Trading Real-World Assets on Blockchain - An Application of Trust-Free Transaction Systems in the Market for Lemons

Since its introduction in 2008, blockchain technology has outgrown its use in cryptocurrencies and is now preparing to revolutionize a multitude of commercial applications including value and supply chains, business models, and market structures. This work follows design science research to guide the implementation of a blockchain-based proof-of-concept prototype that enables the automated transaction of real-world assets, such as cars, and provides a valid, transparent, and immutable record of vehicle history to market participants, authorities, and other third parties. The contribution of this study to existing research is threefold: First, it introduces a built-in mechanism to reduce transaction risk resulting from the irreversibility of transactions in blockchain-based systems. Second, it replaces a trust-based, centralized, and bureaucratic register with a tamper-free and autonomous transactional database system that comprises a secure registration and transaction process. Third, it proposes a novel approach to mitigate adverse selection effects in lemon markets by providing a reliable, transparent, and complete record of each marketable asset’s history. In total, the findings in this article illustrate the potential of blockchain-based systems but also highlight technological shortcomings and challenges for commercial applications, such as scalability or privacy issues

Engineering Decentralized Markets – A Blockchain Approach

In der Dissertation wird die Eignung der Distributed Ledger oder Blockchain-Technologie als Infrastruktur für dezentrale Marktplattformen untersucht. Dies beinhaltet die Schaffung eines konzeptionellen Rahmens, die technische Umsetzung durch Prototypen und die Analyse ökonomischer Auswirkungen. Im ersten Schritt kombiniert die vorliegende Arbeit die Ergebnisse einer strukturierten Literaturrecherche mit dem Market Engineering-Ansatz von Weinhardt und Gimpel (2007). Das resultierende „Blockchain Engineering Framework“ beschreibt den Aufbau und die Kernelemente blockchainbasierter Marktplattformen, zeigt Grenzen der Technologie auf und bietet einen Rahmen zur Strukturierung und Kommunikation von Forschungsvorhaben und -ergebnissen. Aus technologischer Sicht veranschaulichen zwei Prototypen die Implementierung und den Betrieb dezentraler Märkte. Der erste Prototyp betrachtet die Anwendung in Märkten mit Qualitätsunterschieden und Informationsasymmetrien anhand des Gebrauchtwagenmarktes. Der zweite Prototyp konzentriert sich auf Mikrostrukturaspekte und stellt einen Ansatz zum Handel von Aktien vor. Durch die Prototypen wird deutlich, wie die verteilte Datenbank Transparenz schafft und wie die diskrete Funktionsweise des Konsensmechanismus Interaktionen beeinflusst. Der dritte Teil greift diese Erkenntnisse auf und untersucht ökonomische Auswirkungen. In einem zweiperiodigen Spiel mit unvollständiger Information wird gezeigt, dass die öffentliche Verfügbarkeit von Qualitätsinformation zu opportunistischem Verhalten einzelner Marktteilnehmer und Marktversagen führen kann. Um den Einfluss der Kapazität und Frequenz neuer Datenblöcke auf die Qualität dezentraler Märkte zu analysieren, werden die entsprechenden Marktergebnisse mit Hilfe von Orderdaten der Börse Stuttgart nachgebildet. Die Auswertung der resultierenden Datengrundlage legt nahe, dass größere und schnellere Blöcke die Aktivität und Liquidität steigern. Gleichzeitig begrenzt eine Zunahme von Preisschwankungen die Skalierbarkeit dezentraler Märkte. Insgesamt stellt diese Dissertation einen ersten Schritt in der Analyse und Gestaltung dezentraler Marktplattformen dar. Sie skizziert wesentliche Elemente, demonstriert die technische Machbarkeit, beleuchtet ökonomische Konsequenzen und hebt zukünftigen Forschungsbedarf hervor

The Regulation of Cryptocurrencies: Between a Currency and a Financial Product

Cryptocurrencies are electronically generated and stored currencies by which users can trade either real or virtual objects with one another. As these digital assets gain popularity, the issue of how to regulate them becomes more pressing. Cryptocurrencies are attractive due in part to their decentralized, peer-to-peer structure. This makes them an alternative to national currencies which are controlled by central banks. Given that these cryptocurrencies are already replacing some of the “regular” national currencies and financial products, the question then arises—should they be regulated? And if so, how? This paper draws the legal distinction between cryptocurrencies which are in fact currency and those which are securities disguised as currency. It further suggests that in cases where a token is indeed a security, regular securities regulation should apply. In all other cases, anti-fraud measures should be in place to protect investors. Further regulation should only be put in place if the cryptocurrency starts increasing systemic risk in the general financial system

Towards a Framework for Evaluation of Blockchain Implementations

Organizations appear to implement blockchain solutions based on fear of missing out instead of a clear understanding of blockchain usefulness. Actually, ninety percent of current blockchain projects do not need a blockchain to meet their requirements. Therefore, we employ a Design Science Research approach to develop a framework for evaluation of blockchain implementations. The framework incorporates common factors of blockchain decisions, including blockchain innovation, blockchain design, inter-organizational integration, and implementation environment. We contribute to the scientific literature by structuring previous research efforts in a four-step framework, which provides a fruitful ground for future conceptual and empirical studies. For practitioners, the framework is useful to identify blockchain projects that facilitate purposeful blockchain adoption

Disruptive Power of Blockchain on the Insurance Industry

Kindlustus on olnud globaalse majanduse võtmekomponendiks oma lisatasude suuruse, investeerimismahtude ja ennekõike oma isikliku ja äririski katva sotsiaalse ja majandusliku rolli tõttu. Aastate jooksul on antud sektoris olnud püsiv reform, kuid sellele vaatamata on kindlustuse tööstusharu jäänud suuremalt jaolt samaks oma ärimudeli ja toimimise osas. Seda sektorit domineerivad vahendajad, kes mängivad võtmerolli kliendi vajaduste mõistmises ja viivad selle kokku kindlale sihtgrupile mõeldud kindlustustootega. PwC poolt tehtud uuring raportis „Kindlustus 2020: Muutuse pööramine võimaluseks“ [1] võtab arvesse sotsiaalsed, tehnoloogilised, keskkondlikud, majanduslikud ja poliitilised faktorid ning viitab sellele, et kindlustuse sektoril on vajadus muutuda agentuuripõhisest jaotusmudelist kasutusepõhiseks ärimudeliks. Antud uurimustöö uurib plokiahela tehnoloogiat ja selle häirivat mõju kindlustussektorile hinnates praegust äriprotsessi ja –mudelit ning seda, kuidas see tehnoloogia suudab antud mudeleid täiustada. Uurimustöö järeldusena pakutakse uut protsessi suunda kindlustuse tööstusharule rõhutades kliendile pakutavat parema väärtusega teenust, kus on kasutusel plokiahela tehnoloogia. Võtmesõnad: plokiahela tehnoloogia, kindlustuse äriprotsess, jaotatud peaarvetehnoloogiaThe insurance industry has been a key component of the global economy by the amount of premiums it generates, the scale of its investment and more fundamentally, the essential social and economic role it plays in covering personal and business risk. Over the years, there have been a growing reform in this sector but despite some of these reforms, the insurance industry has remained much the same in its business model and operations. The sector has been dominated by intermediaries who play the key role of understanding and matching the need of the customer with specific tailored insurance product. A research conducted by PwC in a report titled “Insurance 2020: Turning change into opportunity” [1], takes into account STEEP (Social, Technology, Environmental, Economic and Political) drivers all points to the need of the insurance sector to evolve from the agency- based distribution model to an usage based business model. This paper examines the blockchain technology and its disruptive power in the insurance sector by evaluating the current business process and model in the industry and how this technology can improve this model. This paper concludes by proposing a new process flow for the insurance industry placing emphasis on better values service to the customer using blockchain technology

BREAKING DOWN THE BLOCKCHAIN HYPE – TOWARDS A BLOCKCHAIN MARKET ENGINEERING APPROACH

The blockchain has reached the tip of a global hype across a variety of industries. The potential of this technology, inter alia building the fundament of Bitcoin, is assumed to be immense and disruptive – particularly for the financial industry. FinTech start-ups as well as established players however are just about to explore the true potential of blockchain technology as the fundament of (financial) markets. Before this backdrop, Information Systems research is making valuable contributions to the field by integrating the technical view on blockchain with interdisciplinary research approaches. Our contribution to the growing body of Information Systems literature in the context of the blockchain is twofold: First, we conduct a comprehensive literature review of the most relevant and recent IS research on blockchain. Second, based on the findings of our review, we build on existing research and propose a Blockchain Market Engineering Framework, which can support researchers as well as practitioners in analyzing and designing the elements of blockchain-based markets on an individual and global level. In addition, we go beyond a purely analytical perspective and provide a toolbox to support the active construction of blockchain-based ecosystems and infrastructures. In doing so we pave the way for future research that will help to break down the blockchain hype

Buyers of Lemons: Addressing Buyers’ Needs in the Market for Lemons with Blockchain Technology

The automotive market is in the top three markets with the least trust from consumers. In particular, in the second-hand car market, consumers suffer from such problems as the car being in worse condition than initially indicated, accident damage that is not disclosed, fraud, etc. Akerlof, described the market for used cars as an example of the problem of information asymmetries and resulting quality uncertainty. In order to cope with quality uncertainties, used car buyers actively engage themselves in information seeking. Blockchain technology promises to automatize the tracking of cars through their lifecycles and provide reliable information at any point in time it is needed. In our study, we investigate the problems car buyers face during information seeking and propose requirements for the design of a blockchain-based system to address these

Travels along the hype cycle: a set of blockchain applications and the economic processes they impact

Some commentators refer to blockchain as a potential General Purpose Technology. Yet despite a plethora of cryptoassets and projects, it has struggled to gain traction beyond payments and price discovery. This thesis explores how the technology is being applied to better understand the potential and risks of deploying blockchain. It examines four different use cases with econometric and case study methods: (1) Bitcoin mining as the token incentivized processing of records, (2) Initial Coin Offering tokens as a form of venture financing, (3) Uniswap the decentralized exchange and (4) Kompany improving the data integrity of compliance records via notarization to a public blockchain. It finds that blockchain enables capabilities that did not exist before, but that these capabilities are bounded by trade offs and developer priorities. Ultimately this research expands the literature on blockchain applications and argues that blockchain does not build better systems, but different systems that can achieve different objectives. It provides evidence that firms and society are gradually traversing the hype cycle, deploying blockchain, solving real world economic problems and creating value

Empirical insights into the benefit from implementing smart contracts

Smart contracts are highly relevant due to their support for new decentralized business models and processes. We empirically investigate the benefit of implementing smart contracts. Our approach measures the benefit by capturing the impact of implementing smart contracts on processes directly. Thus, our research supersedes previous research that uses deductive approaches for deriving beneficial effects from technical and architectural properties of smart contracts and blockchains. We conduct a systematic approach using the aspects cost, quality, time and flexibility, and their impact on the four process phases interest, agreement, fulfillment, and assessment. Our research enables decision-makers to make decisions on implementing smart contracts more precisely. Furthermore, decision-makers become able to develop more target-oriented initiatives