Blockchain governance and governance via blockchain: decentralized utopia or centralized dystopia?

Abstract Is blockchain the technological blueprint of a utopian decentralized future or a dystopian centralized one? In search of an answer to this question, this article juxtaposes blockchain governance and the state’s utilization of blockchain to govern citizens. This juxtaposition reveals that whilst being a disruptive general-purpose technology emerging from mistrust of centralized institutions, blockchain could also be the vehicle delivering centralized state surveillance and behavioral control. This juxtaposition further reveals that in contrast to the expectations of blockchain enthusiasts, states’ approach to blockchain does not appear to be entirely antagonistic but it consists of a tripartite strategy of appropriation, regulation and rejection depending on which satisfies the state interests in a given context. As most constructs of governance via blockchain are still at an embryonic stage, it is difficult to reach definitive conclusions about what the future holds for blockchain’s impact on citizenship. Nevertheless, this article argues that it is necessary to follow blockchain-based governance critically to identify whether there will be a further divergence between the two worlds of blockchain.


Introduction
Blockchain is perceived as a "disruptive" technology that could fundamentally impact the foundations of the key institutions of the capitalist economy and society (Berg, Davidson, and Potts 2019, ch.2).What makes blockchain disruptive is its so-called "trustless" quality which resolves the trust problem of transaction cost economics and makes it possible for agents who do not know each other to exchange information and other resources without needing a centralized organization to certify the exchange relationship (ibid).Trustlessness in this sense is a technical term referring to the absence of the need for trust between parties of an exchange relationship in contrast to the conventional contracts regulating exchange in a market setting (see Lemieux 2002, 49).Due to blockchain's trustlessness and programmability, which allows smart contracts to operate on the blockchain, blockchain-based constructs are expected to compete against core centralized institutions organizing capitalist exchange relationships, such as banks, centralized financial institutions and firms. 1  Having their philosophical roots in the cypherpunk movement's distrust of state surveillance (Hughes 1993), devotees of blockchain technology believe that there is an unavoidable conflict between blockchain and state power.Members of the Bitcoin community (the first cryptocurrency to use blockchain technology) commonly refer to the inability of states to destroy Bitcoin as a superior quality in contrast to central bank-produced fiat currencies (e.g.Price 2021).Since Bitcoin uses public and immutable distributed ledger technology, as long as a single peer of the network has a record of the transaction history and internet access, the network could be recreated like a rebirth of the phoenix from its ashes.This emphasis on the indestructibility of Bitcoin and its blockchain belies an expectation or presumption that the state will aim to destroy Bitcoin and blockchain technology, as these constructs pose a fundamental threat to the state power and centralized organizations of capitalist exchange (See e.g.Krishnan 2020).
Against this background, this article juxtaposes blockchain governance (i.e. the regulation of the relationships between different agents with potentially divergent interests within the blockchain realm) to governance via blockchain (i.e.states' utilization of the blockchain technology to regulate state-citizen or inter-citizen relationships).As a result of this juxtaposition, the article illustrates that contrary to the presumed animosity between blockchain and the state, emerging blockchain regulations reflect a strategic tripartite approach consisting of rejection, regulation and appropriation.States reject or ban constructs utilizing blockchain if those constructs pose a significant threat to the interests of centralized institutions of capitalist exchange.States regulate other constructs that challenge capitalist exchange relationships without posing a fundamental threat to centralized institutions.Finally, states appropriate blockchain technology and utilize it when certain qualities of blockchain, such as immutability and permanent record-keeping, enable states to exercise their functions and powers more effectively.
The appropriation of certain aspects of blockchain to advance state powers constitutes one of the most controversial aspects of blockchain: a technology whose creation was inspired by a fundamental distrust of state power being utilized to entrench power with significant implications on the state-citizen relationship.The contradiction between the imagined future in which blockchain liberates citizens from centralized power by allowing them to engage in decentralized exchange and the reality in which the same technology could be utilized to enhance centralized powers is the key focus of this article.Naturally, this bipolarity is not specific to blockchain.Once technologies are created they detach from the objectives of their creators and gain a life of their own in which they can serve contradictory purposes.
However, due to its idiosyncratic qualities, such as immutable record-keeping and the imposition of immediate monetary rewards and punishments through smart contracts, blockchain can influence the state-citizen relationship fundamentally.Therefore, international organizations setting global patterns for economic regulation (such as OECD, UN and WEF) perceive blockchain as a key technology to implement the fourth industrial revolution alongside artificial intelligence (AI) (UN 2018;WEF 2016;Wyckoff 2017).Although most public strategies utilizing blockchain are still at the proof-of-concept stage, they need to be followed critically as they could potentially bring a fundamental shift in the state-citizen relationship.States' utilization of this complex technological construct in governance could be problematic, as it would be difficult for citizens without technical literacy to disentangle the effects of governance via blockchain on their autonomy and rights with a view to defend these against a potential intrusion by the state.Additionally, in the post-Covid governance paradigm, citizens are less likely to be protective of their autonomy considering Covidrelated emergency regulations significantly shifted the boundaries of acceptable state intrusion to citizens' autonomy (Eck and Hatz 2020).
The structure of the article is as follows: the following section introduces blockchain technology and the underlying principles of its governance.Then the article discusses how states utilize blockchain and with what implications on citizenship.This is followed by a section juxtaposing blockchain governance and governance via blockchain.Afterwards, the article is concluded with a short section posing a research agenda and questions for law and policy based on the findings of this juxtaposition.

Blockchain governance: a decentralized utopia?
Blockchain is a distributed electronic ledger allowing the record and exchange of information between peers without needing a centralized party (Armstrong, Hyde, and Thomas 2019, ch.1;De Filippi and Wright 2018, ch.3).Blockchains have different qualities and use different protocols depending on the objectives and philosophical beliefs of their creators.However, the original blockchains such as Bitcoin's blockchain follow the characteristics of trustlessness, decentralization, transparency, permissionless and pseudonymity (or anonymity) to a certain degree (Armstrong, Hyde, and Thomas 2019, ch.1;De Filippi and Wright 2018, ch.3).
In these blockchains, the peers involved in the network collectively certify the authenticity of an exchange which displaces the need for a centralized party to perform this task.This also makes blockchain resistant to fraud and tampering.Some blockchains are public and transparent which means that any individual can access and scrutinize the history of transactions.Permissionless blockchains allow any individual to join the peer network as long as they invest in the required equipment.Some blockchains, such as that of Bitcoin, are pseudonymous, which means that parties to transactions can only be identified by combining on-chain information with real-life information.Other blockchains, such as that of Monero, are anonymous, which means that parties do not leave an on-chain footprint about their identity.
Blockchain originated from the cypherpunk philosophy advocating open source code-writing as the key method of protecting privacy against increasing state surveillance.The cypherpunk manifesto declared: "We know that someone has to write software to defend privacy, and since we can't get privacy unless we all do, we're going to write it" (Hughes 1993).Similarly, the genesis block of Bitcoin contained a message referring to the 2009 Times headline about a second bank bailout after the 2008 financial and economic crisis which is interpreted as a mission statement to challenge centralized financial institutions.Nevertheless, some argue that the history of the relationship between blockchain and the state has been more complex than it is commonly reported (see e.g.Golumbia 2016).
Due to its idiosyncratic characteristics and its philosophical underpinnings, blockchain is considered a technology fundamentally challenging the monopoly positions of centralized institutions regulating capitalist exchange.The programmability of blockchain allows the operation of so-called "smart contracts" which are computer codes that can execute a previously agreed-upon exchange without needing human authorization (Howell and Potgieter 2021).Whilst reducing transaction costs, smart contracts also raise some significant legal dilemmas due to their idiosyncratic characteristics, such as "immutability" which makes it nearly impossible to cancel or amend them even when the parties wish to do so or when conditions justify an "efficient breach" (Guadamuz 2019).Individuals aiming to form a more complex set of relationships under a common objective can create so-called "Decentralized Autonomous Organizations" (DAOs) utilizing smart contracts which resemble firms in terms of their objectives but have a decentralized form of organization (Sims 2019).
As a result, blockchain is considered to be a disruptive general-purpose technology challenging the positions of key established institutions of the free market economy, including lawyers, courts and firms (Davidson, De Filippi, and Potts 2018).This is because due to trustlessness and decentralization, blockchain enables individuals who do not know and trust each other to engage in an exchange relationship without needing a centralized third party to guarantee the authenticity of the exchange.Selfexecuting smart contracts imply that code-writers might replace lawyers who have a monopoly position in drafting the legal framework underlying capitalist exchange.Similarly, courts might no longer be needed in the resolution of contractual conflicts, since smart contracts are self-executing.
As a result, blockchain solves the fundamental transaction cost problem of new institutional economics (Davidson, De Filippi, and Potts 2018).Additionally, blockchain-based constructs are resistant to political and economic capture, since blockchain is not owned or regulated by a single entity but by a group of peers collectively.In other words, blockchain lacks a single "choking point." This broad overview might lead to the conclusion that blockchain could offer a decentralized and democratic alternative to centralized institutions regulating exchange relationships.But before reaching this conclusion one needs to engage in a deeper investigation of blockchain governance.
Firstly, it needs to be noted that even if blockchain is a disruptive technology, the challenge it poses to the established institutions of capitalist exchange is limited.This is because whilst challenging centralized capitalist institutions, blockchain does not challenge capitalist exchange itself.There is nothing in the philosophy or operation of blockchain that suggests a reorganization of capitalist relationships or redistribution of resources.Whilst there are individual projects that utilize blockchain with public good objectives (Rozas et al. 2021), such as Duniter 2 and Faircoin 3 that aim to offer a universal basic income regime, these projects constitute a small minority in the blockchain universe due to the collective action problems facing public goods.The vast majority of blockchain-based constructs operate on the premise of individual profit, be it cryptocurrencies or decentralized finance protocols (for empirical analysis see Casino, Dasaklis, and Patsakis 2019).This is not surprising, since blockchain allows monetization of almost everything through smart contracts which results in the creation of a so-called "token economy" (Lacity and Treiblmaier 2022).
Secondly, notwithstanding the generic qualities described above, there can be fundamental differences between the governance principles of blockchains based on the objectives of a blockchain's creators.In blockchain governance decentralization refers to the collective validation of transactions by peers of the network but not necessarily to democratic governance by peers through participatory decision-making.As a result, decentralization and democracy are different phenomena in blockchain governance.Democracy in this context is understood as the participation of those affected by decisions in the decision-making process.
Legal scholars utilize constitutional models to analyze blockchain governance (see e.g.Allen et al. 2020;Alston 2020;Alston et al. 2022;Manski and Manski 2018).If blockchains have constitutions, these are based on a collection of written and unwritten constitutional rules and principles, similar to the UK constitution.Arguably, the constitutional framework of a blockchain comprises the white paper of the construct operating on the blockchain, the code of the blockchain programme and in particular the voting rules for programme changes, and the philosophical beliefs and objectives underlying the blockchain and unifying the blockchain community.Some of these principles could be considered of "meta-constitutional" status, i.e. so fundamentally reflective of the underlying philosophy and objectives that, similar to the unamendable provisions of some constitutions, a compromise or change in these principles cannot even be proposed.Arguably, decentralization and permissionlessness constitute metaconstitutional principles for the Bitcoin community, 4 whereas anonymity constitutes a meta-constitutional principle for the Monero community.
If blockchains have constitutions, they have incomplete constitutions at best.A constitution would be expected to bring together the fundamental mechanisms of governance of a society, including but not exclusive to key values and principles, institutions governing the society and their powers, rules of citizenship, rules about lawmaking and rules about the resolution of conflicts between rules.Most blockchains have incomplete constitutions, predominantly because most blockchains are not created through a "constitutional moment" in which governance rules are discussed and decided through open discourse and a participatory process.The constitutional gaps in blockchain governance are closed through the resolution of problems and conflicts.Arguably, Ethereum's forthcoming switch from the proof-of-work consensus mechanism to the proof-of-stake mechanism constitutes an exceptional constitutional moment, where a fundamental change to the blockchain protocol will take place following extensive discussions within the community. 5Similarly, the founding fathers of most blockchains do not reveal the governance rules in detail in the foundational documents of the blockchain.Examples of exceptions to this include Tezos 6 and Cardano 7 which set out detailed participatory governance mechanisms in their white papers.
In the absence of rules regulating conflicts between rules, conflicts between constitutional or meta-constitutional principles are resolved in an ad hoc way through discourse within the community in the light of various cost-benefit considerations.The Bitcoin block-size controversy and the Ethereum DAO controversy constitute the most notorious examples of such conflicts that are widely discussed in the blockchain literature (see e.g.Finck 2018, ch.7).
The Bitcoin block-size controversy involved the question of whether the Bitcoin blockchain's block size should be increased to make the processing of transactions more efficient. 8Whilst increasing efficiency and scalability, increased block size would come into direct conflict with the meta-constitutional principles of security and decentralization.Since bigger blocks are more expensive to produce this would reduce the number of peers in the network compromising decentralization and also making the network potentially more vulnerable to security risks.The DAO controversy involved a hack in DAO, a smart contract operating on the Ethereum blockchain, which resulted in the loss of funds worth $60 million. 9This resulted in the question of whether the Ethereum blockchain should be reverted to its status before the hack to return stolen funds to owners.This brought the meta-constitutional principles of immutability and tamper-resistance into direct conflict.Both questions resulted in so-called "hard forks" creating two distinct blockchains.In the Bitcoin block-size controversy the majority of the community sided with the principle of decentralization and the existing design of the blockchain, whereas a minority eventually created Bitcoin Cash.In the DAO controversy, the majority sided with the principle of tamper-resistance and reverted the blockchain to its status before the hack, whereas a minority siding with the principle of immutability created Ethereum Classic.
Both Ethereum and Bitcoin operate on permissionless blockchains, which means anyone can join these networks as a peer.Thus, it could be argued that permissionless blockchains are governed by a principle of open citizenship.Similarly, in the context of Bitcoin and Ethereum, anyone can propose changes to the protocol (so-called "Bitcoin Improvement Proposal" and "Ethereum Improvement Proposal"), although code changes require intimate knowledge of the operation of the blockchain and the software, which means in reality only those possessing "technical sovereignty" can propose changes that are likely to be adopted (Samuels 2018). 10The constitution of neither blockchain contains explicit rules as to how these rule changes will be discussed and voted on and who can participate in the discussions and vote on the proposals.In reality, discussions take place between core developers and the wider community and other influencers on social and traditional media platforms, through Reddit and Github discussions and real-life conferences.
The interests of peers and coin/token holders are indirectly taken into consideration in these debates.This is because peers can refuse to implement protocol changes which can bring the system to a halt.In many cases, decisions are made in light of the exit, voice and loyalty paradigm (Hirschman 1970).Either the proposal is accepted providing a voice to proposers.Or proposers show loyalty to the existing protocol even though their proposals are rejected.In some cases when neither voice nor loyalty can be established, exit happens through hard forks.Exit, nevertheless, happens rarely, as it lowers the value and conflicts with the interests of all actors involved due to the nature of blockchain as a network economy.
Other blockchains may have more explicit governance principles and impose restrictive rules about who can join the network and who is entitled to participate in decision-making processes.For instance, in permissioned blockchains, only those authorized can join the network as peers and in those following the proof-of-stake mechanism, individuals need to stake a certain number of coins/tokens to become a peer.Some blockchains follow token-based governance principles attributing voting rights to governance tokens and creating "plutocracy" in which wealth determines one's decision-making power (Buterin 2018).
In summary, blockchain is a decentralized technology that originates from the distrust of the centralization of economic and political powers and the objective of protecting privacy against increasing state surveillance.Blockchain challenges the monopoly position of centralized institutions governing capitalist exchange.However, whether blockchain could be the technological infrastructure of a decentralized utopian society is questionable.This is because blockchain does not directly challenge capitalist exchange and to what extent decentralization translates into democratic governance depends on the constitutional framework of the blockchain in question.Although governance principles may differ significantly from one blockchain to another, the original principles, such as decentralization and tamper resistance, play a significant role in blockchain governance.Similarly, even though governance rights might be limited in other blockchains, most prominent blockchains follow open governance principles.As a result, whilst not paving the way toward a utopian decentralized society, blockchain offers a more decentralized alternative to institutions regulating capitalist exchange, including banks, financial institutions and state institutions regulating monetary policy.

Governance via blockchain: a centralized dystopia?
After discussing blockchain governance, this article now turns to the discussion of governance via blockchain.Governance in this context is understood as practices and rules adopted by state and non-state actors with an impact on citizens' socio-economic choices and behaviors. 11State and non-state actors could utilize blockchain as a governance construct with fundamental impacts on these behaviors and choices.
Whilst not the primary subject of this article, the governance implications of blockchain via the actions of non-state actors should be explained here briefly considering private and public governance are essentially intertwined (Freeman 2000).Blockchain could have significant socio-economic implications through private governance primarily through smart contracts utilizing the programmability feature of blockchain.
These governance effects could be experienced if rules and practices that are currently idiosyncratic to blockchain influence socio-economic relationships in the offchain world.For instance, platforms that host DAOs offer arbitration services based on game theoretical efficiency considerations rather than notions of justice and fairness which constitute the primary conflict resolution principles through the legal system.For example, in Aragon's arbitration regime, 12 not experience or expertise but the number of coins locked determines one's chances of being chosen as an arbitrator.The dispute resolution system encourages arbitrators to make individual decisions based on their best guesses of what the majority of arbitrators will decide.Whilst encouraging efficient decision-making and potentially preventing future appeals, this incentive structure prevents maverick judges from making decisions embracing justice against the mainstream opinion.Whilst smart contract-based arbitration is currently a niche field, DAOs could become more widespread in the future or their governance principles could be utilized to challenge the dynamics of offchain dispute resolution.This could potentially put the rule of law in direct conflict with efficiency and result in ethical governance questions.Courts utilizing non-fungible tokens to serve documents 13 illustrate that blockchain-based constructs have begun to penetrate the legal system and a future where society faces the significant ethical questions posed by governance via blockchain might not be too far.
The internet of things (IoT) and internet of bodies (IoB) constitute other examples illustrating how blockchain-based constructs could potentially make a significant private governance impact.IoT refers to devices with processing abilities connected via blockchain to exchange information and goods and services through smart contracts without needing human involvement (M arquez 2021).IoB refers to human bodies seamlessly sending and receiving health-related data through wearable medical devices connected to a network so that healthcare decisions could be made remotely (Matwyshyn 2019).IoT is framed as an efficient construct delegating mundane daily decisions to machines, such as a smart fridge ordering groceries utilizing a smart contract.Similarly, it could be argued that IoB will inject efficiency into healthcare systems struggling to meet increasing demands by replacing healthcare professionals with digital technology in the making of decisions that do not need human discretion.Nevertheless, these technologies also raise some significant ethical governance challenges.For instance, the IoB is such a precarious construct from the perspective of human safety that there is a discussion of whether human bodies could be weaponised through the hacking of wearable devices (Matwyshyn 2019, p.118).Additionally, these constructs could enable the permanent recording of intimate aspects of human life on the blockchain which could open a new era of data harvesting and surveillance with minimum or no informed consent from the subjects.
Naturally, not all constructs utilizing blockchain will have negative implications on human life.Blockchain could also be used as a technological platform to create constructs that decentralize power and involve direct citizen participation in governance.For instance, a part of the effort in creating Web 3.0 centers on developing peer-topeer exchange networks replacing centralized gatekeepers, such as Facebook, Twitter, Airbnb or Uber, that rely on their monopoly position to extract data from citizens. 14 Similarly, Decidim, a blockchain-based democracy platform, aims to increase direct citizen participation in local decision-making processes. 15Nevertheless, as explained in the previous section, due to collective action problems, decentralized governance constructs that aim to advance the public interest fall behind profit-orientated constructs that pose ethical governance challenges both in terms of the number and the level of investment they attract.
Due to blockchain's decentralization objective, blockchain and cryptocurrency communities assume that states' approach to blockchain will be antagonistic (see e.g.Price 2021).Nevertheless, despite the assumed hostility of governments toward blockchain, the emerging regulatory landscape implies that states' approaches to blockchain have been more strategic and versatile than expected.
Blockchain regulation is still at an embryonic stage and extreme approaches, such as total rejection and laissez-faireism can be observed.For instance, at the one end of the spectrum, China has banned all cryptocurrency transactions (Quiroz-Gutierrez 2022), whereas, at the other end, Malta and some states in the US aim to establish themselves as blockchain heavens (Abraham 2019;Brooks, 2022).In between the binary of two extremes, the emerging regulations of North America and the EU seem to be built on a tripartite strategy composed of appropriating those aspects of blockchain that could serve the state's objectives, 16 rejecting those aspects that pose a challenge to the position and powers of institutions regulating capitalist exchange, and finally regulating the remaining blockchain related activities primarily from a consumer protection perspective.This strategy is visible in the EU's Markets in Crypto Assets Regulation 17 as well as the US's tripartite draft cryptocurrency regulations. 18Neither the EU nor the US regulations aim to regulate blockchain at the consensus level.These regulations approach most heavy-handedly toward stablecoins.EU Regulations ban the issue of interest to stablecoins (Cengiz 2021).Arguably, this is because stablecoins are the only type of cryptocurrency with the potential of becoming a competitor to fiat currencies due to their non-volatile value which not only poses a significant challenge to the interests of centralized banking and finance but also to central banks' ability to implement macroeconomic policies via quantitative easing and interest rate adjustments.
States' appropriation of blockchain takes place predominantly as part of strategic plans to implement the so-called fourth industrial revolution, a period of presumed intense economic activity and growth underlined by an increased reliance on digital technologies, including blockchain and AI.States' appropriation of blockchain technology implies a fundamental shift in the state-citizen relationship and raises the most significant questions about blockchain-based governance.Cagigas et al. (2020) provide an excellent review and summary of the state-created constructs utilizing blockchain.
According to the UK government, the fourth industrial revolution will result in the "blurring [of] the lines between the physical, digital and biological worlds" and will "disrupt nearly every industry in every country, creating new opportunities and challenges for people, places and businesses" (Department for Business and Energy & Industrial Strategy 2019).In short, the fourth industrial revolution is expected to significantly change every aspect of socio-economic life, capitalist exchange relationships and governance.As admitted by WEF, the fourth industrial revolution will increase inequality, as mass unemployment is expected in sectors that will become entirely redundant or not reliant on paid human labor due to significant advances in automated production technologies (WEF 2016).
The strategies to implement the fourth industrial revolution are still in the planning stage and most of the technological constructs proposed have not yet gone further than a proof-of-concept stage.These strategies propose a utopian future where technological constructs will be utilized to make the capitalist exchange more efficient and democratic and the governments more accountable toward citizens.In this utopian future, blockchain will be utilized for the permanent record and storage of different types of data and documents (e.g.diplomas, marriage certificates, healthcare data, and property deeds, see Eder 2019;Berryhill et al. 2018;WEF 2020,).Blockchain will be the technology underpinning the state-citizen relationship, as it will be utilized in the exercise of the most fundamental citizenship rights inter alia through blockchain-based digital elections, digital identifications (IDs) stored on the blockchain and central bank digital currencies (CBDCs) (Gregory and Doten 2021).
According to the forecasts of this utopian future, blockchain's intrusion into citizenship will fundamentally improve the experience of particularly the most deprived citizens.The poorest in the Global South will be able to access banking, finance and healthcare through digital IDs (Kshetri 2017;Ning, Ramirez, and Khuntia 2021;Thomason 2017).Refugees without documents will be able to travel, as data stored on the blockchain will be accessible in the transit and destination countries (UNHCR 2018).All citizens will enjoy a so-called "self-sovereign identity" and have control over the usage of personal data, as a trusted third party will be able to verify whether the individual in question satisfies a certain condition (such as age, qualifications, vaccination status etc.) based on information stored on the blockchain without revealing the information to the requesting party. 19 A closer look at these blockchain-based constructs reveals that the reality could potentially not be as advantageous to citizens as described in the fourth industrial revolution strategies.There are reasons to suspect that in contrast to the decentralizing tendencies of blockchain governance discussed in the preceding part of this article, governance via blockchain could result in the opposite outcome: further centralization and entrenchment of states' powers over citizens.
Firstly, the development of blockchain-based constructs which play a key role in the fourth industrial revolution strategies suffer from neocolonialist undertones (Gstrein and Dimitry 2021;Howson 2020;Shukla 2019).Organizations that play a central role in international economic governance openly encourage developing countries to test blockchain-based constructs, such as digital elections, digital land registers and digital public procurement systems.Not only does this open new lucrative markets for international tech giants that partner with developing countries in the development of those constructs, but also whether and how these constructs can improve citizenship experience in those countries without a significant infrastructure transformation is doubtful, considering that the majority of citizens do not even enjoy access to the internet. 20As a result, it could be suspected that developing countries provide a testing ground for the security and operation of blockchain-based constructs before these can be safely implemented in developed countries.
Secondly, blockchain-based constructs are often presented as potentially positive contributions to citizenship based on the governance principles of blockchain, such as permissionlessness, transparency and open-source code.As a result, it is argued that governance via blockchain will make state actors more transparent and accountable to citizens (Gregory and Doten 2021).Nevertheless, in reality, blockchains utilized by state actors as governance constructs have opposite qualities to those of blockchains utilized by decentralized socio-economic organizations.Blockchains utilized by states are often permissioned (i.e.only actors authorized by the state can join the network as a peer), private (i.e.only actors authorized by the state can scrutinize the transaction history on the blockchain) and codes used in these blockchains are protected by intellectual property rights (Semenzin, Rozas, and Hassan 2022).
In light of these qualities, blockchain-based constructs could potentially improve the state's ability to scrutinize citizens' behaviors and activities but not the citizens' ability to scrutinize the state.As a result, even if state blockchains improve transparency and accountability, they improve the transparency and accountability of citizens toward the state but to what extent they could improve accountability and transparency of the state toward citizens is questionable.Similarly, considering the hierarchical and superior position of the state in governance via blockchain, to what extent citizens will have sovereignty over their data, as indicated by the concept of "self-sovereign identity," is not immediately obvious.
Additionally, blockchain enables the efficient collection of vast amounts of data and efficient and instantaneous combinations of different types of data in a way which is not possible through centralized databases.Considering the immutability of blockchain, it is often voiced that storing citizen data on blockchain will conflict with the right to be forgotten protected in data protection regulations (Armstrong and Schwartfeger 2021).Perhaps more fundamentally, the ability to efficiently access and combine different types of data could further entrench states' surveillance powers and enable states to discriminate against individuals in novel ways.For instance, healthcare information stored on the blockchain in the home and transit countries could enable the host state to discriminate against immigrants based on health status.In the fourth industrial revolution strategies, there is a strong emphasis on the storage of healthcare data particularly to prevent another pandemic (WEF 2021).Covid-19 normalized the collection of increased amounts of personal data on citizens and discrimination against individuals based on health status in a way which would have not been possible before.For instance, in light of the track and trace rules of the UK government, citizens engaging in routine daily activities were required to submit personal data not only to state entities but also to other individuals without any guarantee about the protection of this data.As a result, the combination of different types of data and discrimination against individuals on this basis appears a potentially more likely scenario in the post-Covid governance paradigm where citizens have become used to state surveillance of their daily lives and health status.
Similarly, immutability and freedom from tamper, whilst appearing as positive qualities for data collection under normal circumstances, could potentially entrench the state's surveillance powers over citizens.This is because, when utilizing a blockchain-based construct, states could potentially make the exercise of citizenship rights or access to public services conditional on the submission of different types of data, simply because they can claim that this data could safely and securely be stored in blockchain.As a result, blockchain could legitimize more extensive data surveillance about citizens' behaviors and choices.
Another quality of blockchain which could potentially entrench states' surveillance powers is programmability and efficient monetization of services through smart contracts.Self-executing smart contracts could enable costless and automatic surveillance of citizens' choices and behaviors and immediate release of monetary rewards and punishments depending on whether or not citizens are following the states' preferences.For instance, the programmability feature of CBDCs allows central banks to embed an expiry date in coins to remove citizens' autonomy to save or invest funds when this is considered necessary for macroeconomic stability ((Ahnert et al. 2022).Similarly, in the post-2008 austerity paradigm, states have been scrutinizing citizens' behavior to make access to the welfare state conditional on the preferred behavioral choices (Edmiston, Patrick, and Garthwaite 2017).Blockchain-based constructs could intensify the role of conditionality in the exercise of citizenship rights by imposing monetary control on non-confirming citizens.
Finally, blockchain-based governance constructs raise some other fundamental questions of citizenship that cannot be addressed in the context of this article: for instance, considering the technological complexity of blockchain which is not easily accessible to citizens and which is a further abstraction from the already problematic accumulation of digital footprints can citizens give informed consent to data collection about very intimate aspects of their lives?Given the fundamental global inequalities between different citizen groups' access to technology, based inter alia on income, age, and location, could governance via blockchain increase inequalities in citizens' experiences?Finally, if blockchain in combination with AI is authorized to make decisions about citizens' access to public services can these technological constructs be held accountable for their decisions in light of the rule of law principles?Lemieux (2019, 2) argues that "blockchain concentrates power in the hands of techno plutocracy without the guarantees and protection afforded by the rule of law."A tragic example of the technology-rule of law contradiction can be observed in the Dutch benefits scandal where over a thousand children were unduly separated from their parents because of an algorithm that developed a bias against marginalized citizen groups. 21 These questions will be pressing harder as governance via blockchain intensifies.This discussion shows that there are good reasons to suspect that governance via blockchain could increase states' surveillance and control of citizens' behaviors.The next section will juxtapose blockchain governance with governance via blockchain and discuss this contrast in more detail.

Governance and blockchain: decentralized utopia or centralized dystopia?
This article has shown two different worlds of blockchain.Blockchain emerged from the cypherpunk philosophy aiming to reverse increasing state surveillance with open source code allowing individuals to directly engage in decentralized exchange relationships without needing the authentication of centralized institutions governing capitalist exchange.Although the governance of blockchain is more decentralized and democratic compared with the centralized institutions of capitalist exchange, this is decentralization and democracy with a small "d" at best.Whilst challenging the centralized institutions governing capitalist exchange, blockchain does not emerge from a general questioning of capitalist exchange or an ambition for a more egalitarian distribution of resources.Also, decentralization in blockchain governance does not necessarily mean democracy as there could be limits on who can participate in decision-making in a way that attributes privilege to those with technical knowledge or wealth.
However, even with its democratic and decentralized qualities with a small "d," blockchain governance stands in strong contrast to governance via blockchain.Whilst still at an embryonic stage, governance via blockchain might not necessarily contribute to a utopian democratic society and transparent governance as promised in the fourth industrial revolution strategies.There are reasons to be cautious about the storing of citizen data on the blockchain, as this could intensify surveillance and result in discrimination against non-confirming citizens in the access to public goods and services.
In her work on surveillance capitalism, Zuboff (2015, 83) explains that the problem with surveillance is not only that the hoarding of data by centralized monopolists breaches citizens' right to privacy but also that it potentially enables those monopolists to control and manipulate citizens' behavior.Zuboff perceives this relationship essentially as a "Faustian Bargain" because individuals need to disclose the requested information as they are in a relationship of dependency with the party requesting the information.Zuboff argues that "if power was once identified with the ownership of the means of production, it is now identified with ownership of the means of behavioral modification" (ibid., p.82).Varian (2014, 30) argues that citizens surrender data when they want something in return, like a mortgage.However, a mortgage and other essential goods and services cannot be perceived as things that people "want."Those are things that could only be described as the bare necessities of the human experience.This renders the relationship one of dependency and erases the possibility of informed consent from the surrender of data.
If surveillance capitalism is already here why should be worried about governance via blockchain?It is because due to its idiosyncratic qualities discussed in this article, blockchain could potentially open a new paradigm of surveillance capitalism.The element of dependency in the state-citizen relationship is substantially stronger than the relationship between citizens and monopolists no matter how fundamental the goods and services they supply may be.As a result, states enjoy an undeniably superior position in their ability to control citizen behavior by making access to public goods and services conditional upon following the behaviors and choices and by scrutinizing compliance through data surveillance.Blockchain offers a superior technological blueprint to achieve this end with its idiosyncratic qualities that allow efficient and permanent storage and combination of different types of data and immediate and efficient imposition of monetary rewards and punishments through smart contracts.
Blockchain is not the only bipolar technology whose implementation could potentially lead to paradoxical societal outcomes against the original intentions of its creators.In his book investigating "the change from a cyberspace of anarchy to a cyberspace of control," Lessig (2006, p.5) reports the devotion of early adopters to the internet as a global democratic platform for human interactions and socio-economic relationships: 'The claim for cyberspace was not just that government would not regulate cyberspaceit was government could not regulate cyberspace.Cyberspace was, by nature, unavoidably free.Governments could threaten, but behaviour could not be controlled; laws could be passed, but they would have no real effect … Cyberspace would be a society of a very different sort.There would be no definition and direction, but built from the bottom-up.The society of this space would be a fully self-ordering entity, cleansed of governors and free from political hacks.' (ibid., p.3) Yet, ironically, the internet now serves as the platform of surveillance capitalism.Morozov (2011) reports similar contradictions in the effects of technology in democracies of the developing world.Perhaps this bipolarity in the foundational objectives of a technological construct and the purposes it serves in the real world cannot be prevented, since neither blockchain nor other technologies come with an embedded ruleset limiting in what ways and for which purposes they could be utilized.As a result, it appears that their key fundamental strength happens to be their fundamental weakness: they are not owned by anyone, so no one can dictate what specific objectives they will serve.In this context, it could be argued that the meta-constitutional and benevolent principle of open-source code writing has been a weakness of blockchain governance, as this principle allows states and other actors to rely on the knowledge created by early adopters to develop constructs potentially conflicting with the objectives of those early adopters.
In light of these dynamics, it is a valid question to ask: are we going to observe an increasing divergence between the two worlds of blockchain?The world in which it serves as the blueprint for the decentralized organization of socio-economic relationships and the world in which it serves as the infrastructure of increased surveillance and behavioral control.Arguably, it is more likely that these two worlds of blockchain will develop and grow in parallel.

A role (and a research agenda) for law and policy in governance via blockchain
Blockchain is described as an "alegal" construct since it defies existing legal and regulatory categories due to its fluidity (De Filippi and Loveluck 2016).It is also argued that governance via blockchain will result in computer code replacing the law, as computer code rather than legal rules and conventional institutions enforcing them will take priority in the governance of exchange relationships (ibid).Nevertheless, governance via blockchain could also result in the proliferation of the role of law and policy in governance via blockchain to mitigate the risks discussed in this article.
There could potentially be room for states to take advantage of blockchain's positive qualities without compromising the democratic qualities of citizenship.For this more positive scenario to materialize states need to follow a fundamentally different approach to policymaking and address potential implications on citizenship through participatory decision-making.The strategic policy background of blockchain-based constructs is developed by institutions not directly accountable to citizens utilizing technocratic processes and states implement these strategies with very little, if any, communication with citizens.Constructs like CBDCs and digital IDs could potentially bring significant shifts in the fundamental dynamics of citizenship.Therefore, their future operation and legitimacy depend on whether an open societal conversation happens today about the potential risks and advantages of these constructs.
Also, there needs to be a conversation about effective legal methods of regulating states' surveillance powers in governance via blockchain to prevent blockchain-stored data to be used to discriminate against citizens.Although there is an increasingly growing legal literature about the blockchain-data protection relationship and the operation of smart contracts, there is a need for a more holistic legal research agenda focusing on the effects of blockchain on the state-citizen relationship from multiple legal perspectives, including constitutional and anti-discrimination law.It is hoped that this article will contribute to the development of this research agenda.