Abstract
Typically, people have a misconception about blockchain as they associate this technology with cryptocurrency. This chapter does not focus, however, on bitcoin or cryptocurrencies that pertain to its intrinsic value. Rather, the authors focus on the disintermediation feature of blockchain technology by providing insights into how this technology could substitute for the functions and roles of the intermediary. The findings show that blockchain technology is not equipped with financing and physical distribution functions. The current research further demonstrates that most of the blockchain service providers that are listed in the Liechtenstein Blockchain Act are required to perform the traditional roles of an intermediary. Thus, blockchain technology is not found to support a full concept of disintermediation. This chapter is vital in order for existing intermediaries to gain a deeper understanding of how to analyze and optimize their existing functions and roles while adjusting their business model in the token-based economy.
TopIntroduction
The approval of the Token and Trustworthy Technology Service Providers Act (AKA Liechtenstein Blockchain Act or simply the Blockchain Act), which came into force on January 1, 2020, has introduced a new list of blockchain service providers. Importantly, the Blockchain Act focuses on blockchain and tokens in general rather than emphasizing cryptocurrency. In this regard, any form of assets or rights—money, securities, rights to assets, rights to real estate, license rights, rights of use—could be tokenized, and a token is defined as “a piece of information in a [blockchain]1 system which can represent claims or rights of memberships against a person, rights to property, or other absolute or relative rights, and is assigned to one or more [blockchain] identifiers” (p. 117 of the Blockchain Act). Thus, the token-based economy relates to using a set of immutable digital data to represent any assets or rights with blockchain technology. With this Blockchain Act, tangible and intangible assets could be legally tokenized on the blockchain platform, and thereby, firms should equip themselves with the knowledge of analyzing how blockchain technology could bring benefits to their business model.
A business model is essential to a firm’s plan for making a profit and ensuring business sustainability. It explains how the firm creates, delivers, and captures value in the economy (Chong et al., 2019). As opposed to being firm-internal centric, Berglund and Sandström (2013) suggested that a technology-oriented business model should be recognized from an open systems perspective, which highlights the importance of making sure that the business model is complementary with other business partners and mutually beneficial to collaborative business relationships (Hummel et al., 2010). Following this notion, an open business model is considered relevant to blockchain service providers due to blockchain’s distributed database that facilitates resource sharing (Goertzel et al., 2017), such as an open-source model (Casadesus-Masanell & Llanes, 2011). Despite this, previous research has found that blockchain technology could transform the economy by accelerating the disintermediation of many key players in the marketplace, such as banks (Scott et al., 2017), auditors (Dai & Vasarhelyi, 2017), lawyers (Pivovarov, 2019), and real estate brokers (Kejriwal & Mahajan, 2017). As such, blockchain technology itself is considered an autonomous entity (Tapscott & Tapscott, 2016) as it can perform the functions and roles of the intermediary.2 Nonetheless, some scholars have raised their concerns regarding the disintermediation role of blockchain technology (Hawlitschek et al., 2018; Zamani & Giaglis, 2018).
To the best of our knowledge, no research has provided a marketing theory-based analysis of the intermediary functions and roles in the context of blockchain technology. In this chapter, we aim to fill this research gap by focusing on whether the existing intermediaries may optimize current functions and roles while adjusting their business model in the token-based economy. Thus, drawing on intermediary functions (Alderson & Martin, 1965; Monash, 2020) and middleman theory (Krakovsky, 2015), we conducted a series of theory-based analyses, exploring the potentials and limitations of blockchain technology in performing the intermediary functions and roles, as well as mapping the intermediary roles with the descriptive roles of the blockchain service providers that are stated in the Liechtenstein Blockchain Act.
Key Terms in this Chapter
Token Depositary: A person or entity who holds tokens (both private and public keys) on behalf of another person or another person’s or entity’s account.
Token Issuer: A person or entity offering tokens to the public on the token issuer’s behalf or that of another person or entity.
Key Depositary: A person or entity acting as a custodian who holds private keys on behalf of the principal.
Token-Based Economy: Using a set of immutable digital data to represent any assets or rights with distributed ledger or blockchain technology.
Identity Service Provider: A provider serves to identify the actor in possession of the right of disposal related to a token and the provider records it in a blockchain directory.
Functions of Intermediary: Include transactional functions, facilitating functions, and logistical functions.
Exchange Service Provider: A person or entity who exchanges fiat (legal tender) for tokens (or vice versa).
Verifying Authority: A person or entity that verifies the legal capacity and requirements for token disposal.
Decentralized Networks: Refer to governing a network in a distributed fashion, which means that no single authority has absolute rights to exert power in the network, whereas data is copied and spread across a network of computers.
Smart Contract: A self-executing digital contract that automatically executes the terms and conditions of an agreement in a blockchain or distributed ledger technology.
Protector: A person or entity holding tokens in their own name in a blockchain technology system for the benefit of a third party that has authorization pursuant to the Trustees Act.
Intermediary: A mediator or middleman who acts as a link between people/business entity in order to try and bring about an agreement.
Physical Validator: A person or entity who ensures the existence and enforcement of contractually obligatory rights to property represented in a blockchain technology system in the sense of property law.
Blockchain: A distributed ledger database that is consensually shared and synchronized across the multistakeholder using cryptography.
Disintermediation: Refers to the power of removing intermediaries in the distribution network.
Price Service Provider: A person or entity providing blockchain technology system users with aggregated price information based on buying and selling offers or completed transactions.