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 and those benefits may elude us if decentralization fails in practice.
How blockchain governance is enacted—what people do in practice—can differ considerably from how blockchain governance is envisioned—what people aspire to do. There is no one commonly agreed-upon definition of blockchain, but according to one often used in the common discourse, a blockchain is a distributed ledger shared by multiple parties who can add transactions to the ledger. This implies that changes are reflected consistently for all parties. If reconciling contradictory ledgers is costly, this may be beneficial. Blockchain’s proponents expect it to be virtually immutable without being centralized, meaning that blockchain would not require a trusted third party that decides upon the ledger’s content. Bitcoin, the first blockchain implementation, has succeeded in allowing for digital payments without having to rely on any trusted third party.
Such decentralization is expected to bring cost savings (through disintermediation), and empowerment to participants, since the parties using the blockchain do not need to trust a powerful third party to act in their best interest. But these benefits are realized only through decentralization. If decentralization fails to materialize, we return to the problems of power and trust. We can understand this contradiction by identifying the different ways Bitcoin– as a prototypical example of blockchain– is governed, both in its envisioned form and in practice.