A project on the use of distributed registry technology to improve funding for start-ups in Japan has been considered. The project is based on the application of distributed registry technology, smart contracts, a big database of start-ups credit risk (in Japan CRDS), a local investment fund, a unified marketing and trading platform. The model of investor behavior (taking into account risk and profitability) has made it possible to show, that with growing investor confidence (individuals and households) and a certain level of profitability of startups, investing in startups will be more preferable, than a bank deposit. The features of the project have been highlighted and a conclusion has been made, that under certain conditions, the adduced scheme for financing start-ups can be used in Russia, for example, by the Industry Development Fund.
Since 2013, Initial Coin Offerings (ICO) have allowed companies to attract financing with the help of cryptocurrencies. Statistics of ICO shows that the ICO market is increasing and demand for funds continues to grow with claims of over $ 15 billion raised in the first half of 2018. The increasing volumes of investment in ICO projects as an alternative method to venture capital or IPO are caused by, for example, the possibility of reselling the received tokens at a higher price after the launch of the project or obtaining the company’s services at lower prices. While the importance of the topic is growing, there is the absence of fundamental works emphasizing the determinants of an ICO’s success. The scientific novelty of the forthcoming research consists in the formation of the model evaluation of ICO success. Using econometric analysis based on data for 1392 projects, we show that the volatility of the main cryptocurrencies has a significant impact on the success of ICO. The constraints of the platform for Smart Contacts (ERC-20) and dependence on the Ethereum volatility overcome all other factors. Our data contributes to existing literature and shows the insignificance e of the sector of the project, almost all location region and fl of infl e of quality of the team. This result may be explained by the uncertainty of the investor about the project (weak signals), absence of the regulation and legal framework. This result is beneficial for owners of companies since it is an argument for decreasing costs for marketing.
Do-hun Kim, Dong-Hwan Kim, Dong‐Ho Lee, Sunjoo Park · 5 authors
With the institutionalization of reducing emissions from deforestation and forest degradation, and the role of conservation, sustainable management of forests, and enhancement of forest carbon stocks in developing countries (REDD+), the global REDD+ financial network has been formed to support the implementation of REDD+ in developing countries. Although the rapid expansion of the network made it decentralized, it is still a highly centralized network in terms of the distribution of financial resources, revolving around only a few major actors. While the source of financing was diversified due to an increase in influential donors, the majority of financing still came from a few constant major donors, and a few constant major developing countries received most of the financial support. Although increases in donor numbers and the amount of finance received can provide more chances to support developing countries, it may cause inefficiency due to overlaps and duplications. Also, over-centralization of financial resources can be ineffective in terms of achieving maximum greenhouse gas (GHG) reduction, and can broaden gaps between developing countries’ ability to cope with climate change and deforestation. Lack of coordination among donors and the differing capacity of developing countries may have caused centralization of financial resources in the global REDD+ financial network. To minimize this problem, a comprehensive monitoring system and platforms for information sharing are needed.
Open access
Conservation, Biodiversity, and Resource Management
Dirk Andreas Zetzsche, Ross P. Buckley, Douglas W. Arner, Anton N. Didenko
The transformative potential of distributed ledger technology (DLT) is attracting significant interest around the world. Many institutions are investing heavily in proof of concept demonstrations, pilot initiatives and the rollout of applications of DLT. Part of the attraction of distributed ledger systems, such as blockchain, lies in their perceived ability to transcend law and regulation. Yet, while the law may be dull and the technology exciting, the impact of the law cannot be simply wished away. With data distributed among many ledgers, legal risks will remain. Legal relationships recorded on, or evidenced by, distributed ledgers may give rise to various forms of liability based on contract, tort, partnership or joint venture structures, specific legislation or breach of fiduciary duties. At the same time, despite existing similarities among common law and civil law systems, the sources of DLT-linked liability may vary substantially across jurisdictions.
istributed ledger technology (DLT) and blockchain, and their headline-catching applications in cryptoassets and initial coin offerings (ICOs), have attracted extraordinary global attention. Alongside Bitcoin's spectacular rise and fall in the past few years, there has been an explosion of ICOs, a tokenization of assets, and fund-raising projects utilizing digital tokens issued and operated on blockchains.
This paper provides the first evidence of a moral hazard in signaling in an entrepreneurial finance context, by examining token offerings or Initial Coin Offerings (ICOs). Entrepreneurs' ability to signal quality is crucial to succeeding in the competition for growth capital. However, the absence of institutions that verify endogenous signals may induce a moral hazard in signaling. Consistent with this hypothesis, artificial linguistic intelligence indicates that token issuers systematically exaggerate information disclosed in whitepapers. Exaggerating entrepreneurs raise more funds in less time, suggesting that investors do not see through this practice initially. Eventually, the crowd learns about the exaggeration bias through trading with other investors. The resulting investor disappointment causes the cryptocurrency to depreciate and the probability of platform failure to increase.
Modern patent systems are slow, inefficient, expensive, and may result in outcomes that actively harm technological progress. This paper proposes a substantive re-think of these systems and lays a foundation upon which practical solutions can be built. Many solutions proposed in the past, such as prior-art bounties, outsourced examination, and dynamic fee setting, have gone unheeded due to the cost of administering them and the rigidity of the patent system. We explore how distributed ledger technologies (DLTs) enable these major changes by altering the way stakeholders are able to interact with the patent records system. We find that transitioning to a DLT-based patent records system can enable many previously suggested improvements to current patent systems in a flexible, scalable, and transparent manner. The case for such a transition is strengthened when jointly considering the complex but common roots of problems facing modern patent systems, rather than a balkanised set of technical solutions to address each issue independently. Noting that a DLT-based system is not a panacea, we also provide comment on the political, legal, and organisational challenges that must be overcome for such changes to be implemented at scale.
The rise of the crypto economy brings promises and perils to the venture capital industry. Distributed ledger technologies offer new investment opportunities to venture capitalists (VCs). Traditional VCs are gradually diversifying their portfolios to invest in crypto-assets and blockchain technology projects, as well as launching crypto-centric funds. Simultaneously, venture capital funds are developing various hybrid financing models to adopt and imitate the fundraising mechanism of initial coin offerings. However, the polymorphous and evolving features of crypto-assets also introduce new risks to the venture capital market. The paper therefore examines the emerging models in the venture capital crypto landscape, identifies the new risks, and examines the current regulatory and contractual solutions. The paper also proposes recommendations for the venture capital crypto landscape going forward, including heightened regulations on crypto-centric funds and fund managers.
Decentralized finance has evolved as a major contender for traditional banking systems over the last few years. Evolution in blockchain and cryptography technologies are the driving forces for decentralized finance’s growth. The emergence of Bitcoin in the finance system was a major driving force toward the tremendous growth of decentralized finance. However, with various platforms merging every day, the decentralized finance sector is still in its early, unorganized stages. The current decentralized finance market is chaotic. With a new “coin” being introduced almost every month, standardization is highly lacking in the system. DeFi already has several different applications available. For instance, one can purchase stable coins, or assets pegged to a national currency, on decentralized exchanges, move the assets to a lending platform that is also decentralized to earn interest, and then add the interest-earning instruments to a decentralized liquidity pool or an on-chain investment fund. DeFi enterprises frequently aim at decentralized decision-making, or governance, in everything from the user fees to the products they provide. A decentralized program may be started by one person or a small number of individuals, but as the project gathers traction, its leaders frequently try to step down and cede control to the user base. A decentralized autonomous organization that has its rules and regulations written into computer code and that may issue governance tokens, which allow its holders a voice in decisions rather than allowing the decision-making to a centralized government authority as in case of traditional finance, could represent this transition. While on one side, world governments are still trying to grasp and regulate the sector, on the other side, the technology’s reach has been very limited. Undoubtedly, the emergence of blockchain-based decentralized finance is massively influencing our current finance technology industry. In this chapter, we discuss the current growth in the FinTech industry and the blockchain-based decentralized finance sector. Furthermore, we discuss how decentralized finance can be used in the current FinTech industry.
Lennart Ante, Philipp Sandner, Ingo Fiedler, Andranik Tumasjan · 5 authors
This study explores the determinants of initial coin offering (ICO) success, where success is defined as the amount of capital a project could raise. ICOs are a tool for startups in the blockchain ecosystem to raise early capital with relative ease. The market for ICOs has grown at a rapid pace since its start in 2013. We analyze a unique dataset of 278 projects that finished their ICOs by August 2017 to assess determinants of funding success that we derive from the crowdfunding and venture capital literature. Our results show that ICOs exhibit similarities to classical crowdfunding and venture capital markets. Specifically, we identify resemblances in determinants of funding success regarding human capital characteristics, business model quality, project elaboration, and social media activity.
Every year the World Economic Forum publishes a list of the top ten emerging technologies. This list of breakthrough technologies has included 3-D printing, self-healing biomimicry materials, and human microbiome therapeutics. In 2016, the financial technology Blockchain dominated the list. Over $1 billion was invested into Blockchain technology and major financial firms are actively exploring Blockchain innovation. As innovators enter the Blockchain space, they have pushed for patent protection. This Note examines whether Blockchain is patent eligible. Patent eligibility for business methods and software patents is determined under the Supreme Court’s holding in Alice v. CLS Bank. The first section of this note discusses the technological aspects of Bitcoin and Blockchain. Blockchain was originally developed for the decentralized digital cryptocurrency Bitcoin: however, Blockchain is not tied to Bitcoin and possesses a variety of uses that could potentially revolutionize our financial system. The second section of this note discusses patent eligibility. The third section applies patent eligibility to Blockchain, discusses why Blockchain should be patent-eligible, and discusses how patent attorneys should draft Blockchain patents. The fourth section discusses the regulatory implications granting Blockchain patent-eligibility and this Note concludes by summarizing my overall thesis that Blockchain is patent-eligible.
I consider a developer working on an open-source blockchain-based software that can be used only in conjunction with a specific crypto-token. This token can be sold in an Initial Coin Offering (ICO) to raise funds, but can also be sold later on a frictionless financial market to earn a profit. I show that, if the developer raises funds in an ICO, in each post-ICO period there is a positive probability that the developer sells all of his tokens on the market and, as a consequence, no development occurs. If the developer does not need to raise funds via an ICO, the equilibrium will nonetheless be inefficient because the developer's payoff depends on the surplus generated by the protocol in a given period (when he expects to sell his tokens). He therefore fails to internalize that the protocol will be used (and generate surplus) over multiple periods.
This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China's ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors.
Distributed Ledger Technology (DLT) creates a decentralized system for trust and transaction validation using executable smart contracts to update information across a distributed database. This type of ecosystem can be applied to Commodity Trade Finance to alleviate critical issues of information asymmetry and the cost of transacting which are the leading causes of the Trade Finance Gap (ie. the lack of supply of capital to meet total trade finance demand). The possibility of scaling up such ecosystems with a number of Institutional Investors and micro small medium enterprises (MSME) would be advantageous, however, it brings up its own set of challenges including the stability of the system design. Agent-based modeling (ABM) is a powerful method to assess the financial ecosystem dynamics. DLT ecosystems model well under ABM, as the agents present a clearly defined taxonomy. In this study, we use ABM to assess the Aquifer Institute Platform - a DLT-based Commodity Trade Finance system, in which a growing number of participating parties is closely related to the circulation of utility tokens and transaction flows. We study the system dynamics of the platform and propose an appropriate setup for different transaction loads.