There is an interesting recent release in the area of Govtech: O Pollicino & G De Gregorio (eds), Blockchain and Public Law. Global Challenges in the Era of Decentralisation (Edward Elgar 2021).
It is an edited collection prefaced by a sharp critical account of the blockchain utopia (Kohl), and comprising a broad spectrum of analyses of the potential implications of blockchain on a range of public law areas, including: sovereignty (De Caria), citizenship (Gstrein & Kochenov), democracy (Goossens), authoritarianism (Bell), public administration (Hermstrüwer), freedom of expression (De Gregorio), or privacy (De Hert & Kumar). It also includes sectorial analyses in healthcare (Motsi-Omoijiade & Kharlamov), FinTech (Annunziata), antitrust (Maggiolino & Zoboli) and the broader issue of smart contracts (Sirena & Patti).
The chapters engage with analysis at different levels, from high level doctrinal considerations premised on the feasibility of completely decentralised blockchain implementations, to bottom-up reflections based on the emerging evidence of more limited blockchain implementations and their difficult coordination with existing legal frameworks. The diversity of approaches to the analysis of the public law implications of blockchain technology is in itself very thought-provoking, as it forces the reader to (eventually) take a stance on the likelihood of some of the scenarios considered in the book. There are two chapters that stood out to me.
The first one is Kohl’s ‘Blockchain utopia and its governance shortfalls’ (13-40). In this convincingly argued chapter, Kohl ‘sows seeds of scepticism about blockchain governance and liberation narratives’. Indeed, Kohl dissects the blockchain utopia and raises a number of heavy criticisms of essentialist approaches to the impact of this technology, mainly relying on a legal realist critical approach to the potential functionalities and the contextual constraints on the adoption of new technologies. Some of Kohl’s insights are worth highlighting, reproducing in full, and keeping in mind when thinking about these issues and, more generally, about the potential impact of digital technologies on public governance and law.
… the uptake of blockchain is premised on an assumption of the continued validity and relevance of established legal orders (even if their precise application may often still be uncertain), which is consistent with its transition into legitimacy and its endorsement by those for whom the legal system provides important protection of their proprietary interests. To be sure, new blockchain entrants may challenge existing intermediaries and bottlenecks and, in the course of doing so, disrupt the redistribution of assets and thereby unsettle existing ‘value asymmetries’, but overall the incorporation of blockchain technologies into mainstream society is likely to see it tamed, rather than unleashed. The broader point is that technologies, whether the internet or blockchain, are tightly and on multiple levels interconnected with exiting social orders and those interconnections decide upon the configurational latencies of the technological innovation within concrete settings: who uses the technological innovation in what configuration, for what purposes and against whom. This is not to deny the possibility of socio-technological disruptions to existing orders, but rather to emphasise how dominant political and economic actors will look to new technology for opportunities for maintaining, reinforcing and enhancing the status quo, and some of these ways may produce the very opposite outcomes to those articulated in utopian narratives (24-25, reference omitted and emphasis added).
Although blockchain may guarantee the authenticity and integrity of information as per creation, it cannot comment on the substantive value or quality of that information in its interface with reality. This quality exists on a different ontological level, not susceptible to verification by any distributed ledger. In a subscription contract for an online news service, blockchain applications may facilitate secure payments and even certify the provenance of the news item. Yet, it cannot certify the factual truth of the story or the competent interpretation of facts. However, it is in respect of these quality aspects of information production that important forms of trust are invoked; in the case of news, the trust in another’s construction of reality. This extra layer of trust, on the one hand, calls into question the validity of the distinction between the ‘internet of value’ and the ‘internet of information’ as generated by the blockchain phenomenon. Although blockchain applications can facilitate certain transactional aspects with security, and thereby enable new forms of value exchanges, the ‘internet of value’ is constituted of informational exchanges and there are important quality aspects of information to which blockchain does not speak. These can only be addressed by traditional gatekeepers acting as trusted third parties … (30-31, references omitted).
When decentralisation or disintermediation blockchain narratives argue for the substitution or marginalisation of existing corporations (such as banks or online platforms …) through distributed networks or decentralised organisations, they achieve much less than meets the eye. First, in essence they seek to replace one collective action mechanism for another - on the basis of the preferability of a flatter or distributed decision-making structure within the network or organisation … Essentially, public blockchain networks and organisations are ‘entities’ without a central management. This, however, only addresses the internal side of the organisation (by empowering its members …); the corporation’s cooperative arrangement, however, was also designed to present a unified front to the outside and thereby cushion its members from volatile markets. Assuming that even in a blockchain landscape, there would still be markets for blockchain networks competing with each other …, the decentralised networks or organisations would just become another intermediary, or centre of economic power, and thus recreate some of the very dependencies vis-à-vis users, that utopian accounts seek to redress. In other words, the replacement of a centralised management within an organisation does not touch upon its centralised position within a market: disintermediation within does not affect intermediation outside (35-36, references omitted).
Coupled with transaction costs analysis (which Khol also addresses eg at 40, and on which see here), these three insights put together seem to me to point towards the conclusion that blockchain is structurally incapable of creating an alternative institutional framework that is completely decentralised and, more specifically, that blockchain will not deliver a meaningful disruption of current institutions, even if it is suited to alter some of their processes.
From that perspective, the second chapter I find a must-read is Hermstrüwer’s ‘Blockchain and public administration‘ (105-122), which is a perfect concretization and further elaboration of the above insights. In this chapter, Hermstrüwer convincingly argues that ‘blockchain technology provides a much weaker basis for truly decentralized and legitimacy-preserving public administration than blockchain evangelists tend to claim. The main reason … [being] that [blockchain] is too static and rigid to be aligned with principles of administrative law without further ado’ (106).
Hermstrüwer demostrates this by explicit reference to problems or inconsistencies between blockchain and the foundational characteristics of public administration, such as: centralization; the incompleteness of administrative rules and decisions requiring interpretation; the tensions inherent in the unavoidability of the exercise of discretion in some contexts and the discretion aversion of public servants in other contexts; variability and intertemporal effects concerning the validity of administrative decisions, or the efficiency of public administrative action. The chapter further considers important issues of legitimacy of administrative action, including the security of and accountability for administrative decision-making. The conclusion that ‘Neither blockchain technology nor smart public contracts will be able to supplant centralized administrative agencies and courts … Blockchain technology might facilitate more cost-effective, secure and accurate procedures in the areas of public registration, verification, permissions and cross-agency cooperation … blockchain may remain what it currently is: a useful distributed ledger’ (122) can but be entirely shared.
To my mind, these two chapters and the broader variety of perspectives in the book, make an important contribution to current scholarly debates. Hopefully this research will also be noticed by policymakers presented with opportunities (or pressures) to adopt blockchain technologies.