Finding the Right Balance: Technical and Political Decentralization in the Token Economy

• Published in: Blockchains and the Token Economy pp. 53 - 86
• Main Authors: Pfister, Michelle, Kannengießer, Niclas, Sunyaev, Ali
• Format: Book Chapter
• Language: English
• Published: Cham Springer International Publishing 11.08.2022
• Series: Technology, Work and Globalization
• Subjects: Cross-ledger interoperability; Decentralization; Distributed ledger technology; Token economy
• ISBN: 9783030951078; 3030951073
• ISSN: 2730-6623; 2730-6631; 2730-6631
• DOI: 10.1007/978-3-030-95108-5_3

Token economy instances can be built on a variety of protocols, such as distributed ledger technology (DLT) protocols. DLT protocols are used to operate DLT systems that perform, in a decentralized way, several tasks (e.g., the prevention of double-spending) that are usually handled by central actors, such as banks. Using DLT can be subject to challenges in terms of interoperability between DLT systems (e.g., due to incompatible interfaces), limiting the dynamics in token economy instances, for example, regarding collaboration between organizations operating on separate distributed ledgers. Cross-ledger interoperability (CLI) systems can connect DLT systems. However, it is unclear how the degree of decentralization (i.e., technical and political) of CLI systems affects token economy instances that comprise multiple DLT systems. To better understand such effects, we describe patterns for the implementation of CLI systems and present our notion of political decentralization in token economy instances using CLI. We describe potential implications of CLI patterns and governance mechanisms on token economy instances. Drawing from those implications, we discuss balancing centralization and decentralization in token economy instances that comprise multiple DLT and CLI systems.