Decentralized entities under Article 101 TFEU: The Case of Blockchain Forks

Blockchain can be seen as one of the most significant inventions of humanity since the Internet. Its raison d’être originates from cyberlibertarianism and calls upon helping people to avoid the coercive power of a State. This technology is a decentralized, immutable, and highly transparent ledger, the initial objective of which was to create a trustworthy digital currency. However, blockchain is also used for other purposes, such as the design and the enforcement of smart contracts. Additionally, this technology has another crucial feature, namely its possibility to be forked. A blockchain fork represents a process when one blockchain network splits into two distinct ones due to either technical changes to its protocol or disagreements between the users regarding community rules. The forking process is innovative for two reasons. Firstly, it allows any participant to make their voice heard and to circumvent lengthy bureaucratic procedures when it comes to the implementation of a proposed change. Secondly, in case of a significant disagreement with the rules in place, forks allow any member of a blockchain community to easily establish a new entity without significant costs being involved.
This being said, one can clearly see that blockchain significantly altered the way people organize themselves and interact with each other. Nevertheless, it also poses well-founded questions regarding the applicability of Article 101 TFEU to this technology in general and to the process of forking in particular. The reasoning behind this statement is twofold. Firstly, as blockchain does not have centralized top-down governance in its network, it does not fall within Coase's Theory of the Firm. Meanwhile, the current understating of which kind of entities should be considered an undertaking for the purpose of Article 101(1) TFEU is based on this theory. This further results in ambiguity regarding whether blockchain should be seen as an undertaking in the first place. Secondly, there are concerns around the question of liability, as it is unclear who should be held liable for a collusive practice if no specific user or group of users has direct control over the blockchain network’s activities. This regulatory loophole results in a scenario in which blockchain participants are left without any remedies if an anticompetitive practice is directed towards them. It is also the case when it comes to the activities of blockchain forks. Indeed, the recent Bitmain case has illustrated that a blockchain fork can engage in a potentially collusive practice with other entities to ensure its survival.
Bearing in mind the regulatory loopholes around blockchain forks and the high relevance of this topic for society, this paper will seek to examine their implications for competition law. Accordingly, it does not support a complete ban of the forking process, as it would deprive blockchain of its central feature and decrease its added value for the population. By contrast, it will seek to outline a specific trajectory that competition authorities and courts can take while assessing the legality of blockchain forks in light of Article 101(1) TFEU.