The Slow Death of the Firm

My view is that some centralization of decision making is generally necessary in the early days of a project. The best projects will likely be designed to be decentralized across all facets of the org for the long-term, but not necessarily right from the beginning.

-Data isn’t controlled by any one entity

There are clear hurdles holding back decentralized organizations from broader adoption

-Decision making power is not controlled by one person or group and there are checks and balances from a broad variety of market participants

Bitcoin is the first example of an organizational structure that has the beneficial characteristics of the firm (minimizing transaction costs, aggregating capital and mindshare, and providing job security for contributors) combined with some new characteristics:

In traditional firms, the incentives between users, employees, and owners are often not clearly aligned. When a token on a global blockchain is the business model, incentives are no longer muddled by legal entities, jurisdictions, and business models that conflict with the best interest of the users.

It is difficult to accurately measure contributions in most types of work today. Bitcoin works well because labor contributed to the system can be measured objectively and is very difficult to game. Most labor still requires some centralized human judgement to effectively allocate resources.

There is no firm behind Bitcoin; there’s simply code (rules for organization) and incentives (the BTC token) that brings together many different participants who are all incentivized to contribute their time and resources to maintain the service.