PosterPDF Available

Decentralising Power, Competence and Incentives – A Case Study on Emerging Visions in the Blockchain Space

Abstract

This is a poster. The corresponding paper can be found here: https://www.researchgate.net/publication/327427029 ............................................ Abstract: Blockchain technology is an emerging phenomenon that is thought to change how individuals and businesses organise themselves (Beck et al., 2018; Voshmgir, 2017). A key differentiation between DAOs and traditional forms of organisations is their ability to decentrally incentivise members through a system that is native to public blockchain technology. By introducing aligned incentives as a third key characteristic besides sourcing competence and allocating decision-making power, DAOs extent the solution space of organisational forms. The shaping of DAOs is subject to ideologies. Contributing towards a sensemaking of blockchain, two organising visions are identified which each follow their own ideology. Moving forward, it remains to be seen whether incumbents will successfully retain their power in blockchain-based infrastructure, or whether blockchain is a ‘crypto trojan horse’ (Waters, 2017) that changes business models to inevitably end the paradigm of artificial scarcity.
Introduction
The Bitcoin blockchain introduced a technical solution to
decentralised consensus, which, up to that point, had been a
major ambition for computer scientists in cryptography and
distributed systems. Six years after Satoshi Nakamoto
revealed Bitcoin, Vitalik Buterin proposed the Ethereum
blockchain, a ‘world computerthat runs smart contracts.
What makes blockchain so intriguing to social sciences is its
promise of trust. Centralising trust is at the very core of
institutions that emerged across today’s societies and
economies. These institutions are framed in legal and moral
contexts which ultimately fail to extract trust out of a social
context. For the first time in human history, trust may now
become digitised and abstracted from social contexts.
While information systems research unmistakably states that
blockchain resonates with the foundation of organisation
studies, scholars in this field have barely scratched the
surface of blockchain and its implications for the field.
Partly, this is due to a lack of technical understanding of the
technology which draws from peer-to-peer networks, game
theory and cryptography. Hence, the objectives of this
research are to characterise the technology and discuss its
implications for organisation studies.
Materials and methods
To make sense of blockchain as an emerging technology, a
qualitative research design is chosen. A holistic multiple-
case allows to incorporate various methods, including
documentation analyses, observations and expert interviews.
Eleven semi-structured in-depth interviews with a total
length of 492 minutes were conducted with experts across
Europe and North America. Such primary data was
complemented by secondary data, e.g. documentation
material (e.g., project whitepapers, blog posts and recorded
interviews). Observations from four conferences and several
community events (meetups) contributed ethnographic data.
All interview recordings were transcribed following a strict
verbatim style with occasional conversational elements. The
data was analysed through open coding in MAXQDA12.
Acknowledgments
My sincere thanks go to Prof. Neil Pollock who helped me
with much-needed guidance, drawing from his vast research
experience in the Web 2.0 era. I would also like to thank the
University of Edinburgh Business School for providing me
with a travel grant to include ethnographic data in this study.
Results
Traditionally prevalent organisational forms decentralise competence and power to varying degrees (Figure 1). For instance, outward-looking firms
that engage in open innovation draw from external knowledge and thereby decentralise competence, yet decision-making power remains internalised.
Vice versa, closed communities, such as holacracies, decentralise decision-making processes but are less outward-looking. Decentralising both
competence and power, open communities such as free and open-source software (FOSS) communities are the basis for major successes, notably
Wikipedia and Linux. However, open communities often rely upon utilitarian and hedonic motives, lacking systematic incentivation of contributors.
Drawing on principles of cryptoeconomics, blockchain introduces a third dimension of decentralisation: incentives (Figure 2). By distributing stake
through initial token offerings (ITOs) and ongoing distribution (e.g., pay-outs, airdrops and exchanges), a formerly fuzzy crowd evolves into an
aligned group of contributors who each have skin in the game. Hence, appropriate token designs transform a blockchain into an ‘incentive machine’.
Decentralised incentivation introduces novels forms of organisations, so called decentralised autonomous organisations (DAOs). A DAO is a
governance structure whose rules are code and enforced autonomously whereas its governance is subject to various degrees of decentralising
competence and power. For instance, an inconsequential DAO decentralises incentives through token distribution; yet, its governance mechanisms
Conclusion
Blockchain technology is an emerging phenomenon that is
thought to change how individuals and businesses organise
themselves (Beck et al., 2018; Voshmgir, 2017). A key
differentiation between DAOs and traditional forms of
organisations is their ability to decentrally incentivise
members through a system that is native to public
blockchain technology. By introducing aligned incentives as
a third key characteristic besides sourcing competence and
allocating decision-making power, DAOs extent the solution
space of organisational forms. The shaping of DAOs is
subject to ideologies. Contributing towards a sensemaking of
blockchain, two organising visions are identified which each
follow their own ideology. Moving forward, it remains to be
seen whether incumbents will successfully retain their power
in blockchain-based infrastructure, or whether blockchain is
a‘crypto trojan horse’ (Waters, 2017) that changes business
models to inevitably end the paradigm of artificial scarcity.
Theodor Beutel
t.f.beutel@sms.ed.ac.uk; @theobtl
Literature cited
Beck, R., Müller-Bloch, C., & King, J. L. (2018). Governance in the
blockchain economy - a framework and research agenda. Journal of the
Association for Information Systems.
Voshmgir, S. (2017). Disrupting governance with blockchains and smart
contracts. Strategic Change, 26(5), 499509.
Waters, N. (2017). Blockchain Commons: The End of All Corporate Business
Models. Retrieved from https://medium.com/peerism/blockchain-
commons-the-end-of-all-corporate-business-models-3178998148ba
Further information
The full paper can be found at http://theodorbeutel.de.
Figure 1: Competence-power-incentives framework in a Web 2.0 context Figure 2: Competence-power-incentives framework in a Web 3.0 context
reinforce patterns of centralised competence and
decision-making power. On the contrary, a global
DAO utilises a token design that incentivises
collaboration across teams while also drawing
from external competencies (e.g., through low
barriers to entry) and distributing decision-
making power (e.g., through reputation-weighted
voting power).
Moreover, this study finds that the blockchain
space is coined by two organising visions which
diverge in sensemaking of the novel dimension of
incentivation (Figure 3). While Vision 1 restricts
power to a federated group of stakeholders for
commercial reason, Vision 2 is coined by ethical
considerations. Growing research in token
engineering, cryptoeconomics and decentralised
governance are key to Vision 2 in bringing about
not only novel forms of organising but also a new
economic model for the Internet.
Figure 3: Two visions within the solution space of the competence-power-incentives framework
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