Discussion Papers 2019
CIRJE-F-1119 | "Blockchain Disables Real-World Governance" |
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Author Name | Matsushima, Hitoshi |
Date | May 2019 |
Full Paper | |
Remarks |
Abstract |
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This study indicates that the improper uses of a public blockchain disable real-world governance in organizations and marketplaces. By using any basic application of smart contracts, such as escrow transactions, along with a revelation mechanism outside the blockchain, individuals can execute illegal cartel acts in a self-enforcing and non-judicial manner. Cartel members can then implement collective deviations without help from trusted intermediaries or any requirements on reputation or word-of-honor. We show that a first price auction is vulnerable to cartel threats even if the seller can hide bidders’ prices because bidders take a countermeasure to hidden prices by using blockchain. |