Abstract
In the current discussions around Blockchain and distributed ledger technologies, we find a lack of theory to conceptualize and understand application scenarios. In this paper we propose to conceptualize distributed ledger technologies as trust mechanisms. Whereas previously one had to rely on a trusted third party (e.g. notary), now one must trust a complex software system – the Blockchain and distributed ledger application– as well as the parties that host the software system and ensure its effectiveness. Based on theories of e-commerce, business networks, and trust, we explore relations between trust and Blockchain design. We analyze three case studies of Blockchain applications in the diamond industry. In each case we study two complementary research questions: (1) how does the blockchain application influence trust, and (2) how do trust based requirements affect the design of a blockchain application? We formulate two propositions and find dynamic interactions between trust requirements, blockchain application design, and transaction trust.
Highlights
The popularity of Blockchain and distributed ledger technologies for business applications has increased substantially over the past years
Apart from the Bitcoin hype, how can we understand the attractiveness of distributed ledger technologies for its use in business applications? A recent claim is that Blockchain applications may enhance trust in inter-organizational relationships and business transactions
The aim of this paper is explorative: we define key concepts in chapter 2 and we explore three cases to identify relations between “how do trust requirements influence the design of Blockchain Applications” and between “how does the design of Blockchain Applications influence trust”
Summary
The popularity of Blockchain and distributed ledger technologies for business applications has increased substantially over the past years This is due to a hype, fueled by the rising and dropping value of Bitcoin. Regarding Blockchain as trust mechanism suggests that people trust technology rather than institutions or agencies (e.g., notary; solicitor) and that such institutions may be combined with or even replaced by Blockchain applications. These effects of distributed technology on business networks appear to be similar to dis-intermediation and cyber-mediation effects in e-commerce (Laudon and Traver, 2018). By analogy, Blockchain applications may have a variety of effects on business networks and business relations, including effects on trust and effects on the network structure
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