No Blockchain Is an Island

Primavera De Filippi is a permanent researcher at the CERSA/CNRS/Université Paris II, a faculty associate at the Berkman-Klein Center for Internet & Society at Harvard Law School, the "alchemist" for DAOstack and a co-author of "Blockchain and the Law."

Much discussion is currently taking place concerning the nature and specificities of blockchain governance, but when we say "blockchain governance" we're really talking about multiple things.

While people often use the term to describe the mechanism by which the underlying protocol of a blockchain-based network can be modified or updated - in terms of both on-chain and off-chain governance - we focus here on a much broader question:

What are the various elements or forces that influence the governance of blockchain-based networks or applications?

Harvard professor Lawrence Lessig identifies four different forces that influence behavior: law, social norms, markets, and architecture (i.e., technical infrastructure or code). In doing so, he underlines the fact that we cannot focus solely on the rules specifically designed to govern or regulate one particular individual.

Rather, we need to take a larger ecosystemic approach, looking at various forces that influence that individual. Accordingly, when it comes to promoting or precluding certain behaviors, we might choose to directly regulate individuals via the legal system or indirectly regulate them through one of the other three forces (markets, social norms, and architecture).

Lawrence Lessig's four constraints of regulation
We propose such an ecosystemic approach to identify the different levers that could influence the operations of a blockchain-based system and the extent to which these levers contribute to the broader notion of "blockchain governance."

Blockchain-based applications do not exist in a vacuum. They subsist within a larger ecosystem of internet applications, each operating according to its own protocols and rules.

The internet layer
In particular, the operations of a blockchain-based system - whether it is a blockchain-based network, platform, or application - are defined by the rules that govern these systems but also respond to the different layers of the internet infrastructure, which to a different extent contribute to shaping the systems' overall governance.

Specifically, blockchain-based networks like bitcoin and ethereum operate on top of the internet and ultimately depend on protocols like the TCP/IP, which is responsible for routing and transferring packets of information between different nodes on the network. These blockchain-based networks thus cannot operate without internet connectivity.

Most critically, because internet service providers (ISPs) ultimately control the transportation layer of the internet, they could discriminate against packets coming from or directed toward a blockchain-based network, effectively tampering with its operations.

Internet governance can therefore have a significant impact on the operations of a blockchain-based network. Particularly relevant in this context is the "net neutrality" debate. The practice of packet discrimination makes it possible for ISPs to favor certain blockchain-based networks, at the expense of others.

More radically, if a government were to ban a particular blockchain-based network, it could require all ISPs operating within its national boundaries to block or filter traffic coming from or directed to that network - e.g., through mechanisms such as deep packet inspection (DPI) or other traffic detection techniques.

Accordingly, while internet governance is external to the blockchain ecosystem (in that its scope is much broader), regulating the internet infrastructure could indirectly affect the operations of a blockchain-based system.

The blockchain layer
Similar problems emerge within a singular blockchain-based network.

While ISPs are responsible for routing packets through the internet, according to specific protocols (e.g., TCP/IP and BGP), miners on a blockchain-based network are responsible for validating and recording transactions into the underlying blockchain, according to a particular protocol (e.g., the bitcoin protocol), consensus algorithm and fork-choice (e.g, bitcoin's proof-of-work protocol stipulates that miners should always add to the "longest chain" as defined by the amount of hashing power required to compute the chain).

Today, this task of processing transactions is driven mostly by an economic incentive system, whereby the higher the transaction fees paid to the network, the greater the chance for these transactions to be included into the next block.

But transaction fees and mining rewards - albeit a fundamental incentive for miners - are not the only factors that might influence the behavior of miners. Other levers might come into play, stemming from the outside of the blockchain infrastructure.

For instance:

Markets: What would prevent a large mining pool from entering into an (off-chain) agreement with third parties, in order to speed up the inclusion of certain transactions at the expense of others.
Social norms: Could miners collectively agree that specific transactions coming from or directed towards a criminal dapp [decentralized application] will not be processed into a block?
Laws: Could regulators stipulate that all miners located in particular jurisdictions are prohibited from validating transactions pertaining to a specific dapp or account?
Architecture: Might the Great Firewall of China be constructed to limit the ability of miners in China to handle larger blocks?
These external forces, existing beyond the control of any given blockchain-based application, could force radical consequences over the operations of that particular dapp.