Since its inception, blockchain has promised to make “trusted third parties” redundant. In practice, though, whether blockchain is actually decentralized depends on what is governed and how this governance is enacted. As more businesses explore blockchain, this distinction becomes increasingly important. There are many expected benefits from decentralization that may elude us if it fails in practice.

Blockchain is commonly defined as a distributed ledger shared by multiple parties who can add transactions to it. Bitcoin, the first blockchain implementation, has succeeded in allowing for digital payments without having to rely on any trusted third party acting in the user’s best interest.

Such decentralization is expected to bring cost savings and empowerment. If it fails to materialize, we return to the problems of power and trust. We can understand this contradiction by identifying the four different ways Bitcoin, as a prototypical example of blockchain, is governed.

Read the full BusinessMirror article.

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Hanna Halaburda is Associate Professor of Technology, Operations and Statistics