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Blockchains and The Token Economy Theory and Practice Mary C Lacity Full Chapter
Blockchains and The Token Economy Theory and Practice Mary C Lacity Full Chapter
Series Editors
Leslie P. Willcocks
Department of Management
London School of Economics and Political Science
London, UK
Mary C. Lacity
Sam M. Walton College of Business
University of Arkansas
Fayetteville, AR, USA
The Technology, Work and Globalization series was developed to provide
policy makers, workers, managers, academics and students with a deeper
understanding of the complex interlinks and influences between techno-
logical developments, including information and communication tech-
nologies, work organizations and patterns of globalization. The mission
of the series is to disseminate rich knowledge based on deep research
about relevant issues surrounding the globalization of work that is
spawned by technology.
Mary C. Lacity • Horst Treiblmaier
Editors
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature
Switzerland AG 2022
Chapter 3 and Chapter 8 are licensed under the terms of the Creative Commons Attribution 4.0
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This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
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Acknowledgments
v
Contents
1 Implications
of the Token Economy: A Taxonomy and
Research Agenda 1
Philipp Lesche, Philipp Sandner, and Horst Treiblmaier
2 Working
Title: Recovering from Blockchain Missteps and
Myths with Coopetition 31
Dale Chrystie
3 Finding
the Right Balance: Technical and Political
Decentralization in the Token Economy 53
Michelle Pfister, Niclas Kannengießer, and Ali Sunyaev
4 Cryptoeconomics:
Designing Effective Incentives and
Governance Models for Blockchain Networks Using
Insights from Economics 87
Cathy Barrera and Stephanie Hurder
5 Verifiable
Credentials in the Token Economy113
Mary C. Lacity and Erran Carmel
vii
viii Contents
6 NFTs
and the Metaverse Revolution: Research
Perspectives and Open Challenges139
Klitos Christodoulou, Leonidas Katelaris, Marinos
Themistocleous, Panayiotis Christodoulou, and Elias Iosif
7 Asset
Tokenization of Real Estate in Europe179
Max Zheng and Philipp Sandner
8 Tokenization
and Regulatory Compliance for Art and
Collectibles Markets: From Regulators’ Demands for
Transparency to Investors’ Demands for Privacy213
Tom Barbereau, Johannes Sedlmeir, Reilly Smethurst, Gilbert
Fridgen, and Alexander Rieger
9 Token-Based
Insurance Solutions on Blockchain237
Simon Cousaert, Nikhil Vadgama, and Jiahua Xu
10 Revisiting
Blockchain Token Sales: How Crypto
Companies Raise(D) Money261
Esther Nagel and Johann Kranz
11 Ensuring
Safety and Security in Blockchains: A Private
Capital Markets Example287
Daniel Conway, Kiran Garimella, and Oscar A. Jofre
12 Utilizing
Non-fungible Tokens for an Event Ticketing
System315
Ferdinand Regner, André Schweizer, and Nils Urbach
13 Saving
the Oceans with NFTs345
James Allen Regenor and Eric D. Achtmann
Contents ix
Appendix: Overview of Blockchain Technologies359
Mary C. Lacity and Horst Treiblmaier
Index367
Notes on Contributors
xi
xii Notes on Contributors
xxvii
xxviii List of Figures
xxix
xxx List of Tables
The future of the token economy will emerge based on the actions we
take today as individuals, collectives, and societies. We invited foremost
academics and practitioners who are leading the efforts to realize the full
potential of a token economy. The authors in this collection contribute
taxonomies, frameworks, projects, and case studies on the nascent but
rapidly evolving token economy. They confirm one important insight,
namely, that innovations do not happen in a vacuum; innovations hap-
pen by combining, extending, or departing from earlier innovations (Zur
& Lacity, 2021). Even Bitcoin’s creator, Satoshi Nakamoto (2008), syn-
thesized several prior innovations, such as the idea of a public ledger for
timestamping and record-keeping (Massias et al., 1999; Haber &
Stornetta, 1991; Bayer et al., 1993; Dai, 1998); cryptographic Merkle
trees for security (Merkle, 1980); digital currencies (Back, 2002); and
proof-of-work consensus (Dwork & Naor, 1993). Nakamoto brought
these prior inventions together to create a peer-to-peer payment applica-
tion. Similarly, the authors in this collection are combining, extending,
or departing from earlier innovations in the blockchain space.
Bringing insights from the field of economics, along with their consult-
ing work at the Prysm Group, the authors create a process guide and
accompanying frameworks to design effective blockchain goverance
models. Their comphrehensive House Framework covers value proposi-
tion, funding, incentive, tokenization, and governance layers. One of
their most provocative insights is “Many people think that the main eco-
nomic innovation of blockchain is the use of tokens. That is not true.
Indeed, as we discuss in our Prysm Group House Framework, economi-
cally sound structuring of transactions, marketplaces, and information all
contribute—along with token design—to the functioning of blockchain
systems and the value that they deliver to users. A blockchain platform
can create significant economic value without having a native token at
all.” These authors challenge us to think more deeply about the role of
tokens in the token economy; it’s the shared value creation that will drive
organizational adoption.
In Chap. 5, Mary C. Lacity and Erran Carmel discussed self-sovereign
identity (SSI), the idea that individuals should possess and control attes-
tations made about them by issuers and, if they choose to do so, prove
these attestations cryptographically to verifiers. In addition to user con-
trol and digitally verifiable credentials, SSI’s design principles also include
identity binding, privacy and security, availability to all, interoperability
across platforms, data minimization, and transparency about data cre-
ation, collection, and use. Many standards-making bodies, open-source
working groups, and organizations are working on the key elements to
make SSI a reality, such as decentralized identifiers, SSI digital wallets,
and trust registries. The authors investigate early applications for job
skills and digital health passes and show that early applications meet
some, but not yet all, of SSI’s principles. They conclude, “Today, verifi-
able credentials rely on trusted third parties for network services.
Interoperability standards, user-generated identifiers, and utility tokens
are not yet advanced enough for wide-scale adoption. However, we can
more easily see the possibilities.”
In Chap. 6, Klitos Christodoulou, Leonidas Katelaris, Marinos
Themistocleous, Panayiotis Christodoulou, and Elias Iosif invite readers
into the future world of the metaverse, where augmented, virtual, and
physical realities converge. This chapter epitomizes our conjecture that
Introduction to the Token Economy xxxvii
The authors state, “There are many examples of wicked problems being
solved when a community unites to tackle them … The Salacia Project is
one small effort to raise awareness, fund BlueTech and provide a venue
for people, corporations, and governments to make a difference as they
answer the call to action.”
As the last contribution in this book, we include an overview of block-
chain technologies in the Appendix. For readers new to blockchains, this
overview aims to quickly bring readers up to speed so they can under-
stand and enjoy the innovations described by authors of this collection.
Conclusion
By the end of the book, we will have succeeded as editors and authors if
the readers’ thoughts, emotions, and curiosities are heightened. Readers
who are currently providing trusted third-party services rightly might be
threatened by the coming token economy, but with knowledge comes
choice. Those readers should next ask, “What new value can my organiza-
tion add to the token economy?” This is a question often posed by Dale
Chrystie, the author of Chap. 2. Also, the deeper conversations on decen-
tralization and dispersion in Chaps. 3 and 11 show that decentralization
comes with significant challenges that might result in the need for cen-
tralized services for certain use cases. Certainly, prior research has borne
this out for enterprise adoptions as of 2021; trusted third parties (TTP)
still exist after blockchains, but they perform different services than
before blockchains. For example, TTPs now manage network services
such as operating network nodes, protecting digital wallets on behalf of
clients, enforcing access rules set up by members, and managing software
updates, but no longer need them to validate transactions (Lacity & Van
Hoek, 2021).
Beyond the losses from disruption, we hope the majority of readers feel
inspired by the possibilities of the coming token economy. It’s a beautiful
vision of individual empowerment, inclusion, privacy, security, and trust.
We can more efficiently use our planet’s natural resources and distribute
wealth more equitably. Our final thought is to encourage readers to join
xlii Introduction to the Token Economy
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1
Implications of the Token Economy:
A Taxonomy and Research Agenda
Philipp Lesche, Philipp Sandner, and Horst Treiblmaier
Introduction
Distributed ledger technology and blockchains as a subset of the former1
have a substantial impact on the economy by transforming industry
sectors and organizational functions such as finance, marketing logistics,
energy, tourism, and public administration, just to name a few (Rejeb
1
In the remainder of the paper, we use the term blockchain to denote all kinds of distributed ledger
technologies independent of their underlying data structure.
P. Lesche
Bayerisches Staatsministerium für Digitales, Munich, Germany
e-mail: [email protected]
P. Sandner
Blockchain Center, Frankfurt School of Finance & Management gGmbH,
Frankfurt am Main, Germany
e-mail: [email protected]
H. Treiblmaier (*)
School of International Management, Modul University Vienna,
Vienna, Austria
e-mail: [email protected]
Literature Review
Token-based systems have preceded the rise of blockchain technology by cen-
turies. Tokens were used to count, store, and communicate information rep-
resenting different forms of economic value. A very early example of the use
of token are clay coins. In the early agricultural societies, people exchanged
these coins for goods and services, which marked the development from
simple barter systems to more complex economies (Schmandt-Besserat &
Hallo, 1992). More current examples for tokens include casino chips, bonus
points in an airline loyalty program, or entry tokens for a skiing resort repre-
sented by a card worn in a jacket. In fields such as psychiatry, clinical psychol-
ogy, and education, for several decades the term token economy has been used
to denote operant techniques in treatment and education, with the goal to
achieve a certain target behavior (Kazdin, 1977). Carton and Schweitzer
(1996), for example, illustrate how a token (i.e., reward) system can be used
to reduce noncompliant behavior of a young patient.