The Siren Song: Algorithmic Governance by Blockchain

Innovation and Economic Growth and Privacy and Security

Article Snapshot


Kevin Werbach


After the Digital Tornado: Networks, Algorithms, Humanity, Kevin Werbach, ed., 2020


Blockchain technologies such as bitcoin promise greater freedom, but the technology is immature. The systems are imperfect, but some cannot effectively recover from failure.

Policy Relevance

Developers should build governance mechanisms into every blockchain system.

Main Points

  • A new and still immature technology, blockchain, promises gains in efficiency and freedom by replacing governmental or dominant firms’ points of internet control with decentralized mechanisms.
  • For centuries, societies have been organized around the use of ledgers for accounting and recordkeeping; blockchain is a distributed ledger.
    • Traditionally, ledgers have been centralized, with one copy designated as the master.
    • Blockchain offers a decentralized alternative, with each party controlling the information about its own transactions.
  • Blockchain technologies require a network of participants to attest to the integrity of shared information; another key element of blockchain is the smart contract, software code that allocates rights and responsibilities among participants.
  • Immutability means that once a transaction has been added to the blockchain ledger, it cannot be altered; digital records are ephemeral and immutability is hard to achieve.
    • No system can entirely eliminate the possibility that an attacker has altered the ledger.
    • Trustworthy systems balance acknowledgement of imperfection with assurance sufficient to inspire trust.
  • Because of blockchain immutability, even invalid or illegitimate exchanges cannot easily be reversed; one developer's attempt to address a coding flaw caused cryptocurrency funds to become permanently trapped in certain accounts.
  • Human input is necessary to prevent bias and address unforeseen problems with blockchain systems; some blockchain networks use "on-chain" governance, allowing difficult questions to be resolved by majority vote.
  • Governance mechanisms should be built into blockchain technologies to allow the blockchain to recover from failure.
    • Consensus mechanisms ensure that transactions are immutable.
    • Override mechanisms designate who can decide if immutability should be reversed when problems arise.
    • Rule change mechanisms determine who sets policy for the network.
    • Community governance rules set out who can participate in blockchain governance and change the rules.
  • Blockchain developers resist government involvement, but government could contribute to a healthy blockchain economy.

Get The Article

Find the full article online

Search for Full Article