Economics of Permissioned Blockchain Adoption

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