This chapter first describes the current use of the term “decentralized” as applied to permissionless blockchains like Bitcoin and Ethereum. Then, it analyzes the complex, contested nature of the term, delving into issues such as the different domains where power is exercised in blockchain systems and the fluid nature of power concentration and diffusion in these systems. Next, it provides examples of events that reveal sites of concentrated power in permissionless blockchain systems, focusing on the activities of software developers and miners. Finally, it explores the significant implications for law of using a fuzzy term like “decentralized” to make legal decisions, as misunderstandings about power hidden in the term can lead to flawed decisions across a wide swath of legal fields.
This chapter addresses the myth of ‘decentralized governance’ of public blockchains, arguing that certain people who create, operate, or reshape them function much like fiduciaries of those who rely on these data structures. It compares the role of leading software developers and Frankel’s conception of a ‘fiduciary’ and finds much in common, as users place extreme trust in the developers to be both competent and loyal (i.e. to be free of conflicts of interest). The chapter frames the cost–benefit analysis necessary to evaluate whether it is wise to treat these parties as fiduciaries, and outlines key questions needed to flesh out the fiduciary categorization. For example, which software developers are influential enough to resemble fiduciaries? Are all users of a blockchain ‘entrustors’ of the fiduciaries who operate the blockchain, or only a subset of those who rely on the blockchain? The chapter concludes by considering the broader implications of treating software developers as fiduciaries, given the existing accountability paradigm that largely shields them from liability for the code they create.
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