Platform Precommitment via Decentralization

February 9, 2024

Preview Citation

Format: Chicago

Marco Reuter. Platform Precommitment via Decentralization, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

I study an entrepreneur’s incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform’s users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal.

Subject: Blockchain and DLT, Labor, Revenue sharing, Self-employment, Taxes, Technology

Keywords: Blockchain, Blockchain and DLT, Commitment, Cryptocurrency, Decentralization, Decentralized governance, Decentralized platform, Entrepreneur keep, Entrepreneur's incentive, Platforms, Platform's user, Revenue sharing, Self-employment, Smart contracts

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/028
Stock No:

WPIEA2024028
ISBN:

9798400267284
ISSN:

1018-5941

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