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We develop a theory of blockchain governance. In our model, the proof-of-work system, which is the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. We show that the proof-of-work system may lead to a situation where some large firms in the blockchain industrial ecosystem -- blockchain conglomerates -- capture the governance of the blockchain.

Published in

The Review of Financial Studies, Volume 36, Issue 4, April 2023, Pages 1364–1407

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