Abstract
The proposition that constitutional rules serve as permanent, fixed points of interaction is challenged by the existence of contestable rule amendment and the emergence of de facto authority. This observation not only applies to conventional political constitutions, but to the fundamental rules which govern interactions by numerous people using new forms of technology. Blockchain technology aims to coordinate action in a world of incomplete information and opportunism, but the governance arrangements in blockchain protocols remain far from settled. Drawing upon recent theoretical developments regarding constitutional change, we interpret changes to the fundamental working rules of blockchain protocols as central to the adaptive, emergent nature of activity within this technological space. We apply this concept of “constitutional catallaxy” to selected blockchain platform case studies, illustrating the dynamism inherent in establishing protocols within the blockchain. Blockchain coordination changes and adapts not only to the technological limitations of the available protocols, but to mutual expectations and influence of interacting stakeholders.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
This reward is known as the ‘coinbase transaction’, and was 50 Bitcoin in 2009, halving every 4 years. Thus, at the time of writing the coinbase transaction is worth 12.5 Bitcoin. In addition to this coinbase reward, miners also receive transaction fees, which users include to incentivise miners to incorporate their transactions in new blocks.
There are several scaling proposals to increase the number of transactions the Bitcoin can process. See for instance Chauhan et al. (2018). In fact, blocks larger than one megabyte can be (and have been) mined due to an August 2017 upgrade known as segregated witness (SegWit) (Song 2017), but this does not materially change the analysis presented in this paper.
As this strictly defined supply schedule is coded into the Bitcoin protocol itself, this might be considered in the context of monetary constitutionalism (in similar vein to Buchanan 1962).
The authors thank an anonymous referee for pointing us to the formative literature on “agenda setting,” and its potential implications for our arguments.
Another common distinction between certain types of forks is one of a soft fork or a hard fork. In general, a soft fork results in backwards compatibility with previous versions of the protocol, while a hard fork is not backwards compatible.
Based on 250 byte transactions.
The software change from July 2010 (static const unsigned int MAX_BLOCK_SIZE = 1000000) can be viewed here: https://github.com/bitcoin/bitcoin/commit/a30b56ebe76ffff9f9cc8a6667186179413c6349#diff-118fcbaaba162ba17933c7893247df3aR2614.
As discussed earlier, this constitution has been drafted by Daniel Larimer (2018), the CTO of the organisation that wrote the EOS software.
References
Allen, D. E. W., & Berg, C. (2020). Blockchain Governance: What we can learn from the economics of corporate governance. Retrieved January 17, 2020 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3519564.
Alston, E. (2019). Constitutions and blockchains: Competitive governance of fundamental rule sets. Working Paper Series No. 3. Utah State University: Center for Growth and Opportunity.
Antonopoulos, A. M. (2017). Mastering Bitcoin: Programming the open blockchain. Sebastopol: O’Reilly Media.
Atik, J., & Gerro, G. (2018). Hard forks on the Bitcoin blockchain: Reversible exit, continuing voice. Stanford Journal of Blockchain Law and Policy, 1 (1). Retrieved June 7, 2019 from https://stanford-jblp.pubpub.org/pub/hard-forks-bitcoin.
Belshe, M., Casares, W., Wu, J., Garzik, J., Smith, P., & Voorhees, E. (2017). Segwit2x Final Steps. Bitcoin-segwit2x mailing list. Retrieved January 24, 2020 from https://lists.linuxfoundation.org/pipermail/bitcoin-segwit2x/2017-November/000685.html.
Berg, A., & Berg, C. (2017). Exit, voice, and forking. Retrieved June 7, 2019 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3081291.
Berg, A., & Berg, C. (2018). Blockchains and constitutional catallaxy: An EOS case study. Retrieved June 7, 2019 from https://medium.com/@cryptoeconomics/blockchains-and-constitutional-catallaxy-an-eos-case-study-37936d5f7d67.
Berg, A., Berg, C., & Novak, M. (2018). Crypto public choice. Retrieved June 7, 2019 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3236025.
Berg, C., Davidson, S., & Potts, J. (2018b). Blockchains as constitutional orders. In R. E. Wagner (Ed.), James M. Buchanan: A theorist of political economy and social philosophy (pp. 383–397). New York: Palgrave Macmillan.
Berg, C., Davidson, S., & Potts, J. (2019). Understanding the blockchain economy: An introduction to institutional cryptoeconomics. Cheltenham: Edward Elgar.
Berg, C., Davidson, S., & Potts, J. (2020). Proof of work as a three-sided market. Frontiers in Blockchain, 3(2). https://doi.org/10.3389/fbloc.2020.00002.
Brennan, G., & Buchanan, J. M. ([1985] 2000). The reason of rules: Constitutional political economy. Indianapolis: Liberty Fund.
Buchanan, J. M. (1962). Predictability: The criterion of monetary constitutions. In L. B. Yeager (Ed.), In search of a monetary constitution (pp. 155–183). Cambridge: Harvard University Press.
Buchanan, J. M. (1987). The constitution of economic policy. American Economic Review,77(3), 243–250.
Buchanan, J. M., & Faith, R. L. (1987). Secession and the limits of taxation: Toward a theory of internal exit. American Economic Review,77(5), 1023–1031.
Buchanan, J. M. ([1975] 2000). The limits of liberty: Between Anarchy and Leviathan. Indianapolis: Liberty Fund.
Buchanan, J. M., & Tullock, G. ([1962] 1999). The calculus of consent: Logical foundations of constitutional democracy. Indianapolis: Liberty Fund.
Champagne, P. (2014). The book of Satoshi: The collected writings of Bitcoin Creator Satoshi Nakamoto. Austin: e53 Publishing LLC.
Chauhan, A., Malviya, O. P., Verma, M., & Mor, T. S. (2018). Blockchain and Scalability. In 2018 IEEE international conference on software quality, reliability and security companion (QRS-C). https://doi.org/10.1109/qrs-c.2018.00034.
Chohan, U. W. (2019). The limits to blockchain? Scaling vs. decentralization. Retrieved December 29, 2019 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3338560.
Copeland, T. (2019). EOS block producers scrap constitution for equally defunct user agreement. Retrieved June 7, 2019 from https://decrypt.co/6505/eos-block-producers-scrap-constitution.
Cryddit (2015). Re: Permanently keeping the IMB (anti-spam) restriction is a great idea. Retrieved January 21, 2020 from https://bitcointalk.org/index.php?topic=946236.msg10388435#msg10388435.
De Filippi, P., & Wright, A. (2018). Blockchain and the law: The rule of code. Cambridge: Harvard University Press.
Deschapell, A. (2017). Segwit2x is doomed to fail. Coindesk, 6 November. Retrieved January 22, 2020 from https://www.coindesk.com/opinion-segwit2x-doomed-fail.
Digital Currency Group (2017). Bitcoin scaling agreement at consensus 2017. Retrieved June 7, 2019 from https://medium.com/@DCGco/bitcoin-scaling-agreement-at-consensus-2017-133521fe9a77.
Dinkins, D. (2017). Bitcoin core developers remain adamant in opposition to SegWit2x, potential showdown in November. Retrieved June 7, 2019 from https://cointelegraph.com/news/bitcoin-core-developers-remain-adamant-in-opposition-to-segwit2x-potential-showdown-in-november.
Downs, A. (1957). An economic theory of democracy. New York: Harper and Row.
EOS Core Arbitration Forum (ECAF). (2018). ECAF rules of dispute resolution—EOS constitution. Retrieved June 7, 2019 from https://www.eoscorearbitration.io/home/governance.
EOS New York. (2019). The EOS User Agreement has been proposed on-chain. Retrieved June 7, 2019 from https://medium.com/eos-new-york/the-eos-user-agreement-has-been-proposed-on-chain-61bf3760b604.
Eos.io. (2018). EOS constitution. Retrieved June 7, 2019 from https://github.com/EOSIO/eos/blob/5068823fbc8a8f7d29733309c0496438c339f7dc/constitution.md.
EOS.Mainnet. (2018). EOS Constitution. Retrieved June 7, 2019 from https://github.com/EOS-Mainnet/governance/blob/3ff0a9615b267bdf44185e08d4b9b1b1842353a8/eosio.system/eosio.system-clause-constitution-rc.md.
Floyd, D. (2018). The EOS arbitrator problem: A crypto governance breakdown explained. Retrieved June 7, 2019 from https://www.coindesk.com/eos-arbitrator-problem-crypto-governance-breakdown-explained.
Hayek, F. A. (1976). Denationalisation of money: An analysis of the theory and practice of concurrent currencies. London: Institute of Economic Affairs.
Hertig, A. (2017a). The Segwit2x boycott: Bitcoin’s UASF isn’t backing down from August deadline. Coindesk, 14 July. Retrieved January 22, 2020 from https://www.coindesk.com/segwit2x-boycott-bitcoins-uasf-isnt-backing-august-deadline.
Hertig, A. (2017b). UASF revisited: Will Bitcoin’s user revolt leave a lasting legacy? Coindesk, 2 August. Retrieved January 24, 2020 from https://www.coindesk.com/uasf-revisited-will-bitcoins-user-revolt-leave-lasting-legacy.
Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in firms, organizations, and states. Cambridge: Harvard University Press.
John, A. (2015). Culture as a constitution. In L. E. Grube & V. H. Storr (Eds.), Culture and economic action (pp. 225–242). Cheltenham: Edward Elgar.
Krecké, E. (2004). The emergence of private lawmaking on the Internet. In J. Birner & P. Garrouste (Eds.), Markets, information and communication: Austrian perspectives on the internet economy (pp. 289–307). London: Routledge.
Larimer, D. (2018). The “intent of code” is law. Retrieved June 7, 2019 from https://medium.com/@bytemaster/the-intent-of-code-is-law-c0e0cd318032.
Levine, M. E., & Plott, C. R. (1977). Agenda influence and its implications. Virginia Law Review,63(4), 561–604.
Luther, W. J. (2019). Getting off the ground: the case of bitcoin. Journal of Institutional Economics,15(2), 189–205.
MacDonald, T., Allen, D. W. E., & Potts, J. (2016). Blockchains and the boundaries of self-organized economies: Predictions for the future of banking. In P. Tasca, T. Aste, L. Pelizzon, & N. Perony (Eds.), Banking beyond banks and money: A guide to banking services in the twenty-first century (pp. 279–296). Cham: Springer.
Markey-Towler, B. (2018). Anarchy, blockchain and utopia: A theory of political-socioeconomic systems organised using Blockchain. Journal of the British Blockchain Association,1(1), 13–21.
Morgan, D. (2017). The great Bitcoin scaling debate—A timeline. Hackernoon, 4 December. Retrieved January 22, 2020 from https://hackernoon.com/the-great-bitcoin-scaling-debate-a-timeline-6108081dbada.
Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. Retrieved June 7, 2019 from https://bitcoin.org/bitcoin.pdf.
Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and cryptocurrency technologies: A comprehensive introduction. Princeton: Princeton University Press.
Narayanan, A., & Clark, J. (2017). Bitcoin’s academic pedigree. Communications of the ACM,60(12), 36–45.
Neudecker, T., & Hartenstein, H. (2018). Short paper: An empirical analysis of blockchain forks in Bitcoin. Retrieved June 7, 2019 from https://fc19.ifca.ai/preproceedings/24-preproceedings.pdf.
Novak, M. (2019). Crypto-friendliness: understanding blockchain public policy. Journal of Entrepreneurship and Public Policy. https://doi.org/10.1108/JEPP-03-2019-0014.
Nyffenegger, R. (2018). Scaling Bitcoin. Masters thesis. Universität Basel. Retrieved January 22, 2020 from https://wwz.unibas.ch/fileadmin/user_upload/wwz/00_Professuren/Berentsen_Wirtschaftstheorie/Lecture_Material/Master_s_Thesis/Completed_Master_s_Theses/Master_Thesis_Remo_Nyffenegger.pdf.
Pennington, M. (2011). Robust political economy: Classical liberalism and the future of public policy. Cheltenham: Edward Elgar.
Rajagopalan, S. (2018). Blockchain and Buchanan: Code as constitution. In R. E. Wagner (Ed.), James M. Buchanan: A theorist of political economy and social philosophy (pp. 359–381). New York: Palgrave Macmillan.
Rajagopalan, S., & Wagner, R. E. (2013). Constitutional craftsmanship and the rule of law. Constitutional Political Economy,24(4), 295–309.
Rauchs, M., Glidden, A., Gordon, B., Pieters, G. C., Recanatini, M., Rostand, F, et al. (2018). Distributed ledger technology systems: a conceptual framework. Cambridge Centre for Alternative Finance. Retrieved January 25, 2020 from https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2018-10-26-conceptualising-dlt-systems.pdf.
Rizzo, P. (2017). Bitcoin’s new controversy: The AsicBoost allegations explained. Coindesk, 6 April. Retrieved January 23, 2020 from https://www.coindesk.com/bitcoins-new-controversy-asicboost-allegations-explained.
Runst, P., & Wagner, R. E. (2011). Choice, emergence, and constitutional process: A framework for positive analysis. Journal of Institutional Economics,7(1), 131–145.
Salter, A. W., & Wagner, R. E. (2019). Constitutional catallaxy: Friends and enemies in an open-ended social order. Journal of Public Finance and Public Choice,34(1), 95–109.
Song, J. (2017). Understanding Segwit block size. Retrieved June 7, 2019 from https://medium.com/@jimmysong/understanding-segwit-block-size-fd901b87c9d4.
Song, J. (2018). BCH is fiat money. Retrieved June 7, 2019 from https://medium.com/@jimmysong/bitcoin-cash-is-a-fiat-money-39626c002f77.
Stigler, G. J. (1971). The theory of economic regulation. The Bell Journal of Economics and Management Science,2(1), 3–21.
Theymos. (2015). Citation needed: Satoshi’s reason for blocksize limit implementation. Retrieved June 7, 2019 from https://www.reddit.com/r/Bitcoin/comments/3giend/citation_needed_satoshis_reason_for_blocksize.
Voigt, S. (1999). Explaining constitutional change: A positive economics approach. Cheltenham: Edward Elgar.
Wagner, R. E. (2016). Politics as a peculiar business: Insights from a theory of entangled political economy. Cheltenham: Edward Elgar.
White, L. H. (2015). The market for cryptocurrencies. The Cato Journal,35(2), 383–402.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Berg, A., Berg, C. & Novak, M. Blockchains and constitutional catallaxy. Const Polit Econ 31, 188–204 (2020). https://doi.org/10.1007/s10602-020-09303-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10602-020-09303-9