Economics of Permissioned Blockchain Adoption

36 Pages Posted: 12 Jun 2020 Last revised: 1 Jun 2021

See all articles by Garud Iyengar

Garud Iyengar

Columbia University - Department of Industrial Engineering and Operations Research (IEOR)

Fahad Saleh

Wake Forest University - Schools of Business

Jay Sethuraman

Columbia University

Wenjun Wang

Columbia University, Department of Industrial Engineering and Operations Research (IEOR), Students

Date Written: July 8, 2020

Abstract

We construct an economic framework for understanding the incentives of the participants of a permissioned blockchain for supply chains and other related industries. Our study aims to determine whether adoption of blockchain is socially beneficial and whether such adoption arises in equilibrium. We find that blockchain unequivocally benefits consumers but that gains for the manufacturing sector are competed away. We demonstrate that there exist conditions under which although the blockchain improves global welfare, blockchain adoption does not arise in equilibrium. We refer to such a scenario as an adoption failure, and we propose a system of transfers to resolve that failure.

Keywords: Permissioned Blockchain, Blockchain Adoption, Technology Adoption, FinTech

JEL Classification: O33

Suggested Citation

Iyengar, Garud and Saleh, Fahad and Sethuraman, Jay and Wang, Wenjun, Economics of Permissioned Blockchain Adoption (July 8, 2020). Available at SSRN: https://ssrn.com/abstract=3602376 or http://dx.doi.org/10.2139/ssrn.3602376

Garud Iyengar

Columbia University - Department of Industrial Engineering and Operations Research (IEOR) ( email )

331 S.W. Mudd Building
500 West 120th Street
New York, NY 10027
United States

Fahad Saleh (Contact Author)

Wake Forest University - Schools of Business

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States

Jay Sethuraman

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Wenjun Wang

Columbia University, Department of Industrial Engineering and Operations Research (IEOR), Students ( email )

New York, NY
United States

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