Introduction : A nascent but growing literature on the economics of blockchain is beginning to emerge. Blockchain networks have brought attention to some areas of economics that have a long history of research. These include the economics of information, and more recently, the economics of data, which has been spurred by advances in processing power, machine learning, and storage. Additionally, the economics of privacy is a relevant topic within the context of blockchains.

Catalini and Gans (2016) discuss how blockchain technology can shape innovation and competition in digital platforms. In their discussion, two key costs affected by the technology are considered: the cost of verification and the cost of networking. By reducing the costs of running decentralized networks of exchange, blockchain technology allows for the creation of ecosystems where the benefits from network effects and shared digital infrastructure do not come at the cost of increased market power and restricted data access by platform operators. Reduction in the cost of networking allows open-source projects and startups to directly compete with entrenched incumbents through the design of platforms.

Abadi and Brunnermeier (2018) note that although blockchains keep track of ownership transfers, a centralized record-keeping best compliments the enforcement of possession rights. They note that the ideal qualities of any record keeping would be correctness, decentralization, and cost efficiency. However, blockchain fails to satisfy all three properties simultaneously. Unlike centralized record-keepers that extract rents due to monopoly power based on restricted access to their ledgers, blockchains allow for free entry of record-keepers and thus drive down rents. Blockchains provide static incentives for correctness through expensive proof-of-work algorithms and giving permission to record-keepers to undo fraudulent reports by rolling back history.

Jones (2020) discusses the non-rival property of data and argues that because of its infinite usability, there are large social gains to allocations in which the same data is used by multiple firms simultaneously. However, firms are incentivized to hoard data in order to avoid competition, leading to inefficiencies and lower productivity. The paper indicates that giving data property rights to consumers can lead to allocations that are close to optimal and is more efficient than government-imposed restrictions on selling data.