coercive such a system would not go indeed beyond the power and individual rights, through the concept of primitive phase of pactum societatis, characterized : coercion based upon the law is thus by conflicts between many different consensus- source of rights for citizens, and of not only duties, based groups and oligarchies, in the general absence and it constitutes the necessary common ground of mechanisms to enforce citizens' rights and between and democracy. freedom. Contrary to the claims of some blockchain Examining the fundamental assumptions of advocates, the final outcome would be the general democratic theory, Robert Dahl (1989) explained disempowerment of individuals, the “deification of that anarchists considers the coercive authority as the market and the triumph of antipolitics” (Marden, an undesirable model, which should be replaced by 2003, p. 185). These conclusions, however, hardly voluntary associations based on continuing consent. come as a surprise: in discussing technological Today, a strong anti-government feeling and determinism and utopianism as peculiar historical technological determinism lead many crypto- traits of American society, Segal (1985) suggests that anarchists and techno-libertarians to believe in the technological utopias generally lack effective blockchain as a disruptive technology capable to solutions in terms of social cohesion and real social gain such continuing consent, in order to create a progress. And the deterministic applications of society with horizontal structures and distributed blockchain technology to politics appear to bear this authority. out. Dahl, however, proposed many valid theoretical points which contradict these assumptions. Firstly, if 6. THE MYTH OF AN EGALITARIAN BLOCKCHAIN- we judge the performance of political systems as BASED SOCIETY good or bad according to the extent to which they minimize coercion and maximize consent, then we are dealing with moral doctrine and not with Techno-libertarians usually place particular . However, most importantly, emphasis on blockchain capability to reach since coercion is indeed a moral problem, it does not consensus between participants on large scale, disappear with the demise of the State, nor with a considering vertical political authority detrimental horizontal distribution of authority. Coercion will to individual powers. They often advocate the continue to exist even in the absence of the State, wishful scenario of a flat, non- hierarchical and simply because there will always be recalcitrant coercion-less society run through algorithm-based wrongdoers in society; moreover, even if democratic consensus, in which individuals can cooperate freely. institutions were dismantled, some associates could This vision, however, seems to come in addition to always gain enough resources to create an the number of many others ICTs myths emerged in oppressive State. the last decades – including for instance “the myth Since the continuous consent is in practice of a new and a better government”, “the myth of the impossible and coercion responds to an unavoidable rational information planning”, and “the myth of the moral problem, all that remains is to decide how and intelligent and empowered consumer” (Bekkers & when the use of coercion is justifiable, according to Homburg, 2009). democratic rules. We will briefly discuss reasons why the Showing that the problem of coercion is all but blockchain governance as political model does not solved by the absence of the State, Dahl leads us solve neither the problem of coercion, nor the back again to the inescapable problem of setting a problem of hierarchic structures in society. higher level of political coordination, with legitimate procedures to achieve organized coercion – as 6.1 The Issue of Coercion discussed earlier. But this does not have to be a negative thing per se. As Dahl rightly pointed out, In the rhetoric of decentralization, consensus and avoiding coercion cannot be considered as a coercion have become concepts related to opposite supreme goal, which should prevail on other ends models of social and political organization. By like security, freedom, justice, or happiness: indeed, semantic association, the word consensus seems to it is not superior to such values at all. evoke principles such us equality, fairness, We can thus conclude that in the democratic agreement, brotherhood, cooperation, pacification. theory, noncoercion, just like decentralization, On the contrary, both the words centralization and cannot be regarded as a political end in itself. coercion seem to be related to the idea of constrain, oppression, violence, lack of freedom, infringement

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6.2 The Emerging of New Hierarchies: the Further, Curtois confirmed that the design of the Blockchain Governance entire Bitcoin architecture always gives mining pool operators a greater strategical power in decision A part from the issue of coercion, the blockchain- making, compared to nodes. But most importantly, based governance is not likely to solve the problem Curtois stressed that open communities tend to of social hierarchical structures either. aggregate into clusters: sub-communities of Bitcoin Despite the nature of protocols enthusiasts, well-established service providers and and the much-vaunted of peer-to-peer other influential stakeholders interested in networks, a massive adoption of blockchain services promoting their brand name and their business with no public institutions to coordinate their action interests, for instance, tend to set up an would most probably end up creating new authoritative power, especially if there are major oligarchies and a strong polarization in society. In economic interests at stake. virtue of their technical skills, code developers, The most compelling evidence of this is miners, fintech professionals and technopreneurs perhaps Bitcoin XT, a much criticized hard fork would easily have a privileged position in society, launched in August 2015, for which the Bitcoin becoming the new policy makers to detriment of a Foundation took upon itself the power of decision big mass of computer illiterate or low skilled over global policy strategies (Hayase, 2015). Albeit individuals, reduced to mere passive recipients of not formally vested with centralized decisional services. Elites can assume many forms according to powers, Bitcoin Foundation is endowed with a the social and political context, and we are in a formal structure and legal obligations, and phase of human development where the power to according to global governance researchers, this has develop codes and select algorithms has – and it will led to “an increased significance of voting” in the increasingly have – major implications in decisional process (Gasser, Budish & West 2015, p. contemporary society: this power entails “assertion 20). of authority” (Musiani, 2013) and it constitutes If foundations or similar institutions may “politics pursued by other means” (Latour 1988, p. achieve a significant and unaccountable soft power 229; Musiani, 2013), calling into question the in decentralized ecosystems, there is also a number egalitarian nature of technology and networks. of prominent individuals in the Bitcoin and Regrettably, indeed, open source does not blockchain , which have a strong influence automatically mean neither equal opportunity, nor on the community and its discussions inclusiveness. Since such networks present major (coindesk.com, 2015). This elite group may consist cognitive entry barriers, the issue of accessibility of startup founders, key executives, chief scientists and digital divide is still the greatest obstacle to any and evangelists, who easily make headlines for their technology-based cosmopolitan governance (Marden, leading role in technical debate. These celebrities 2003). generally gain charismatic power through a strong According to many observers, a tendency to visibility in international conferences and media, by elitism and centralization is already observable in virtue of their technical and rhetoric skills, or the current state of Bitcoin network, and similarly in because of their reputation as big private investors. other decentralized platforms. In theory, the open In this kind of global theathrocracy – as Plato would source protocol is designed to foster cooperation on say – grounded on online and stage presence, by global scale and anyone can contribute to code acting as industry thought leaders, they become development through an online forum (github.com). leaders de facto, promoting their ideas on how the In practice, however, decisions are executed by a industry should move forward, and using financial small number of core developers and they constitute power, technical skills and persuasion – namely a governance group with the exclusive power to “influence over beliefs” (Dahl 1989, p. 274) – as accept submissions (Gasser, Budish & West 2015). means of . This Steve Job-style charismatic Users remains free to opt in or opt out at will, with a power can strategically use information to steer consensus ex-post policy that is only a shrunken network policy or shape users consensus at global version of democratic governance, because of its level. passive nature. While the good faith of these public figures is Gervais, Karame, Capkun and Capkun (2013) generally taken for granted, it is significant that they have exposed the lack of transparent decision may have previously had high-rank careers in IT or making in Bitcoin and its centralized nature, financial giants, such as Google or JP Morgan. Is the emphasizing the privileged position of core global financial techno-elite exploring new profitable developers in conflict resolution and the emergence geographies of capital, joining the cause of of many profitable businesses, mostly related to decentralization? In addition, if so, with what mining operations. While the community generally political aim in view? Whatever the answer is, the believes that no entity will ever acquire enough revolving door issue may raise legitimate concerns, computing power to control the network, miners being potentially harmful to the public interest, dominate the market and the fate itself of Bitcoin, especially in case of massive adoption of the new since their power far exceeds the one of individuals technologies at stake. (Gervais, Karame, Capkun & Capkun, 2013). Considerations made so far may as well apply Also Curtois (2014) warned about the existing for crowd-funded decentralized platforms like imbalances in the Bitcoin ecosystem, both from a Ethereum, a token-based service from which technical and economic point of view. Bitcoin depends the execution of smart contracts and other stakeholders – to name but one example – generally applications. Ethereum is developed by a worldwide lack essential information about security issues, team of contributors called ETHDEV, through GitHub because there is a strong asymmetry in information platform. The platform is run on behalf of the between core developers, pool managers and users. Ethereum Foundation, a non-profit organization

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registered in Switzerland, and its centralized If properly managed, decentralization of structure consists of a Board of Directors and an government services through permissioned Executive Chief. Albeit functional to the blockchains is possible and desirable, since it can development of the platform, Ethereum model of increase public administration functionality. governance is founded on ownership and vertically Decentralization of governance through open, structured power: this inevitably raises the issue of distributed blockchains like Bitcoin, however, legitimacy, integrity of the management team and presents serious risks and drawbacks, which offset adequate transparency in the mechanisms for the benefits. reviewing development proposals, especially when Although originally designed as dealing with citizens' essential services. In a world disintermediation tools, the ecosystems of fully increasingly reliant on technology and ruled by distributed blockchains are characterized by a great networks, whoever owns and controls these amount of third parties and profitable businesses platforms will always have a significant power over offering intermediation services, with strong civil society on a global scale. asymmetries of information and power between Elitist theorists like Gaetano Mosca (1884; developers and users. Trend towards centralization, 1896) claimed that any socio-political regime is digital divide, lack of transparency in decision always ruled by an organized minority. The making process, and unaccountable power of core examples discussed so far confirm that even developers – all these factors call into question the cyberspace and open networks have an inherent egalitarian nature of current open networks, making elitist nature, in which debate and decisions still some blockchain advocates' expectations tend to be dominated by few. Indeed, networks overestimated and unrealistic. In particular, the idea based on distributed consensus are far from having of a blockchain-based authority that “floats freely” a homogeneous and egalitarian structure: despite (Section II, point l) turns out to be deceptive, since the incorruptible nature of algorithms, individuals authority is in fact proven to morph into more are inclined to form clusters based on similar subtle or hidden centralized forms: while this kind interests and networks are thus likely to present of governance is acceptable for business and private subtle or hidden points of control, other directly services – since inequalities and relativism are managed by core developers or indirectly shaped by typical of markets – it is clearly unsuitable for e- diffused, charismatic powers. government, because of its very antidemocratic All these elements confirm that the nature. revolutionary potential of governance- by- network There are hence reasons to question the role of as an absolute, perfectly horizontal mode of political the blockchain-based governance as a great and social organization is often overstated and facilitator of individual power, in an absolute sense. unrealistic – as van Dick and Winters-van Beek On one hand, the promise of empowering (2009) already pointed out. Networks are never individuals is likely to remain unfulfilled, because of based exclusively on pure cooperation, on the the dominant role of markets and the speculative contrary they have their own centralized modes of verification systems of fully distributed blockchains. steering and governance, without which they easily On the other hand, the process of downplaying risk to fall apart (van Dick & Winters-van Beek, public institutions, the primacy of economics over 2009). politics, and the transformation of citizens into Despite any utopian vision about a blockchain- costumers with the promise of more freedom, based, horizontal distribution of authority in society, efficiency, and equality may hide yet another hierarchies, markets and networks constitute the insidious process of corporatization of politics, three main components of any society and they will which invariably empowers markets to the detriment always exist, restlessly competing against each other of citizens. Far from being new, such shift of power for power (Aron 1965; van Dick & Winters-van Beek, from public to private sector has been ongoing in 2009). In the end, these very dynamics prevent both various forms for decades, with huge social and utopias and dystopias to become real (van Dick & economic costs. Winters-van Beek, 2009). Insofar as the State is not recognized as a But since a mix of centralization, necessary collective body, it is weakened or mostly decentralization and competition for power appears dissolved in economy; a new elite of code developers to be inevitable in society, resisting any disruptive with unaccountable power reduces politics to information technology, we are back again to the electronic service delivery; citizens are mere problem of selecting leaders through legitimate consumers of services provided by private procedures, defining transparent and accountable platforms; collective rights “float freely”, treated like mechanisms to limit their power. An issue that the any other commodity; and betting digital tokens on governance of open blockchains leaves unresolved, public policies is extolled as “a quintessential promising instead a utopian and universal socio- example of the potential transformative power of political levelling. blockchain technology” (see futarchy, Section II, point h); then all the libertarian rhetoric against 7. THE BLOCKCHAIN-BASED GOVERNANCE AS AN political hierarchies and the narrative constructed ORGANIZATIONAL THEORY. CONCLUSIONS around blockchain decentralization risk to come down to a hi-tech, anarcho-capitalist paradigm, the nature of which is deeply anti-democratic. The blockchain is a disruptive technology with a A reasonable conclusion is that the blockchain- tremendous transformative potential for our based governance should be seen as an societies. Risks and benefits related to its possible organizational theory – with significant technical applications, however, must be carefully weighted, and managerial advantages for markets, private avoiding utopian expectations, as well as the pitfalls services, communities, and e-government itself – of technocratic reasoning and determinism.

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while it is not meant to be a stand-alone political The major challenge for global civil society will theory. Likewise, blockchain technology and soon be to explore new political and social decentralized platforms are not hyper-political, but dimensions, with the aim of integrating the rather pre-political tools. If not balanced out by the applications of disruptive technologies such as the functions of centralized, democratic institutions, the blockchain with citizens' rights, equality, social blockchain-based governance risk falling within the cohesion, inclusiveness, protection of public sector, concept of amoral antipolitics, justified by the and our established democratic principles. rhetoric of inevitability of globalization, free-market Such integration is vital and cannot be left to and individual power (Marden, 2003). And these the (anti-) political engineering of IT experts, antipolitical forces are able to disrupt those very financial investors, and code developers: it requires democratic values that today many libertarians indeed a mature and interdisciplinary effort by all strive to defend. the fields of human knowledge, with particular When assessing risks and benefits of regard to political theory, humanities and social blockchain applications, we cannot overlook the fact sciences, to best assess risks, benefits and outcomes that to overthrow the State and to absorb its of the new technologies. functions is a profitable business. While the In the very next future, this integration might blockchain was originally created to eliminate the be the only safeguard left against many possible need of a third party in transactions, the paradox is technological dystopias. that stakeholders now involved in blockchain governance play the classical role of tertius gaudens REFERENCES (Simmel 1908; Portinaro, 1986), a “rejoicing third” that attains economic benefits by replacing the State 1. Abbott, F. (2000). Distributed Governance at the in some or all its functions; even worse, these agents WTO-WIPO: An Evolving Model For Open- may also intentionally pursue a strategy of divide et Architecture Integrated Governance. Journal of impera (divide and rule) between civil society and International Economic Law, 3(1), 63-81. State, aimed to undermine the traditional democratic http://dx.doi.org/10.1093/jiel/3.1.63. order, modify the existing balance of power and 2. Allenby, B.R. (2012). 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