How does the blockchain realize antitrust?

This paper was jointly completed by V God and Thibault Schrepel, a guest professor at the Paris School of Political Studies. The article proves that blockchain can help achieve the goals of anti-monopoly law when the rule of law is not suitable. It is explained in detail from a technical and legal perspective. The measures that need to be taken for this purpose.
The rule of law does not manage all human interactions. As recorded by the World Justice Project, sometimes countries will bypass legal constraints, and other times, jurisdictions may be unfriendly to each other and refuse to enforce foreign laws.
In this case, people may wish to rely on other means to increase common interests.

In the face of this situation, we intend to prove that blockchain is a great candidate.

More specifically, we show that in areas where legal rules do not apply, blockchain can supplement antitrust laws.

Blockchain establishes trust between parties at the individual level, enabling them to trade freely and increasing consumer welfare.

At the same time, blockchain also helps promote decentralization, which is consistent with the antitrust law. However, there is a premise that blockchain can supplement the anti-monopoly law only if legal constraints do not hinder its development.

Therefore, the law should support the decentralization of blockchain so that blockchain-based mechanisms can take over (even if it is imperfect) when the law does not apply.

In view of this, we believe that law and technology should be regarded as allies, not enemies, because they have complementary advantages and disadvantages. And doing so will lead to a new “law and technology” approach. We demonstrate the attractiveness of this approach by showing that the blockchain builds trust, leading to an increase in the number of transactions (Part 1), and may promote the decentralization of economic transactions across the board (Part 2). The law should be considered when it is applied (Part Three), and finally we come to a conclusion (Part Four).


first part
Blockchain and trust

The rule of law makes the game cooperative by tying participants together.

When using smart contracts, the same is true for blockchains (A). This means an increase in the number of transactions, which will have multiple consequences (B).


A game theory and introduction to blockchain
In game theory, the Nash equilibrium is the result of a non-cooperative game in which no participant can independently change his position and become better.
We may find a Nash equilibrium for each finite game. Nevertheless, the Nash equilibrium of the game is not necessarily Pareto optimal. In other words, there may be other game results that are better for a participant, but need to make altruistic sacrifices.

Game theory helps to understand why participants are willing to trade.

When the game is not cooperative, each participant will ignore the strategies other participants will choose. This uncertainty may make them reluctant to trade because they are not sure that other participants will also follow the course of action that leads to Pareto optimality. Instead, they only have a random Nash equilibrium.

In this regard, the rule of law allows each participant to bind other participants by contract. For example, when selling a product on a website, whoever completes part of the transaction first (for example, pays before receiving the product), is in a vulnerable position. The law can help build trust by incentivizing subcontractors to fulfill their obligations.

In turn, this will turn the transaction into a cooperative game, so it is in the personal interests of the participants to engage in productive transactions more often.

The same is true for smart contracts. It can ensure that each participant cooperates with each other under code constraints, and may automatically sanction in case of breach of contract. It enables participants to be more certain about the game, thereby achieving Pareto optimal Nash equilibrium. Generally speaking, the enforcement of password rules can be compared with the enforcement of legal rules, although there will be differences in the drafting and enforcement of rules. Trust is only produced by code written in computer language (not human language).


B No need for antitrust trust
Transforming a non-cooperative game into a cooperative game will build trust and ultimately translate into more transactions being executed. This is a positive result accepted by our society. In fact, company law and contract law have played an important role in promoting the modern economy, especially by establishing legal certainty. We believe that blockchain is the same.
In other words, the increase in the number of transactions will also lead to an increase in the number of illegal transactions. For example, this is the case when a company agrees to a price.

To solve this problem, the legal system strives to strike a balance between creating legal certainty through private law and enforcing public law (such as antitrust laws) and ensuring the normal functioning of the market.

But what if the rule of law does not apply, for example, when jurisdictions are not friendly to each other (cross-border issues), or when the state does not impose legal restrictions on its agents or private entities? How can the same balance be achieved?

In other words, despite the implementation of illegal transactions during this period, is the increase in the number of transactions allowed by the blockchain (in the case where the law does not apply) beneficial to the common good? More specifically, should the design of the blockchain lean toward the goals pursued by the antitrust law?

If yes, how? This is what we discussed in the second part.



Post time: Sep-03-2020