The governance of blockchain systems from an institutional perspective, a matter of trust or control?

Blockchain Technology is considered as a general-purpose technology with far reaching effects. As can be seen from the discussions on blockchain applications, both practitioners and researchers struggle to get to the core of blockchain technology consequences. Especially practitioners in the governmental sector explore adequate responses to this new technology. Therefore, our aim is to provide a conceptualization of the consequences of blockchain systems from an institutional perspective, and to use this conceptualization to provide insights into the governance of blockchain systems. We use a Grounded Theory approach to conceptualize the institutional consequences of blockchain technology. This approach leads to our core category: power transfer in environments with highly institutionalized values. This core category supports the synthetization of the governance issues related to blockchain systems. We conclude that the controlling powers that were formerly vested in highly institutionalized organizations (such as governments and regulators) and institutions (such as legal frameworks and agreements), are no longer automatically part of the governing ecosystem in blockchain systems but are engrained into the technical system itself. Thus, Blockchain technology enables the technological institutionalization of values in environments that are highly dependent on these values. We believe that this is at the core of why existing institutions are being pressured by blockchain technology, and as such increase the difficulty for governments to effectively govern blockchain systems. Using this notion, public and private parties within the blockchain ecosystems can develop regulatory arrangements and strategies that strike a balance between fostering the innovative power and possibilities that blockchain applications offer and to mitigate possible negative effects of blockchain technology.