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This chapter introduces the institutional economics of distributed ledger technology. Blockchains are a distinct general purpose technology that provide reduce the transaction costs of exchange; that is, they are an institutional technology. The chapter presents the economic attributes of blockchains in the framework developed by Oliver Williamson. Blockchains complement and compete with other institutions that work to mitigate opportunism by industrialising trust. The chapter concludes with a comparative institutional analysis of blockchains as an institutional technology.

This chapter considers blockchains as constitutional orders. Blockchains compete and complement with firms, markets, governments, clubs, and the commons. Additionally, their versatility (the constitution can be varied for each application) allow them to adopt the characteristics of other institutions. The authors call this the ‘universal Turing institution’. The chapter then explores the dynamics of institutional and constitutional innovation in distributed ledgers.

Ledgers are a fundamental economic technology. This chapter develops the ledger-centric view of the economy. Ledgers provide an underlying infrastructure for exchange by allowing actors to prove, validate, and verify property ownership. In this sense ledgers map economic, political and social relationships. The chapter offers three analytic categories of ledgers (general, actual, and perfect), and considers the evolution of ledger technology in this context. Finally, the chapter tackles ledgers as rule sets for economic coordination, and the significance of this for interoperability.

This chapter answers the question of whether cryptocurrencies are money. Blockchain tokens do not fit neatly into our categories of financial assets. The chapter asks whether, and how, money is a public good or emergent social institution, and then applies this to crypto-tokens. Money can be seen as ‘dequity’: a unique instrument with the features of both debt and equity. The chapter then considers the evolution of money in a world of a multiplicity of cryptocurrencies and other technologies – such as artificial intelligence – that allow for barter transactions to occur at a low cost.

Distributed ledgers record and make available information through time. Unsurprisingly, their use for managing records of goods (and services) as they travel through supply chains has been the second most prominent application of distributed ledger technology after cryptocurrencies. This chapter details the economics of supply chain management on blockchains as the creation and accumulation of identity attributes in historical time. It first details how distributed ledger supply chain management reduces opportunism, and consequently where value is distributed on the chain. It then outlines an identity theory of supply chains, and relates that theory to the ledger-centric view of the economy.

This chapter details how blockchains facilitate a new category of firm: the V-form organisation, where vertical integration is outsourced to a distributed ledger. The chapter first outlines the evolution of the firm from the unitary structure (U-form) to the multidivisional (M-form), and explains how V-form organisations are distinct. V-form organisations are structured around supply chains of information. The chapter looks at the experience of V-form organisations so far, and makes some predictions about the future of the firm, which the authors expect to be smaller, less hierarchical, and more networked.

This chapter provides a framework to think about public policy choices in response to blockchain technology. It first introduces the idea of ‘crypto-friendly’ public policy as a set of policy dispositions around regulatory clarity and consistency and a permissionless innovation attitude to the risks posed by new technologies. The chapter explores the complex balance between regulatory certainty and the rapid need for regulatory change in response to new institutional innovation. It then presents these policy change dilemmas in an international context. Blockchains are available wherever the internet is available, and blockchain firms can locate themselves in the most crypto-friendly jurisdiction.

This chapter explores the long-run economic and policy consequences of wide-spread blockchain technology adoption. Blockchains disrupt the historical rationale for much modern economic policy. the authors formulate the institutional logic of a co-evolutionary model of the demand for economic policy. In the industrial revolution, complex production led to economic growth, but that complexity had to be managed through hierarchical governance. Karl Marx and Joseph Schumpeter both identified the consequences of hierarchy for power relations, creating a demand for public policy to counteract the effects of hierarchy. Blockchains offer the dehierarchicalisation of capitalism, and a corresponding reduction in demand for anti-hierarchy public policy.