Decentralising Power, Competence and Incentives A

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Nov 1, 2008 - A Case Study on Emerging Visions in the Blockchain Space by Theodor Beutel* .... Free/libre and open source software is computer software that is publicly ...... Liquid Democracy, Ethereum, and the slow path to revolution. Retrieved from .... https://download.slock.it/public/DAO/WhitePaper.pdf. Katz, D.
Decentralising Power, Competence and Incentives A Case Study on Emerging Visions in the Blockchain Space

by Theodor Beutel*

Originally submitted on 23/08/2018

*

[email protected], https://about.me/theodor.beutel

Recommended citation: Beutel, T. (2018). Decentralising Power, Competence and Incentives – A Case Study on Emerging Visions in the Blockchain Space (master’s dissertation). University of Edinburgh Business School. Retrieved from https://www.researchgate.net/publication/327427029

Abstract Context: Bitcoin, cryptocurrencies and smart contracts enjoy great popularity. The underlying technology, blockchain, is thought to bring about no less than a paradigm shift in how societies and economies interact. While considerable benefits are anticipated in domains such as e-payments, other domains allocate less attention to blockchain. In business studies, not enough attention is given to the claim that this phenomenon, the so-called ‘trust machine’ (Economist, 2015), may ‘kill the traditional firm’ (Mulligan, 2017). Objectives: While information systems research unmistakably states that blockchain resonates with the foundation of organisation studies, scholars in this field have barely scratched the surface of blockchain and its implications for the field. Partly, this is due to a lack of technical understanding of the technology which draws from peer-to-peer networks, game theory and cryptography. The objectives of this thesis are to characterise the technology and discuss its implications for organisation studies. M ethod: In order to make sense of this emerging technology, a qualitative case study approach is chosen. Eleven semi-structured in-depth interviews with a total length of 492 minutes were conducted with experts across Europe and North America, complemented by an analysis of technical documentation material. Observations from four industry conferences and several community events contributed ethnographic data. Results: Blockchain introduces novels forms of organisations that draw on the principles of crypto-economics. While today’s organisational forms decentralise competence and power to a varying degree, blockchain-enabled phenomena of organising introduce a third dimension: incentives. Based on these three dimensions, four novel organisational archetypes are proposed. Moreover, this study finds that the blockchain space is coined by two organising visions which diverge in sensemaking of the incentive-dimension. While one vision keeps power centralised to harness blockchain technology for economic reasons, the other vision decentralises power for value-based motivations, along with a new economic model for the Internet. Implications: While the results of this study are subject to quantitative validation, these insights into the emerging phenomenon of blockchain bring up more questions than have been answered as part of this thesis. Is the blockchain-enabled incentive machine going to deliver on its promise of disrupting the nature of the firm? Are incumbents going to embrace this phenomenon and integrate it into existing systems and business models, or is blockchain a ‘crypto trojan horse’ (Waters, 2017) that inevitably changes the paradigm of artificial scarcity? Implications for both practitioners and scholars in organisation research are plentiful, as business studies and information systems are making sense of this emerging phenomenon. Keywords: blockchain, governance, incentives, cryptonetworks, communities, organising visions I

Glossary Technical terms which are listed in this glossary are marked through underlining throughout this thesis. Alpha

See Release

Aragon

Aragon is a protocol for DAOs. See https://aragon.org/.

Beta

See Release

Bitcoin

Bitcoin is a cryptocurrency and a blockchain. Bitcoin introduced the concept of a blockchain, see Nakamoto (2008b).

Colony

Colony is a protocol for DAOs. See https://colony.io/.

ConsenSys

ConsenSys is a software development company, specialised on the Ethereum blockchain. See https://new.consensys.net/.

Crypto Whales

See Whales

Cryptoeconomics, Cryptoeconomic

Cryptoeconomics is economics applied to cryptography and “studies protocols that govern the production, distribution, and consumption of goods and services in a decentralized digital economy” (Zamfir, 2015).

Cryptonetworks

Cryptonetworks consist of blockchains, tokenisation, game theory and P2P networks and result in a structure that is compared to ecosystems or cities, rather than a firm.

DAOstack

DAOstack is a protocol for DAOs. See https://daostack.io/.

Decentralisation

See P2P network

Decentralised Application, DApp

A DApp, or decentralised application, is a software application that runs on a P2P network of computers, not a single server.

Distributed Ledger Technology, DLT

DLT is an umbrella term for distributed ledgers. See section 2.2.1.

Ethereum, Ether, ETH, ETC

Ethereum is a blockchain, proposed by Buterin (2014b). Ethereum supports smart contracts and has a cryptocurrency called Ether (ETH). Ethereum classic (ETC) is a fork of Ethereum.

Fork, Hard-Fork, Soft-Fork,

See Forking.

Forking, Forkability, Forkonomy

Forking is when an open source project is split into two. Forkability is when the former is possible, e.g. with FOSS, but not with proprietary software. Forkonomy are effects and dynamics that results from forks and the possibility to do so. See Alsindi (2018).

FOSS, open source

Free/libre and open source software is computer software that is publicly available (code is accessible), free of charge and II

comes with no or a non-restrictive license that allows the modification and redistribution of code. Futarchy

Futarchy is a form of governance which uses prediction markets in order to make decisions depending on how much money people bet on a future outcome. See Hanson (2013).

Genesis Block

The first block of a blockchain that is minted.

Hard-Fork

See Fork

ITO, ICO

Initial token offerings (ITOs) and initial coin offerings (ICOs) are, like initial public offerings, events where the ownership is spread across a group of stakeholders who buy themselves in. ITOs are the default among blockchain projects.

Liquid Democracy

Liquid democracy is a form of delegated democracy where an individual can pass on their vote to any other individual. See Duncan (2017).

Mainnet, Main-Net

Mainnet described blockchains that are not testnets.

Meritocracy

Meritocracy is a form of governance where decision-making power only depends on merit, i.e. reputation or quality of contributions, and not on wealth or other non-qualitative factors.

Multisignature, Multi-Sig

A multi-sig wallet is a blockchain wallet that requires multiple wallet owners to authorise transactions, thus allow various constellations of 2/3 or absolute majorities for transactions to become authorised.

Offchain, Off-Chain

Offchain interactions are transactions that are not logged onto a blockchain, thus enjoy the benefits and disadvantages of a blockchain, such as immutability and transparency.

Onchain, On-Chain

Onchain interactions are transactions that are logged directly onto a blockchain, thus enjoy the benefits and disadvantages of a blockchain, such as immutability and transparency.

P2P network, Peer-to-peer network

P2P networks consist of multiple independent computers. In a blockchain context, P2P networks are “politically decentralized (no one controls them) and architecturally decentralized (no central infrastructural point of failure), but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)” (Buterin, 2017c).

Prediction Markets

See Futarchy

Proof-of-Work, PoW

Proof-of-Work is a consensus algorithm for blockchains.

Quadratic Voting

Quadratic voting is a governance mechanism where individuals can buy multiple votes but need to pay for the square of the number of votes they buy, see Posner (2014).

III

Release: Alpha, Beta, Stable Release, Version 1.0

Software release cycles describe the maturity of a software. Alpha is usually unstable, Beta is relatively stable, and version 1.0 (or stable release) is the first version that is recommended for non-testing end users.

Soft-Fork

See Fork

Stable Release

Version 1.0, See Release

Testnet, Test-Net, Kovan, Rinkeby, Ropsten

Contrary to the mainnet, a testnet behaves like a blockchain but does not come with all features (e.g., immutability) and is purely intended for testing purposes.

Tokens

Tokens is cryptographically secured code that can function not only as cryptocurrency but also as represent voting rights, asset ownership and more. See Euler (2018).

Turing-complete

A system is Turing-complete if it is computationally universal in the sense that it can simulate mathematical models, described as a Turing machine.

Whales, Crypto Whales

Individuals, or individual addresses, that own a significant share of tokens in a network.

IV

List of Abbreviations

ABM

Agent-based modelling

AI

Artificial intelligence

DAG

Distributed acyclic graphs

DAO

Decentralised autonomous organisation

DApp

Decentralised application

DHT

Distributed hash tables

DLT

Distributed ledger technology

ERP

Enterprise resource planning

ETC

Call-sign for Ether Classic, a cryptocurrency

ETH

Call-sign for Ether, a cryptocurrency

EVM

Ethereum virtual machine

FOSS

Free/libre and open source software

GHM

Firm theory of Grossman, Hart and Moore

ICO

Initial coin offering, see also ITO

IS

Information systems

ITO

Initial token offering, see also ICO

Multi-sig

Multisignature

P2P

Peer-to-peer

PoS

Proof-of-Stake consensus algorithm

PoW

Proof-of-Work consensus algorithm

REP

Call-sign for Augur's reputation token

TCE

Transaction-cost economics

TCP/IP

Transmission Control Protocol/Internet Protocol

TCR

Token-curated registry

WISYWIG

What you see is what you get

WWW

World Wide Web

V

List of Figures

Figure 1: Google search volumes for blockchain-related terminology (in percent) .................................. 2 Figure 2: Lost trust in a trustless system ............................................................................................ 4 Figure 3: Competence-power framework............................................................................................. 9 Figure 4: Blockchains as a special kind of distributed database.......................................................... 11 Figure 5: The blockchain technology stack ....................................................................................... 13 Figure 6: Fat Protocols ................................................................................................................... 14 Figure 7: Competence-power-incentives framework in a Web 2.0 context ........................................... 32 Figure 8: Competence-power-incentives framework in a Web 3.0 context ........................................... 33 Figure 9: Incentives as a third characteristic in the competence-power-incentives framework ............... 35 Figure 10: Archetypes I - VIII in the solution space of the competence-power-incentives framework .... 36 Figure 11: Two visions within the solution space of the competence-power-incentives framework ........ 37

List of Tables

Table 1: Towards a definition of a DAO .......................................................................................... 23

VI

Table of Contents Abstract ............................................................................................................................................ I Glossary ........................................................................................................................................... II List of Abbreviations ......................................................................................................................... V List of Figures ................................................................................................................................. VI List of Tables .................................................................................................................................. VI

1

2

Introduction .............................................................................................................................. 1 1.1

Subject .............................................................................................................................. 1

1.2

Significance ........................................................................................................................ 3

1.3

Research objectives ............................................................................................................. 5

1.4

Structure............................................................................................................................ 5

Theoretical foundation ............................................................................................................... 5 2.1

2.1.1

Decentralising competence ........................................................................................... 6

2.1.2

Decentralising power.................................................................................................... 7

2.1.3

Decentralising competence and power........................................................................... 7

2.1.4

Competence-power framework ...................................................................................... 8

2.2

4

Blockchain ....................................................................................................................... 10

2.2.1

Distributed ledgers..................................................................................................... 10

2.2.2

Smart contracts......................................................................................................... 12

2.2.3

Private and public blockchains ................................................................................... 12

2.2.4

Characteristics of public blockchains ........................................................................... 13

2.3 3

Organisation studies ........................................................................................................... 5

At the intersection of blockchain and organisation studies .................................................. 15

Methodology ........................................................................................................................... 18 3.1

Research strategy ............................................................................................................. 19

3.2

Data analysis.................................................................................................................... 22

Results .................................................................................................................................... 22 4.1

Towards a definition of DAOs ........................................................................................... 22

4.2

Characterising decentralised governance in DAOs ............................................................... 24

4.2.1

Agnosticism through modularity ................................................................................. 24

4.2.2

Mechanisms .............................................................................................................. 24

4.2.3

Scale......................................................................................................................... 25 VII

4.2.4

Scope in an organisational sense ................................................................................. 26

4.2.5

Scope in an architectural sense ................................................................................... 26

4.2.6

Human-in-the-loop and accountability of individuals .................................................... 26

4.3

4.3.1

Decentralising decision-making power ......................................................................... 27

4.3.2

Decentralising competence ......................................................................................... 28

4.3.3

Decentralising incentive alignment .............................................................................. 28

4.4

5

6

What exactly in a DAO is subject to decentralisation?........................................................ 27

Two motivations for blockchain-enabled decentralisation .................................................... 29

4.4.1

Collaboration in a federated blockchain context........................................................... 29

4.4.2

Contrasting visions of openness .................................................................................. 30

4.4.3

Collaboration in a public blockchain context ............................................................... 30

Discussion ............................................................................................................................... 31 5.1

Summary of results ........................................................................................................... 31

5.2

Proposing new organisational archetypes............................................................................ 31

5.3

Emerging vision 1: “Appropriating value by retaining power” ............................................... 38

5.4

Emerging vision 2: “Incentives to change the status quo” .................................................... 40

5.5

Theoretical implications .................................................................................................... 42

5.6

Managerial implications .................................................................................................... 48

Conclusion .............................................................................................................................. 49 6.1

Limitations ....................................................................................................................... 50

6.2

Further research ............................................................................................................... 51

References ...................................................................................................................................... 52

VIII

1 Introduction

2008-11-01 23:16:33 UTC Title: Bitcoin P2P e-cash paper I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. […] Satoshi Nakamoto

In this email, sent by Satoshi Nakamoto (2008a) to a mailing list of cryptography researchers, they1 introduced Bitcoin as a digital peer-to-peer (P2P) payment system. The idea of P2P electronic cash was (and stays) intriguing – however, perhaps less anticipated was Bitcoin’s breakthrough in computer science. Bitcoin introduced a technical solution to decentralised consensus, which, up to that point, had been a major ambition for computer scientists, especially in distributed systems and cryptography. They had been working towards the problem of consensus in distributed systems with malicious actors for decades.

1.1 Subject The true innovation of Bitcoin was less P2P e-cash itself, but more the implementation thereof through a novel, underlying technology – the Bitcoin blockchain. As the first application of a general-purpose technology, Bitcoin may be to blockchain what e-mail was to the Internet (Iansiti & Lakhani, 2017). From its genesis block, blockchain was unstoppable – literally (as such a decentralised system cannot be turned off) as well as ideologically. Six years later, Vitalik Buterin (2014b), proposed the Ethereum blockchain which continued the fundamental innovation of the Bitcoin blockchain, followed by a plethora of other projects building upon Nakamoto’s (2008b) breakthrough in cryptography and distributed systems.

1

Satoshi Nakamoto never revealed his/her/their identity and vanished in 2010, around two years after Bitcoin had been proposed. This was likely motivated by the fundamental philosophy of Bitcoin where no central authority exists. There is ongoing speculation about the identity of Satoshi Nakamoto. Language expressions indicate that Nakamoto may be English. Conversation patterns suggest that Nakamoto was active throughout multiple time zones and used various linguistic styles. Nakamoto may therefore be a group of people. In the following, Nakamoto is referred to as ‘they’ which should not be interpreted as speculation, but both as a plural ‘they’ and a singular ‘they’ simultaneously.

1

Ten years into the development of blockchain, the world is beginning to grasp its significance. Relatively recently, search volumes for “Bitcoin” and “Ethereum” on Google began to rise dramatically (see Figure 1) while books on blockchain became best-sellers (McAfee & Brynjolfsson, 2017; Tapscott & Tapscott, 2016).

Figure 1: Google search volumes for blockchain-related terminology (in percent)

Adapted from Google Trends (2018)

Inevitably, the question arises: What lies behind this phenomenon, and what actually is blockchain? The answer is not straightforward. That is not only because the Bitcoin blockchain continues to evolve, but also because the Bitcoin blockchain was followed by many other forms of ‘blockchains’ which draw on the notion of decentralisation, yet, some fundamentally differ in their purpose and solution space. For this study, blockchain is defined as “a way of creating a robust, secure, transparent distributed ledger (Davidson, Filippi, & Potts, 2016, p. 1). Further details regarding the technology are found in section 2.2. What makes the concept of blockchain particularly intriguing to social sciences is its promise of trust. The fundamental premise of blockchain is to provide a technological solution to trust without institutional or human intermediaries – an emotion that is at the very core of human psychology. In order to compensate for lack of trust, intermediating institutions emerged (Coleman, 1994). It is beyond the scope of this thesis to give examples for such social constructs across all areas of humanity; yet, organisational research in the context of business studies provides a fruitful lens to reveal the significance of trust (Mayer, Davis, & Schoorman, 1995) and explore roles a trustless technology may take on. 2

1.2 Significance Centralising trust is at the very core of institutions that emerged across societies and economies, including political representation and financial institutions. However, such institutions are framed in a legal and moral context (Jackson et al., 2012) which, ultimately, fails to extract trust out of a social context. With continued technological progress (Brynjolfsson & McAfee, 2014; McAfee & Brynjolfsson, 2017), trust may now – for the first time in human history – become digitised and abstracted from social contexts. While such thoughts remain a utopia (or, perhaps a dystopia) to date, Nakamoto’s (2008b) idea of a trustless, distributed consensus algorithm was a breakthrough discovery and a step towards that vision. Today, businesses thrive on business models that involve some form of ‘trust as a service’. Especially in e-commerce, such services tend to correlate with network effects and economies of scale (McAfee & Brynjolfsson, 2017). However, the age of the Internet also had unintended consequences2 (Erwin, 2018). “[T]he fact that power is concentrated among so few companies has made it possible to weaponize the web at scale.” (Berners-Lee, 2018)

For instance, major technology companies such as Google, Facebook, Amazon, Uber and Airbnb developed platform business models where it is in the interest of the company to maximise market share and, due to the nature of winner-takes-all markets, create digital monopolies (McAfee & Brynjolfsson, 2017). While it is true that these companies are highly innovative and deliver excellent services to users, there are also substantial conflicts of interests appearing when such a platform faces trade-offs between maximising shareholder value and user experience. These conflicts are commonly found around questions of data privacy as well as monopolistic pricing resulting from lock-in effects (McAfee & Brynjolfsson, 2017). Sharing economy platforms are therefore a prime example for P2P networks that have been monetised by centralised institutions, whereas they could arguably deliver the same services without conflicts of interests through decentrally governed platforms (Tapscott & Tapscott, 2016; Tumasjan & Beutel, Forthcoming). However, underlining Sir Tim Berners-Lee’s quote above, blockchain too could be subject to fundamental unforeseeable changes along the way (Folkinshteyn, Glassboro, Lennon, Altoona, & Reilly, 2015).

2

See Kulwin (2018) for an interview series with “architects” of the Internet. “Things that ruined the Internet” are cookies, the Farmville vulnerability, algorithmic sorting, the ‘like’ button, pull-to-refresh and pup-up ads.

3

Blockchain technology is still immature and years away from mass adoption (Iansiti & Lakhani, 2017). Recent examples such as the Parity wallet hack3 and when ‘The DAO’ (Jentzsch, 2016) was compromised show that the technology is far from being stable. For instance, the attack on ‘The DAO’ brought one of the first formalised blockchain-based organisation in history to a spectacular end when an attacker who identified a bug in The DAO’s smart contract drained funds that had been invested into the organisation (Finley, 2016). A significant amount of funds were at stake – 3.6 million ETH, or 750 million GBP in today’s terms. The funds were eventually recovered through a hard fork – i.e., at the cost of immutability, which resulted in a major crisis within the Ethereum community (ibid.).

Figure 2: Lost trust in a trustless system

The Ethereum community (l.), ‘The DAO’ (r.) and the hack (m.). Reproduced from CryptoComics (2016).

3

According to Palladino (2017), an attacker who found a vulnerability in a multisig wallet was able to extract over 150,000 ETH/30,000,000 GBP as of Aug 2018.

4

1.3 Research objectives The goal of this project is to evaluate the implications of blockchain for organisation studies and, more specifically, how blockchain could facilitate organisational processes. However, given the immaturity and vagueness of blockchain, as explained in the earlier section, this thesis also maps the overall solution space of the technology and show corresponding visions therein. This requires reliable information about the underlying technological characteristics of blockchain, which will therefore be at the core of this study.

1.4 Structure To begin with, this thesis introduces relevant theoretical concepts in organisation studies, followed by a technical introduction to blockchain. Both sections are condensed in section 2.3 which also presents the research gap and elaborates on the objectives of this project. Subsequent sections introduce the methodology (section 3) and present the results (section 0). An extensive discussion of the results contains a summary of results (section 5.1), an extension of the theoretical framework (section 5.2), an overview on organising visions (sections 5.3 and 5.4), integration into theory (section 5.5) as well as implications for both theory and practice. The study concludes (section 6) with a summary, accompanied by limitations and paths for further research. Due to the novelty and complexity of blockchain technology, this thesis includes a technical glossary which can be found at the beginning. Technical terms that are part of the glossary are indicated by underlining.

2 Theoretical foundation 2.1 Organisation studies In ‘The Nature of the Firm’, Coase (1937) describes a “principle of marginalism” (ibid., p. 404) by which an organisation would set its boundaries. Coase argues that “a firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm” (ibid. p. 395). While Coase discusses “a cost of using the price mechanism” (ibid., p. 390), it is only later that the notion of weighting market costs against internalised costs is referred to as ‘transaction cost economics’ (TCE), most prominently coined by Williamson (1973, 1981, 1985).

5

TCE presents internalisation in response to market failures (Williamson, 1971), yet Hayek (1937; 1945) and takes a different view. The Austrian School directs attention to individuals’ knowledge that is distributed across society, where “[t[he economic problem of society is […] a problem of the utilization of knowledge which is not given to anyone in its totality” (Hayek, 1945, pp. 519–520). To date, TCE and the rationale of ‘The Nature of the Firm’ retain utility. Yet, recent years gave rise to multiple phenomena that are situated between Austrian School ideals of individualism with market pricing, and bureaucratic organisations with well-defined boundaries (Hall, 1963). Corresponding theories emerged, including open system theory (Katz & Kahn, 1966) where organisation are seen in context with their environment and network systems theory (Burnes, 2005) taking global markets, exponential technologies and other externalities into account while drawing from complexity theory. With the rise of the knowledge economy and firms highly depending on individuals’ knowledge, Hayek’s views regained traction (Kim & Mauborgne, 1998). Santos and Eisenhardt (2005) argue that TCE and approaches of exchange efficiency, such as dyadic make-or-buy decisions in firms, “dominated” (ibid., p. 505) research on organisational boundaries. Instead, the field would rather require a lens that is wider than TCE and efficiency-driven measures, they argue. Consequently, they shift their focus to other dimensions, including boundaries of competence and boundaries of power (Santos & Eisenhardt, 2005). In the following, these two dimensions are discussed in further detail.

2.1.1 Decentralising competence Expanding boundaries of competence (Santos & Eisenhardt, 2005) is not a new phenomenon to firms which, since decades ago, utilised boundary-spanning competence mechanisms such as outsourcing (Mullin, 1996), joint ventures (Hennart, 1988; Kogut, 1988) and consortia (Katz, 1986). While sourcing knowledge is inherently tied to the concept of a firm (Nelson, 1991), it is generally acknowledged that firms over time increasingly engaged in such and related practices that led to spanned, permeable or even dissolved boundaries (Lichtenthaler, 2011; Rosenkopf & Nerkar, 2001). For instance, the notion of open innovation received wide attention in the field new product and service development (Chesbrough, 2003; Chesbrough & Bogers, 2014) which is defined as “a distributed innovation process based on purposively managed knowledge flows across organizational boundaries” (Chesbrough & Bogers, 2014, p. 17). While its broad definition as well as its arguably simplistic and misleading representation of ‘closed innovation’ raised critique (Trott & Hartmann, 2009), open innovation proved to be a handy lens for practitioners and researchers alike which unified outward-looking, firm6

centric innovation methodologies. In contrast, with the user at its centre, an opposing approach to decentralising competence is user innovation (Hippel, 2005, 2017). Both concepts describe a range of methodologies which decentralise competence across firms and individuals, such as the lead user method (Bilgram, Brem, & Voigt, 2008), co-creation (Prahalad & Ramaswamy, 2004), communities (West & Lakhani, 2008) and crowdsourcing (Howe, 2006b).

2.1.2 Decentralising power Besides following a more decentralised approach to sourcing competencies and knowledge, firms underwent further changes regarding boundaries of power (Santos & Eisenhardt, 2005) towards more decentralised decision-making processes. Decentralising power inside a firm is facilitated, for instance, through heterarchy or holocracy (Bernstein, Bunch, Canner, & Lee, 2016). Coincidentally, it was shown that the introduction of new organisational decision-making logics which seek to replace hierarchies with ‘postmodern’ or ‘network’ structures, may change structures initially but eventually tend to reintroduce some form of hierarchy (Diefenbach & Sillince, 2011). Related concepts include agile and Scrum project management (Rigby, Sutherland, & Noble, 2018) which are both rooted in software development where they are common practice (Lee & Xia, 2010; Nerur, Mahapatra, & Mangalaraj, 2005). In this regard, open source software development serves as an interesting example, not only for decentralising power but also competence.

2.1.3 Decentralising competence and power Open source software, also referred to as free/libre and open source software (FOSS)4, is an emergent phenomenon that is closely related to the processes in sections 2.1.1 and 2.1.2. While FOSS is well researched within the discipline of information systems (Ågerfalk & Brian, 2008; Fitzgerald, 2006; Goode, 2005), it is given less attention across other fields of business studies (Weber, 2004). A prominent counter-example are Hippel and Krogh (2003, 2006) who recognised early on that the nature of free revealing in FOSS development leads to noteworthy organisational phenomena that are not in line with the way firms’ boundaries of power and competence are usually observed (Santos & Eisenhardt, 2005). With free revealing and non-restrictive licences, knowledge and decision-making are distributed across FOSS developers and participating organisations. In this vein, FOSS development is closely related

4

FOSS, also known as F/OSS or OSS/FS, describes software that is not only zero-price but also grants the users freedom to modify and redistribute the code, “think of ‘free speech’, not ‘free beer’ Stallman (2016a, 2016b).

7

to the notion of user innovation (Hippel, 1988, 2005, 2017) as FOSS development takes place in ways that are used as a prime example of user communities (Hippel, 2001).

2.1.4 Competence-power framework The three previous sections and the highly condensed overview on organisational processes showed that – ever since Coase published ‘The Nature of the Firm’ in 1937 – the body of literature in organisational theory was increasingly extended with concepts that decentralised competence and power. Drawing on previously introduced literature, I derive four archetypes which serve as a foundation for this study. The framework proposed (see Figure 3) in this study is based on multiple existing studies. At the core of the framework at hand are boundaries of competence and boundaries of power, summarised as “boundary management” (Santos & Eisenhardt, 2005, p. 492) or “organizational continuum” (Gawer, 2014, p. 1246). These two dimensions closely relate to a “locus of innovation” (Lakhani, Lifshitz-Assaf, & Tushman, 2013, p. 368) as an organisation may employ a narrow or a broad locus for generating and selecting knowledge, respectively. Similarly, “meta-organizational designs” (Gulati, Puranam, & Tushman, 2012, p. 576) range from incorporating knowledge through closed to open boundaries and facilitating decisionmaking in heterarchical or hierarchical processes. Moreover, the framework draws from further related studies (Albers, Wohlgezogen, & Zajac, 2016; Benner & Tushman, 2015; Kodama, 2009; Svahn, Mathiassen, & Lindgren, 2017; Vujovic & Ulhøi, 2008). As illustrated in Figure 3, Archetype I summarises the phenomena that decentralise both competence and power, such as Wikipedia and FOSS communities, as introduced in the previous section. Following Gulati et al. (2012) and Lakhani et al. (2013), I call this archetype “open communities”. Archetype II refers to section 2.1.2 ‘decentralising power’ where organisations retain their knowledge closely bounded inside a core of people but allow this core to freely organise themselves in non-hierarchical structures. These, I call “closed communities” (Gulati et al., 2012). The third archetype stands for ‘traditional’ firms in the sense of hierarchical decision-making and internal knowledge sourcing. In line with Lakhani et al. (2013), Archetype III is called “inward-looking firms”. Lastly, “outward-looking firms” in Archetype IV represent the phenomena discussed in section 2.1.1 and closely relate to the concept of open innovation where competence is decentralised, either to some extent through “pre-selection” (Bilgram et al., 2008, p. 444) or entirely through an “open call” (Howe, 2006a). Yet, within this archetype, decision-making power stays with gatekeepers in the firm.

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Figure 3: Competence-power framework

Adapted from Santos and Eisenhardt (2005), Lakhani et al. (2013) and Gulati et al. (2012)

While some concepts are still experimental and are not yet widely applied in practice, such as holocracy, other concepts, such as open innovation, quickly spread through industries by creating win-win situations among firms, or by constituting a competitive advantage and causing a chain reaction among competing firms. Overall, a demand pull (Nemet, 2009) towards decentralisation is observed. While concepts of decentralisation in organisational theory describe a demand pull, technological progress not only facilitates the former but also leads to a technology push towards decentralisation. With technologies advancing exponentially (Moore, 1965), transformations of societies and businesses also affect cognitive processes and knowledge work in the context or organisational theory (Loebbecke & Picot, 2015). In this context, blockchain is a technology that has received notable attention in recent years (McAfee & Brynjolfsson, 2017; Swan, 2015; Tapscott & Tapscott, 2016).

2.2 Blockchain In technical terms, a blockchain is “a very special kind of distributed database” (Meunier, 2016). Like databases generally, such distributed databases are designed to log transactions and hold them accessible. However, unlike centralised databases (such as SQL), distributed databases spread a transaction log across a network of computers (see Figure 4). A more granular type of distributed databases are distributed ledgers (such as Bitcoin, Ethereum, Corda and Hyperledger Fabric) which leverage cryptography and consensus algorithms. Their distinction from other distributed databases (such as NoSQL or Hadoop) is twofold (Meunier, 2016). Firstly, read/write permissions are logically decentralised, thus not controlled by a single entity. Secondly, distributed ledgers are immutable without relying on trusted third parties (see Figure 4).

2.2.1 Distributed ledgers Distributed ledgers, or distributed ledger technologies (DLT), come in various forms which do not necessarily involve ‘chains of blocks’5, yet distributed ledgers are also referred to as “public and private blockchains” (Buterin, 2015; Morabito, 2017). Although the term ‘blockchain’ is technically imprecise and can either be seen as a type of or synonymous to distributed ledgers (Meunier, 2016), it is widely known and commonly used interchangeably with other descriptions (Jeffries, 2018). For the sake of simplicity, in this thesis, ‘blockchain’ is used interchangeably with ‘distributed ledgers’.

5

For instance, distributed acyclic graphs (DAG; e.g. IOTA) or distributed hash tables (DHT; e.g. Holochain).

10

As illustrated in Figure 4, blockchains are a new means to decentralise data storage, as well as read/, write access of a transaction log that was technically not possible before its inception by Nakamoto in 2008. Thus, blockchains represent a ‘technology push’ (Nemet, 2009) towards decentralisation.

Figure 4: Blockchains as a special kind of distributed database

Adapted from Meunier (2016)

In order to evaluate how and in which context such a technology push towards decentralisation through blockchain could meet a demand pull from organisational theory and innovation practitioners, it is helpful to have a more granular understanding of the characteristics of blockchain technology.

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2.2.2 Smart contracts The initial concept of the Bitcoin blockchain laid out the foundation for the emerging field of blockchain, although the solution space has been extended. The Bitcoin blockchain intended to be a digital payment system6 that tackled the double-spending problem by using a Proof-of-Work (PoW), a novel consensus algorithm in public contexts with untrusted actors (Nakamoto, 2008b). Subsequently, multiple projects applied the principles of PoW to other applications than payment systems, such as Mastercoin (Buterin, 2013a) as “a platform for generalized financial contracts” (Buterin, 2013b). This notion of a Turingcomplete blockchain that would be universally programmable rather than specified as a means of payment was later refined with the Ethereum blockchain (Buterin, 2014b), also referred to as a decentralised “world computer” (Wood & Antonopoulos, 2018). Whereas Bitcoin decentralised payments, Ethereum and other “blockchain[s] 2.0 [are] for the decentralization of markets more generally” (Swan, 2015, p. 9). Their core innovation lies in computational capabilities which, in the case of Ethereum, is enabled by the Ethereum Virtual Machine (EVM) that is (quasi-)Turing-complete7. In this vein, Swan’s (2015) argument that blockchain 2.0 ‘generalise’ decentralisation lies in the property of blockchains 2.0 combining functionalities of computers with characteristics of blockchains, thus, allow for trustless execution of computer code. This functionality is known as smart contracts. The term was coined by Szabo (1996) and, at the time, defined as “a set of promises, specified in digital form, including protocols within which the parties perform on the other promises” (Szabo, 1996). Because algorithmic contracts are “far more functional than their inanimate paper-based ancestors” (ibid.), Szabo chose to call them ‘smart’. In a blockchain context, a “smart contract [is] a piece of special purpose code that executes a complex set of instructions on the blockchain” (Tapscott & Tapscott, 2016, p. 46), which is an “unprecedented method of ensuring contractual compliance, including social contracts” (ibid., p. 47)

2.2.3 Private and public blockchains Similarly to Internet technologies that are deployed on public networks (such as the World Wide Web, WWW) as well as in private networks (such as intranets), blockchain technologies too may be public or private (Mougayar, 2016) and are therefore designed for varying degrees of decentralisation. In a simplified

6

Carney (2018) argues, neither being a medium of exchange nor a store of value, Bitcoin “failed” as a currency.

7

Turing-completeness is formally not given (Miller, 2016), yet the EVM is quasi-Turing-complete (Wood, 2014).

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blockchain context, the equivalent to the WWW would be a public blockchain such as Bitcoin and Ethereum, while private intranets could be compared to various levels of privatised blockchains, such as Hyperledger Fabric and Corda. While private blockchains may be used inside a single organisation, they share significant (if not all) characteristics with some centrally permissioned databases (see Figure 4) and therefore receive minor attention (Mougayar, 2016). Private blockchains that are implemented across multiple organisations receive wider attention. Here, organisations would share a blockchain across a consortium but not with entities outside the consortium. Such implementations are referred to as permissioned, consortium or federated blockchains. Most attention, however, is allocated to public blockchains (Tapscott & Tapscott, 2016) which “could be the next major disruptive technology and worldwide computing paradigm” (Swan, 2015, p. 7) due to characteristics that federated and private blockchains utilise only selectively, if at all.

2.2.4 Characteristics of public blockchains Built upon the existing infrastructure of internet technologies (TCP/IP and the WWW), blockchains add new protocols and applications (Monegro, 2014; Mougayar, 2016), as illustrated in Figure 5. By combining decentralised permissioning, distributed storage, consensus algorithms and smart contracts, blockchain technology is also referred to as “the trust machine” (Economist, 2015) and introduces a range of novel characteristics that are distinct from contemporary digital technologies.

Figure 5: The blockchain technology stack

Adapted from Monegro (2014) and Mougayar (2016)

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A fundamental difference of blockchain to the Internet lies in the distribution of value. According to the theory of fat protocols (Monegro, 2016), the blockchain technology stack is “replicating and storing user data across an open and decentralized network rather than individual applications controlling access to disparate silos of information”. The Internet, as we know it today, consists of an open source and decentralised protocol stack that is relatively ‘thin’ in the sense that protocols, such as TCP/IP, capture little monetary value – but a ‘fat’ application layer that is rich in value, illustrated by the winner-takes-all business models of Google, Facebook, Amazon, Uber and Airbnb (Brynjolfsson & McAfee, 2014). According to the fat protocols theory, public blockchains dissolve such data silos because all underlying data is publicly readable which results in applications developing competitive advantages other than siloing data. Thus, applications would be ‘thin’ in value (see Figure 6).

Figure 6: Fat Protocols

Adapted from Paivinen (2017)

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The reason blockchain’s protocol layer would accrue significantly more value than the Internet’s lies in the implications of tokenisation through initial token offerings8 (ITOs). Blockchain-based tokens are a means to “to fund previously unfundable shared infrastructure, like open source” (Srinivasan, 2017) by distributing ownership of a protocol among its “participants, including users, developers, investors, and service providers” (Dixon, 2018) and thereby creating “a better-than-free business model, where [participants] make money for being early adopters” (Srinivasan, 2017). Thus, participants are inclined to work towards a common goal and soften the separation between capital and labour. In theory, tokenisation removes barriers for FOSS, such as standardisation and financing, which previously advantaged proprietary software over FOSS. These token dynamics result in a protocol layer that is rich in value (see Figure 6). However, tokens are still “niche and controversial” (Dixon, 2017) and tokenised enterprises remain thought experiments (McConaghy, 2017). Ultimately, the ‘trust machine’ of blockchain and the emerging concepts of tokenisation and fat protocols could imply that dissolving platforms and data silos give rise to a new era of “cryptonetworks [… that] are essentially open-source, mutually owned & operated web platforms” (Grossman, 2018). Such cryptonetworks “tend to emerge in a bottom-up way” (Yahya, 2018) and “communities of loosely affiliated individuals” (ibid.). According to Yahya (2018), cryptonetworks are analogous to cities, rather than firms.

2.3 At the intersection of blockchain and organisation studies In less than a decade, blockchain technologies not only introduced the concept of federated blockchains – which by itself is a paradigm shift – but also public blockchains and the notion of crypto-networks, claiming “that tokens *are* [sic] the business model for Web 3.0” (McConaghy, 2017). Previous decades showed how technology fundamentally changes how businesses operate and create value. Some strengthen the firm, such as ERP software “optimising the supply chain through collaboration with trading partners” (Pollock & Williams, 2009, p. 125) and “innovation technology […] reshaping the way [a firm] manages its innovation process [… and] supports the movement towards open innovation” (Dodgson, Gann, & Salter, 2006, p. 334). Other technologies weakened the individual firm, such as “increasingly digitized […] production practices [and] very-low-cost, Internet-based communication” driving user innovation (Baldwin & Hippel, 2011, p. 1399) as well as digital platforms that “can capture much, most, or even all of the value as they spread throughout an industry” (McAfee & Brynjolfsson, 2017, p. 224).

8

ITOs are also known as initial coin offerings (ICOs). However, the term ‘tokens’ is more universally applicable since ‘coins’ in the sense of cryptocurrencies are just one out of four archetypes a token can form (Euler 2018).

15

In a future blockchain economy where tokens democratise the contribution of capital, and cryptonetworks democratise the contribution of labour, blockchain may change not only the production function of firms but also the very nature of the firm (Beck, Müller-Bloch, & King, Forthcoming; Buterin, 2014a; Davidson et al., 2016; Swan, 2015; Tapscott & Tapscott, 2017; Voshmgir, 2017).

Research Gap However, the body of literature on blockchain and how the technology relates to business studies and organisation studies is scarce (Voshmgir, 2017; White, 2017). An exemplary search on EBSCOhost substantiates this point as Business Source Complete returns only 14 papers in academic journals when queried “SU Organization AND TX ("Blockchain" OR "Distributed ledger technology”)”. Existing research on blockchain that is not exclusively taking a technical viewpoint on blockchain is predominantly rooted in information systems (IS) which, as a discipline, realised that “[t]he IS community should make blockchain a key topic” (Niederman et al., 2017, p. 87). While the IS community appreciates that the “implications of blockchain might be significant because it offers an alternative logic to record keeping which is part and parcel of the human enterprise” (Avital, Beck, King, Rossi, & Teigland, 2016, p. 2), it has only began diving into such fundamental questions. Often, studies are still in the making or forthcoming (Beck et al., Forthcoming) and leaving many more questions at the intersection of blockchain and organisation studies untouched, e.g. “[w]hich business transactions can be outsourced to blockchain systems?” (Risius & Spohrer, 2017, p. 389) and “considering how blockchain technology drops transaction costs, what is core [to a firm]?” (Tapscott & Tapscott, 2016, p. 110). Will blockchain perhaps even “kill the traditional firm” (Mulligan, 2017)? While Mulligan’s (2017) arguments remain to be validated, Voshmgir’s (2017) paper on ‘disrupting governance with blockchain’ is among the most sophisticated approaches to illuminate blockchain through an organisational research lens. Voshmgir (2017) gives an initial overview on themes that future research needs to cover, since “[n]ow is the time to ask whether we want to adapt to new social, economic, and political circumstances, if and when they emerge in the future” (Voshmgir, 2017, p. 508). Moreover, Beck et al. (Forthcoming) focus on governance-related characteristics and implications of blockchain and present an initial framework, accompanied by an extensive research agenda. However, their case study focuses on a sole case of an application that utilises blockchain-enabled organisational processes, rather than protocols overall that facilitate the former.

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Objectives The thesis at hand intends to direct attention to the vast amount of research that is needed at the intersection of blockchain and organisation studies and aims to contribute towards filling these gaps. The core objective of this thesis is to relate the emerging phenomenon of blockchain to organisation studies. More specifically, it is questioned how blockchain-enabled organisational constructs fit into existing frameworks on the decentralisation of competence and power. Because blockchain and its technological principles are non-trivial and follow a different logic than existing technologies, it is necessary to analyse the overall solution space of blockchain and its fundamental logic. It is therefore central to this study to characterise the technology in order to map its solution space.

Conceptual framework Since blockchain is still in an early stage of technological maturity (Folkinshteyn & Lennon, 2017) and “technology implementation is complex and often unpredictable” (Griffith, 1999, p. 472), it is reasonable to assume that the vision of blockchain is subject to social shaping and sensemaking (Davidson, 2002; Swanson & Ramiller, 1997, 2004). Processes of social shaping may diverge across social sub-groups at this early point in time in the maturity process of blockchain. Therefore it is indicative to expect not strictly one but potentially multiple visions of blockchain that exist simultaneously which, in turn, may respond differently to the initial question of this thesis.

Research question Consequently, the research question of this thesis considers multiple visions across the problem and solution spaces of blockchain before relating these potential pathways of blockchain to organisation studies. In short, the research question is as follows:

How is blockchain envisioned to facilitate organisational processes?

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3 Methodology The implications of blockchains as a novel yet ambiguous and still emerging technology require a thoughtful epistemological approach to the validity of knowledge and appropriate methods. When seeking to explain such a phenomenon, it is important to note that the interaction between people and real-world subjects is mediated by an essential social context (Crotty, 1998). So is the object of this study, which is an emerging phenomenon that is being shaped through visions (Swanson & Ramiller, 1997), institutional logics (Thornton, Ocasio, & Lounsbury, 2012) and general sensemaking among IS and business practitioners (Elsden et al., 2018; Griffith, 1999), thus it is inherently ambiguous both within and across social contexts where “any kind of induction is dependent upon hypotheses which must have been constructed beforehand by cognizing subjects” (Fischer, 2001, p. 368). In this vein, the study employs an interpretivist-constructivist perspective that is based on a multiplistic worldview where it is assumed that a there is no single instance of an emerging technology. Yet, in line with the lens of organising visions (Currie, 2009), an inductive approach is chosen in order to make sense of information that is spread across people who engage with this emerging phenomenon and not restrain this study to existing knowledge that may narrow the view and ignore substantial data (Flick, 2009).

Research Design As a phenomenon that began emerging relatively recently (Buterin, 2014b; Nakamoto, 2008b), blockchain is quite a new field of interest that does not yet draw from a meaningful body of knowledge. As shown in the previous section, research on blockchain is scarce and, apart from first studies on Bitcoin, blockchain has not yet received much attention. Especially in the context of organisational processes and governance, blockchain research is still very much in its infancy (Beck & Müller-Bloch, 2017). A suitable research design for this thesis is exploratory and able to provide an initial, in-depth look into exemplary cases of the technology, rather than aspiring general claims (Yin, 2003, 2009). Thus, a qualitative research design is chosen (Flick, 2009). For related research objectives, a quantitative approach could be fruitful, such as a sentiment analysis of secondary data from online sources and social media (e.g. Twitter). However, this method was rejected as it would not allow for sufficient depth due to its methodological flaws from abstraction. Nevertheless, automated sentiment analyses could be used for follow-up studies in order to validate certain sub-findings through data from a broader and more inclusive context. 18

3.1 Research strategy A holistic multi-case study was chosen because it allows to combine multiple methods in a single research design which is found to be helpful in the case of the blockchain space an emerging phenomenon where there is no shared definition of how blockchain relates to organisational processes (Voshmgir, 2017). Case study research is a common practice in social science and suited for theory building (Eisenhardt, 1989b; Eisenhardt & Graebner, 2007; Yin, 2003, 2009). This case study includes documentation analysis (Bowen, 2009), observations (Flick, 2009) and in-depth expert interviews (Bogner, Littig, & Menz, 2014). Other approaches to qualitative research such as observations interviews – each by themselves – are not considered optimal since the aggregate of the former promises a more thorough construction of an emerging phenomenon. A multiple-case study is preferred over a single-case study due to its improved empirical validity as it is – to a lesser extent – prone to subjectively biased data (Yin, 2009). Yin’s (2009) three-staged process of allows to define what is to be explored, what is the purpose of the exploration and what are the criteria by which the exploration will be judged successful. To begin with, the matter to be explored is the emerging field of blockchain technology, especially in the context of governance mechanisms and new types of organisations that are facilitated by this emerging technology. Such exploration depends on the accessibility of information, which is given from online documentation (e.g., white papers of blockchain projects; YouTube videos of conference talks, panel discussions and other events; secondary data from news website and specialised blogs). Secondly, information can be sourced from the practitioners and their context, i.e. through observatory and ethnographic approaches at industry conferences and community events. Thirdly, thought leaders and entrepreneurs in the field provide a useful source of constructed knowledge which is accessed through in-depth semi-structured expert interviews. Secondly, the purpose of exploration of this research lies in an initial exploration of a phenomenon that emerges through practitioners’ sensemaking but has not received sufficient attention in theory building; thus, this study is about sensemaking of sensemaking. Thirdly, this study is deemed successful if any form of sensemaking can be described and, ideally, when there are contrasting visions emerging among practitioners which allow to build a more granular image of this emerging phenomenon that goes beyond the field of view of a single individual’s capabilities for sensemaking and their corresponding visions. Data collection took place between January and August 2018. While documents were continuously reviewed and provided initial insights into the matter, observations and interviews took place especially throughout June and July 2018. 19

Documentation Analysis Since all three cases of this case study as well as most other projects in the blockchain space are open source and provide extensive access to information online, documentation analysis is a major element of this study. More than 100 sources were reviewed, including white papers, mission statements, press releases, chat logs, project presentations, conference panels, news reports and more. If an insight specifically referred to such a document, then it is listed in the List of References at the end of this thesis. Most documents served as background and contextual information and are not listed in the References. Due to the novelty of this emerging technology, it was deemed necessary to also refer to such documentation material as a source of information (including section 2.2 which introduces blockchain from a theoretical and conceptual standpoint). For instance, the two most important papers in the blockchain space, Nakamoto (2008b) and Buterin (2014b), are both technical white papers and classify as grey literature. Other critical documents include the white papers of Aragon (2017a), Colony (2017a) and DAOstack (2018c). Due to the crucial importance of these and other non-peer reviewed literature, they are included in this study on pair with academic references as long as no equivalent academic reference is available.

Observations Observational and ethnographic techniques were an essential element to this study. Throughout four industry conference across the United Kingdom and Germany as well as multiple other small-scale events such as meetups, the researcher received rich observational data from various sub-groups within the blockchain space which were documented through an informal research diary (Flick, 2009) using OneNote and audio self-recordings. These ethnographic insights made had a profound contribution to shaping organising visions and contributed towards evaluating documentation material. Moreover, observations and interactive engagement throughout conferences led to industry contacts which resulted in several informal conversations and in-depth expert interviews, as explained in the following.

Expert Interviews Moreover, eleven expert interviews with an average length of 44 minutes were conducted. They followed a semi-structured approach which was based on an interview guide (Bogner et al., 2014). The interviews were partly conducted remotely via call and partly in person in Berlin and London. Across the fields of 20

public and federated blockchain, renowned experts from institutions such as ConsenSys, Harvard University and Deloitte were interviewed. Immersion in the industry led to interviews or informal conversations with projects in the public blockchain space one the one hand, such as Aragon, Colony, DAOstack, Gnosis, OScoin, Polkadot, Status and others; as well as with industry-leading providers of blockchain enterprise solutions, such as IBM, Oracle, SAP and Fujitsu who work with federated blockchain projects such as R3 Corda, Hyperledger Fabric and the Ethereum Enterprise Alliance. The search for interview partners started through a simple web search and contacting projects on Twitter that were applying blockchain to governance-related topics. Twitter proved to be a useful way to get and stay in touch with the blockchain community which is remarkably active on the platform. In terms of results, a single Tweet by the researcher reaching out for interview opportunities resulted in 3.015 impressions. Other than that, the ‘snowball technique’ was utilised to get recommended from interviewee to interviewee. However, it was not necessary to rely on this technique which may lead to bias, since direct contact to interviewees at conferences proved to be the most effective way of onboarding interview candidates.

Ethics and Limitations The study at hand was found to be in line with Level 1 and 2 ethics which was communicated to the ethics board of the university and ensured through asking for informed consent. However, the case study methodology and the chosen methods are subject to limitations. While limitations of this study are summarised in section 6.1, at this point, a remark on the method of interviews is made. These commonly involve biases, inaccurate articulation and poor memory among interview partners (Yin, 2009) which is addressed through diverse sampling of background and sub-industry as well as online documentation (Bogner et al., 2014). Moreover, the lens of organising visions outs biased views into perspective.

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3.2 Data analysis All interview recordings were transcribed following a strict verbatim style with occasional conversational elements, such as indicating laughter, as proposed by Misoch (2015). The data was analysed through open coding (Flick, 2009) in order to identify second-order codes and validate assumed parent codes. The author intended to use NVivo 12 for computer-assisted qualitative data analysis. However, due to dissatisfying user experience and instability of the software, the use of NVivo 12 was discontinued. Instead, MAXQDA 12 was used. A final selection of 136 codes resulted in 1008 coded segments which were analysed through inbuilt functionalities of MAXQDA. The number of coded segments per interview transcript ranged from 53 to 140.

4 Results "There are almost no laws of physics in the digital world, compared to the physical one, so we see different ecosystem physics – and you have different kind of organisations which will emerge." (CTO #3, blockchain project)

An organisational form that is built on top of a stack of blockchain technologies draws on principles and dynamics that are native to these technologies. Since blockchain technologies have yet to mature, there is notable ambiguity not only around technology itself but also around a vast, new solution space of organisational constructs. “We are in a transition period. And we do not know towards what, but we are in one. […] I see this chaotic mess” (CEO #2, blockchain project).

4.1 Towards a definition of DAOs The concept of a blockchain-enabled organisation is commonly referred to as decentralised autonomous organisations (DAOs; (Buterin, 2014a, 2014b; Swan, 2015; Tapscott & Tapscott, 2016). Yet, as a relatively recent phenomenon, DAOs are vaguely defined. For primary data collecting as part of this thesis, the following definition is derived (see Table 1). A DAO is a governance structure whose rules are code and enforced autonomously.

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Table 1: Towards a definition of a DAO

Quote

Rules are

Code enforced

Governance

(background colours group sources)

code

autonomously

structure

A DAO is a “completely distributed network of participants where what they can do and cannot do is governed by an underlying technology.” (Consultant #2, corporate)

A DAO is “a governance structure, that's enforceable by running it on an immutable sub-string.” (CTO #2, blockchain project)

X

X

X

X

A DAO is “a building block for people to converge on a mission and vision and the X

processes around a problem space, allocate funds and what not.” (CTO #2, blockchain project)

“You should rather call it a 'decentralized unstoppable organisation'. Because 'autonoX

mous' requires...it gives you the impression that the decision-making is autonomous, totally not true.” (CTO #2, blockchain project)

A DAO is “an organisation which lives on the blockchain where the rules are code, so they are not interpreted by a state-legal-system but they are interpreted by computers. On this system, you have people having some stake in the system who collectively make

X

X

X

decisions.” (CTO #3, blockchain project)

A DAO is “not something trustless. […] You trust a huge set of [unstrustworthy actors]

X

to collectively end up in honest decisions.” (CTO #3, blockchain project)

A DAO is “a standard legal organisation […] but the by-laws are code and they are deployed in a decentralised manner.” (CEO #2, blockchain project)

X

“You can have a DAO that is very hierarchical, you can have a DAO that is very X

democratic. You can have DAOs that concentrate power or that distribute it.” (CEO #2, blockchain project)

“The autonomous part is pretty important in the sense that if I write a code that depends on me, you will not trust it unless you trust me. If we want real decentralization, the code should autonomous. At the same time, […] it's very difficult to draw a strong line between what's autonomous and what's not. I see it much more fuzzy what levels of autonomous you can have.” (CEO #2, blockchain project)

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X

4.2 Characterising decentralised governance in DAOs While the notion of DAO governance is relatively young, it is argued that “there will be a Cambrian explosion of economic and governance designs” (Ehrsam, 2017). This is because FOSS tools that create digital test beds make it “extremely easy for people and very cheap to experiment with different governance models” (Brink, 2018), leading to “a spectrum” of different governance models (ibid.). From there, we “should build a framework for exploring massive amounts of governance structures” (CTO #2, blockchain project) to provide “each tribe, each community, each consortium, each government” (ibid.) with a vast set of governance mechanisms so “the users can decide how they want to run their organisations” (Developer #2, blockchain project).

4.2.1 Agnosticism through modularity To facilitate such a ‘governance of governance mechanisms’ in practice, some DAO protocol architectures are governance-agnostic. In the case of Aragon, such agnosticism is enabled through modular architecture which allows each DAO to pick a governance module that suits best (Aragon, 2017b). Likewise, DAOstack’s Arc framework allows for different governance mechanisms to be used interchangeably depending on the preferences of each DAO (DAOstack, 2018d). That way, DAO protocols provide the framework for modules to undergo an experimental, evolutionary path where "the ones which are not performing disappear due to lack of users" (CTO #3, blockchain project), and the overall system becomes "better and better across time" (ibid.) through "survival of the fittest" (CTO #2, blockchain project).

4.2.2 Mechanisms Initial designs of decentralised governance comprise a variety of approaches to decision-making which can be summarised as being democratic, meritocratic, plutocratic, or a mix of the former. Exploring these designs in-depth is beyond the scope of this thesis. The following paragraphs focus on their relevance to DAOs while, for further detail, it is referred to the sources referenced. Futarchy is a – unsurprisingly somewhat futuristic – governance mechanism which utilises prediction markets and ‘the wisdom of crowds’ to bet on facts at a future point of time (Hanson, 2013). However, systems that utilise prediction markets with token-weighted decision-making “may turn into plutocracies […] and this is a structurally very important problem” (CEO #2, blockchain project). Drawing on futarchy, DAOstack combines meritocratic voting with prediction markets in order to scale the system’s decision-making capabilities with growing numbers of users and proposals while voters are required to surpass 24

a certain threshold of reputation (DAOstack, 2018a). Similarly, Colony utilises a pure meritocracy to facilitate decision-making (Colony, 2017b). Meritocratic mechanisms follow the idea that “wealth is no proxy for expertise” (CEO #1, blockchain project) and are closely tied to blockchain-based projects where it is “kind of idealistic that we're getting rid of hierarchies as much as we can” (Developer #2, blockchain project) and instead have, for instance, a reputation-based, “quantitative data meritocracy” (CTO #1, blockchain project). Yet, reputation-based systems require a lot more fine-tuning and testing as they are “not tremendously well defined” (Wood, 2018). A common choice to fall back on is a "digital democracy with voting" (Developer #1, corporate) which is widely used among DAOs that are implemented in private networks and occasionally in public networks, too. As of today, Aragon supports simple (one man, one vote) voting and intents to add support for liquid democracy, that is a mix of direct and representative democracy through delegated voting (Duncan, 2017). An upcoming concept is quadratic voting (Lalley & Weyl, 2018; Posner, 2014) which, to date, has not been implemented yet into any DAO protocol but is considered a “leading candidate” (Buterin & Weyl, 2018) for DAOs restoring power to oppressed minorities. On a related note, the emerging discipline of ‘forkonomy (Alsindi, Forthcoming) is unique to and omnipresent with public blockchains. Forking empowers minorities to “vote with their feet” (CTO #3, blockchain project), fork the codebase and proceed with their version of a blockchain, DApp or DAO. ‘Forkability’ may therefore even be “the most prevalent feature of decentralised governance” (CTO #3, blockchain project). When forking splits a community into two and reduces network effects, it may lead to Pareto suboptimal outcomes. While it “should only be the last resort if fixing from inside hasn’t worked” (CTO #3, blockchain project), it is a powerful fall-back indeed. Still, “the concept of unity” (CTO #2, blockchain project) remains essential. In fact, since DAOs are expected to “lower the occurrence” (CTO #3, blockchain project) of forking by “allow[ing] for better signalling”, they could be part of a solution to managing forks.

4.2.3 Scale Some argue that there is "no particular point where you don't want the DAO to grow anymore" (CTO #3, blockchain project) since the chance of colluding actors decreases with size. In that vein, it is considered a "strength of DAOstack" (Strategist #2, blockchain project) that it is designed for resilience at scale. After all, the premise of a DAO should be to "handle voting quickly" for not "slow[ing] down innovation" (CTO #1, blockchain project). On the other hand, a DAO may not always be needed to scale its governance, as "mass-voting scenarios [may not be] incredibly relevant for companies" (Consultant #2, corporate). At this stage, scalability of decentralised governance appears to be the Holy Grail

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– much like the scaling-debate with blockchains on a consensus level. ‘Holographic consensus’ by DAOstack is one among the few approaches to scaling decentralised governance (DAOstack, 2018c; Field, 2018) which, however, has not yet been validated in real-life conditions and small-scale experiments are just about to be conducted.

4.2.4 Scope in an organisational sense Next to scale, decentralised governance relates to a particular scope of decisions that range between governance and operations. For the sake of efficiency and to keep day-to-day operations in an organisation lean, DAOs look to distinguish governance processes for high-impact decision-making from small-scale operational matters. Aragon, Colony and DAOstack align in their intention to keep decision-making processes for the latter uncomplicated and straightforward, but all three seek to decentralise board-level governance. However, in between it stays ambiguous what “ceases to be governance and becomes operations” (CEO #1, blockchain project). This complicates the public discourse about ‘decentralised governance’ as opinion holders may have diverging implicit assumptions about the scope of operations and (board-level) governance respectively.

4.2.5 Scope in an architectural sense In a different sense, there is an ongoing debate around the scope of decentralised governance, particularly in the context of onchain and offchain governance. Not only is it contested whether “we're at this stage [yet] where […] everything will be handled through [code]” (CTO #1, blockchain project), but the question is posed whether this stage will and should ever be reached. If governance processes will always include interaction that happens outside a technological system which "matter for how power dynamics play out" (Researcher #1), the point is made that "hyper-governance of things on-chain" (ibid.) is never going to be complete. It is noted that "luckily, we've moved away a little bit from […] [solving] the problem of the mushy humans” (ibid.); yet, the discussion around the scope of onchain and offchain governance is very much an open one.

4.2.6 Human-in-the-loop and accountability of individuals It is argued that “collective intelligence can work [… while] it has to be facilitated [… and y]ou have to very well define the processes – and this is very difficult” (CEO #2, blockchain project). Challenges lie in incorporating “a huge spectrum of motivations, especially in communities” (ibid.) and, on the flipside, in overseeing people “who are defining these processes, and with which assumptions” (ibid.).

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Decision-making involves "human factors that [...] hopefully we can get rid of with blockchain governance" (Developer #2, blockchain project). Here, it is questioned where ‘human factors' such as cognitive biases can be addressed at all. After all, "the problem with the concept of cognitive bias is that it sounds as if that there is a condition of non-bias – which I'm not entirely convinced that there is" (Researcher #1). A "good governance system" (ibid.) may, therefore, refrain from “striving for that condition of nonbias” (ibid.). Instead, such effects undermining governance mechanisms could be channelled through systems that, by design, incorporate accountability of individuals’ decision-making. For instance, it is noted that “majority voting without accountability is potentially a huge flaw in the system because it rewards vote miming” (Strategist #2, blockchain project) and could consequently fail to utilise crowd intelligence due to opposing forces, e.g. from short-term financial incentives that diverge from optimal long-term decision-making. Prediction markets could enhance DAOs with accountability, though they require more modelling and experimentation, as they are widely untested in reality.

4.3 What exactly in a DAO is subject to decentralisation? 4.3.1 Decentralising decision-making power To sum up, a central theme across different visions and initial implementations of DAO protocols appears to be decentralisation of decision-making power. While the definition given in section 4.3 remains relatively vague at this point, there is growing support to view DAOs in the context of “large amounts of people [who] do not dependent on a central, hierarchical way of making decisions” (CEO #2, blockchain project), thus, “[p]ower is more decentralized instead of highly concentrated” (ibid.). For instance, with a meritocratic governance, it is argued that merit “normalises over time" (CEO #1, blockchain project). Therefore, power accrues only to a limited extent because it is allocated by merit which depends on time, and "nobody has an unfair advantage in terms of time" (ibid.). A caveat is that, even in a meritocracy, wealth “can […] and will still accrue according to a power law distribution” (CEO #1, blockchain project) which could retransform into power if meritocracy is combined with prediction markets, as futarchy has “a high risk of economic or political failure” (Buterin, 2018b) and is therefore at risk to shifting towards plutocracies, unless proven otherwise. Similarly, onchain governance that is hyper-deterministic involves the danger of “conflating the model for reality” (Researcher #1) without realising how events exogenous to the system could dramatically change power dynamics and reconcentrate control, perhaps contrary to what the model intended.

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Nevertheless, the ambition is and remains to decentralise decision-making power within, across and beyond organisations and could materialise within the next “5 to 10 years” (Developer #2, blockchain project; CTO #1, blockchain project). This is in line with observations from multiple developer conferences where it is argued, firstly, that we are now seeing the equivalent of what the 1970s were to the Internet and, secondly, that blockchain is going to mature and become adopted more rapidly than the Internet.

4.3.2 Decentralising competence Another prevalent theme across DAOs is a scope of contributors decentralises the knowledge base. DAO protocols are conceptualised to enable DAOs with either centralised or decentralised competence. For instance, a holocratic DAO could consist of selected members but remain decentralised in terms of decision-making and incentivisation. On the other hand, a meritocratic DAO can be open for anybody to contribute if their merit permits, thus decentralising the knowledge base. By "getting rid of […] obstacles to people starting new ventures together and creating new value" (Developer #2, blockchain project), the concept of DAOs "gives rise to new ways of working and organising […] regardless of where [people] are" (ibid.). This matters not only for people "pursuing freelance economy work [… who should be] compensated appropriately for that value [they] put in" (CTO #1, blockchain project), but also because there are "a lot of talented people in the world that could add a lot of value […] in terms of creating companies [and] innovation" (Developer #2, blockchain project). Given access to the Internet, DAOs democratise entrepreneurship by dematerialising the apparatus of organisations.

4.3.3 Decentralising incentive alignment Through cryptography, blockchain is capable of facilitating a particular behaviour by aligning the incentives of network participants who can trust that these are for their own good due to the decentralised nature of a blockchain (see section 4.2.2), also referred to as an "incentive machine" (CTO #2, blockchain project). Guided through such financial incentives that are known to be legitimate due to the transparent and immutable nature of smart contracts, participants in such a blockchain environment engage in a mutually beneficial exchange of transactions "without necessarily knowing the identity of the counterparties [and] there's definitely a role for non-human actors too" (Developer #2, blockchain project). Such trustless interaction is where "the beauty of blockchain" would lie (ibid.). In this vein, DAOs arguably allow for “a whole new way of people coordinating” (CTO #2, blockchain project) beyond hierarchies and markets but around problem spaces. In an age where “we have more postmodern values and different problems that are more […] global” (CEO #2, blockchain project) than in

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recent years, DAOs are seen as “a building block for people to converge on a mission and vision and the processes around a problem space” (CTO #2, blockchain project). Similarly, Aragon argues that “in the ideal world, every organization has a manifesto with its mission and values” whereas “if an organization fails to follow their manifesto, users can point out the value they broke” (Aragon, 2018e). When DAOs choose a metric that suits their purpose, their incentive designs could be any of “coordinating with value, coordinating with scarcity, coordinating maybe with abundance in the end” (CTO #2, blockchain project). Ultimately, DAOs and their incentive mechanisms are inherently flexible and designed to embody contemporary thinking that roots in value-based and mission-driven initiatives which today’s organisational structures between hierarchies and markets have not been optimised for.

4.4 Two motivations for blockchain-enabled decentralisation An essential characteristic of blockchains is to decentralise infrastructure, which is, therefore, an underlying characteristic that DAOs are built upon. While both federated and public blockchains make use of DAOs for governance processes, their respective visions and implementation of decentralisation differ. Each perspective perceives decentralised governance with DAOs differently – the one more incremental, the other more radical. While the notion of federated DAOs tends to change existing structures more efficient one, the notion of public blockchain DAOs introduces a more disruptive approach that is not only motivated by efficiency but also by values, as further discussed in sections 5.3 and 5.4.

4.4.1 Collaboration in a federated blockchain context On the one hand, DAOs can be deployed in a federated blockchain with known actors who seek to collaborate but keep a certain level of privacy within the network and remain distanced from outsiders. In a federated blockchain-setting, a DAO allows to “transact and interact with people across your supply chain in a completely new way” (Consultant #2, corporate). This is particularly relevant where companies seek to “have control of their own data, they can decide to join and leave and there isn't a central person controlling prices” (Developer #1, corporate) which avoid problems from cases where “incentives were not aligned with suppliers” (CEO #1, blockchain project). What makes DAOs “extremely interesting” (Consultant #2, corporate) is that you now “don’t need to trust everyone […] in a supply chain setting” (ibid.) anymore. In this context, DAOs fit existing structures where power balances stay about the same, but participants benefit from the system becoming more efficient overall.

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4.4.2 Contrasting visions of openness However, it is argued that “the potentials of the blockchain are deployed in a public blockchain”. (CEO #2, blockchain project). While forming consortia was in line with “the current enterprise thinking […,] they don't get that they have to tokenise the enterprise, […] become part of a network and […] not only bring your consortiums but also bring your underlying infrastructure” (CEO #2, blockchain project). When “a closed consortium that wants to share data in a permissioned way [discusses blockchain,] it feeds the hype [but it] is completely disconnected with these values [of a public blockchain]” (CEO #2, blockchain project). For incumbents, blockchain and the notion of DAOs is “a complete paradigm shift” (Consultant #2, corporate) which lets them face existential questions, including “why does my company exist, who are we actually serving, who are our clients really?” (ibid.).

4.4.3 Collaboration in a public blockchain context On the other hand, DAOs can run on a public blockchain with known and unknown actors. This is feasible due to a concept referred to as cryptoeconomics which are capable of incentivising collaboration (Tomaino, 2017a). As described in section 4.4.3, blockchain functions as a "incentive machine" (CTO #2, blockchain project) that utilises price mechanisms and game theory to facilitate a desirable behaviour among actors, no matter if they are known or unknown. For example, Nakamoto (2008b) designed the Bitcoin blockchain in a way that is not based on unrealistic ‘homo economicus’ assumptions and that requires 51% of the network to be malicious and aligned in order to break the system (Verbin, 2018). Later, Buterin (2018a) proposed an algorithm adapted from (Lamport, Shostak, & Pease, 1982) which would even resist a 99% majority of malicious actors. Moreover, DAOs deployed on a public blockchain result in all data and metadata being openly accessible. Zero-knowledge proofs could enable privacy, although they are yet to be implemented into (quasi-)Turingcomplete public blockchains, such as Ethereum (Reitwiessner & Gabizon, 2017). In the case of public blockchains, DAOs target a much broader spectrum of actors which makes them not only more versatile per se but also less compatible with existing structures when they, for instance, require certain levels of privacy or exclusiveness or when the incentive structure of a DAO contradicts prevalent processes and leads to a conflict of interest among individuals or organisations.

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5 Discussion Having laid out the fundamental characteristics of DAOs as blockchain-enabled organisational structures, the following sections discuss these results. Section 5.2 relate DAOs to the competence-power-framework (see section 2.1.4), followed by section 5.3 and 5.4 which apply the lens of organising visions. Section 5.5 reintegrates previous findings and discussions into organisational theory before implications for theory and practice close this chapter. To begin with, I present a summary of the results.

5.1 Summary of results Organisational phenomena have a long-standing history of various degrees of (de)centralisation in competence and power (Lakhani et al., 2013; Santos & Eisenhardt, 2005). This path is continued by the concept of DAOs, a form of blockchain-enabled organisations. Finding #1: DAOs can facilitate the decentralisation competence and power The results of the study at hand suggest that DAOs draw from both centralised or decentralised competence while decision-making power generally spreads across a network (see sections 2.1.1 and 2.1.2). Various shades of decentralisation exist depending on the type of a given blockchain (public or federated). Finding #2: DAOs can align incentives in a decentralised fashion of novel scale Crucially, the results suggest that blockchain introduces a third major criterion of decentralisation, alignment of incentives (see section 4.3.3). Trustless incentives are considered a key feature of blockchain and thought to play a key role in blockchain-based organisations and governance mechanisms therein. Finding #3: DAOs enable new forms of organisations The former two findings suggest that blockchain-based governance mechanisms result in novel types of organisations. Observations of the blockchain space show that some characteristics of DAOs (see section 4.2) and emerging visions (see section 4.4) intend to disrupt existing structures to create new ones.

5.2 Proposing new organisational archetypes Recall that the body of knowledge on organisation studies discusses a range of organisational concepts between the dimensions of decentralising competence and power (see Figure 7). These are subject to fuzzy incentives as ownership not necessarily aligns with labour (archetypes I – IV) or is public domain (archetype I, FOSS), thus separating knowledge holders from decision makers.

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Figure 7: Competence-power-incentives framework in a Web 2.0 context

Adapted from Santos and Eisenhardt (2005), Lakhani et al. (2013) and Gulati et al. (2012)

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Figure 8: Competence-power-incentives framework in a Web 3.0 context

Adapted from Santos and Eisenhardt (2005), Lakhani et al. (2013) and Gulati et al. (2012)

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With decentralising incentive alignment considered as a third axis, I propose a new set of archetypes with four types of blockchain-enabled forms of organisations (see Figure 8). These types take the shape of DAOs which inherently align incentives. The previous two axes, competence and power, reflect contemporary practice and their diverging visions of openness. Analogous to open communities, a “global DAO” combines decentralised competence and power but adds the dimension of incentivation to form Archetype V. This archetype aligns with meritocratic or futarchic governance structures that decentralise power, as well as with the intention of DAO protocols such as DAOstack (holographic consensus; DAOstack, 2018c) and Colony (externally open; Colony, 2017b) to publicly and globally scale. Archetype VI is closely related to the previous archetype, yet it is centralising competence in the sense that knowledge is sourced from a limited, well-defined core of contributors. Such a “local DAO” represents Colony’s (Colony, 2017b) concept of a DAO that is ‘internally open’ and meritocratic. The two remaining archetypes VII and VIII share that decision-making power stays with centralised with one or a few individuals while incentives are decentralised; for instance, through an ITO. While these tokens distribute ownership, they do not grant decision-making rights. In this vein, I call Archetype VII an “inconsequential DAO” which would match most early-stage blockchain projects that recently held an ITO but do not (or not yet) have a mechanism for decentralised governance in place which renders tokens useless regarding decision-making power and governance-related properties. Similarly, Archetype VIII represents a project that does not (and neither intends to) grant decision-making rights with their tokens – but does receive contributions for the project from a community. An example for such a “freeriding DAO” would be Ripple where more than 60 contributors pushed more than 13.000 commits to their open source repositories on GitHub9, yet an absolute majority of all tokens are owned by Ripple as a private company (Shin, 2018). Figure 9 illustrates how the third dimension of decentralising incentive alignment extends the solution space of blockchain-enabled organisations. Combining this extended solution space (Figure 9) with the four archetypes derived from theory (Figure 7, p. 32) and the four archetypes proposed from data (Figure 8, p. 33), Figure 10 (p. 36) illustrates how all eight archetypes fit into the solution space of the competence-power-incentives framework.

9

See https://github.com/ripple/rippled and https://github.com/ripple/ripple-lib (data as of 23/08/2018).

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Figure 9: Incentives as a third characteristic in the competence-power-incentives framework

Own illustration

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Figure 10: Archetypes I - VIII in the solution space of the competence-power-incentives framework

Own illustration

To explain these results, I now propose and discuss two visions that appear from relating the findings of this study to the extended solution space of organisational archetypes. Both visions aspire to decentralise competence and align incentives (though, neither to the same extent nor in the same manner). Where both visions fundamentally diverge is the question of decentralising decision-making power and the question where the locus of power in governance-related processes should reside. In essence, centralised decision-making in vision 1 is inherently connected to its economic goals which utilise blockchain technology as a means of appropriating value in line with business models. In stark contrast to vision 1, followers of vision 2 see blockchain technology as a means of facilitating political values that tie in with democratic ideals but may not be compatible with prevalent business models (see Figure 11). In short, each vision is either predominantly economic (vision 1) or politically (2) motivated. This corresponds to contrasting requirements on how the technology should be implemented, indicated by Archetypes I – VIII. The following two sections elaborate on each of the two visions by applying Swanson and Ramiller’s (1997) lens of an ‘organising visions’.

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Figure 11: Two visions within the solution space of the competence-power-incentives framework

Own illustration

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5.3 Emerging vision 1: “Appropriating value by retaining power” The first of the two visions (see Figure 11, red area) is particularly prominent among actors who seek to utilise blockchain technology for an incumbent business. However, even among experienced managers who have been following the technology for a while, major uncertainty remains about the role their company could play in a blockchain economy. While a few early movers in the field of federated blockchains benefit financially from other corporates seeking software solutions and expertise (Developers #3 and #4, both corporate; both informal conversations), these other corporates are lost between, firstly, the paradigm of decentralisation that has been imposed on them and, secondly, a lack of understanding of the technology and business models (Strategists #3 and #4, both corporate; both informal conversations). The second argument – lacking expertise in technology and business models – results in notable activism among incumbents, e.g. through attending conferences and founding consortia, however not always on reasonable grounds. For instance, at practitioner conferences, it was observed that keynotes were ambiguous and lacked both detail and practicality, resulting in limited insights among corporate attendees. Some corporations are pursuing a ‘wait and see’ approach (Strategist #3, corporate; informal conversation), while others explore the technology and “see how useful it was in the [company]” (Developer #1, corporate). Among the latter, initial exploration often results in pessimistic expectations. “[V]ery big parts of our business [… is] extremely threatened by blockchain technology.” (Consultant #2, corporate)

Facing existential questions like these, affected companies are seeking solutions that could preserve their current revenue streams and, most importantly, are actionable. This directly relates to the first argument – that the paradigm of decentralisation is not chosen but being imposed on corporates. The way how corporate blockchain solutions are being communicated to them imposes the technology on companies in a sense that, it is argued, late movers would not become part of ecosystems that were to form now. For instance, a visitor to the website of the Hyperledger initiative is being told that “the goal is to set up a set of participants in an ecosystem” (Hyperledger, 2018; emphasis added), accompanied by the statement that “you’re seeing every financial business looking to get involved in business blockchain technologies” (ibid.) which appears as if it was indicative for companies to form or join federated blockchains. However, observations in an industry context indicate that today’s leadership boards may be ill-prepared

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to fully immerse their businesses in such a blockchain-enabled ecosystem. That is not only because of technological limitations and risks, but also due to an incompatible mindset among these leaders. “The CEOs and leaders of today, they have all grown up and studied in a world where competition is always something you don't work with. […] This is a very new thing for them.” (Consultant #2, corporate)

The idea of a DAO is politically not even considered if decentralised models of networks, ecosystems or consortia are not (or rather not known to be) compatible with a given existing business model of a firm – which is for a reason, as some firms should expect existential challenges on the road ahead. “I am not even sure what direction it will go. Some companies […,] very big ones also, will die away. Because inefficiencies lead to intermediaries, and a lot of companies have built very good businesses being an intermediary company.” (Consultant #2, corporate)

Among incumbent corporations, the vision around blockchain wavers between progressive, idealistic thinking of how a whole industry could become more efficient overall on the one hand; and a protective, pragmatic thinking on the other hand where each incumbent actor seeks to keep – or even grow – its role in a given industry that is meant to transform itself into an ecosystem. In the long term, “I think it is not only advantageous, I think it is absolutely necessary [for a company] to succeed in any kind of ecosystem” (Consultant #2, corporate). However, as such idealistic thinking is trumped by pragmatic thinking that protects a manager’s firm’s business model, the pragmatic economic rationale prevails. Following the inherent logic of business models to maximise captured value, firms that join federated DAOs intend to appropriate as much of the value that is set free through these DAOs. While such motivations are compatible with decentralising incentives among ecosystem participants (Figure 11), these incentives are significantly less pronounced than in the second vision. Financial incentives may be distributed to an extent that is beneficial for the business strategy which remains under the control of an internal core of a firm. In other words, the core stakeholders of an entity benefit from a game theoretical advantage where they are not only able to draw from financial incentives but also remain in power of decision-making power which, ultimately, keeps ownership and control intertwined despite decentralisation. This logic is contrary to token-based business models that are crucial to the second vision. 39

5.4 Emerging vision 2: “Incentives to change the status quo” The second vision (see Figure 11, green area) envisions that not only competence but also both decisionmaking power and incentives alignment are decentralised (see Figure 11). Supporters of this vision, spanning across archetypes I, II, V and VI, have particularly deep roots in FOSS (archetype I) and support the concept of DAOs that decentralised power (archetypes V, VI), deployed to public blockchains. This vision has developed since the inception of blockchain in the early days of Bitcoin and draws from a range of ethical and value-based considerations among concerned IS practitioners and tech-savvy activists. “There was something to be in opposition to. You had the Googles, the Facebooks, you had the centralization of Internet infrastructure really. And Bitcoin was in part a response to that." (Researcher #1)

Representing a counter-force, “Web 3 is the vision of the serverless Internet, the decentralised web […] where users are in control of their own data, identity and destiny ” (Web3 Foundation, n.d.) and is also being referred to as “the post-Snowden Web” because Web 2.0 with “entrusting our information to organisations in general is a fundamentally broken model” (Wood, 2014a). A root cause of problems prevalent with the ‘pre-Snowden’ Internet lies, according to this vision, in misaligned incentives which blockchain could resolve since the “key benefit of tokens is to align incentives” (McConaghy, 2017). While, at times, over-enthusiastic proponents need to be reminded that “decentralisation should not be a religious doctrine” (CTO #3, blockchain project), this vision does in fact follow an ideology: “[Public blockchains] usher in a post-capitalist alternative that can compete with capitalism on its own terms [… whereas] cryptoeconomics has got a potential to enable that.” (CEO #1, blockchain project)

These views are rooted in, “on one side, anarchist ideology and, on the other side, libertarian ideology, which crossover more and more now” (Strategist #2, blockchain project) and also reach “people who are way more centrist in terms of economy, but who are for liberty in terms of moral [… such as] buy[ing] drugs, […] freedom of press, freedom of expression" (CTO #3, blockchain project). In the present case of this vision, the former ideologies find common ground in replacing public and private institutions with trustless, blockchain-based institutions that are considered superior due to their transparent and immutable nature from cryptographic principles. 40

On the one hand, the libertarian thinking supports replacing incumbent institutions with autonomous ones that consist of deterministic market mechanics which incentivise through the price mechanism. “[While] the nature of nature of markets […] can be very competitive and cold[, it is] important that you have two parties, one party that wants to spend as little as possible, one party that wants to receive as much as possible and that there is a healthy equilibrium that forms as a result.” (Consultant #1, corporate)

However, libertarian ideals are not uncontested with their understanding of decentralisation. “I don't think that markets are the solution to every problem. […] We have different social movements that now do not depend on centralised structures. And what blockchain […] allows is to empower this already existing paradigm – to facilitate much more decentralised governance that these communities are really already having.” (CEO #2, blockchain project)

In this vein, blockchain is thought to provide infrastructure for local, self-governing initiatives which are already operating by such principles, such as Occupy Wall Street or the Arab spring movement. Among supporters of this vision, a major concern are the mechanics of decentralised governance, as described in section 4.2. As projects in this space are designed for maximised scale and maximised autonomy, the question of how to technologically reach social consensus is at the core of many projects’ agendas. Nevertheless, (at least a part of) the community is aware that completely on-chain, hyper-deterministic governance processes are to be treated with caution, if not avoided at all. “[P]eople who think that the purpose of blockchains is to completely expunge soft mushy human intuitions and feelings in favor of completely algorithmic governance (emphasis on “completely”) are absolutely crazy” (Buterin, 2017b).

Tokenised infrastructure is not compatible with current business models but its tokens are the business model (McConaghy, 2017). In theory, tokens appreciate in value with increasing connectedness of the system they are being used in. While first movers benefit the most from tokens appreciating in value, anyone can purchase tokens and is then too incentivised to increase connectedness.

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5.5 Theoretical implications Both visions, as laid out in the previous section, built upon blockchain as an "incentive machine" (CTO #2, blockchain project), also referred to as an “incentive network” (Voshmgir, 2017, p. 502) or a new “internet of value” (Tapscott & Tapscott, 2017, p. 10). This technological potential of blockchain to implement trustless incentive designs corresponds in an emerging discipline coined cryptoeconomics (Buterin, 2017a; Zamfir, 2015).

Cryptoeconomics At the intersection of economics and cryptography, cryptoeconomics is defined as “[a] formal discipline that studies protocols that govern the production, distribution, and consumption of goods and services in a decentralized digital economy. Cryptoeconomics is a practical science that focuses on the design and characterization of these protocols” (Zamfir, 2015). In this vein, cryptoeconomics is “not a subfield of economics, but rather an area of applied cryptography that takes economic incentives and economic theory into account” (Stark, 2017). In practical matters, cryptoeconomics aims to “[build] systems that have certain desired properties” (Buterin, 2017a), whereas these properties are notably influenced by the reasoning laid out in Vision #2, as in “creat[ing] robust decentralized P2P networks that thrive over time despite adversaries attempting to disrupt the network” (Tomaino, 2017a). Rather than being a pure science, cryptoeconomics therefore appears to be partly driven by a mission, based on value-based motives as in vision #2 (see section 5.4) which drive the development of infrastructure to facilitate incentive networks that are fundamentally decentralised.

‘The Firm as an incentive system’ This is in stark contrast to existing approaches to incentive design that are inherently centralised. Ever since Coase (1937), the concept of the firm has been at the centre of incentivation, for instance, to efficiently organise human resources and align factors of production for economic value creation. Ultimately, the firm is understood “as an incentive system” (Holmstrom & Milgrom, 1994, p. 972) The perhaps most pervasive argument in organisational theory for the concept of a firm is rooted in the notion of incomplete contracts. For reasons of bounded rationality among individuals as “human

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behavior is intendedly rational, but only limitedly so” (Simon, 1957, p. xxiv), contracts are thought to be inherently incomplete. In fact, “[v]irtually every economist […] argues that, in practice, complete contracts are not possible” (McAfee & Brynjolfsson, 2017, p. 315). To mitigate ex-post transaction costs from incomplete contracts in market transactions, TCE considers hierarchical authority an adequate measure; hence why firm exist. Within firms, managers have “the residual rights of control: the right to make decisions not specified in contracts” (McAfee & Brynjolfsson, 2017, p. 327). However, as agency theory (Eisenhardt, 1989a) suggests, firms face inefficiencies when agents make decisions that are suboptimal for the principal (i.e., managers, owners or any stakeholder), and for the firm as a whole. Such issues are particularly striking in the context of knowledge-intensive work where the firm as a whole heavily depends on individuals’ knowledge and that each individual has the firm’s best interest in mind (Grant, 1996). To align incentives, agency theory therefore discusses a range of (monetary and non-monetary) incentive mechanisms (Eisenhardt, 1989a; Jensen, 1994; Shapiro, 2005). The previous point of firms taking measures to preserve individuals’ knowledge relates to Hayek’s (1945) concept of distributed knowledge and market logic. Here, an alternative approach to TCE is provided in the firm theory of Grossman, Hart and Moore (GHM; Grossman & Hart, 1986; Hart, 1995; Hart & Moore, 1990). Both GHM and TCE account for incomplete contracting. However, TCE is concerned with incentive design in market-based mechanisms, such as outsourcing, that seek to minimise potential ex-post transaction costs (Barthélemy & Quélin, 2006), while GHM focuses on aligning incentives ex-ante. According to GHM, TCE cannot sufficiently explain the boundaries of a firm – when GHM argues a firm would set its boundaries in order to incentivise behaviour among parties of a transaction by allocating power to them. In this sense, “internalization matters because ownership of non-human assets is a source of power when contracts are incomplete” (Hart, 1995, p. 198).

Incentivation and ownership In a similar fashion, the concept of tokenisation is for the purpose “to align incentives among participants of [an] ecosystem” (McConaghy, 2017) by utilising a trustless P2P network to distribute ownership of the former through tokens (Tomaino, 2017b). For instance, tokenised software incentivises not only users to become early adopters and spread the adoption but also developers who can get compensated for their contributions to – formerly not compensated work with – FOSS (Chen, 2018). As this is a “positive-sum game” (McConaghy, 2017) among participants of an ecosystem, arguably, “tokens will eat the enterprise from within, because investors will make money and the community will gain” (ibid.). 43

There is a caveat, however, and this potential fault to the system has not received much attention yet. Publicly distributing token ownership through an ITO and the like does not automatically resolve the problem of optimal asset ownership, as a suboptimal allocation may render a protocol or DApp dysfunctional. For instance, if tokens are transferrable/tradable and their ownership is tied to a governance mechanism involving voting rights, then this governance mechanism is “not only […] inconsistent with user interests, it is also antithetical to the ethos of public blockchains. […] Cryptocurrency holdings (like wealth in global society) is highly concentrated in the hands of a very small number of people. The blockchain isn’t supposed to be owned by anyone” (Zamfir, 2017). While parts of the blockchain community are publicly discussing such issues (Buterin, 2018b; Zamfir, 2017), it is rare to find implementations that work against such emerging plutocratic structures. Quite the contrary, discussions around governance mechanisms commonly revolve around the starting point that “[b]lockchains should not be democracies” (Qureshi, 2018) and – for the lack of empirical evidence – speculate about alternative concepts, as shown in section 4.2.2.

Governance in context and emergent mechanisms Since libertarian values are prevalent within the blockchain space (see section 5.4), market-based mechanisms enjoy great popularity such as futarchy and prediction markets. These governance mechanisms, however, tend to be plutocratic by nature. That is unless the community actively takes intervening measures, which is arguably unlikely as the status quo is already inherently plutocratic. Because token and cryptocurrency holdings tend to be dominated by ‘crypto whales’ – individuals (or to be precise, individual wallet addresses) that hold substantial amounts of tokens. For instance, both Bitcoin and Ether are highly unequally distributed as their Gini coefficients amount to 0.65 and 0.76 respectively (Pearson, 2017) which is more unequal than even the most unequal country on earth10. At this point, the argument can be made that the very same ‘incentive machine’ that is at the core of blockchain also reinforces plutocratic structures due to sunk costs among network participants. That is because "[i]f you squinted it the right way, you can view all the crypto as being a single company or a single system […]. If […] anybody ends up being super successful, if you're an Ether holder, that's good for you. By that rationale, does that mean we're all part of a company? Are we all stockholders in

10

According to the U.S.-American Central Intelligence Agency (https://www.cia.gov/library/publications/theworld-factbook/rankorder/2172rank.html), the least equal country on earth is Lesotho with a Gini index of 0.63.

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this 'Ethereum thing'?” (CEO #1, blockchain project). In other words, it may not always be clear to outsiders if political or economic motivations prevail and whether a sunk cost fallacy may lead ecosystem participants to make decisions that primarily benefit themselves financially rather than change the system, for instance, through a less unequal governance mechanism. It is too early to say whether DAOs and cryptonetworks function as intended and, if so, are sufficiently reliable to provide an alternative to ‘the nature of the firm’ and firm-like constructs explained by TCE or GHM. However, there are various instances where present approaches to incentive design fall short.

Public goods First and foremost, traditional governance mechanisms for innovation proved to be of limited effectiveness for the production of public goods. For instance, the open innovation strategy of revealing can lead to public goods. Yet, revealing happens rarely as it requires a net-benefit in captured value, and if it happens then mostly selectively (Henkel, Schöberl, & Alexy, 2014). On the other hand, user innovation describes free revealing among user innovators who benefit from reputation gains of the innovator or accelerated adoption of the product, although the latter is only common with open source software and therefore not applicable to most other industries. In contrast to Internet-based governance mechanisms, blockchainbased governance can incentivise to not only the creation of private and club goods but also public goods by minimising value capture on platforms due to open infrastructure, thereby making them de-facto nonexcludable next to being non-rivalrous, hence a public good. Hence, cryptonetworks and blockchain-based governance mechanisms can arguably “solve the tragedy of the commons and drive future abundance at the same level of scale as the stock market and the corporation” (Maples, 2018).

Communities The body of literature on public goods and how they are managed efficiently is vast, yet, in practice, not too fruitful. 20 years before DAOs emerged, Foldvary (1994) showed how communities could manage public goods just as well – at times even better – than centralised governments. In fact, the concept of communities finds extensive use across sub-fields of organisational theory and beyond. Communities managing commons are not only found among citizens (Foldvary, 1994), but also among users (West & Lakhani, 2008), employees and practitioners (Brown & Duguid, 1991; Kodama, 2007), corporations (Snow, Fjeldstad, Lettl, & Miles, 2011). However, even with decentralised decision-making power strategic

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communities, there is a crucial step that remains a bottleneck in the governance process of a traditional hierarchical firm – that is, the role of the gatekeeper (Allen, 1970). In this context, especially when uncertainty is high, firms with less hierarchical structures performed better in terms of innovativeness (van de Vrande, Lemmens, & Vanhaverbeke, 2006). DAOs and other governance mechanisms that employ decentralised decision-making power intend to remove the role of a gatekeeper once and for all, thus free the organisation from such failures in agency theory. However, this promise has yet to materialise since DAOs and their context remain ambiguous and could – depending on governance mechanisms as well as their scope and reliability – introduce new agency issues (Voshmgir, 2017). While – at the time of writing in August 2018 – sophisticated large-scale decentralised organisations have not yet been implemented through blockchain-based governance mechanisms, blockchain projects are themselves happen to be a helpful indicator how DAOs are envisioned. For instance, ConsenSys, a blockchain incubator and consultancy, organises itself in a decentralised fashion that is closely tied to holocratic structures, which includes “dynamic roles rather than traditional job descriptions; distributed, not delegated authority; transparent rules rather than office politics; and rapid reiterations rather than big reorganizations” (Lubin in Tapscott & Tapscott, 2016, p. 88). Furthermore, the core team of Aragon split itself from the open source product and the corresponding Aragon Foundation (which also owns the funds of approximately 20 million GBP raised at the ITO) and announced to decentralise its development, including access to the funds raised by the Aragon Foundation (Aragon, 2018c). Since August 2018, there are two core teams contributing to Aragon, ‘Aragon One’ and ‘Aragon DAC’ (Aragon, 2018b, 2018d).

Are the two visions converging? Voluntarily giving away significant funds and giving potential competitors access to them – that is unheard of in corporate logic. Ultimately, both systems are not only based on diverging values but also on different business models, which explicitly encourage (vision 2) or explicitly forbid (vision 1) such a strategy. It is striking how vast the solution space of blockchain currently is across all organising visions, specifically the two identified as part of this thesis. It is not clear, if and how both visions would possibly converge to a unified solution space of blockchain, because both visions continuously manifest themselves through field-configuring events. For instance, at practitioner conferences, newcomers to the blockchain space find themselves confronted with a complex technology whose long-term vision is often framed as an imperative.

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While DAOs in the context of Vision 1 are – arguably almost exclusively – driven by a business problem that can be incremental to the status quo, Vision 2 is based upon political ideas and corresponds to values among individuals. This finding is in line with Tumasjan and Beutel (Forthcoming) who found that the adoption of blockchain depends on an individual’s value-based perception of the technology. Vision 2 is inherently radical and intents to replace contemporary systems. After all, public blockchain infrastructure is commonly referred to as “Web 3” which positions it is as the direct successor of Web 2.0 technologies which are dominated by the very same incumbents that are at the core of the first vision: major technology companies. That said, for many incumbents and institutions, the ‘hype’ of blockchain appears to be too strong to ignore this technology-push – no matter how the technology aligns with their values or economic motivation. Not only large corporations but also major institutions, such as central banks and governments, are taking part in public discourse and experimenting with blockchain technology. Ironically, such initiatives may contribute towards removing superfluous intermediaries among the very same incumbents who initially just intended to explore the technology.

“Once [incumbents] privately decentralized their entire backends, all that will remain is their brand, a user interface and a fiduciary requirement to deliver profits to shareholders. Perhaps that’s enough for customers to continue paying a premium fee. Or perhaps customers will switch to a public DAO equivalent with zero profit requirements, that offers the same (or better) service with much lower fees.

In this sense, blockchain technology is a crypto trojan horse.”

(Waters, 2017; emphasis in original)

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5.6 Managerial implications As pointed out in section 5.3, blockchain technology is still a black box to many incumbent businesses. In this early stage of technological maturity, every decision towards experimenting with the technology must be treated with caution. At the same time, a ‘wait and see’ approach should be the least favourable option for forward-looking managers who seek to maximise the probability of future business success and avoid subconscious or unintentional ‘innovation blindness’ as a barrier to firm progress (Leonardi, 2011). There are strong signals that blockchain is technologically capable of bringing about a paradigm shift. That is not to say that such change will materialise; and if so, to what extent and impact. Nevertheless, the concepts of a trustless ledger, tokenised FOSS (i.e., a business model for open source) and decentralised incentive mechanisms appear too powerful to be dismissed at first sight. The notion of cryptonetworks which are thought to behave more on a meso-scale, similar to cities and ecosystems, rather than on a micro scale, like firms and individuals, has rich potential for forward-looking investors who engage with protocol development – but also poses an existential threat to every firm that currently relies on a business model that is based on intermediating, gatekeeping or any other form of artificial scarcity. Therefore, considering a big picture in the long run, firms are recommended to reconceptualise their core competencies and maximise (or, to start with, ensure) their compatibility with value creation in cryptonetworks. Regarding the individual firm and a micro-level of human interaction and business processes, managers are advised to embrace the market pull (see section 2.1) for decentralising competence, power and incentives to the extent that aligns not only with stakeholders and managers of a firm but also with its employees’ preferences. The blockchain economy constitutes a strong technology push towards systems that have such features of decentralisation natively at its core. Once DAO protocols released stable versions and DAOs become a workable form of organising for value creation, then DAOs could pose a real threat to firms that rely on highly skilled knowledge workers who may choose to reorganise themselves and their business partners through a DAO if this model turns out to be more attractive. Since DAO protocols are currently in the making and partly already in public beta, managers should consider immersing themselves in prototypes and community discussions around these protocols. Rather than ‘waiting and seeing’, firms are told to evaluate early on whether the concept of a DAO offers a substantial improvement in working conditions over the existing employment policy in a given firm. In some instances, a DAO may even be a fruitful alternative concept to reorganise an organisation as a whole – for instance, in the case of FOSS projects, blockchain projects, cooperatives, non-governmental organisations and others.

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6 Conclusion Blockchain technology is an emerging phenomenon that is thought to change how individuals and businesses organise themselves (Beck et al., Forthcoming; Tapscott & Tapscott, 2016; Voshmgir, 2017). This thesis set out to explore how and in what ways blockchain can influence organisational processes. A case study was conducted to map how the technology takes shape. At the time of writing in August 2018, all the protocols for blockchain-based organisations that were part of this study are still in development. While some are in alpha or beta, there is no DAO protocol in stable release11. Thus, at the current state of the art, blockchain arguably faces major iterations of development on the road ahead. A key differentiation between DAOs and traditional forms of organisations is their ability to decentrally incentivise members through a system that is native to public blockchain technology and in various adaptations also found in federated blockchains. By introducing aligned incentives as a third key characteristic besides sourcing competence and allocating decision-making power, DAOs extent the solution space of organisational forms in a profound manner. In a way, DAOs employ market-based mechanisms to decentralise incentivation but are not restricted to either market-based nor internalising measures for distributing power and competence; thus, they enable new forms of organisations that are neither firms nor markets. The shaping of DAOs is subject to ideologies. Contributing towards a sensemaking of blockchain in the context of organisational studies, two organising visions are identified which each follow their own ideology. Vision #1 is prevalent among incumbent firms and managers who seek economic utility from adopting blockchain technology in the context of an existing business model. Popular approaches are DAO-enabled consortia or ecosystems that interlink multiple, individual firms through a shared, trusted ledger that distributes knowledge across a federated (private and controlled) network of firms which sources knowledge across firm boundaries and, to some extent, aligns incentives towards ecosystem success. Each individual firm usually keeps veto-rights. Moreover, internal decision-making processes of a given firm at not affected by joining a consortiums DAO in a federated blockchain context. Such consortia pose a major challenge to managers who are not used to opening their processes to partners and potentially even competitors. However, due to major pressure from the industry and an anticipated uncertainty regarding

11

Aragon released an open beta (Aragon, 2018) while Colony is in closed beta (Colony, 2017) and DAO-

stack released an alpha on the Ethereum Kovan testnet (DAOstack, 2018).

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future competitive advantages, incumbent firms are eager to explore blockchain and engage in federated blockchain despite cultural challenges, technological uncertainties and not confirmed benefits. Vision #2 is fundamentally different, as their ideals for governance build upon public blockchains that are open source (i.e., are non-proprietary, transparent and forkable). Public blockchains utilise cryptoeconomic mechanics and tokenisation in order to make FOSS development financially sustainable due to token mechanics that incentivise all participants towards increasing the value of a network (e.g., through development, usage, partnerships, etc.). In this context, DAOs are subject to decentralised decision-making mechanisms where power is distributed among an either known or unknown group of members (while a member can be an individual, a group of individuals or an AI). Ultimately, the two visions are not compatible. On the one hand, corporations seek to materialise efficiency gains from cross-firm collaborations through federated DAO consortia and appropriate value out of decentralised systems. On the other hand, Web 3.0 initiatives intent precisely the opposite, i.e. to accumulate value into decentralised systems by aligning incentives through tokenising FOSS in open and global DAOs.

6.1 Limitations As with any study, this thesis is not without limitations. First, the qualitative nature of this thesis implies that findings are subject to quantitative validation, including the proposed archetypes. On that note, identifying the two organising visions is an inherently biased encounter as their shape was profoundly influenced by field observations – which were of limited scope. Due to a lack of time and funding, only four industry conferences could be attended. Moreover, these are limited to a narrow geographical area, Western Europe. These findings need to be put into perspective with organising visions that are prevalent with other geographical regions, such as major technology hubs other than Berlin (such as San Francisco and Shenzhen) as well as other major financial hubs than London (such as New York City and Shanghai). Second, as the interview series that was part of the case study was intended to be open-ended and broad in nature, this comes with a limitation if ‘level 4’ and ‘level 5’ questions (Yin, 2009) are part of the conversation, i.e. questions that are normative or extremely broad. Due to the broad scope of this study, the vast technological solution space and the, arguably, wide-reaching implications blockchain could have on societies and economies, such questions were naturally part of the conversation. Third, this thesis focused on accurately documenting the technological mechanisms behind blockchainenabled organisations and states these as they are. Despite its scope, due to time constraints, the discussion of this study did not provide sufficient room to discuss this emerging phenomenon in all its particulars.

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6.2 Further research Combining much of what the emerging blockchain space has to offer, cryptonetworks constitute a promising phenomenon that eminently young and not empirically confirmed, yet conceptually intriguing. Along with the emerging disciplines of cryptoeconomics and forkonomy, cryptonetworks require substantial amounts of conceptual research where they could draw from multiple established fields in related domains, such as business ecosystems (Moore, 1997) open collaborative innovation (Baldwin & Hippel, 2011), living labs (Beutel, Jonas, & Möslein, 2017) and innovation ecosystems (Gassmann, Enkel, & Chesbrough, 2010). Blockchain-based solutions to the tragedy of the commons form a fruitful avenue for further research. Multiple contributions to this cause have already been made or are on their way, such as the initiative “Programming a Sustainable World” which studies synergies between blockchain and the UN Sustainable Development Goals (Voshmgir, 2018). For instance, blockchain-based open production networks which allow consumers to “factor ethical and sociological considerations into their purchasing decisions” (Goertzel, Goertzel, & Goertzel, 2017, p. 65) could lead the way towards a more sustainable and inclusive future. Moreover, prediction markets and futarchy (Hanson, 2013) are commonly discussed within the blockchain space. Approaches such as ‘DAO democracy’, proposed by Merkle (2016), provide novel and promising insights on how to decentralise human decision-making; yet, they remain to be empirically validated. Future studies should not only evaluate governance mechanisms such as futarchy and meritocracy in small-scale experiments but also through simulation studies, such as agent-based modelling (ABM) which proves to be a useful yet underappreciated tool for research across the social sciences. Related to the previous point and in line with Goertzel et al. (2017), I argue that more research and intervention is needed on potential dystopian futures involving blockchain. The emerging field of blockchain research should not forget about potential scenarios that less desirable. By extending the view across a range of scenarios from utopia to dystopia, blockchain research can contribute to building robust systems that are exempt of fatal design flaws – or at least provide an effective governance mechanism to cope with the former. In the light of hyper-deterministic tendencies in the blockchain space, it needs to be ensured that there is no second, unintended trojan horse inside the “crypto trojan horse” (Waters, 2017).

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