Blockchains, Private Ordering, and the Future of Governance

Ten years ago Satoshi Nakamoto published the Bitcoin white paper and launched the first Bitcoin protocol. Since then, blockchain’s potential to impact upon a wide variety of relationships and transactions has become evident. Blockchain-based governance is now possible, and as technologists, entrepreneurs, and legal professionals refine its implementation, it will likely become more mainstream. It is no exaggeration to say that a blockchain revolution has begun. Although not as attention-grabbing as blockchain’s earliest uses to facilitate cryptocurrency, the technology’s potential to transform the way business enterprises are governed is no less ground-breaking. This chapter considers blockchain-based governance from an American business law perspective. It argues that, despite the possibility that it will allow parties to rely less on the governance arrangements currently provided by traditional business organizations, it is nonetheless consistent with American business law’s ‘enabling’ approach and the significant room it leaves for private ordering. Furthermore, substitution of blockchain-based for traditional governance does not obviate the need for limited liability and the other advantages of separate legal personhood. Consequently, state-level efforts to accommodate blockchain-based governance in the context of limited liability entities are already appearing. The chapter concludes with a short discussion of some of the challenges that blockchain-based governance presents under American business law.