Category: Journal articles

Towards legal recognition of Decentralised Autonomous Organisations

With Darcy WE Allen and Aaron M Lane. Published in Australian Business Law Review, June 2024. Working paper available at SSRN.

Abstract: Decentralised Autonomous Organizations (DAOs) are a typical organisation form in the Web3 economy. DAOs are internet-native organisations that are coordinated and governed by pseudonymous community members through a nexus of blockchain-based digital assets and smart contracts. There is over US$26 billion locked in over 2,300 active DAOs globally. This article examines the legal recognition of DAOs in an Australian context. A recent Australian Senate Inquiry recommended DAOs be recognised as a distinct business structure. This article makes three contributions towards this goal: (1) critically evaluate options for DAO recognition under Australian law; (2) a comparative analysis of United States DAO laws; and (3) an analytical outline of the key design features of an Australian DAO law.

Voting with time commitment for decentralized governance: Bond voting as a Sybil-resistant mechanism

With Vijay Mohan and Peyman Khezr. Published in Management Science, online March 2024. Early version available at SSRN

Abstract: In this paper, we examine the usefulness of time commitment as a voting resource for decentralized governance when the identity of voters cannot be verified. In order to do so, we take a closer look at two issues that confront token-based voting systems used by blockchain communities and organizations: voter fraud through the creation of multiple identities (Sybil attack) and concentration of voting power in the hands of the wealthy (plutocracy). Our contribution is threefold: first, we lay analytical foundations for the formal modeling of the necessary and sufficient conditions for a voting system to be resistant to a Sybil attack; second, we show that tokens as the only instrument for weighting votes cannot simultaneously achieve resistance to both Sybil attacks and a plutocracy in the voting process; and third, we design a voting mechanism, bond voting, that is Sybil resistant and offers a second instrument (time commitment) that is effective for countering plutocracy when large token holders also have a relatively high opportunity cost of locking tokens for a vote. Overall, our paper emphasizes the importance of time-based suffrage in decentralized governance.

Interoperability

Published in Internet Policy Review, Volume 13, Issue 2 (Glossary of decentralised technosocial systems)

Abstract: Interoperability describes the ability of systems to share services and resources with other systems. It is used in many fields — in the law, in communications and payments systems, in healthcare systems and in military alliances, to name a few — and describes a large number of characteristics from technical standards, to information architecture, to organisational governance. This glossary entry presents a topology of interoperability layers and presents some of the key economic and socio-technical concerns faced by interoperable systems.

Why airdrop cryptocurrency tokens?

With Darcy WE Allen and Aaron M Lane. Published in the Journal of Business Research, 2023. Manuscript version available at SSRN

Abstract: A cryptocurrency token airdrop is a novel means of distributing rights over a blockchain project to a community of users and owners for free. The market value of these airdrop giveaways is often upwards of hundreds of millions of dollars. This paper considers why projects might choose this unusual and costly means of token distribution. It considers a selection of high-profile airdrops as case studies between 2014 and 2022. This is the first comprehensive analysis of the rationales and mechanisms of Web3 token airdrops. We find that two primary rationales for airdrops are marketing (to attract new users and to maintain a community) and decentralisation of ownership and control of a project (building community, providing regulatory protection, and enhancing security). The paper contributes to an understanding of business practice and strategy in the emerging cryptocurrency and blockchain industry.

Repugnant innovation

With Darcy WE Allen and Sinclair Davidson. Journal of Institutional Economics, published online 11 October 2022. Working paper at SSRN

Abstract: Repugnant innovation is a form of evasive entrepreneurship that occurs in repugnant markets. Repugnance is an informal institution – controlled by long-lived norms, attitudes, customs and traditions – and repugnant innovation acts to shift institutions at the lowest level of the institutional stack. The paper considers three examples of repugnant innovation: e-cigarettes, online gambling, and webcam modelling. Each repugnant innovation challenges the complex mixture of material and moral concerns that contributes to repugnance in their respective markets. The paper adds to and expands on a body of evidence about innovation in apparently unsupportive institutional environments.

On Coase and COVID-19

With Darcy WE Allen, Sinclair Davidson and Jason Potts. European Journal of Law and Economics volume 54, page 107–125 (2022)

Abstract: From the epidemiological perspective, the COVID-19 pandemic is a public health crisis. From the economic perspective, it is an externality and a social cost. Strikingly, almost all economic policy to address the infection externality has been formulated within a Pigovian analysis of implicit taxes and subsidies directed by a social planner drawing on social cost-benefit analysis. In this paper, we draw on Coase (1960) to examine an alternative economic methodology of the externality, seeking to understand how an exchange-focused analysis might give us a better understanding of how to minimise social cost. Our Coasean framework allows us to then further develop a comparative institutional analysis as well as a public choice theory analysis of the pandemic response.

Published here. Working version available at SSRN or in PDF here.

The Political Economy of Australian Regulatory Reform

With Darcy WE Allen, Aaron M Lane and Patrick A. McLaughlin. Published in Australian Journal of Public Administration, 18 September 2020

Abstract: The problem of regulatory accumulation has increasingly been recognised as a policy problem in its own right. Governments have then devised and implemented regulatory reform policies that directly seek to ameliorate the burdens of regulatory accumulation (e.g. red tape reduction targets). In this paper we examine regulatory reform approaches in Australia through the lens of policy innovation. Our contributions are twofold. We first examine the evolutionary discovery process of regulatory reform policies in Australia (at the federal, intergovernmental and state levels). This demonstrates a process of policy innovation in regulatory mechanisms and measurements. We then analyse a new measurement of regulatory burden based on text analytics, RegData: Australia . RegData: Australia uses textual analysis to count “restrictiveness clauses” in regulation—such as “must”, “cannot” and “shall”—thereby developing a new database. We place this “restrictiveness clauses” measurement within the context of regulatory policy innovation, and examine the potential for further innovation in regulatory reform mechanisms.

Available at Australian Journal of Public Administration. Working paper available at SSRN

Exit, Voice, and Forking

With Alastair Berg. Published in Cosmos + Taxis, Volume 8, Issue 8-9, 2020

Abstract: This paper offers a new framework to understand institutional change in human societies. An ‘institutional fork’ occurs when a society splits into two divergent paths with shared histories. The idea of forking comes from the open-source software community where developers are free to copy of a piece of software, alter it, and release a new version of that software. The parallel between institutional choice and software forking is made clear by the function and politics of forking in blockchain implementations. Blockchains are institutional technologies for the creation of digital economies. When blockchains fork they create two divergent communities with shared transaction ledgers (histories). The paper examines two instances of institutional forks. Australia can be seen as a successful fork of eighteenth-century Britain. The New Australia settlement in Paraguay can be seen as an unsuccessful fork of nineteenth century Australia.

Available at Cosmos + Taxis and in PDF here. Earlier version available in working paper at SSRN

The Cryptoeconomics of Cities, Data and Space

With Darcy W E Allen, Kiersten Jowett, Mikayla Novak, and Jason Potts. Published in in Cosmos + Taxis, Volume 8, Issue 8 + 9, 2020

Abstract: We explore the connection between new decentralised data infrastructure and the spatial organisation of cities. Recent advances in digital technologies for data generation, storage and coordination (e.g. blockchain-based supply chains and proof-of-location services) enables more granulated, decentralised and tradeable data about city life. We propose that this new digital infrastructure for information in cities shifts the organisation and planning of city life downwards and opens new opportunities for entrepreneurial discovery. Compared to centralised governance of smart cities, crypto-cities are more emergent orderings. This paper introduces this research agenda on the boundaries of spatial economics, the economics of cities, information economics, institutional economics and technological change.

Available at Cosmos + Taxis and in PDF here. Preprint available at SSRN. (Previously titled ‘Spatial Institutional Cryptoeconomics’)