Blockchains and the Token Economy: Theory and Practice

ISBN-13: 9783030951078 / Angielski / Twarda / 2022 / 400 str.

Spis treści

Chapter 1: Introduction the Token Economy

·         Horst Treiblmaier, Professor of International Management at Modul University Vienna, Research Fellow at the UCL Centre for Blockchain Technologies

·         Mary Lacity, Walton Professor of Information Systems and Director of the Blockchain Center of Excellence at the University of Arkansas, Sam M. Walton College of Business

Abstract: In the introductory chapter we present a classification of blockchain-based tokens, describe their various use cases and summarize previous literature on the subject. We also briefly summarize the content from the contributing authors and provide an outline for the whole book.

SECTION I: Studies in Theory

Chapter 2: Finding the Right Balance–Decentralization in the Token Economy

·         Michelle Mei-Li Pfister, Graduate student at the Karlsruhe Institute of Technology majoring in information systems

·         Niclas Kannengießer, PhD Student at the Karlsruhe Institute of Technology

·         Ali Sunyaev, Director of the Institute of Applied Informatics and Formal Description Methods (AIFB) and Professor at the Karlsruhe Institute of Technology

Abstract: Current token economy instances build on a variety of protocols, where distributed ledger technology (DLT) is applied to set up distributed ledgers that perform several tasks (e.g., prevention of double-spending) in a decentralized way that were previously handled by third parties. However, to date distributed ledgers can hardly interoperate with other ledgers (e.g., due to incompatible interfaces), limiting the dynamics in the token economy, for example, regarding changing collaborations and cooperation between organizations operating on separate distributed ledgers. Cross-ledger interoperability (CLI) artifacts can interconnect distributed ledgers. Still, it is unclear how the degree of decentralization (i.e., political and technical) of CLI artifacts will affect token economy instances on currently separated distributed ledgers. To understand these effects, we introduce and explain patterns of CLI artifacts and discuss their impact from both the political and technical perspectives under engagement of DLT experts. Drawing from derived implications, we discuss challenges related to the usage of CLI to enable interconnected token economy instances.

Chapter 3: Non-fungible Tokens (NFTs): A Marketplace Analysis

·         Marinos Themistocleus, Director of the Institute for the Future and Associate Dean at the School of Business, University of Nicosia

·         Leonidas Katelaris, Research Assistant at the University of Nicosia

·         Klitos Christodoulou, Assistant Professor in the Department of Management and MIS – Digital Currency at the University of Nicosia

Abstract: Non-fungible tokens (NFTs) enable the exchange of ownership of unique digital items. An NFT is an indivisible Blockchain token which can contain anything digital from songs, video games, trading cards, drawings etc. NFTs propose a new category of blockchain-based tokens. Their ‘predecessor’ fungible tokens were used mainly during the Initial Coin Offering (ICOs) crowdfunding hype, which estimated at 12 billion USD and were made available due to the ERC-20 standard. NFTs were initially proposed by the ERC-721 standard which denoted the two aspects that differentiated NFTs from fungible tokens i.e., their uniqueness and non-divisibility. NFTs offer a new type of on-chain tokens, which addresses different use cases such as the authenticity and ownership of a unique digital asset. NFTs recently gained massive attention, with some of the paradigms to include the digital art collection sold by Beeple for 69$ million at Christie’s. The CEO and co-founder of twitter is another example of the NFT frenzy, who sold his first tweet for 2.9$ million. A popular NFT use case is the NBA and Dapper Labs partnership, known as the NBA Topshop, which mints and sells videos from NBA highlights as NFTs. Currently, more than 100,000 users claim at least one NBA highlight video, with the dunk by Lebron James to exceed 250,000$. The aim of this chapter is to identify and discuss the types of NFTs in existence and the purpose(s) each type of NFT serves. Furthermore, this chapter aims to present an analysis of current and emerging NFT Marketplaces.

Chapter 4: Real Estate Asset Tokenization

·         Philipp Sandner, Head of the Frankfurt School Blockchain Center (FSBC) at the Frankfurt School of Finance & Management

Abstract: The real estate industry is one of the most important and oldest asset classes in the world. It is also one of the most inefficient and inflexible ones. This chapter explores a disruptive technology that could solve fundamental problems within the real estate market. With the advent of blockchain technology and the concept of tokenization, two major possibilities have arisen. First, the fractionalization of assets or claims in general and second, the digital representation of asset ownership. The former feature has the potential to enable access to any investor to realize real estate investment opportunities. This could lead to a more democratized investment environment and greater liquidity. The latter aspect opens up room for real innovation by displaying asset ownership on a digital platform. This chapter presents most current use cases of blockchain application in the real estate industry. To further verify the business feasibility, it will provide insights gained through industry experts and real estate tokenization company representatives. The results show that the concept will most probably disrupt the current real estate market and lead to major shifts in revenue and asset ownership towards a digital environment. This chapter also identifies current challenges and hurdles that are yet to be overcome in order for blockchain technology to fully mature in this particular market.

Chapter 5: Tokenized Property Rights and Regulatory Compliance for Alternative Asset Markets

·         Gilbert Fridgen, Full professor in Digital Financial Services and Paypal-FNR PEARL Chair, Université du Luxembourg

·         Alexander Rieger, Research and development specialist, Interdisciplinary Centre for Security, Reliability and Trust, Université du Luxembourg

·         Johannes Sedlmeir, Researcher at Kompetenzzentrum Finanz- & Informationsmanagement

·         Reilly Smethurst, Doctoral Researcher at the Interdisciplinary Centre for Security, Reliability and Trust, Université du Luxembourg

Abstract: Alternative asset markets tend to involve lower liquidity and higher fees than public equity markets. This is especially true for the art and collectibles market. Distributed ledger technology can “tokenize”' artworks and collectibles, so that these physical assets’ property rights can be exchanged digitally via non-fungible tokens (NFTs). Tokenization offers new opportunities to alternative asset investors such as fractional ownership, asset loans that generate yield, tradeable indexes, and access to a global digital market. This, in turn, promises higher liquidity and reduced fees. The main challenge for researchers and developers is to satisfy art investors’ demands for privacy as well as regulators’ demands for transparency and auditability. New solutions are required that enable market participants to disclose the absolute minimum amount of information that is required by regulators. New solutions must also ensure that the tokenized property rights are authentic and legally valid. We explore new concepts from cryptography and digital identity management that can help address these challenges.

 

Chapter 6: The Economics of DeFI Governance Tokens

·         Nikhil Vadgama, Deputy Executive Director at UCL Centre for Blockchain Technologies (CBT)

·         Jiahua Xu, Researcher at the UCL Centre for Blockchain Technologies

·         Paolo Tasca, Founder and Chairman at P2P Financial Systems, Founder and Executive Director of the Centre for Blockchain Technologies (UCL CBT) at University College London.

Abstract: Many DeFi protocols have in recent times issued tokens to incentivize participation in their businesses. Many of these tokens are governance-related and have attracted a large interest in the market, particularly from speculators. Yet, the tangible benefits and valuations behind this remain unclear. In this chapter we examine token holder benefits vis-a-vis the valuation of tokens as perceived by their holders. We additionally explore how protocol founders profit from the employment of governance tokens and how it shapes the behavior of network participants. To this end, we seek to quantify/model the utility of governance tokens from the perspective of agents with different roles in the DeFi ecosystem.  We further demonstrate real-life implementation of governance tokens with several case studies such as AAVE, COMP, UNI, SNX, YEARN, NXM, GNO.

Chapter 7: Revisiting Blockchain Token Sales: How Crypto Companies Raise(d) Money

·         Johann Kranz, Professor for Internet Business and Internet Services at Ludwig-Maximilians-Universität München

·         Esther Nagel, Doctoral student at the Ludwig-Maximilians-Universität München

Abstract: Like any startup, young crypto companies need to raise money. The years 2017 and 2018 saw an abrupt rise in so-called token sales. In a token sale, a startup issues proprietary blockchain tokens, which can present various rights. Initially, startups could employ this funding mechanism relatively free of regulations and without need of an intermediary. In this chapter, we critically reflect on the token sale phenomenon and derive how trust could be established in this setting. Based on extant research and empirical observations, we further trace subsequent developments to delineate technological, organizational, and environmental factors that affected the trajectory of the token sale phenomenon. Finally, we provide insights on the current state of crypto company fundraising. This chapter contributes to research on startup fundraising and token sales, and discusses the opportunities – and boundaries – of blockchain-enabled decentralization.

SECTION II: Studies in Practice

Note from editors to Palgrave Macmillan: The editors have secured provisional commitments from the following authors.  However, many of the practitioner authors will need to gain additional permissions from their employers for publication, but this step cannot happen until we have a book under contract. For the bios for the proposal, the practitioners requested that we point to their LinkedIn profiles.

 

Chapter 8:  Digital Asset Transformation

·         Chen Zur, Partner/Principal for EY | US Blockchain Practice Leader

Abstract: In the chapter, the author describes the journey from the way value is stored and transferred today by using the Internet and intermediaries to the future where value is stored and transferred using tokenized digital assets (starting with financial services organizations), integrated with decentralized finance (DeFi), and on-boarded to enterprises (e.g., tokenized inventory). Ultimately, the functions that are performed today in siloed enterprise resource planning (ERP) systems which will eventually be performed by decentralized operations (DeOps).

·         Short Biography - https://www.linkedin.com/in/chen-zur-03b58518/ (all my info is maintained on LinkedIn

 

Chapter 9: Cryptoecomonics: Designing Effective Incentives and Governance Models for Blockchain Networks Using Insights from Economics

·         Cathy Barrera and Stephanie Hurder, founding economists at Prysm Group, a firm that specializes in economic and governance design for distributed-ledger-based projects

·         Don Tapscott, co-author of Blockchain Revolution and Co-founder of the Blockchain Research Institute.

 

Abstract: Cryptoeconomics is the application of economic sciences to the design of blockchain-based platforms. It is based on decades of economic research, as well as the design of multimillion-dollar markets such as the Federal Communications Commission (FCC) auction for broadband spectrum. In this chapter, the authors argue that the main economic benefits of blockchain—coordination, commitment, and control—do not stem from tokens, but instead from the interaction of many economic levers.  The House framework outlines the levers—including contract design, market design, information systems, token design, and governance—that enterprises can use to generate economic value.  

 

Note to publisher:  A longer version of this chapter was published behind the firewall of the Blockchain Research Institute (BRI), co-founded by Don Tapscott.  The authors are committed to shortening and updating the chapter for this book.

 

Chapter 10: The Fourth Modality of Logistics: Tokenization and Supply chains

·         Col. James Allen, Regenor, USAF(ret), Founder of VeriTX and Rapid Medical Parts 

·         Mary Lacity, Walton Professor of Information Systems and Director of the Blockchain Center of Excellence at the University of Arkansas, Sam M. Walton College of Business

Abstract: This chapter explores the history of VeriTX and how asset tokenization in supply chains enables the fourth modality of logistics. VeriTX was incorporated in Delaware, with its head office in East Aurora, New York in 2019. VeriTX’s mission is to enable the fourth modality of logistics, which Regenor calls digital, following the first three modalities of land, sea, and air.  The company built a business-to-business platform for the buying and selling of digital assets (like printing specs) and physical assets, powered by blockchain technology. Essentially, Regenor imagines a completely decentralized manufacturing process in which military and commercial customers could print parts where they need them, when they need them. The potential business value is enormous, such as significantly less downtime, lower inventory costs, lower customs fees, and lower shipping and transportation costs.[i]  The challenges to realize such a decentralized manufacturing process – particularly in such a highly regulated context – were equally as enormous.  What if the 3-D printing instructions had been tampered with by a cyber-terrorist?  Or what if the instructions were counterfeit?   Military and commercial users would need a way to guarantee that the part that came off the printer was authentic and that the part was ready for use.  Furthermore, the newly printed part would need to be tracked over its entire lifetime, so it would need an embedded unique ID when it came off the printer. Military and commercial users would need a decentralized network with the highest security.  VeriTX found blockchain technologies to be the ideal technical solution: a decentralized blockchain application for decentralized additive manufacturing.[ii] The VeriTX platform has been built and tested with many POCs with global strategic partners, and it will launch into production in 2020.

·         Short Biography - https://www.linkedin.com/in/col-james-allen-regenor-usaf-ret-44732a10/

 

 

 

 

Chapter 11:  Coopetition: Team-Building for the 21st Century

·         Dale Chrystie, Blockchain Strategist at FedEx, Chairman – Blockchain in Transportation Alliance (BiTA) Standards Council

Abstract: Blockchain is a technology discussion, but it is not only a technology discussion.  The technology works.  It’s not yet fast or scalable or mature, and it is not as good as other enterprise-ready databases, but where authenticity matters, it will be game-changing, everywhere in our world.  What many are not yet realizing is ‘how’ to scale it.  We have spent more than a decade watching people try to monetize blockchain and trying to use the same monetization model as the internet, with little to no success.  In the global commerce space, consortia models won’t scale – too much friction in the process.  With that realization, the other fork in that road is that ‘open’ is inevitable.  The transformative nature of peer-to-peer technology, smart contracts and standards means it is not just each of us competing against each other to ‘win’ in this space, it actually means our success in this area will be measured by how we work together as a global team.  Yes, blockchain technology will change many things, but the ‘impact’ of blockchain technology is changing the rules, and changing many business models.  Explain that to your C-Suite or others who may still be trying to marginalize blockchain only as a fringe technology.  What we are talking about is ‘coopetition,’ which may mean the difference between success and failure in years to come.

Short Biography – Dale Chrystie is business fellow and blockchain strategist for FedEx, based in the Memphis area. He also serves as chairman of the Blockchain in Transport Alliance (BiTA) Standards Council, and is a member of the Blockchain Research Institute. He was awarded the inaugural Enterprise Blockchain Award in Enterprise & Industry Leadership and speaks globally on the business and strategy aspects of blockchain and emerging technologies. His focus on ‘coopetition’ in the blockchain space continues to challenge conventional wisdom and typical corporate and regulatory culture.  Dale's career in transportation began more than 30 years ago, and in addition to his work leading the first proof of concept at FedEx using blockchain technology, he has extensive experience in strategy, quality, process improvement, portfolio management, human resources, operations, sales, education, risk, and standards development, and is a proud graduate of the University of Arkansas.

Chapter 12: Safety and Security in Blockchains

·         Dan Conway, Professor of IS and Associate Director of the Blockchain Center of Excellence, University of Arkansas 

·         Dr. Kiran Garimella, Chief Scientist & CTO @KoreConX, Associate Professor, University of South Florida

Abstract: The defining and a critical characteristic of blockchains is their potential to forge a strong ecosystem of disparate and widespread partners in a loosely-coupled matrix of relationships and dependencies. As blockchains increase their footprint in the business world, their ability to provide credible assurance of the safety and security of transactions and security will play an increasingly important decision factor for adoption and trust. In this chapter, we explore the main components of safety and security, ranging from the purely technical security to the broader issues of safety through validations, governance, and distribution of control. We also address the requirement of the various participants to maintain their individuality, value proposition, brand, and privacy, while also sharing data on a need-to-know basis and power on a need-to-act basis.

Bio: https://www.linkedin.com/in/kirangarimella, https://www.kirangarimella.com

 

 

 

 

Chapter 13: Tokenizing Talent: The SmartResume Solution

·         David Wengel, Founder and CEO of IDatafy, inventor of SmartResume

·         Mary Lacity, Walton Professor of Information Systems and Director of the Blockchain Center of Excellence at the University of Arkansas, Sam M. Walton College of Business

Abstract: Credentials are a major use case in the token economy. The token economy will help to secure and automate the trust triangle among credentialing organizations (i.e., for passports, driver’s licenses, vaccination records, diplomas, etc.), verifiers who need proof of credentials before granting access to services, and the holders of the credentials. In this chapter, we explore the tokenization of one type of credentials, namely job skills. Talent acquisition remains a process wrought with fraudulent claims by applicants, selection bias by hiring firms, and data privacy violations by platforms and recruiters. The SmartResume solution, developed by iDatafy, establishes a trusted platform for talent acquisition based on verified credentials that are secured with blockchain technology. The platform masks personal data to eliminate selection bias and ensures privacy protection and regulatory compliance. The success of the solution is based on how iDatafy convened a consortium of credentialing organizations, hiring companies, and individuals.

[i] Small, G., Additive Manufacturing Reshaping Logistics, http://www.moog.com/news/blog-new/IntroducingVeripart_Issue3.html

 

[ii] Regenor, J. (April 18^th 2017), Industry Impact: Aerospace Supply Chain, presentation at the Blockchain for Business Conference at MIT, Cambridge Massachusetts

 

O autorze

Mary C. Lacity is Walton Professor of Information Systems and Director of the Blockchain Center of Excellence in the Sam M. Walton College of Business at The University of Arkansas, USA.

Horst Treiblmaier is a Professor in International Management at Modul University Vienna, Austria.

Blurb

In the context of blockchain technologies, tokens present a novel way to transfer value between parties without relying on traditional intermediaries. The so-called ‘token economy’ has only recently attracted the attention of practitioners and academics, who seek to understand the potential of tokenization, but also its challenges and pitfalls.

In this book, leading practitioners and academics provide a comprehensive overview explore theories on the future of the token economy and provide real world case studies from a range of industries.

Chapter 3 and Chapter 8 are available open access under a Creative Commons Attribution 4.0 International License via link.springer.com.

Mary C. Lacity is Walton Professor of Information Systems and Director of the Blockchain Center of Excellence in the Sam M. Walton College of Business at The University of Arkansas, USA.

Horst Treiblmaier is a Professor in International Management at Modul University Vienna, Austria