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.
Simona Ibba, Andrea Pinna, Gavina Baralla, Michele Marchesi
Abstract An Initial Coin Offering (ICO) is an innovative way to raise funds and launch a startup. It is also an opportunity to take part in a project, or in a DAO (Decentralized Autonomous Organization). The use of ICO is a global phenomenon that involves many nations and several business categories: ICOs collected over 5.2 billion dollars only in 2017. The success of an ICO is based on the credibility and innovativeness of project proposals. This fund-raising tool contains however some critical issues, such as the use of tokens that have no intrinsic value and do not generate direct liquidity, and the role of investors in the management of the startup. We analyzed if the Lean Startup methodology is helpful to face this critical aspects and we examined some ICOs in which the proposing team states explicitly that a lean startup approach is used.
This article presents a brief overview of the Distributed Ledger Technology, Token Offering and their regulation, if any, in four main jurisdictions, the United States (U.S.), Switzerland, the European Union (EU), and Singapore. It should be noted that is expected to have new developments on the regulatory side, in this and other jurisdictions, of Distributed Ledger Technology and token offerings, Malta, for example, has recently officially stated the creation of the Malta Digital Innovation Authority that will be responsible to regulate and incentivize this industry in Malta and the EU. Distributed Ledger Technology and token offerings are fairly new concepts and are revolutionizing different industries at an incredibly fast pace. The regulators, as well as all other stakeholders, must maintain attention and remain vigilant to any developments in this regard. Conclusively, the Distributed Ledger Technology will, undoubtedly, bring innovative solutions to different industries, especially the financial services industry. As analyzed in the present article, key components previous to launching a token offering, are: define the jurisdiction that will be used for the corporate structure; the categorization of the token; and the applicable regulation accordingly.
Naoyuki Yoshino, Tim Schloesser, Farhad TaghizadehâHesary
To achieve the sustainable development goals (SDGs) as well as the Paris Agreement major investments in renewable energy (RE) production are necessary worldwide. In particular, decentralized, small-scale projects offer copious potential to create energy access as well as to contribute to an affordable, reliable and sustainable energy supply system. However, in developing countries such projects often face issues in finding funding. Direct private investment tools like the community-based hometown investment trust (HIT) fund address this issue and offer a way of financing for those projects. Technical developments in the sphere of distributed ledger technologies (DLTs) provide the opportunity to increase the fund's transparency and thus to improve its functioning. On that basis, this paper contributes to the literature in two ways: First, it delineates a concrete application of DLTs in the field of green financing, which offers the potential to increase social welfare. Second, the decision problem of investors is modeled, which illustrates through which channel the use of DLTs impacts the investors' behavior.
Much American electoral and policy debate now centers on how best to reignite the nationâs economic dynamism and rebuild its competitive strength. Any such undertaking presents an extraordinary challenge, demanding a correspondingly extraordinary institutional response. This Article proposes precisely such a response. It designs and advocates a new public instrumentality--a National Investment Authority (âNIAâ)--charged with the critical task of devising and implementing a comprehensive long-term development strategy for the United States.Patterned in part after the New Deal-era Reconstruction Finance Corporation, in part after modern sovereign wealth funds, and in part after private equity and venture capital firms, the NIA is an inherently hybrid, public-private entity that combines the unique strengths of public instrumentalities--their vast scale, lengthy investment horizons, and explicit backing by the publicâs full faith and credit--with the micro-informational advantages of private market actors. By creatively adapting familiar tools of financial and legal engineering, the NIA overcomes obstacles that ordinarily impede or discourage private investment in critically necessary and even transformative public infrastructure goods. By channeling presently speculative private capital back into the real economy, moreover, the NIA plays an important role in enhancing the resilience and stability of the U.S. and global financial systems.The Article makes original contributions not only to contemporary policy debates over how to revive Americaâs productive prowess and bring its financial system back into the service of the real economy, but also to current theoretical understandings of âpublic goods,â âmarket failures,â and how to provide or address them. It offers an account of what it calls âcollective goodsâ--a broader category than orthodox public goods--as solutions to collective action problems that pervade decentralized markets, hence as goods that can be supplied only through exercises of collective agency. Our NIA proposal operationalizes this theoretical insight by elaborating a specific institutional form that such collective agency can take.
Which is more innovative: the decentralized, diversified firm, or the centralized, more narrowly focused firm? The economics and finance literatures argue that diversified firms have innovation advantages as their operating units have access to an internal capital market. In contrast, the strategy and entrepreneurship literatures argue that managers of these firms suffer from âmanagerial myopia,â discouraging them from investing in projects with longâterm, uncertain payoffs. We take a fresh look at the relationship between innovation and diversification using a comprehensive sample of diversified and nondiversified firms and a novel approach that teases out the mechanisms influencing the relationship between diversification and innovation. Consistent with conceptual and empirical work in strategy, we find a robust negative correlation between diversification and R&D intensity, suggesting that diversification reduces innovation by discouraging investment. However, our analysis suggests that internal capital market inefficiencies, rather than managerial myopia, is responsible for this observed negative relationship.
The objective of this research is to provide the reader an overview of the distributed ledger technology (DLT), its fundamental challenges, the current and potential future uses in the financial industry, and to suggest future fields of the topic to be researched. The first task of this thesis is trying to answer, âhow will the distributed ledger technology impact the financial industryâ. Although the thesis will not cover exhaustively all the financial industryâs needs towards the distributed ledger technology, it will give an overview of the DLTs probable usage in the industry. By reading the thesis and especially its use cases from the fields of private equity, and settlement and clearing of public securitiesâ trading, the reader should get a more accurate answer to the secondary question âhow can the public securities and private equity markets use distributed ledger technology in the near futureâ. The question about the distributed ledger technologyâs impact on the whole market is complicated. Despite the amount of financing this technology has acquired in the recent years, there are no new, disruptive or widespread usages for the DLT in the financial industry. However, it is expected that during the next five years, the DLTs become reality. This is due to their enormous potentiality in security, efficiency and automation, which all could save the financial industry up to 50% of their current costs. Additionally, during the same time period, it is highly expectable that some financial service applications, basing on the DLT, will be presented for the consumers by the players from outside the traditional markets. To answer the secondary question, the both markets will face significant changes during the upcoming years: public securitiesâ post-trade processes will benefit from the more secure and rapid settlement, whereas the private equity marketâs whole nature can become a more accessible for both the investors and the businesses seeking for financing.
Technological innovation in general, and distributed ledger technology (DLT) in particular, could become a game changer in the financial sector. Market infrastructures, which are the backbone of financial markets, need to adequately respond to technological advances and the resulting change in user needs and expectations. This paper discusses the potential impact of DLT on European financial markets and the potential scenarios of DLT adoption. Furthermore, it analyses the Eurosystemâs strategic considerations for the future of its market infrastructure and how change is embraced. Finally, it examines whether DLT could prove to be an integral part of the Eurosystemâs evolving market infrastructure and what other functions of the European Central Bank (ECB) could be affected by market actors adopting DLT.
Chris Khan, Antony Lewis, Emily Rutland, Clemens Wan · 6 authors
R3 has built a global consortium to focus on the application of distributed-ledger technology (DLT), which can help banks combat low return on equity and alleviate pressure on their operating costs. The authors explain the conditions that led to interest in DLT and introduce Corda, R3's shared ledger for recording and managing financial agreements.
Talent hits a target others cannot hit, Genius hits a target others cannot see (Arthur Schopenhauer). Bereits 2013 begannen sich neue KryptowĂ€hrungsunternehmen zu formieren, die sich von der WildâWestâMentalitĂ€t der Mt. Gox und der Silk Road abgrenzen wollten. Die entstehenden KryptowĂ€hrungsdienstleister â groĂteils finanziert von US Venture Capital-Gebern â unterwerfen sich teils freiwillig den Know Your Customer (KYC) Bestimmungen der Finanzaufsichtsbehören. Gleichzeitig entstanden KryptowĂ€hrungsstartups, deren GrĂŒnder die Meinung vertraten, dass eine Kooperation mit den Finanzinstituten bzw. den FiatwĂ€hrungen statt Konfrontation wirtschaftlich sinnvoller wĂ€re und damit begannen, neue Kryptotransaktionssysteme mit dieser Zielrichtung zu entwickeln (beispielsweise Ripple Lab vgl. auch Abschn. 14.2.). Zeitgleich â auch hier spielten die Interessen der investierten Venture-Capital-Geber eine wichtige Rolle â begannen Startups intensiv am Einsatz des BitcoinâTransaktionssystems fĂŒr alternative Zwecke zu arbeiten. Dabei wird unterschieden in:
Dominic Wörner, Thomas von Bomhard, Yan-Peter Schreier, Dominik Bilgeri
The Bitcoin ecosystem has grown tremendously in recent years.While the main sectors of growth and venture capital funding have been infrastructure for the Bitcoin ecosystem itself as well as financial services, there is also a more recent evolution in sectors beyond financial services.We classify the venture-capital backed start up ecosystem accordingly and present its evolution over time.Thereby, we identify interesting sectors, i.e. digital assets, marketplaces, and notary services.Each sector is further subdivided, and six representative venture-backed start-up companies are presented in comprehensive case studies.We extract the core innovations and Bitcoin features on which these are based.Finally, we critically discuss their disruptive potential.
This dissertation addresses the assembly of organizational resources by technology ventures. We study how innovative firms acquire human and financial capital and then organize those resources, and how public policy affects that capability.\nIn the first chapter, we study the role of information in organizational decision-making for the financing of entrepreneurial ventures. We formally model a decentralized set of agents who vote strategically to allocate resources to a project with unknown outcome; they can each acquire costly information to improve their decision quality. We test our predictions in the setting of venture capital, where partners make their own angel investments outside of their employer. We find that the venture capital partners, acting independently, make riskier investments into younger firms with less educated and younger founding teams, but these investments perform better on some metrics even when controlling for investment size and stage. Geographic distance and liquidity constraints increase the probability the investment is taken up by a partner and not the VC.\nIn the second chapter, we evaluate the impact of skilled immigration on U.S. innovation by exploiting a random lottery in the H-1B visa program. Proponents argue that immigration allows firms to access technical skills and promote innovation, while opponents argue that firms substitute domestic labor for cheaper but equally or less skilled foreign labor. We find that winning an H-1B immigrant does not significantly increase patent applications or grants at the firm level, and there is pervasive use of the program in industries where patenting is not the main value-appropriation strategy.\nIn the third chapter, we study how a firm should organize the diversity of technical experience, contained within its pool of inventive human capital, for firm-level innovation. Using a sample of biotechnology start-ups, we examine the implications of alternate firm-level design regimes, drawing on both a firm-year panel structure and an inventor-year difference-in-differences empirical approach. Organizing a firm's human capital with greater across-team diversity yields increased firm-level innovation benefits as compared to organizing with greater within-team diversity. The benefits of across-team diversity stem mainly from the influence of that regime on team stability.
Abstract We show how decentralized individual investments can efficiently allocate capital to innovating firms via equity crowdfunding. We develop a model where consumers have privately known consumption preferences and may act as investors. Consumers identify worthwhile investments based on their own preferences and invest in firms whose product they like. In the presence of aggregate demand uncertainty, an efficient capital allocation is achieved if all groups of consumers have enough liquidity to invest. If some groups of consumers cannot invest, capital flows reflect preferences of liquid investors but not future demand. Comparing with traditional financing forms, crowdfunding in the absence of liquidity constraints can be superior unless traditional financiers are fully competitive and perfectly informed.
Jan 1, 2016·Proceedings of the ... Annual Hawaii International Conference on System Sciences/Proceedings of the Annual Hawaii International Conference on System Sciences
Maximilian Friedlmaier, Andranik Tumasjan, Isabell M. Welpe
The blockchain (i.e., a decentralized and encrypted digital ledger) has the potential to disrupt many traditional business models. This study investigates the emerging blockchain business-application landscape by analyzing its industry, venture capital funding, and regional distribution. By matching four venture databases on blockchain-based startups we create a unique database to analyze the technology from a diffusion of innovation theoretical perspective. First, our results show that blockchain startups are present across all industry segments and are most prominently represented in the Finance & Insurance and Information & Communication industries. A fine-grained analysis of financial services yields increasing novel applications in existing service offerings. Second, we find that mainly Finance & Insurance and Information & Communication industries are funded by venture capital, but that blockchain startups are present across all industries. Third, our regional distribution analysis of the emerging ventures identifies two leading geographical blockchain clusters (i.e., the US and UK).
This thesis examines how Distributed Ledger Technologies (DLTs) could be utilized in capital markets in general and in the Nordic capital market in particular. DLTs were introduced with the so called cryptocurrency Bitcoin in 2009 and has in the last few years been of interest to various financial institutions as a means to streamline financial processes. By combining computer scientific concepts such as public-key cryptography and consensus algorithms DLTs make it possible to keep shared databases with limited trust among the participators and without the use of a trusted third party. In this thesis various actors on the Nordic capital market were interviewed and their stance on DLTs were summarized. In addition to this a Proof of Concept of a permissioned DLT application for ownership registration of securities was constructed. It was found that all the interviewees were generally optimistic about DLTs potential to increase the efficiency of capital markets. The technology needs to be adopted to handle the capital markets demand for privacy and large transaction volumes, but there is a general agreement among the interviewees that these issues will be solved. The biggest challenge for an adoption of DLTs seem to lie in that of finding a common industry-wide standard.
This paper explores the potential role of DLT in securities markets, using the equity market as an example. The paper discusses potential benefits and costs, drawing out limitations and challenges in the adoption of the new technology, as well as regulatory considerations. Despite the heightened interest in DLT, the paper concludes that the likely path is incremental adoption of the technology rather than wholesale replacement of the existing infrastructure. An earlier version of this paper was presented at the 21st Melbourne Money and Finance Conference.