The links between an integrated and well-governed global digital economy and social flourishing are direct and foundational, such that better governance of digital units of account is a direct input to the economic institutions. A project led by Eric Alston at the University of Colorado Boulder seeks to empirically study questions surrounding the self-regulatory potential of digital currency networks. 

The novelty of these networks’ governance processes are twofold – in addition to their production by private organizations, the means by which network processes are executed and updated have no centralized locus of control to which residual benefits accrue. This makes these networks decentralized relative to traditional intermediaries like banks and payment networks. The combination of transparent cryptographic security and distributed governance gives impersonal confidence in place of the trust in private organizations and government oversight that financial intermediaries have typically required.

The production of these digital units of account has value in facilitating exchange in the global economy. The future of the global digital economy depends on central bank digital currencies approximating the dollar, yuan, and euro. Private digital currency networks are still in demand, however, especially in nations with unreliable monetary systems, or among people who desire privacy. Blockchain technology will likely continue to be used to secure these networks in the future.

Although certain classes of cryptocurrency can facilitate criminal activity, cryptocurrency networks are remarkably transparent, which makes them tractable to analysis and self-regulation. The complexity of the technology makes it one where specialized knowledge is concentrated within the industry. This same technological complexity creates an environment of information asymmetry, a classic context in which industry self-regulation has been emergent. Industries that are better governed privately can tend to preempt more costly or distortionary public sector regulation. These all stand as benefits digital currencies can anticipate from better self-regulation in addition to ethical arguments in favor of preventing fraud, criminal activity, and market manipulation.

This project will look at governance processes and decision-making structures of these networks, as well as the role of the digital currency industry in promoting self-regulation.