Blockchains and Transaction Costs

This paper examines current business applications of blockchain technology and discusses blockchain implications for transaction costs. Blockchains are a relatively new set of technologies that can be used for various business purposes, primarily activities related to contracting. Transaction costs comprise the operational costs of contacting (searching and communicating) as well as the costs of contracting (writing and enforcing contracts), and blockchains can be used to lower, first and foremost, the costs of writing and enforcing contracts. Other technology applications that have been investigated to a larger extent, such as multi-sided platforms, primarily help in lowering the costs of searching and communicating, while blockchains can contribute to lowering the costs of contracting.