Business Transformation through Blockchain

This chapter discusses how the widespread adoption of blockchain technology (distributed ledgers) might contribute to solving a larger class of economic problems related to systemic risk, specifically the degree of systemic risk in financial networks (ongoing credit relationships between parties). The chapter introduces economic network theory, drawing from König and Battiston (2009). Then, Part I develops payment network analysis (analyzing immediate cash transfers) in the classical payment network setting (Fedwire (Soramäki 2007)) synthesized with the cryptocurrency environment (Bitcoin (Maesa 2017), Monero (Miller 2017), and Ripple (Moreno-Sanchez et al. 2018)). The key finding is that the replication of network statistical behavior in cryptographic networks indicates the robust (not merely anecdotal) adoption of blockchain systems. Part II addresses balance sheet network analysis (ongoing obligations over time), first from the classical sense of central bank balance sheet network analysis developed by Castrén (2009, 2013), Gai and Kapadia (2010), and Chan-Lau (2010), and then proposes how blockchain economic networks might help solve systemic risk problems. The chapter concludes with the potential economic and social benefits of blockchain economic networks, particularly as a new technological affordance is created, algorithmic trust, to support financial systems.

Information technology (IT) innovation is rapidly reshaping organisations, affecting fundamental aspects of their everyday business activities and processes. This development is accompanied by benefits as well as challenges. In this article, we focus on a specific distributed ledger IT called blockchain which has been heralded as possessing the capability to radically transform a multitude of industries. However, there is a dearth of research which has coalesced the important considerations that organisations should consider prior to adopting blockchain technologies. Consequently, using innovation theory, which has been extensively used to examine the adoption of IT in organisations, we identify salient technological, organisational and environmental (TOE) considerations which influence the adoption of blockchain by organisations. We anchor our discussion using the top three organisational considerations which emerged from our research: top management support, organisational readiness and organisational support. We also provide an overview of the blockchain concept and outline the advantages and potential use cases that organisations contemplating adopting the technology can leverage.

Recently, blockchain technology has increasingly been deemed to enable novel “decentralized” business models for the sharing economy and thereby potentially provide an alternative to extant “centralized” sharing economy business models. Using a technology adoption perspective, our chapter explores under which circumstances such blockchain-based decentralized sharing economy business models may be widely adopted. Building on extant research, we theorize on the factors that are relevant for adoption from the individual users’ perspective. We then derive eight potential adoption scenarios of blockchain-based decentralized sharing economy business models and explore adoption using an agent-based simulation for the short term vs. long term. Our analyses highlight the relatively high importance of individual attitudes toward decentralized business models vis-à-vis contextual influences and show how adoption patterns vary depending on the time horizon for the different scenarios. We conclude our exploratory study by deriving research and practical implications for blockchain-based business models.

Digitalization is a ubiquitous term and refers to the digitization of processes and information alongside improvements, innovations, and reinventions that are enabled by increasingly powerful information technology. Today, nearly every industry sector is affected by digitalization and is facing threats and opportunities through new possibilities. With the rise of the digitalization, the platform approach has become the dominant strategy for large companies to operate an extensible, digital medium of exchange for products, information, and services. A large share of companies with the highest market capitalization based their business on platforms (e.g., Apple, Alphabet, Amazon). The earlier evolutionary stages of today’s digital platforms were two-sided markets, where two groups of users exchanged goods and every internet user could take the role of either a buyer or a seller (e.g., eBay). Over the last decades, it became a common decision to open up a platform to third-party service developers who could reuse the platform’s core functionality to build complementary components. This opening up of platforms is referred to as “permissionless innovation” (de Reuver et al. 2017). A digital platform is defined as “a system that can be programmed and therefore customized by outside developers users and in that way, adapted to countless needs and niches that the platforms original developers could not have possibly contemplated” (Parker and Van Alstyne 2017).

Interconnecting cyber-physical systems in networks leads to the creation of cyber-physical system-of-systems. In a cyber-physical system-of-systems (CPSoS), systems communicate by exchanging and sharing data and information, which this chapter also refers to as interoperability of information. To ensure reliable and secure interoperability of information between distributed cyber-physical systems, using blockchain technology or distributed ledging technology for distributed entities is an interesting option. Such a blockchain must, at a minimum, be fault tolerant and enable the entities involved to reach consensus on the information transactions that are to be performed. Once consensus about transactions between cyber-physicals is reached, it must be possible for these to record consistently the used data in a distributed ledger that provides a permanent shared overview of completed information transactions. The development of the new technology we call blockchain creates a new and as yet unfathomable reality of interconnected autonomous and self-organising cyber-physical systems that have the ability to make decisions about or for us as human beings.

This chapter explores the question whether Bitcoin as an unregulated cryptocurrency can have a positive effect on already well-diversified investment portfolios. Bitcoin was originally introduced in 2008 in a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. Since then, Bitcoin has seen increasing trading volumes (as well as major capital gains and losses) in a high-volatility environment while also experiencing growing attention by regulators, academics, the media and the general public. At the same time, more and more online and offline businesses worldwide started to adopt Bitcoin as an alternative means of payment, even though Bitcoin does not have legal tender status. Today, Bitcoin is still the most popular unregulated cryptocurrency. Bitcoin’s share of the total market capitalization of all cryptocurrencies currently amounts to just under 45% according to Coinmarketcap (2018), and Bitcoin is also the top-searched cryptocurrency of the top five cryptocurrencies in terms of market capitalization (Google Trends 2018). This is largely due to the fact that Bitcoin was the first cryptocurrency based on a decentralized peer-to-peer network (to confirm transactions and generate a limited amount of new Bitcoins in doing so) and functioning without the backing of a central bank or any other monitoring authority. For the general public and most media outlets, Bitcoin is still seen as the leading cryptocurrency.

Blockchain is known as a disruptive technology with multiple effects on companies, customers, and entire industries. For a long time, the analysis of the impact of information technology has been at the center of information systems research. If the impact is properly understood, appropriate actions for the players in an industry can be derived. In our chapter we set out to develop a discussion agenda that aims to advance the understanding of the impact blockchain might have on the payments industry and which can guide the further development in this field. In order to do so, we conducted a Delphi study among 45 experts and identified a large number of statements summarizing the potential development of blockchain. In the following we elaborate on the data gained from the Delphi study and discuss the statements in terms of two dimensions. First, as we observed different levels of consensus regarding the statements, we develop clusters based on three consensus criteria. Second, we build on thematic groups and discuss the ranking of the statements within these groups. We conclude by providing an agenda to push forward the discussion on the dissemination of blockchain in the payments field.

Interest in Blockchain technology is growing rapidly and at a global scale. As scrutiny from practitioners and researchers intensifies, various industries and use cases are identified that may benefit from adopting Blockchain. In this context, peer-to-peer (P2P) funding through initial coin offerings (ICOs) is often singled out as one of the most visible and promising use cases. ICOs are novel forms of crowdfunding that collect funds in exchange for so-called Blockchain tokens. These tokens can represent any traditional form of underlying asset and have already been used, among others, to denote shares in a company, user reputations in online systems, deposits of fiat currencies, and balances in cryptocurrency systems. Importantly, ICOs allow for P2P investments without intermediaries. In this chapter, we explain the fundamentals of ICOs, highlight their differences to traditional financing, and analyze their potential impacts on crowdfunding.

Although the origin of insurance is shrouded in obscurity, it is commonly assumed that the adoption of insurance can be dated back to around the second millennium BC in China and Babylon, where people developed a mechanism to pay their creditor an additional fund in exchange for the lenders’ guarantee to cancel their loan in case a shipment was lost at sea or robbed (Vaughan 1997). This original model has then gradually evolved into the modern forms of insurance that nowadaysare pervasive in our socio-economic systems. However, the multitrillion-dollar global insurance industry is still somehow stuck in the past. With significant amount of paperwork still existing in practice, data stored in information silos and manual processes not yet automatised, it seems that blockchain—by introducing cryptographically secured forms of shared recordkeeping—has the potential to innovate and radically change the insurance industry as we know it. This chapter will try to understand how insurance will change under the new blockchain paradigm.