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Article

Asli Pelin Gurgun and Kerim Koc

As a remedy to usually voluminous, complicated and not easily readable construction contracts, smart contracts can be considered as an effective and alternative solution…

Abstract

Purpose

As a remedy to usually voluminous, complicated and not easily readable construction contracts, smart contracts can be considered as an effective and alternative solution. However, the construction industry is merely known as a frontrunner for fast adoption of recent technological advancements. Numerous administrative risks challenge construction companies to implement smart contracts. To highlight this issue, this study aims to assess the administrative risks of smart contract adoption in construction projects.

Design/methodology/approach

A literature survey is conducted to specify administrative risks of smart contracts followed by a pilot study to ensure that the framework is suitable to the research question. The criteria weights are calculated through the fuzzy analytical hierarchy process method, followed by a sensitivity analysis based on degree of fuzziness, which supports the robustness of the developed hierarchy and stability of the results. Then, a focus group discussion (FGD) is performed to discuss the mitigation strategies for the top-level risks in each risk category.

Findings

The final framework consists of 27 sub-criteria, which are categorized under five main criteria, namely, contractual, cultural, managerial, planning and relational. The findings show that (1) regulation change, (2) lack of a driving force, (3) works not accounted in planning, (4) shortcomings of current legal arrangements and (5) lack of dispute resolution mechanism are the top five risks challenging the adoption of smart contracts in construction projects. Risk mitigation strategies based on FGD show that improvements for the semi-automated smart contract drafting are considered more practicable compared to full automation.

Originality/value

The literature is limited in terms of the adoption of smart contracts, while the topic is receiving more attention recently. To support easy prevalence of smart contracts, this study attempts the most challenging aspects of smart contract adoption.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

Keywords

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Abstract

Details

The Definitive Guide to Blockchain for Accounting and Business: Understanding the Revolutionary Technology
Type: Book
ISBN: 978-1-78973-865-0

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Article

Randall E. Duran and Paul Griffin

This paper aims to examine the risks associated with smart contracts, a disruptive financial technology (FinTech) innovation, and assesses how in the future they could…

Abstract

Purpose

This paper aims to examine the risks associated with smart contracts, a disruptive financial technology (FinTech) innovation, and assesses how in the future they could threaten the integrity of the global financial system.

Design/methodology/approach

A qualitative approach is used to identify risk factors related to the use of new financial innovations, by examining how over-the-counter (OTC) derivatives contributed to the Global Financial Crisis (GFC) which occurred during 2007 and 2008. Based on this analysis, the potential for similar concerns with smart contracts are evaluated, drawing on the failure of The DAO on the Ethereum blockchain, which involved the loss of over $60m of digital currency.

Findings

Extensive use of bilateral agreements, complexity and lack of standardization, lack of transparency, misuse and speed of contagion were factors that contributed to the GFC that could also become material concerns for smart contract technology as its adoption grows. These concerns, combined with other contextual factors, such as the risk of defects in smart contracts and cyberattacks, could lead to potential destabilization of the broader financial system.

Practical implications

The paper’s findings provide insights to help make the design, management and monitoring of smart contract technology more robust. They also provide guidance for key stakeholders on proactive steps that can be taken with smart contract technology to avoid repeating the types of oversights that contributed to the GFC.

Originality/value

This paper draws attention to the risks associated with the adoption of disruptive FinTech. It also suggests steps that regulators and other key stakeholders can take to help mitigate those risks.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Content available
Article

Tianyu Feng, Xiao Yu, Yueting Chai and Yi Liu

The application of smart contract can greatly reduce transaction costs and improve transaction efficiency. The existing smart contract are expensive, single application…

Abstract

Purpose

The application of smart contract can greatly reduce transaction costs and improve transaction efficiency. The existing smart contract are expensive, single application scenario and inefficient. This paper aims to propose a new smart contract model to solve these problems.

Design/methodology/approach

By investigating the research history, models and platforms, this paper summarizes the shortcomings of existing smart contracts. Based on the content and architecture of traditional contract, a smart contract model with wider application scope is designed.

Findings

In this paper, several models are used to describe the operation mechanism of smart contracts. To facilitate computer execution, a decomposition method is proposed, which divides smart contracts into several sub-contracts. Then, the advantages and deployment methods of smart contract are discussed. On this basis, a specific example is given to illustrate how the application of smart contract will change our life.

Originality/value

Smart contract is gradually applied to more fields. In this paper, the structure and operation mechanism of smart contract system in reality are given, which will be beneficial to the application of smart contract to more complex systems.

Details

International Journal of Crowd Science, vol. 3 no. 2
Type: Research Article
ISSN: 2398-7294

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Article

Hemang Subramanian

Blockchain technologies have pervaded modern crowdfunding and capital sourcing through a variety of financial instruments implemented as smart contracts. Smart contracts

Abstract

Purpose

Blockchain technologies have pervaded modern crowdfunding and capital sourcing through a variety of financial instruments implemented as smart contracts. Smart contracts provide a unique mechanism not only to create a unique one-of-a-type financial instrument, but also to enable unique innovations atop existing financial instruments due to underlying efficiencies. The smartness comes from the flexibility that programs provide which can create extremely unique financial instruments that are often complex to implement, yet easy to create, maintain through versioning, trade and destroy. The purpose of this paper is to describe the security token architecture as an application of smart contracts. Further, the author illustrates the implementation and design of a commonly used financial instrument known as Simple Agreement for Future Equity (SAFE) using the security token architecture proposed and smart contract functionality. The author then models the transaction using relational algebra, and, models the utility maximization. The author shows how on account of reduced information asymmetry between the investors and SAFE users (i.e. startups) utility is positive when smart contract-based security tokens are deployed for each state in the SAFE contract.

Design/methodology/approach

Using an existing well-adopted instrument called a SAFE contract, the author illustrates the architecture of a smart contract-based security token system. The author illustrates how different components of a SAFE contract can be implemented as a smart contract and discusses the advantages and disadvantages of applying blockchain-based smart contracts to design SAFE instruments. The author deploys two methods: a state space diagram to explain state transitions and a utility model to explain the utilities.

Findings

The key findings of this research study are the design of a security token architecture, which can be used to convert any the physical or contract-based financial instrument to a smart contract that runs on the blockchain. However, there are limitations to the implementation of the same which can be overcome. The model illustrates the positive utilities derived for all economic actors, i.e. the contractors, the utility providers, etc., in the market.

Originality/value

This paper is an original paper. For the very first time, the author explored the architecture of a security token system. Using a well-known financial instrument, namely the SAFE, the author describes various components, e.g. the four contracts that form SAFE and then model the utilities for the system.

Details

Managerial Finance, vol. 46 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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Article

Alpen Sheth and Hemang Subramanian

The purpose of this paper is to model blockchain-based smart contracts specifically for the insurance industry. The authors introduce the concept of smart contracts and…

Abstract

Purpose

The purpose of this paper is to model blockchain-based smart contracts specifically for the insurance industry. The authors introduce the concept of smart contracts and further discuss the implementation of a decentralized insurance marketplace, namely Etherisc, using smart contracts on the Ethereum blockchain platform.

Design/methodology/approach

The authors employ three methods in this paper. The first one is a design illustration of a live application, namely, Etherisc. The second one is an economic model using demand–supply and equilibrium economics. The third one is an illustration using principal–agent modeling using constrained optimization.

Findings

The findings illustrate the following: in the design discussion, the authors demonstrate the architecture of a live Ethereum-based smart contract system. In the economic model, the authors illustrate how decentralized smart contract systems can increase social welfare by shifting demand and supply by reducing transactional costs. In the principal–agent model, the authors show how both the principal and agent are positively benefited by various mechanisms.

Originality/value

The paper is an original contribution and can be used as a reference model to study insurance or other similar marketplaces and the underlying economic transformations happening therein.

Details

Managerial Finance, vol. 46 no. 6
Type: Research Article
ISSN: 0307-4358

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Article

Surbhi Dewan and Latika Singh

A blockchain is a shared distributed ledger technology that stores the information of every transaction in the network. The blockchain has emerged with a huge diversity of…

Abstract

Purpose

A blockchain is a shared distributed ledger technology that stores the information of every transaction in the network. The blockchain has emerged with a huge diversity of applications not only in the economic but in the non-economical domain as well. Blockchain technology promises to provide a wide range of solutions to the problems faced during implementation of smart cities. It has the potential to build smart contracts more secure, thus eliminating the need for centralized authority.

Design/methodology/approach

This paper presents a proof-of-concept for a use case that uses an Ethereum platform to build a blockchain network to buy, sell or rent a property.

Findings

The findings of this study provide an opportunity to create novel decentralized scalable solutions to develop smart cities by enabling paperless transactions. There are enormous opportunities in this distributed ledger technology which will bring a revolutionary change in upcoming years.

Originality/value

The concept of blockchain along with smart contracts can be used as a promising technology for sharing services which is a common requirement in smart cities. All the blockchain transactions are stored in decentralized shared database. The transaction recorded in decentralized system is immutable, it cannot be altered and hence chance of forgery is negligible.

Details

Smart and Sustainable Built Environment, vol. 9 no. 4
Type: Research Article
ISSN: 2046-6099

Keywords

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Article

Felicia Hui Ling Chong

This paper aims to provide a reflective discussion on the different avenues of blockchain application in Islamic finance in promoting trust and transparency for increased…

Abstract

Purpose

This paper aims to provide a reflective discussion on the different avenues of blockchain application in Islamic finance in promoting trust and transparency for increased accountability between parties involved in the delivery of Sharīʿah-compliant products and services.

Design/methodology/approach

This paper discusses on blockchain benefits in Islamic finance while providing an illustration with smart Sukuk. Having identified the advantages of the development of Islamic financial technology (i-FinTech), this study ends by debating a couple of challenges (computational codification of Sharīʿah principles and environmental impact) that have to be addressed to promote the development of a real sustainable Islamic FinTech.

Findings

This paper also identifies two challenges in using blockchain in i-Fintech. The first challenge refers to the extent to which Sharīʿah principles can be computationally encoded. Blockchain makes public all transactions that ease Sharīʿah compliance checks and determine if these transactions are Islamic in nature but this check can be done only after their operation. The second challenge is related to the algorithmic protocol used to validate smart contracts (including smart Sukuk). This situation calls into question the principles of Maqasid al-Sharīʿah according to which transactions should not harm society.

Originality/value

In the current debates related to the development of Islamic FinTech, this paper also identifies two challenges in using blockchain in i-Fintech.

Details

Qualitative Research in Financial Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4179

Keywords

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Article

Francesca Dal Mas, Grazia Dicuonzo, Maurizio Massaro and Vittorio Dell'Atti

The objective of this study is to deepen how blockchain technology through smart contracts can support the development of sustainable business models (SBMs). Particularly…

Abstract

Purpose

The objective of this study is to deepen how blockchain technology through smart contracts can support the development of sustainable business models (SBMs). Particularly, the authors aim to determine the key elements enabling SBMs by applying smart contracts.

Design/methodology/approach

The research context focusses on the case study of SmartInsurance, which is a fictitious name for a start-up in the insurance sector and the real name of which is not to be revealed. The start-up was able to collect 18m euros in 80 s in a crowdfunding operation, using smart contracts and a revolutionary business model. Internal as well as external documents of different sources are analysed and coded to gather information about the company, its values and its business and what it pursues with employing blockchain technology.

Findings

The results show how smart contracts can reduce the costs of transactions, increase social trust and foster social proof behaviours that sustain the development of new SBMs.

Originality/value

This study contributes to both the transaction cost theory and social proof theory, showing how new technologies such as the blockchain can provide a fresh perspective to support the development of SBMs.

Details

Management Decision, vol. 58 no. 8
Type: Research Article
ISSN: 0025-1747

Keywords

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Article

Shuchih Ernest Chang, Yi-Chian Chen and Tzu-Ching Wu

The purpose of this paper is to explore the applicability of blockchain technology in international trade process from a perspective of letter of credit payment.

Abstract

Purpose

The purpose of this paper is to explore the applicability of blockchain technology in international trade process from a perspective of letter of credit payment.

Design/methodology/approach

A blockchain-based re-engineering process is designed by employing the blockchain and its affiliated smart contract technology to harvest the benefits of distributed ledger and distributed business workflow automation.

Findings

Comparative analysis and feasibility study were conducted to identify and validate the prospects, in terms of facilitating process flow and enhancing overall trade performance, of the proposed blockchain-based international trade process model.

Practical implications

Traditional trade processes suffer from a great number of issues about intermediaries, information latency and trust, which, in turn, hinder overall process efficiency. The emerging blockchain technology may have potentials to mitigate those issues by revolutionizing business processes across enterprise borders in various industries.

Originality/value

This study contributes to the conceptual design of a blockchain- and smart-contract-based process along with a provision of practical case in business process re-engineering. Further endeavors devoted to blockchain research and application across different sectors are suggested to reach better performance of business process operations.

Details

Industrial Management & Data Systems, vol. 119 no. 8
Type: Research Article
ISSN: 0263-5577

Keywords

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