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Trading Real-World Assets on Blockchain

Benedikt Notheisen (), Jacob Benjamin Cholewa () and Arun Prasad Shanmugam ()
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Benedikt Notheisen: Karlsruhe Institute of Technology
Jacob Benjamin Cholewa: IT University of Copenhagen
Arun Prasad Shanmugam: IT University of Copenhagen

Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, 2017, vol. 59, issue 6, No 4, 425-440

Abstract: Abstract Since its introduction in 2008, blockchain technology has outgrown its use in cryptocurrencies and is now preparing to revolutionize a multitude of commercial applications including value and supply chains, business models, and market structures. This work follows design science research to guide the implementation of a blockchain-based proof-of-concept prototype that enables the automated transaction of real-world assets, such as cars, and provides a valid, transparent, and immutable record of vehicle history to market participants, authorities, and other third parties. The contribution of this study to existing research is threefold: First, it introduces a built-in mechanism to reduce transaction risk resulting from the irreversibility of transactions in blockchain-based systems. Second, it replaces a trust-based, centralized, and bureaucratic register with a tamper-free and autonomous transactional database system that comprises a secure registration and transaction process. Third, it proposes a novel approach to mitigate adverse selection effects in lemon markets by providing a reliable, transparent, and complete record of each marketable asset’s history. In total, the findings in this article illustrate the potential of blockchain-based systems but also highlight technological shortcomings and challenges for commercial applications, such as scalability or privacy issues.

Keywords: Blockchain; Design science research; Trust-free commercial system; Asymmetric information; Market for lemons (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s12599-017-0499-8

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