Chee Wee Tan Et Al Business On Chain Publishersversion

Business on Chain
A Comparative Case Study of Five Blockchain-inspired Business Models

Chong, Alain Yee Loong; Lim, Eric T.K.; Hua, Xiuping; Zheng, Shuning; Tan, Chee-Wee
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Chong, A. Y. L., Lim, E. T. K., Hua, X., Zheng, S., & Tan, C-W. (2019). Business on Chain: A Comparative Case
Study of Five Blockchain-inspired Business Models. Journal of the Association for Information Systems, 20(9),
1310-1339. https://doi.org/10.17705/1jais.00568
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Business on Chain: A Comparative Case Study of Five
Blockchain-inspired Business Models
Alain Yee Loong Chong, Eric T.K. Lim, Xiuping Hua, Shuning Zheng, and Chee-Wee Tan
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Please cite this article as:

Chong, A. Y. L., Lim, E. T. K., Hua, X., Zheng, S., & Tan, C-W. (2019). Business on Chain: A Comparative Case
Study of Five Blockchain-inspired Business Models. Journal of the Association for Information Systems, 20(9),
1310-1339. https://doi.org/10.17705/1jais.00568
DOI: 10.17705/1jais.00568
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Journal of the Association for Information Systems (2019) 20(9), 1310-1339
doi: 10.17705/1jais.00568
RESEARCH ARTICLE
ISSN 1536-9323
Business on Chain: A Comparative Case Study of Five

Blockchain-Inspired Business Models
Alain Yee Loong Chong1, Eric T. K. Lim2, Xiuping Hua3, Shuning Zheng4, Chee-Wee Tan5
1
University of Nottingham Ningbo China, China, [email protected]
2
University of New South Wales, Australia, [email protected]
3
4
5
Copenhagen Business School, Denmark, [email protected]
Abstract
Blockchain technology, despite its origins as the underlying infrastructure for value transfer in the
era of cryptocurrency, has been touted as the main disruptive force in modern businesses. Blockchain
has the capacity to chronologically capture and store transactional data in a standardized and tamper-
proof format that is transparent to all stakeholders involved in the transaction. This, in turn, has
prompted companies to rethink preexisting business practices, thereby yielding a myriad of
fascinating business models anchored in blockchain technology. In this study, we advance
contemporary knowledge of business applications of blockchain by drawing on the theoretical lens
of the digital business model and value configuration to decipher how pioneers in this space are
leveraging blockchain to create and capture value. Through a comparative, multiple case study
approach, we analyzed five companies in mainland China that have rolled out blockchain initiatives.
From our case analyses, we derived a typology of five blockchain-inspired business models, each of
which embodies a distinctive logic for market differentiation. For each business model, we offer
insights into its value creation logic, its value capturing mechanism, and the challenges that could
threaten its longer-term viability. Grounded in our findings, we discuss key implications for theory
and practice.
Keywords: Blockchain, Digital Business Model, Value Creation Logic, Value Capturing
Mechanism.
Roman Beck, Matti Rossi, and Jason Thatcher were the accepting senior editors. This research article was submitted
on April 1, 2018 and underwent two revisions.
institutions, trading partners, individuals, and society
1 Introduction at large (Iansiti & Lakhani, 2017). However, in light of
the challenges posed by the digital economy on data
Current legal, political, and socioeconomic systems are
integrity and veracity (Teichmann, 2018), trust-based
founded on contractual obligations, commercial
governance structures, which underlie conventional
exchanges, and transactional records (Iansiti &
transactions, are no longer adequate to cope with
Lakhani, 2017). Together, they document events and
growing calls for data security. Consequently, it is
identities, engender trust in transactions, and govern
inevitable that both scholars and practitioners have
interactions among commercial entities, governmental
1310
been drawn to blockchain as a technological concerns how blockchain can be applied to generate
advancement for accomplishing trustless transactions value for businesses. Given the dearth of research in
(Risius & Spohrer, 2017). this area, we draw on the theoretical lens of the digital
business model espoused by Al-Debei and Avison
Fundamentally, blockchain is a distributed ledger
(2010) and undertake an exploratory study of
technology that is regulated through a consensus
blockchain companies—which we define as
mechanism and secured with cryptography
companies that have incorporated blockchain into their
(Nakamoto, 2008). In its most primordial form,
business offerings—to uncover their value creation
blockchain comprises a growing list of transactional
logic and value capturing mechanisms. By
records (or blocks) that are connected via
disentangling the interdependency between the value
cryptography. Each block in a blockchain contains a
creation logic and value capturing mechanism for five
cryptographic link to its previous block together with
prominent blockchain companies, we are able to not
the timestamps and transactional data of all
only derive a typology of five corresponding
transactions recorded on the block. Because
blockchain-inspired digital business models, but also
blockchain epitomizes a peer-to-peer network that
to illuminate the challenges associated with pursuing
collectively adheres to a standardized protocol for
each of these digital business models. In so doing, we
authenticating and inscribing transactions onto a block,
attempt to offer an answer to the following research
the integrity and veracity of transactional data can be
question: How do blockchain companies create and
protected against retroactive alteration (Risius &
capture value through digital business models?
Spohrer, 2017). To retroactively alter transactional
data that has already been inscribed onto a block, there The remainder of the paper is structured as follows. In
must be consensus among the network majority to the next section, we offer an overview of the unique
modify all subsequent blocks, an almost impossible characteristics of blockchain and its current state of
task once the blockchain network has grown research. Following this, we review the extant
sufficiently large in size. For this reason, blockchain, literature on the digital business model in order to
by design, is virtually immutable due to its resilience explicate our rationale for embarking on an
to data manipulation. By virtue of its immutability, exploratory study of the value creation logic and value
blockchain has the potential to displace trust-based capturing mechanisms for blockchain companies.
intermediaries (Tapscott & Tapscott, 2016). Indeed, Next, we outline our case selection criteria and
the benefits of blockchain have been acknowledged describe the procedures we adhered to for data
across sectors spanning banking (Guo & Liang, 2016), collection and analysis. We then present our analysis
finance (Tapscott & Tapscott, 2016), government for each of the five case companies, which, in
(Ølnes, Ubacht, & Janssen, 2017), and supply chain combination, gives rise to our typology of blockchain-
industries (Korpela, Hallikas, & Dahlberg, 2017). A inspired digital business models. Finally, we conclude
report by the World Economic Forum (2015) predicts by highlighting the implications of our findings for
that by 2025, transactions constituting 10% of the theory and practice, plausible limitations, as well as
world’s Gross Domestic Product (GDP) will be avenues for future research.
recorded on blockchain.
Despite the optimism surrounding blockchain, the 2 Theoretical Foundation
extent to which it has disrupted traditional business
models remains a subject of intense debate. Avital et 2.1 Overview of Blockchain Research
al. (2016) liken blockchain to bubble memory, which,
Blockchain resembles a fully distributed, decentralized
despite being touted as the replacement for the hard
system that captures and stores an immutable
disk that will eventually revolutionize the computer
chronological log of every transaction among actors on
industry, has failed to live up to its promise. The same
its peer-to-peer network. Blockchain is functionally
sentiments are echoed by Beck, Müller-Bloch, & King
similar to a distributed ledger that does not require any
(2018) who contend that the ability of blockchain
middleman for authenticating and inscribing
technology to strengthen governance and reduce
transactional data onto the ledger (Risius & Spohrer,
coordination cost could be overexaggerated. Iansiti
2017). Instead, the blockchain is usually programmed
and Lakhani (2017) hence allege that blockchain is
in such a way that actors within the network are
unlikely to be a disruptive technology that could
incentivized to contribute computational power to the
challenge conventional business models. Rather,
authentication and inscription process. Therefore, in
blockchain should be viewed as a foundational
contrast to centralized transactions involving trusted
technology capable of revitalizing the infrastructure of
third parties, blockchain guarantees the immutability,
existing socioeconomic systems (Iansiti & Lakhani,
transparency, and veracity of transactional data (Yli-
2017). Due to the aforementioned contradictory
Huumo, Ko, Choi, Park, & Smolander, 2016).
viewpoints on blockchain, Glaser (2017) has asserted
Furthermore, due to its immutability, blockchain
that a critical but elusive question about blockchain
supports the programming of smart contracts,
1311
Case Study of Five Blockchain-Inspired Business Models
computerized transactional protocols devised to economy will be driven by the emergence of

digitally facilitate, verify, or enforce the negotiation or decentralized autonomous organizations (DAOs) in
performance of a contract under the supervision of all which smart contracts among actors in a blockchain
network actors (Underwood, 2016). Smart contracts network dictate the automated execution of
not only enable transactions to be performed credibly transactions without the need for intermediaries (Beck
without the intervention of trusted third parties, but et al., 2018). On the other hand, blockchain detractors
they also ensure that transactions, once executed, are counter that the technology underpinning blockchain is
irreversible and traceable. relatively simplistic and that too much hype is attached
to it in spite of its limited business applications
To expand its peer-to-peer network, blockchain can
(Stinchcombe, 2018; Walker, 2017). Iansiti and
adopt either a permissioned or permissionless
Lakhani (2017) further note that as a foundational
governance structure. Whereas authorization is a
rather than a disruptive technology for supporting
prerequisite for setting up network nodes on a
existing socioeconomic systems, the impact of
permissioned blockchain (Peters & Panayi, 2016),
blockchain might not be felt for decades. To address
network nodes could be set up anonymously and
the knowledge gap concerning applicability, this study
without oversight for permissionless blockchains. For
attempts to shed light on how value can be created and
instance, Bitcoin exemplifies a permissionless
captured through new digital business models inspired
blockchain, in that the protocol is grounded in proof of
by blockchain.
work (PoW) and there is no entry barrier for actors to
partake in the network. Furthermore, data on Bitcoin
transactions are accessible and transparent to all actors
2.2 A Conceptual Overview of the Digital
within the network. Conversely, permissioned Business Model
blockchains operate under the purview of a central Technology has transformed the way businesses are
authority or consortium in that network nodes are conducted by revolutionizing traditional market
prescreened and selected in accordance with structures. Particularly, recent trends in digitalization
predefined compliance criteria. In general, for (e.g., big data, IoT, and prevalence of mobile devices)
permissioned blockchains, no cryptocurrency is issued have culminated in a market environment that is not
and smart contracts are employed to govern only immensely complex and intensively competitive,
interactions among actors within the network (Xu et but also fraught with uncertainty. For this reason,
al., 2017) digital business models have become an indispensable
Given its unique characteristics, it is not surprising that aspect of strategic planning as firms devote resources
research into the technical aspects of blockchain is to the conversion of emerging technologies into an
gaining momentum. Whereas a handful of studies have enduring and sustainable competitive advantage over
explored the intricate relationship between blockchain market rivals (Hamel, 2000).
and cryptocurrencies like Bitcoin (Papadopoulos, Although business models have attracted substantial
2015; Peters, Panayi, & Chapelle, 2015; Vigna & scholarly interest because of disruptions to traditional
Casey, 2016), the bulk of research on blockchain businesses triggered by rapid technological advances
concerns the identification and resolution of (Chesbrough, 2006), researchers remain divided on
technological challenges encountered during project their constituent dimensions (DaSilva & Trkman,
implementation (Yli-Huumo et al., 2016). For 2014). Indeed, attempts to conceptualize business
instance, Liang et al.’s (2017) work concentrates on the models have been undertaken by scholars from fields
detection of threats to privacy and security that may such as economics, management, and strategy
arise from the implementation of blockchain projects, (DaSilva & Trkman, 2014), which in turn have
while Moyano and Ross (2017) focus on algorithmic generated theoretical paradigms such as the resource-
enhancements to optimize the efficiency of blockchain based view of the firm (Barney, 2001) and transaction
architecture (Moyano & Ross, 2017). cost economics (Morris, Schindehutte, & Allen, 2005).
Compared to the advances achieved in comprehending In the age of digitalization, the emergence of digital
the technical properties of blockchain, there is much business models has blurred the boundaries between
less progress being made in recognizing the wider business strategy and processes, fueling further debate
implications of blockchain for businesses. Due to a on their distinction (Al-Debei & Avison, 2010; Porter,
paucity of studies on the business applications of 1996; Zott, Amit, & Massa, 2011).
blockchain, scholars are divided on the extent to which In this study, we adhere to Al-Debei and Avison’s
value can be appropriated from blockchain. On the one (2010) conception of business models as the layer
hand, blockchain proponents regard blockchain as a between business strategy (e.g., product
disruptive technology that will pave the way for novel differentiation) and business processes (e.g., product
business models centered on distributed consensus manufacturing) that enables digital firms to formulate
(Crosby, Pattanayak, Verma, & Kalyanaraman, 2016), and execute value creation and capturing activities
and predict that much of the growth in the digital (Kazan, Tan, & Lim, 2015).
1312
Figure 1. Impact of Blockchain on Preexisting Business Models
Conceivably, the importance of the digital business configurations within the extant literature. A value
model for blockchain companies cannot be understated chain describes the process of transforming inputs into
because blockchain has shifted preexisting business outputs for a firm. Specifically, it unpacks a firm’s
processes from being static and dynamic to being sequential process for connecting production partners
decentralized and automated (see Figure 1). This has (Fjeldstad & Snow, 2017) to create and deliver value
culminated in a coevolution ecosystem among network to its end consumers. Porter (1990) claims that the
actors that causes the business logic of blockchain value creation logic of the value chain is applicable to
companies to deviate significantly from those of any industry. Since generic activities such as
traditional firms (Crosby et al., 2016). We thus turn to marketing and operations are valid for all industries, it
Al-Debei and Avison’s (2010) invocation of four is a focal premise of the value chain that firms should
digital business model value dimensions as well as differentiate through industry-specific actions in order
Fjeldstad and Snow’s (2017) taxonomy of value to acquire enduring and sustainable competitive
configuration for dissecting blockchain companies. advantage in the market (Porter, 1990). Nevertheless,
despite the popularity of the value chain, Stabell and
Within extant literature, there are two primary streams
Fjeldstad (1998) counter that its value creation logic
of research on business models. In the first stream,
may not be entirely transferrable to service industries
management scholars have sought to explicate how
such as education, finance, healthcare, insurance, and
core business processes are configured to create and
music. Because products in service industries are
capture value (Bharadwaj, El Sawy, Pavlou, &
intangible, the applicability of the value chain is rather
Venkatraman, 2013; Pitelis, 2009). In the second
limited (Peppard & Rylander, 2006). As opposed to
stream, information systems researchers have strived
manufacturers, production processes like procurement
to open up the black box on key considerations (or
and inbound and outbound logistics are typically not
value dimensions) that underlie value creation and
relevant for service providers. This is especially true
capturing in digital environments (Al-Debei and
for digital firms such as travel portals (e.g.,
Avison, 2010; Pagani, 2013). We therefore synthesize
Expedia.com), which primarily mediate the digital
both research streams to derive a unified analytical lens
sales of hospitality products between consumers and
for dissecting blockchain companies.
service providers. Likewise, firms, whose value
creation logic revolves around the harnessing of
2.3 Value Configurations internal competencies for problem solving (e.g., law
Past studies in the field of strategic management have firms), are also a mismatch with the concept of the
demonstrated how discrepancies in value value chain.
configurations can lead to variations in value creation To address the shortcomings posed by the value chain,
logic and value capturing mechanisms (Casadesus‐ Stabell and Fjeldstad (1998) advanced a taxonomy of
Masanell & Zhu, 2013). As purported by Fjeldstad and value configurations that incorporate value shop and
Snow (2017), value configuration can be construed as value network into the mix. Unlike the value chain
a contingency factor that dictates the properties of all which is founded on horizontal and sequential business
other business model elements. processes, the value shop is grounded in recursive
Originating from the work of Porter (1985), the value feedback learning loops (Gray, El Sawy, Asper, &
chain is one of the most prominent value Thordarson, 2013). Firms operating as value shops
create value by assessing current situations and then
1313
modifying these situations through iterative learning mechanisms, value delivery architecture, and value
until a desired solution can be found (Kazan et al., stakeholder network.
2015). Conversely, firms operating as value networks
Management scholars such as Porter (1985) and Mol
create value by leveraging on mediating technologies
Wijnberg, and Carroll (2005) define value creation as
to support interactions among network actors.
a series of activities targeted at delivering novel
Consequently, value networks can be characterized by
products and services that satisfy the needs of end
their dyadic, parallel, polyadic, and/or simultaneous
consumers while, at the same time, benefitting all other
activities (Kazan et al., 2015) through which network
stakeholders involved in the process (Teece, 2010).
actors (e.g., consumers, partners, and suppliers)
Value creation is vital because the assurance of
cooperate to co-create value (Peppard & Rylander,
benefits is a precondition for fostering active and
2006).
continuous participation among stakeholders. Value
As affirmed by Fjeldstad and Snow (2017), all firms, creation logic, in the context of the digital business
regardless of digital or physical, should assume one of model, hence encapsulates the focal activities
the three types of value configurations: value chain, undertaken by firms in providing digital products and
where value is created through sequential processing services (Kazan et al., 2015).
of inputs into desired outputs, value network which
On the other hand, value capture in business models
cocreates value through mediating technologies, and
can be viewed as the differential between the cost
value shop, which harnesses its internal competencies
incurred by a firm in creating value and the revenue
for problem solving. The same applies to blockchain
retained by the firm (Bowman & Ambrosini, 2000;
companies. For instance, blockchain companies
Pagani, 2013). In digital business models, the
operating as value chains aim at transforming inputs
mechanism for capturing value denotes the logic of
into desired outputs in an efficient manner (e.g.,
how firms are able to extract revenue from providing
producing valued market outputs such as new
digital products and services (Kazan et al., 2015).
Bitcoins) (Kazan et al., 2015), whereas those operating
as value networks offer mediating services among The value delivery architecture of the digital business
network actors (e.g., facilitating digital rights transfer model revolves around firms’ resources and their
among parties). On the other hand, blockchain configuration (Al-Debi et al, 2008). The concept of the
companies operating as value shops offer solutions to value delivery architecture is grounded in the resource-
clients (e.g., assisting in blockchain project based view that theorizes each firm as a bundle of
implementations). In this sense, value configurations resources (Wernerfelt, 1984). Value delivery
yield insights into the sources of value that can be architecture, in the context of the digital business
tapped through digital business models inspired by model, accentuates how digital firms assimilate and
blockchain. But, at the same time, due to the exploit technological resources to sustain their
inclination of prior research to treat value competitive edge. As such, the value delivery
configurations as monolithic concepts, we turn to Al- architecture can be construed as a firm’s structural
Debei and Avison’s (2010) multidimensional capabilities to orchestrate its technological resources to
theorization of digital business model to supplement provide digital products and services that are hard to
the value configuration view of blockchain companies. replicate (Kazan et al., 2015).
The last dimension of the digital business model
2.4 Value Dimensions of Digital Business
pertains to the value stakeholder network. The value
Models stakeholder network refers to an ecosystem structured
Firms operating in digital environments revolutionize around interfirm modularity in which multiple firms
preexisting business practices by constantly pushing are interconnected through the network to co-
the frontiers of technology. An example of this contribute and mediate configured components
phenomenon can be found in the food and beverage (resources) and modules to acquire value in an
industry. In mainland China, companies such as orchestrated fashion (Kazan et al., 2015). It depicts
Ele.me and Meituan-Diaping have introduced mobile how firms coordinate and collaborate with their
applications that integrate online and offline channels stakeholders to provide digital products and services
to bring about on-demand food delivery, which in turn (Osterwalder, Pigneur, & Tucci, 2005). Stakeholders
has led to a surge in the user base of online food include all participants who participate in firm
delivery to 295 million customers in the first half of functions, potentially including consumers,
2017 (Shen, 2017). To guide firms in comprehending distributors, intermediaries, partners, and suppliers
the intricacies of competing in digital environments (Hall & Martin, 2005; Rajala & Westerlund, 2007).
(Zott et al., 2011), Al-Debei and Avison (2010) Because blockchain companies, by virtue of their
separated digital business models into four core technological roots, are synonymous with firms
elements, namely value creation logic, value capturing competing in digital environments, the preceding value
dimensions of digital business models can be applied
1314
to disentangle the logic underlying the blockchain- logic and value capturing mechanisms of blockchain
inspired business models pursued by these companies. companies informs practice because the creation of
Moreover, by synthesizing the concepts of the digital value must be intimately tied to its capture in order for
business model and value configuration to arrive at an businesses to succeed.
analytical lens for dissecting blockchain companies,
we are able to not only shed light on the sources of 3 Methodology
value being tapped by these companies, but also
unravel how the sources of value are actually being To unravel the spectrum of value creation logic and
tapped with respect to the value creation logic and value capturing mechanisms across blockchain
value capturing mechanisms of these companies. companies, we subscribed to an exploratory multiple
case study approach. For multiple case studies, site
2.5 Value Creation and Capturing in selection should be determined on a substantive rather
Blockchain than a statistical basis such that case companies are
sufficiently representative of the target population
Though Al-Debei and Avison (2010) have (Greene & David, 1984). In light of our research
distinguished among four value dimensions for digital objectives (Seawright & Gerring, 2008), we decided to
business models, we opted to concentrate our inquiry anchor our empirical context on companies that offer
on examining the value creation logic and value blockchain-enabled business applications. Data was
capturing mechanisms for blockchain companies. The primarily qualitative in nature and gathered through
rationale for disregarding value delivery architecture is two primary sources: interviews and public archives.
that blockchain companies all, essentially, rely on Our exploratory approach to data collection is
blockchain as their value delivery architecture. For especially suited for the decentralized and dynamic
these companies, blockchain dictates and serves as the innovation ecosystems in which blockchain companies
underlying value delivery architecture for connecting currently operate (Adner & Kapoor, 2010; Iansiti &
network actors and also determines how information Levien, 2004).
and resources should flow among them. While nuances
in value delivery architecture may exist across 3.1 Selection of Case Companies
blockchain companies, they should not deviate from
the fundamental principles of blockchain. To arrive at a representative sample of firms in the
blockchain space, we began by approaching the
Similarly, we also exclude the value stakeholder People’s Bank of China (PBoC) and the China
network. Undoubtedly, the exact identities of value Academy of Information and Communications
stakeholders will differ according to the blockchain Technology (CAICT), a scientific research institute
network of each company. Nonetheless, the conceptual directly under the Ministry of Industry and Information
role played by value stakeholders within blockchain Technology (MIIT) of China, that recommended five
networks should be largely identical. In other words, reputable blockchain companies matching our
blockchain companies are built on the idea of a selection criteria. All five blockchain companies work
distributed ledger that is maintained by a network of with permissioned consortium blockchains without the
anonymous peers (or equal nodes). This means that the issuance of tokens. These case companies were
role performed by stakeholders in authenticating and deliberately selected with the intention of covering a
inscribing transactional data onto blockchain ledgers wide range of blockchain companies that harness
should not vary, even if the identities of these open-source or self-developed technologies to develop
stakeholders are entirely dissimilar. In this sense, the business applications for internal consumption or
adoption of blockchain technology only alters how external utilization. The five blockchain companies of
stakeholders collaborate but does not usurp their roles interest 1 in this study are (1) ChainArchitect
in the value chain.
(developer and supplier of enhanced blockchain
Through the omission of value delivery architecture architecture for external utilization); (2) ChainFinance
and value stakeholder network, we seek to offer a (provider of industry-specific business application
much more concise picture of the competitive based on open-source technology for external
landscape for blockchain companies: we illustrate how utilization); (3) ChinaNova (provider of customized
these companies, despite sharing comparable value business applications based on open-source
delivery architecture and value stakeholder networks, technology for external utilization); (4) ChainSecurity
innovate in terms of their value creation logic and (developer of open-source blockchain for internal
value capturing mechanisms. Beyond this, consumption); and (5) ChainDraft (provider of both
illuminating the linkage between the value creation self-developed blockchain and tailored business
1
ChainArchitect, ChainFinance, ChainSecurity, ChainDraft are
pseudonyms because these four companies have requested
anonymity.
1315
applications for external utilization). Notably, it is After a methodical inspection of our primary and
worth mentioning that ChainArchitect and ChainNova secondary data, comprehensive case narratives were
are among the first blockchain companies to pass the drafted to outline the business model underpinning
blockchain standard assessment in mainland China. each of the five blockchain companies with particular
emphasis on their value creation logics, their value
3.2 Data Collection capturing mechanisms, and the main challenges
confronting each company. Alongside the case
Data on the five case companies were collected narratives, we also formulated a graphical
through both primary and secondary sources. Before representation of the business model for each
approaching the case companies, we read publicly blockchain company. This, in turn, enabled us to
accessible news articles and press releases in order to visualize how value is exchanged among actors within
acquire background information on these companies. the network ecosystem for each blockchain company.
Once we were familiar with the background for each Next, we employed the thematic analytic technique to
of the five case companies, we contacted managers at analyze the transcribed interviews (Boyatzis 1998). In
these companies and were granted permission to thematic analysis, codes were generated inductively
perform on-site visits between September 2017 and from the raw data. Our inductive analysis centered on
December 2017, during which time we conducted the deciphering the way that value is created and captured
first round of semistructured interviews with senior by each blockchain company and identifying the
executives from the five case companies, including challenges it faces. In the first round of coding, data
three CEOs (ChainArchitect, ChainFinance, and were content analyzed by one of the authors to
ChainNova), one founder (ChainDraft), and one ascertain the blockchain-enabled business application
general manager (ChainSecurity). During our trip to offered by each case company and to discern how
ChainFinance, we also arranged group interviews with value can be appropriated from these business
clients from the banking industry to gain a holistic applications. These coded themes were then mapped to
picture of how value is created for the latter. As senior preexisting concepts in digital business model
executives, interviewees are not only well-versed in research. Cross-case analysis was also performed to
the value creation logic and value capturing compare and contrast business models across the five
mechanisms of their respective blockchain companies, blockchain companies. To ensure rigor in our data
they are also well-acquainted with the market analysis, we applied a differentiated role strategy
environment in which their companies operate and the (Adler & Adler, 1988). The other co-authors played the
hurdles encountered in pushing for blockchain-enabled role of devil’s advocate by generating alternative
business applications. interpretations and counterarguments to the coded
Data from the first round of interviews were filtered themes (Adler and Adler 1988). Whenever
through our analytical lens, which, in turn, prompted disagreements arose, codes were revisited and
subsequent rounds of interviews from January 2018 to discussed until we reached consensus. This iterative
August 2018 to clarify issues of ambiguity arising from data analytical procedure was concluded when all
our interpretation. Data collection was concluded only authors agreed on the conceptual interpretation of the
when theoretical saturation had been reached and no coded themes. We present thematic coding examples
fresh insights could be gleaned from further in Appendix B.
conversations with the interviewees. In total, we
conducted 43 interviews with 31 informants 4 Case Analysis
amounting to 1,963 minutes of interview data. All
interviews were audiotaped. Additionally, we 4.1 ChainArchitect Technology
requested and gained access to the official online
channels of each blockchain company where we were
Company, Ltd.
able to extract archival data such as technical white ChainArchitect Company, Ltd. (ChainArchitect), a
papers as well as product and service pages. Appendix developer of blockchain architecture, was inaugurated
A offers a detailed breakdown of our data sample for in August 2016. From the beginning, the company
analysis. identified a major bottleneck in the business
application of blockchain. Compared to existing
3.3 Data Analysis transactional infrastructures, blockchain is constrained
by the speed with which transactions can be processed.
Interviews were initially transcribed verbatim in
As the CEO of ChainArchitect explains:
Chinese and then translated into English by one of the
authors. All transcripts were then checked against the Blockchain can only record 7 transactions
audiotaped interviews for accuracy by two senior per second, and this speed is much lower
researchers and an independent bilingual professional than the requirement of the real business
(Squires 2009) in order to preserve informants’ environment. Moreover, it is just the
original meaning and intent. beginning of digital currency and we can
1316
expect requirements to ramp up in the its proprietary infrastructure and allows other
future.... Today, transactions in Alipay and organizations to develop their own customized
WeChat peak at 180,000 and 200,000 business applications that leverage the Ledger1.0
transactions per second (tps) respectively, ledger system. For instance, ChainArchitect has
but we anticipate that the number of tps will collaborated with the People’s Bank of China (PBoC),
grow become much higher, along with the the central bank of the People’s Republic of China with
development of the digital currency. This is the authority to formulate monetary policy and to
because apart from transactions among regulate the financial institutions in mainland China, to
human parties, a greater number of lay the foundation for a large-scale deployment of
transactions will take place between distributed ledger technology in the field of financial
machines and software with the services. As clarified by the CEO of ChainArchitect:
introduction of digital currency. Therefore,
We have worked together with the People’s
one of the biggest challenges then will be
Bank of China on a project about cross-
how we can maintain the robustness and
bank money transfer in Jiangsu. It is mainly
security of transactional data when
about information sharing of serial
confronted with this huge number of
numbers on Renminbi (RMB).... There are
transactions.
similarities in money transfer between
Given the abovementioned bottleneck, ChainArchitect individuals and banking institutions. First,
focuses on enhancing the current capabilities of the it is a point-to-point situation and, second,
blockchain architecture to support unlimited and high- the aims of this action are confirmation and
frequency concurrent transactions electronically. Its information sharing. Therefore, it is natural
core business is anchored on the ledger1.0 system, a to deploy blockchain technology in this
new generation open-source distributed ledger situation. We established a connection from
technology that was officially released in June 2017. the central bank to every bill circulating in
ChainArchitect owns the proprietary intellectual the economy such that all information
property rights of the ledger1.0 system and claims that pertaining to each bill can be viewed
this technology represents a quantum leap by evolving through our distributed account ledger....
the distributed ledger technology from single ledger to What we have accomplished is much more
a tree-structure ledger. As explained by the CEO of than just identifying fake currencies. What
ChainArchitect: we could achieve is the ability to trace
every single bill in the economy, not only
Our innovation is the framework we
between banks but also between retailers
proposed.... The structure in our ledger
and customers.
technology is totally new. It is a multichain
structure and will be our future direction.... In this sense, ChainArchitect creates value by
We proposed a tree-based blockchain and innovating on the blockchain architecture as a platform
we call it distributed account book.... We technology and cooperating with third parties to
proposed a multichain, organic structure develop customized business applications. Value
that can sustain a peak rate of 300 thousand Capturing Mechanism: By providing an open-
tps...but we will keep working on improving innovation platform that is tightly coupled with its own
the performance of blockchain to make it proprietary blockchain architecture, ChainArchitect is
usable in most environments. able to capture value as the nexus for realizing
innovation in the era of distributed computing. As
Figure 2 depicts an illustrative example of the
envisioned by the CEO of ChainArchitect:
Ledger1.0 tree-shaped network with three layers and
13 blockchains. If trading partners are on the same Open source is the trend. I believe that all
blockchain (e.g. ☍00), transactional data are recorded software will embody properties of open
in the subchain only. Alternatively, if trading partners innovation in the future. The same applies
are on separate blockchains (e.g., ☍00 and ☍001), to the blockchain because it is a system built
transactional data are inscribed on both subchains on the trust of multiple parties.... It has the
synchronously. By applying a multilayer design, the potential to become a standard protocol
ledger1.0 system not only permits trading among layer that relies on the internet for value
actors located on separate blockchains, but it also exchange. Therefore, the more basic the
significantly bolsters the overall trading capacity technology is, the more open and innovative
through horizontal and vertical network expansions. it should be.... We have a general solution.
Whether you are an e-commerce platform,
Value Creation Logic: By developing its own a financial institution, or a social media
blockchain architecture, ChainArchitect is able to offer platform does not matter. You can utilize
an open innovation platform that is layered on top of our solution.... What we are providing is a
1317
basic and general solution. Regarding the development of the entire blockchain ecosystem. But,
application or service layer, we can at the same time, to deliver on this promise,
customize it based on specific business ChainArchitect is keenly aware that the solution it
scenarios, but at the core it is the same. We offers must be compatible with legacy systems of
will not develop a whole blockchain system organizations and, at times, workarounds will have to
just for you. You can utilize our solution as be devised to assure interoperability. As the CEO of
a foundation and develop the application or ChainArchitect admits, with regards to the project on
service layer by yourself. cross-bank money transfer with the PBoC, the
Challenges: Based on this, it is apparent that biggest challenge in this project is the
ChainArchitect is pursuing a variant form of value integration of the blockchain and the
shop by delivering a generic platformized solution current banking system. We have
with core technological components that circumvent encountered problems with standards and
the current limitations of the blockchain architecture in some other issues.... Therefore, what we
supporting the transactional needs of modern business have done is record the serial numbers of
applications and peripheral elements that can be bills and maintain the infrastructure for
customized to fit the requirements of distinct information sharing, the scanning of the
organizations—what we labeled a platformer strategy. serial numbers is accomplished by the
By positioning itself as the base for spawning future banks themselves.
innovation, ChainArchitect has the promise to steer the
Figure 2. Example of Ledger1.0 Network with Three Layers and 13 Blockchains
ChainFinance has successfully applied blockchain to

4.2 ChainFinance Technology Company, bring about the simultaneous flow of information on
Ltd. serial numbers of circulating bills as well as streamline
The ChainFinance Technology Company, Ltd. physical delivery and accounting procedures during
(Chainfinance) was inaugurated in October 2016 and set interbank transfers (see Figure 3). RMB is the legal
up its headquarters in Beijing. It is a professional service tender currency of mainland China, and each bill can be
provider that applies blockchain to the digital identified by a unique serial number. Through the
management of RMB. Its core business revolves around launch of a centralized database documenting the serial
the RMB interbank transfer system, which encompasses number of each bill in circulation, the movement of
both bill governance and cash management. Through currency in financial markets can be monitored and
conducting market segmentation research and “user- tracked by regulatory authorities such as the PBoC. In
centric” operational analyses, ChainFinance can turn, the PBoC is able to efficiently and effectively
pinpoint unfulfilled market needs of commercial manage cash flows in and out of the treasury. As
banking institutions and regulatory authorities in terms articulated by the CEO of ChainFinance:
of interbank transfer and RMB cash management. Our project is mainly guided by the No. 10
Backed by the Ledger1.0 system from ChainArchitect and No. 14 documents [directives] issued by
and guided by a provincial Branch of the PBoC, the People’s Bank of China.... The PBoC
requires each clearing center to package 100
1318
banknotes as a bunch, 10 bunches as a implementing the blockchain-enabled

bundle, and 20 bundles as a bag. Each interbank transfer system], banks can first
bunch, bundle, or bag comes with its own benefit from supervising employees to make
unique identifier, and commercial banking sure that regulations are being followed.
institutions can obtain the serial numbers of Another benefit is precise cash demand. For
banknotes contained in a package by instance, one bank may estimate that they
scanning its identifier and uploading the need RMB ¥1 million for operations. But to
SFN file to the database of the Money safeguard against the possibility of
Management Department. Once the cash has insufficient cash, they may demand RMB ¥2
been cleared by a releasing bank and the million in cash from the PBoC.
data successfully uploaded, the receiving Consequently, about RMB ¥1 million is
bank can gain access to the information and wasted. Besides, banks typically have no idea
authenticate the banknotes being about their cash inventory [and] the cash
transferred. This eliminates the need for demand of commercial banking institutions
duplicating the cash clearing process. does not fall under the purview of the PBoC.
Through monitoring the flow of banknote [For this reason], the system [blockchain-
data online, the Cash Allocation Division enabled interbank transfer system] is
can ascertain supply-demand patterns actually a win-win because commercial
among commercial banking institutions and banking institutions can maximize their
allocate cash accordingly. benefits by making full use of the cash,
whereas the PBoC can enforce greater
Value Creation Logic: By assuring transparency during
oversight.... Another implication is precise
interbank transfers, ChainFinance endows commercial
cash allocation. Previously, the amount of
banking institutions with augmented competencies in
cash and inventory flows were based on
managing cash flows, minimizing transaction costs, and
experience. Information was not shared,
optimizing cash balances and interest earned. By the end
which is bad for bank performance. So how
of 2017, ChainFinance had received orders from more
can one accurately allocate the cash? The
than 10 branches of PBoC and 100 commercial banking
unique serial number on bills can be
institutions with the transaction volume in the launch
employed to track where the money goes and
city exceeding RMB ¥1 billion daily. The merits of the
how much has been used. Financial
blockchain-enabled interbank transfer system are aptly
statements can be generated automatically.
surmised by the CTO of ChainFinance:
With accumulated big data, commercial
Banks [in the city where the project was banking institutions can effectively reduce
launched] have already approached us their operating costs.
because they have the demand. [By
Figure 3. Blockchain-Enabled Interbank Transfer System
1319
In this sense, ChainFinance creates value by dislodging is important.... From the very beginning, during the
incumbents from conventional value chains through pilot implementation, not all banks were willing to
blockchain-enabled services. Because transactional collaborate.” The same sentiments were echoed by the
information on interbank transfers are automatically section chief of the provincial branch of the PBoC:
inscribed onto the blockchain and can be viewed by all
There was organizational inertia. They are
parties involved, both the PBoC and commercial
happy with their current circumstances.
banking institutions no longer have to rely on one
Why bother changing them? Those banks
another for managing cash flows.
with large amounts of cash withdrawn from
Value Delivery Mechanism: ChainFinance can circulation will have to undertake extensive
capture value through leveling the playing field for modifications to their business processes.
market players by easing interbank transfer for Besides, employees responsible for full
commercial banking institutions. As stipulated in clearing are less receptive to new things
regulations imposed by the PBoC, commercial banking because they are usually older and less
institutions have to undergo a full clearing process for educated education levels.
each interbank transfer with fees incurred for each
clearing. Through migrating the clearing process onto 4.3 ChainNova, Ltd.
the blockchain, commercial banking institutions are
able to reduce the costs associated with interbank ChainNova, Ltd. (ChainNova) is a leading high-tech
transfers. As explicated by the CEO of ChainFinance: company that was co-founded in August 2016 through
a joint venture between the capital group of a listed
One issue is the supervision of cash corporation in mainland China, Zhongnan
transfers in P2P transactions. Another issue Construction (SZ: 000961), and PeerNova, a
is that the PBoC must supervise full technology corporation based in Silicon Valley. It later
clearing [of each transaction] for merged with a high-tech startup, Phoenix Tree.
commercial banking institutions.... Headquartered in Beijing, ChainNova’s core business
[Blockchain] can address these issues centers on harnessing blockchain to revamp the
through interbank transfer. Maybe in the practices of traditional industries through tailored
future, the system can be deployed in applications. To stay at the forefront of the blockchain
conjunction with digital currency to replace revolution, ChainNova has built a team with a strong
transfer checks completely. In terms of the technical background in big data, distributed systems,
PBoC’s supervision of full clearing among and networking solutions. Furthermore, the company
commercial banking institutions, the has ties to Peking University, the top research
operator or validator could then transfer institution in mainland China, which they exploit to
money without adhering to the clearing piggyback on partnerships between industry and
process in order to save time and effort. universities to gain access to the latest innovations in
This is not permitted according to the the area of financial technology. Last but not least,
PBoC’s regulations. Our system could solve ChainNova is also a member of Hyperledger, the
this problem appropriately. Bank executives global enterprise-oriented blockchain community, and
from a neighboring city have visited us and possesses a variety of platform resources to support
been inspired by our project.... They want to open source development.
reduce business costs because the clearing
process among the nine commercial With expertise across a wide range of technologies,
banking institutions in their city is ChainNova is able to deliver blockchain solutions that
commercialized and they have to are tailored specifically to the requirements of
continually pay one another for clearing individual organizations. As stated by the CEO of
processes. They hope that blockchain can ChainNova:
mitigate these costs. Another competitive advantage of our
Challenges: The above quotes show that ChainFinance company is that our relationship with
is pursuing a variant form of value network by Hyperledger is very strong. Whether
delivering a blockchain-enabled interbank transfer Hyperledger or IBM, they are very
system that strives to supplant the clearing and supportive in the development of base
supervisory roles of incumbents, which we label as a technology. Furthermore, ChainNova is a
disintermediator strategy. But, at the same time, due to member of R3. What’s more, we also have
the threat of rendering incumbents obsolete, it is other platform resources, including
natural that ChainFinance would encounter resistance Cuneiform that is developed by our
from market players embedded within conventional shareholder PEERNOVA. Basically, these
value chains. As acknowledged by the deputy director technical platforms were constructed to
of the provincial PBoC branch, “governmental support adapt to different business scenarios. They
1320
all have limitations and none of them are example is the Qixing farm. By equipping
amenable to all business scenarios. Faced the farm with a large number of sensors, it
with such a situation, our product is can generate information from breeding to
designed to fit with various fundamental growth, to storage to grain processing, to
technologies such that it can provide better transportation and sales. There are more
services to users. than 150 links in the production chain and
all of them are recorded by our system....
Value Creation Logic: Because the concept of
The system does not just solve the food
blockchain is unfamiliar to most organizations,
safety problem, it also translates into a
ChainNova creates value by assisting such
replicable business model.... From concept
organizations in isolating business practices for which
to application, we expend effort to position
blockchain can truly make a difference and delivering
the traceability system as a benchmark for
the eventual solution. Recently, ChainNova has
influencing the standard setting.
cooperated with another listed company in mainland
China, Beidahuang Group (SH: 600598) to construct Value Capturing Mechanism: Though ChainNova
an agricultural product traceability platform on the excels at delivering tailored applications that
basis of their data (see Figure 4). This, in turn, gives revolutionize preexisting business practices of
rise to a certification and supply traceability system for traditional industries, it is also keen to capture value by
agricultural products that is founded on blockchain. As replicating these blockchain-driven business practices
clarified by the CEO of ChainNova: in other sectors. For instance, ChainNova is
contemplating ways of transferring lessons learned
Beidahuang is a listed company who owns
from the rice traceability system to product traceability
the largest grain production base in China.
scenarios in general. As explained by the CEO of
Rice produced in the northeastern part of
ChainNova:
China is famous for its quality and is very
popular in the domestic market. We hope we can exploit the traceable
Beidahuang, supported by Heilongjiang feature of blockchain to help traditional
Production and Construction Corps, owns industries in China transform and
more than 10 million acres of land and has innovate.... By employing the blockchain,
equipped hundreds of farmers with IoT we can create (1) a set of systemic standards
sensors. We are now cooperating with them for product traceability such that these
to construct the rice traceability system.... standards can be duplicated and promoted
The Blockchain Farm project is aimed in other areas, (2) an e-commerce platform
at providing end consumers with safe and with traceability components to guarantee
traceable rice via blockchain technology.... the quality [of products offered], and (3) a
Our core objectives in the project are to (1) business cooperation platform which
achieve quality assurance of the production combines the blockchain with IoT devices
process and the ensuing products; (2) and best industrial practices.
facilitate logistical distribution, and; (3)
boost farmers’ real income.... A good
Figure 4. Blockchain-Enabled Traceable Rice System
1321
Challenges: The quote above indicates that Drawing from their experience in e-commerce
ChainNova is pursuing a variant form of value chain transactions and risk-control management,
by delivering tailored applications that upend ChainSecurity was inaugurated in September 2012 to
preexisting business practices in traditional industries, exploit the proprietary data resources of the company’s
which we label as a transformer strategy. Yet, e-commerce platform in order to offer sophisticated
variations in business practices across organizations financial solutions in areas of asset management,
restrict the transferability of lessons learnt. As consumer credit, payment, and supply chain financing.
confessed by the director of the Product Department, ChainSecurity harvests a vast array of consumer and
the “first step is to understand the industry... we are not transactional data to build complex credit and risk-
farmers and we do not understand agriculture despite control models that enable the company to offer
having constructed the rice traceability system.... It is almost-instant credit line approvals for low-risk
definitely hard to convince the industry if no one individuals and companies. As the chief product
understands the process...it takes time.” The CEO of officer of Structural Finance Department relates:
ChainNova further reinforced:
Our positioning is to become a
We are not in a rush to achieve technological company that offers services
profitability.... It is because our priority is to financial institutions. Why? First, the
to find a suitable business scenario for market potential is enormous with
nurturing blockchain technologies. Our numerous finance institutions in China. For
vision for future society is to replace example, the current banking system
centralized governance structures with necessitates that millions of commercial
distributed ones.... At present, the banking institutions are scattered across
blockchain is in its maturing stage and a China to provide services to local
more reliable approach would be to find a communities. However, these banking
suitable business scenario and take institutions are confronted with a lack of
advantage of the technology to push qualified technical talent. ChainSecurity
industry to create real value.... As a matter has the capability to fill this gap. We have a
of fact, most people are not familiar with strong background in both toB and toC
blockchain and they can only get to know scenarios. Besides, we are not only
the technology indirectly via actual experienced in consumer and supply chain
business applications. Therefore, our financing, we also have expertise in
current thinking is to find a business electronic payment and wealth
scenario where industry can benefit from management.... [For the past couple of
deploying blockchain in the near to medium years], we have been trying our best to
term, like 1-2 or 3-5 years. We will then harness advanced technologies to augment
expend effort to implement the blockchain the customer experience in every possible
solution as a replicable business way. Through years of operating in this
model. For example, in the case of space, we have now entered the strategic
Beidahuang, 10% of total grain output in transformation phase where we would like
China is produced there and the usefulness to draw on our capabilities to create value
of blockchain can be easily verified through for others such as banks and other financial
its scale. It is the same in the area of institutions. To date, we have cooperative
finance. We are trying to find a business arrangements with more than 400 banks,
scenario that can benefit from 100 financial institutions, and 60 insurance
deploying blockchain. Suitable business companies.... In contrast to most Chinese
scenarios rather than the project will enterprises who favor a closed-loop system
always be our starting point. in order to acquire and/or maintain a
monopolistic position in the value chain,
4.4 ChainSecurity, Ltd. we prefer to keep our solutions open,
empowering financial institutions to
ChainSecurity, Ltd. (ChainSecurity) is the financial achieve their objectives by supplying either
subsidiary of a Chinese e-commerce company with capital and/or technical resources.
headquarters in Beijing. The e-commerce company is
a member of Fortune 500 and a key competitor to the Value Creation Logic: Due to its background in
Tmall run by Alibaba. With annual growth of 50%, it supply chain optimization, ChainSecurity is uniquely
currently has over 260 million active consumers. In positioned to create value by harnessing the
terms of trading volume, the average compounded technological capabilities of blockchain to bolster
growth rate is 152% per year for the past 12 years. benefits for multiple parties involved in conventional
value chains. An area that has been peddled by
1322
ChainSecurity to be a key beneficiary of blockchain uploaded to the blockchain via

applications, is that of asset-backed security2 (ABS). ChainSecurity Payment. This guarantees
Since mid-2017, ChainSecurity’s ABS cloud platform the truthfulness of asset performance
and Jianyuan Capital have been collaborating to issue because the information cannot be
a car finance lease ABS project whose entire process manipulated. We are now cooperating with
is mapped onto a blockchain. As explained by the several small-scale but reliable consumer
chief product officer of the Structural Finance finance companies that may not have a
Department: strong corporate credit rating.... These
small-scale consumer finance companies
We discovered that ABS is the best business
face formidable challenges in raising
scenario for blockchain application. First,
capital due to high costs. We purchase their
pricing ABS by a data-driven method has a
assets in a way that we can trace each
natural advantage. Second, securities are
trading detail. For example, we employ a
not standardized, and keeping track of
powerful database engine to assess an
transactions among a massive number of
applicant’s [e.g., small-scale consumer
participants would be extremely tedious.
finance company’s] repayment ability and
Third, sellers and buyers do not trust each
default probability when the application is
other.
submitted. If the applicant meets our
Figure 5 depicts major challenges associated with the standards, we will purchase its
conventional means of issuing ABS. The infusion of corresponding asset packages and transfer
blockchain into ABS business applications hence aids the loaned capital into the applicant's
in overcoming the hurdles outlined in Figure 5. As account. This creates a closed-loop cash
highlighted by the chief product officer of the flow system. We also rate these asset
Structural Finance Department: packages and resell them to investors with
varying risk preferences.
We landed two small-sized projects where
lending and payback information is
Figure 5: Overview of Traditional System for Issuing Asset-Backed Securities (ABS)
2
An asset-backed security (ABS) is a financial security securities are not mortgage-based, an ABS is similar to mortgage-
collateralized by a pool of assets such as loans, leases, credit card backed securities. See https://www.investopedia.com/terms/a/asset-
debt, royalties or receivables. For investors, an ABS is an alternative backedsecurity.asp#ixzz5B6Jl3YsS.
to investing in corporate debt. With the exception that the underlying
1323
Figure 6: Overview of Blockchain-Enabled System of Issuing Asset-Backed Securities (ABS)
Conceivably, the blockchain-enabled ABS solution [The blockchain-enabled] ABS system

offered by ChainSecurity benefits each party in the contains four periods: designing and
value chain differently. As clarified by the chief building, ABS issuing, duration
product officer of Structural Finance Department: management, and secondary market
circulation. In the designing and building
Benefits would differ for each participant.
period, the biggest issue is how to ensure
For example, for originators, the system
the authentication of asset information. We
offers a financing channel through which
apply the blockchain in this scenario by
they can separate their assets from those of
cooperating with third parties like credit
their credit clients. Besides, through the
institutions to register information of each
blockchain, originators can enjoy a
transaction on the blockchain.... The second
reduction in financing costs since each
period, the issuing process of ABS, is very
asset is registered in the blockchain and the
complicated. Because it is hard for
whole process is completed on the chain.
investors to comprehend the underlying
As for investors, one advantage is that the
risk, we devised a program to incorporate
blockchain system can provide a better
transactional details and calculate payment
understanding of asset risk. Through more
order. It is a multilayer structure. Beyond
precise pricing of assets, in relation to their
this, we record each transaction on the
risks, investors can estimate profits more
blockchain and create a smart contract to
accurately and reduce their investment
automatically generate various
risk.
transactional documents. This makes it
The merits of the blockchain-enabled ABS solution possible for regulators to exercise diligence
are summarized in Figure 6. in monitoring transactions.... Only when all
transactional information is verified will
Value Capturing Mechanism: The introduction of the
the remaining steps in the issuing processes
blockchain-enabled ABS solution thus allows
be triggered.... The third period is duration
ChainSecurity to not only capture value by mediating management. It concerns how you allocate
exchanges among multiple parties in conventional your assets before issuing ABS and
value chains, but also to extract value from delivering
confirming that the sale is strictly in
game-changing solutions for these value chains. As
accordance with the structure design. In the
described by the chief product officer of the Structural
past, the third period depends on human
Finance Department:
actions, which come at a high cost with no
1324
guarantees. By applying blockchain, we can organizations that meet the requirements of enterprise
execute interagency operations based on applications in terms of performance, permission,
smart contracts. Furthermore, by privacy, reliability, security, and scalability. Focal
automatically generating transactional features of Draftchain includes a high-performance
documents, human errors can be avoided robust consensus algorithm, a data failure and recovery
such that the authenticity and accuracy of mechanism, a dynamic membership management and
information can be assured. privilege control, a multilevel encryption mechanism,
platform monitoring, and a smart contract engine. As
Challenges: ChainSecurity is pursuing a variant form
stated by the founder and vice president of ChainDraft:
of value network with the key objective of rewriting
the rules of the game and reforming the way exchanges Our core competitive advantage is the self-
among multiple parties in conventional value chains developed fundamental blockchain
transpire, what we labeled as a mediator strategy. It is platform Draftchain. It is a close-sourced
inevitable for ChainSecurity to encounter obstacles in platform. In terms of business application
acquiring the buy-in from market players. As scenarios and its technical route, it is
explained by the chief product officer of the Structural comparable to IBM’s Fabric and it is a
Finance Department: consortium blockchain. We have
undertaken enhancements to its
We do not face many technical problems.
functionality and performance. For
Unlike artificial intelligence which
example, we improved the core algorithm—
demands complicated mathematical
the Byzantine-fault-tolerant algorithm to
computations, blockchain is just a simple
attain a higher throughput. Additionally, we
network protocol. For example, in the area
also boosted its performance by enabling
of finance, virtual assets like inflows and
dynamic node management. In the past,
outflows can be converted into digital
whenever there was a need to add or delete
information. Hence, the application of
new nodes, the network had to be closed,
blockchain will not be too difficult.... At
but now, we can add or delete new nodes
present, we are still exploring how to set
online while updating the information
limits of authority for all participants. It is
synchronously. Moreover, we also
tough to assign responsibility to each
strengthened cryptographic security by
involved party due to corporate sensitivity
incorporating the SM1 cryptographic
on topics such as data confidentiality.... We
algorithm and adjusting to domestic
want to involve all participants in the
requirements in the financial industry.
blockchain, but it might be tough to form
There are around 20-30 people on our team
such value chain alliances because some
who are tasked with developing and
participants may not adhere to rules and
maintaining Draftchain.
update changes to information in a timely
fashion.... Our approach involves a Value Creation Logic: To create value, ChainDraft
considerable number of players and we are focuses on advancing the next generation of trusted
devising a series of game-changing rules value exchange networks that can lead to the
for the market. If every participant obeys development of illustrative business applications and
the new gaming rules, effective risk general industry solutions for the financial industry.
management could be realized.... The real An exemplary project for showcasing the strengths of
challenge is how we can persuade other ChainDraft, is the e-draft management system that
financial institutions to adopt the solution, ChainDraft codeveloped with a national joint-stock
because only with proactive participation of commercial bank located in mainland China. As
these intuitions can the new gameplay explained by the founder and vice president of
eventually be accepted. ChainDraft:
...planned from the second half of 2016 and
4.5 ChainDraft Technology, Ltd launched in the first half of 2017. It is a
ChainDraft Technology, Ltd (ChainDraft) was completely new business scenario that was
inaugurated in 2016 and its core business is founded proposed by [the commercial bank]
on the fully autonomous domestic consortium ....Suppose a business operator, such as
blockchain platform of Draftchain. 3 ChainDraft company A, created an account in a
delivers blockchain-enabled network solutions for banking institution and deposited a margin
3
Draftchain is a pseudonym, as the companies have requested
anonymity.
1325
so that a bank draft could be issued to pay recognized if the QR code is scanned by
for routine purchases [e.g., purchasing food sellers. Furthermore, regulations
office tables and chairs]. The current pertaining to draft management [e.g., case
process is that the business operator first withdrawal rules and interest rates] can be
goes to market to select the product and inscribed into the smart contract in
negotiate the price with the merchants advance.
before signing a contract. Next, the business
Figure 7 depicts an overview of the aforementioned e-
operators submit the contract to the finance
draft management system. Based on the quote above, it
office where the payment is processed, and
is apparent that ChainDraft creates value by co-
the merchants then deliver the goods to the
innovating with organizations to develop novel
company. The entire process may take
applications that benefit market players. As explained
weeks or even months to be completed. It is
by the founder and vice president of ChainDraft:
not efficient and could be expedited....
Through the deployment of our e-draft For the business operator who utilizes the e-
management system, a mobile phone draft management system, it can (1)
application is provided to business accelerate the purchasing process and
operators. Business operators can issue the attain time efficiency, (2) conserve
e-draft through the application and they can communication and fractional costs, (3)
validate it by logging into their accounts. monitor the whole life cycle of the e-draft
For example, a business operator could and obtain timely information on spending
first issue an e-draft with a ¥5,000 budget amount and account balance, and (4)
for purchasing stationery. After negotiating increase the liquidity of their e-draft.... For
with merchants, he/she could pay directly the merchants, they can trace the e-draft and
by allowing merchants to scan the QR code get to know its authoritative source.
linked to the e-draft and would obtain the Unfortunately, at this stage, because the e-
goods almost instantaneously. Merchants draft management system is only adopted by
can use the e-draft to make payments to the initiator [bank], merchants can only
others or to withdraw cash from the bank. withdraw cash from that bank. In the future,
Notably, throughout the whole process, the if other banking institutions were to join the
e-draft functions as an accounting system, merchants would be able to
voucher.... The e-draft is programmed by withdraw cash from these other banks and
smart contract and facilitates control to be the liquidity of e-draft would significantly
enforced during the purchasing process. improve.
For example, if the e-draft is designated for
stationery purchases, it cannot be utilized to
buy any other product: payment will not be
Figure 7. Overview of Blockchain-Enabled E-Draft Management System
1326
Value Capturing Mechanism: Pursuing a variant form The main challenge of this project is in the
of value chain, ChainDraft works closely with early communication stage. Because
organizations to cocreate service applications that blockchain is quite new, no one knows what
operate exclusively on its self-developed proprietary the final product could be, and what value
blockchain platform, which we label as a co-innovator can be created. It takes a long time to
strategy. It is able to capture value through licensing repeatedly interact with commercial banks
agreements for its platform technology. Specifically, to pin down the business logic. In the end,
ChainDraft provides excellent support with respect to we decided to break it down into smaller
application development, maintenance, and upgrades. phases, and start with low-volume business
As stated by the founder and vice president of processes such that it would not impact the
ChainDraft: majority of consumers.... Even though our
company is profitable, our clients, in most
When collaborating with financial
cases, have yet to see profits. This is
institutions, we first provide the fundamental
because, apart from initial outlays in
blockchain platform through an authorizing
developmental work, there are ongoing
mechanism. Then, based on Draftchain, we
costs associated with maintenance.... At this
work with these financial institutions to
early stage, organizations mainly apply the
codevelop the upper layer service
blockchain in new, small-scale business
applications. For projects demanding high
scenarios that do not yield a large volume of
levels of confidentiality, core system
customers. If blockchain solutions were to
development will be conducted by the
be adopted for large-scale business
financial institutions themselves, we are
applications in the future, they should
only responsible for providing bottom layer
become profitable ventures for
interface and performing work on the
organizations.
periphery, such as developing mobile
applications.... The general application
development process includes (1) demand 5 Discussion
analysis, (2) program planning and setting,
Blockchain, with its humble origins as the primary
(3) testing, and (4) deployment.... For
infrastructure for the transfer of value in
instance, we did not encounter any major
cryptocurrencies, has emerged as an attractive way for
technical problems when interfacing with
organizations to chronologically capture and store
the bank’s original system. We supplied all
transactional data in an immutable manner. In turn,
kinds of API interfaces, such as Java,
this has spurred manifold possibilities in the
Python, and so on. Commercial banks can
application of decentralized and distributed
easily access our blockchain platform and
computing to a wider spectrum of business practices
utilize its functions without expending extra
that extends beyond currency markets. But, at the
effort on blockchain development....
same time, the nascent stage of blockchain
Essentially, our profit model conforms to an
development implies that successful business
authorizing pattern, since organizations
applications of the technology continue to be elusive
have to buy the licenses. As for system
with most organizations embracing an optimistic but
updates, it depends on the terms stipulated
cautious outlook on its potential. To better understand
in the original contract. For example, we
the ways that organizations entering this space can
can promise to offer free updates, but
create and capture value, we drew on the theoretical
depending on the complexity of these
lens of the digital business model (Al-Debei and
updates, organizations may have to
Avison, 2010) and value configuration (Stabell and
occasionally share the costs.
Fjelstad, 1998). Through conducting comparative and
Challenges: Since blockchain development is still in its in-depth case studies on five companies that have
infancy, a significant hurdle for ChainDraft lies in rolled out blockchain initiatives, we arrived at five
convincing organizations of its value proposition. Even distinct business models inspired by creative
when convinced, organizations may only be willing to applications of blockchain (see Table 1). Furthermore,
undertake experimental implementations on a much for each of these business models, we shed further
smaller scale. This, in turn, presents a challenge to light on the value creation logic, value capturing
ChainDraft because its business model relies on mechanism, and challenges associated with each
licensing agreements and the margins on investment model. In this sense, findings from this study have
will be much lower for small scale implementations of significant implications for both theory and practice.
blockchain solutions. As explained by the founder and
vice president of ChainDraft,
1327
5.1 Implications for Theory also stem from the reorganization of longstanding
relationships among market incumbents (e.g.,
By deriving a typology of business models for disintermediator and mediator) or the streamlining of
blockchain companies, this study contributes to extant outdated business practices (e.g., transformer and co-
literature on three fronts. First, even though it is innovator). In this sense, we extend extant literature
undeniable that blockchain, as a novel architecture for by recognizing the broad spectrum of value creation
value delivery, holds the promise of democratizing and capturing opportunities afforded by blockchain
access to information for stakeholders, knowledge technology beyond the parochial focus on ecosystem
gaps exist with respect to how organizations can (c.f., Crosby et al., 2016).
harness the technology for building lucrative
businesses. Findings from this study thus aid in Second, this study yields insights into how each of the
bridging these knowledge gaps by deriving a typology five business models represented in our typology
with five distinct business models that can be pursued captures value. Specifically, we can infer from the
by organizations to appropriate value from case analysis that each of the five business models
blockchain—namely, platformer, disintermediator, embeds a distinctive view of how value can be
transformer, mediator, and co-innovator (see Table captured. While the platformer is keen to corner the
1). Whereas the platformer (e.g., ChainArchitect) market by positioning itself as the standard on which
competes by innovating on the base technology in a future innovations can be developed, the transformer
bid to increase the appeal of its own proprietary and co-innovator capture value by improving the
implementation of the blockchain architecture as an preexisting practices of businesses, albeit via separate
open platform upon which third parties can develop mechanisms. Like a consultant, the transformer works
business applications, the disintermediator (e.g., with select organizations to devise functional
ChainFinance) and mediator (e.g., ChainSecurity) blockchain solutions for addressing contemporary
insert themselves into conventional value chains by business issues and then transfers the lessons learned
transforming the way transactions occur among to other industries facing similar problems. On the
incumbents. In particular, the disintermediator other hand, the co-innovator, by developing firm-
assumes a more disruptive stance by seeking to specific blockchain alternatives to preexisting
dislodge the market position of incumbents (e.g., business practices, captures value through co-
replacement the People’s Bank of China as the licensing agreements, thereby generating a steady
clearinghouse in interbank transfers), while the flow of income. For the remaining two business
mediator tries to benefit incumbents by resolving models, the disintermediator captures value by acting
inefficiencies in conventional value chains (e.g., as a market equalizer for players that have been
accurate pricing and better risk assessment of asset- disadvantaged in conventional value chains, whereas
backed securities). Interestingly, the coexistence of the mediator reaps its rewards through offering firm-
both disintermediator and mediator strategies implies specific benefits to each party participating in these
that blockchain may not always disrupt conventional value chains.
value chains as speculated in past studies (e.g., Crosby Last but not least, through a deeper understanding of
et al., 2016; Glaser, 2017), it can also resolve how five companies have strived to build profitable
inefficiencies in conventional value chains. As businesses from blockchain, we were also able to
opposed to the three preceding business models, ascertain challenges that threaten the longer-term
which create and capture value from networked feasibility of these business models. For the
economies, both the transformer (e.g., ChainNova) platformer, the greatest hurdle to its ambition of
and co-innovator (e.g., ChainDraft) operate on a firm acquiring a dominant, if not monopolistic, market
level, opting to collaborate with individual position in blockchain innovations, stems from its
organizations in delivering firm-specific business compatibility with existing infrastructures. In the
applications. Of the two, the transformer is more absence of compatibility, the platformer will struggle
conservative in that it does not attempt to depose of to convince third parties to innovate on its platform.
preexisting business practices, but rather, devises Expectedly, for the disintermediator and mediator,
blockchain solutions that complement these business challenges are rooted in incumbents’ resistance to
practices (e.g., product traceability system for their attempts to subvert conventional value chains.
manufacturers). Conversely, the co-innovator Due to the disintermediator’s desire to alter how value
undermines preexisting business practices by exchanges occur in conventional value chains, it is not
conceiving parallel work systems that rival how surprising for the disintermediator to be confronted
businesses function (e.g., e-draft management with incumbents who question the return on
system). Even though the platformer resonates with investment for the new solution. For the mediator, the
the previous characterization of blockchain introduction of parallel work systems demands
technology as a catalyst for coevolution ecosystems fundamental changes to routines that are often tough
(see Figure 1), findings from our study also suggest to realize due to entrenched business practices.
that blockchain-inspired digital business models can
1328
Table 1. Typology of Blockchain-Inspired Business Models

Business Value Shop Value Network Value Chain
Model ChainArchitect ChainFinance ChainSecurity ChainNova ChainDraft
Dimension [Platformer] [Disintermediator] [Mediator] [Transformer] [Co-Innovator]
Value Value created from Value is created Value is created by Value is created Value is created
Creation innovating on the through resolving from by codeveloping
Logic blockchain increases the displacing inefficiencies in revolutionizing rival blockchain
appeal of its own incumbents from conventional value contemporary solutions to
proprietary blockchain conventional chains (e.g., business preexisting
architecture as an open value chains (e.g., originators of asset- practices (e.g., business practices
platform that third parties an interbank cash based securities can rice traceability (e.g., e-draft
can use to develop transfer system separate their credit system for system with a
business applications that bypasses the clients from their Beidahuang) domestic
(i.e., organic, tree-based People’s Bank of own assets, while commercial bank)
blockchain architecture China (PBoC)) investors can lower
with enhanced risk by valuing
performance over securities much
traditional architectures more accurately)
in terms of transaction
speed and volume)
Value Value is captured by Value is captured Value is captured Value is captured Value is captured
Capturing positioning itself as the by acting as a by offering firm- through through licensing
Mechanism primary standard on market equalizer specific benefits to formulating of codeveloped
which future innovations for players who each party functional blockchain
can be developed have been participating in blockchain solutions
disadvantaged in conventional value solutions for
conventional chains tackling
value chains contemporary
business issues
and then
transferring
lessons learned to
other industries
facing similar
problems
Challenges Compatibility with Resistance from Acquiring buy-in Variations in High initial
preexisting infrastructures other players from incumbents to business investments for
(e.g., standards in bank embedded within revisit entrenched practices across small enterprises
account information and strategic value business practices organizations due to
sharing protocols) networks and adapt to new reduce developmental
work routines transferability of and ongoing
lessons learned maintenance
costs
Because of their emphasis on firm-specific solutions, for blockchain and its implications for further theory
the transformer and co-innovator will encounter development along the lines of how blockchain-
challenges pertaining to the ability of their proposed inspired business models can be formulated.
solutions to penetrate the market. Even though the
transformer can attain economies of scale and scope by 5.2 Implications for Practice
replicating its blockchain application across industries,
the specificity of each application, given that it has This study informs practice in two ways. First, even
been tailored to a given organization, hinders the though blockchain is an emerging technology with
transferability of lessons learned. In the same vein, the numerous opportunities for meaningful business
co-licensing value capturing mechanism can only yield applications, contemporary applications of blockchain
rewards for the co-innovator if organizations are still exist at an experimental stage. Consequently, this
willing to go beyond small-scale experimentations of study offers an overview of prevailing business models
the proposed blockchain solution. Arguably, it is that have manifested alongside advances in blockchain
evident that this study can be heralded as a modest technology. For each business model, we further
effort to bring clarity to the nebulous state of progress provide rich descriptions of the case company detailing
1329
how value is created and captured. More specifically, blockchain-inspired business models (due to positive
as uncovered in our case analysis, value appropriation endorsement and reassurance from the PBoC and the
of blockchain technology can occur on three levels, CAICT) we do not deny that these five case companies
namely the ecosystem as a whole (i.e., platformer), are neither definitive nor exhaustive. In spite of our
conventional value chains (i.e., disintermediator and conviction that the two dimensions of value delivery
mediator), and individual organizations (i.e., architecture and value stakeholder network advocated
transformer and co-innovator). In this sense, findings by Al-Debei and Avison (2010) can be omitted from
from this study may assist practitioners, who are our analysis of the five case companies without a loss
already operating in or who possess intentions of of richness, we do accept it as a limitation of this study.
venturing into this space, in gaining a comprehensive We therefore urge future researchers to be mindful of
view of the current blockchain ecosystem. This, in innovative business applications of blockchain that do
turn, helps detect unfulfilled market needs that are best not conform to the general expectations about value
served through the provision of new blockchain- delivery architecture and the value stakeholder
enabled business applications. network. Moreover, we have no doubt that our work
can be expanded through conducting case studies on
Second, apart from the discovery of blockchain-
other blockchain companies in the market, especially
inspired business models, we also describe challenges
those operating in countries other than mainland
exclusive to each of the five business models that may
China. It is our firm belief that the typology of
erode its longer-term profitability. As such,
blockchain-inspired business models advanced in this
practitioners, who are already operating in or who have
study can be further refined to be indicative of the wide
intentions of venturing into this space, may draw on
range of value creation logics and value capturing
findings from this study to anticipate and stay vigilant
mechanisms across blockchain companies.
against possible pitfalls when pursuing a certain
business model. For instance, the co-innovator may
have to forsake the co-licensing arrangement and Acknowledgments
switch to another revenue-generating option if it
This paper would like to acknowledge the support from
continues to face an uphill task in market penetration.
People’s Bank of China, Centre for Inclusive Finance
and UNNC-NFTZ Blockchain Laboratory
5.3 Limitations and Future Research (Established with support from Ningbo Free Trade
Admittedly, this study is constrained in its Zone). The project was partially supported by NBSTB
generalizability due to the analyses of five companies: project 2017D10032.
Though we are fairly confident that our case
companies are representative instantiations of
1330
Crosby, M., Pattanayak, P., Verma, S., &

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Appendix A
Table A1. Detailed Breakdown of Data Sources
Primary Data Secondary Data
Breakdown of Interviews
Purpose of
Organization Timing Web No.
Informant No. of Interview
1st 2nd 3rd Source Articles
interviews Total
Interview Interview Interview
Blockchain Companies
102 To explore how
CEO 2 58 mins 44 mins -
mins blockchain
67 companies who
ChainArchitect CTO 2 20 mins 47 mins -
mins only provide
Company, Ltd. - 36
fundamental
(ChainArchitect) Vice
president, 20 technology
2 20 mins - create and
Government mins
Affairs capture value
284
CEO 3 75 mins 101 mins 108 mins
mins
Project 87
3 22 mins 50 mins 15 mins To reveal the
director mins
ChainFinance business logic of
Technology Director, blockchain
30
Company Business 2 15 mins 15 mins - - 27 company that
mins
Limited Division only provide
(ChainFinance) Senior 63 customized
2 15 mins 48 mins - solutions
engineer mins
Brand 20
1 20 mins -
manager mins
30 To detect how
CEO 1 30 mins - can blockchain
mins
companies that
Founder/Vice 91 provide both
ChainDraft 1 91 mins -
president mins self-developed
Technology,
Ltd. - 21 fundamental
technology and
(Chain Draft)
Vice general 99 upper layer
1 99 mins - applications
manager mins
create and
capture value
General
manager,
35
Structured 1 35 mins -
mins
Finance
Group
To observe how
Chief product blockchain
ChainSecurity, officer, 153
2 68 mins 85 mins - companies can
Ltd. Structured mins N/A 32 create value by
(ChainSecurity) Finance Dept. adopting
Director, existing Fabric
60 Network
policy 1 60 mins -
mins
Institute
Senior
43
consultant, 1 43 mins -
mins
Patent Dept.
ChainNova, Ltd. 146
CEO 2 65 mins 81mins - 43
(ChainNova) mins
1334
Director, www. To examine the

51 chainnova.
Technical 1 51 mins - business model
mins com
Department of blockchain
Director, 45 companies that
1 45 mins - provide
Product Dept. mins
technical
Director, solutions by
32
Marketing 1 32 mins - combining
mins
Dept. several open
source
Brand 63
1 63 mins - blockchain
Manager mins
technologies
Banking Institutions
Deputy To acquire a
30
director, 1 30 mins - strategic
mins
Department A overview of the
blockchain-
Section chief, 35 based banknote
1 35 mins -
Department B mins supply chain,
People’s Bank understand the
of China Vice section adoption
47
(PBoC), chief, 1 47 mins - N/A 6 motivation, the
mins
provincial Department C practical
branch challenges
involved in its
Manager, realization and
113
Deptartment 2 70 mins 43 mins - also the
mins measures taken
D
to address these
challenges
China Vault 20 To assess the
1 20 mins -
Construction manager mins receptivity of
N/A N/A commercial
Bank (CBC), Department 20
city1 branch 1 20 mins - banks who have
director mins
already adopted
the blockchain-
enabled
interbank
transfer system
Agricultural Director,
and unravel
Bank of China Personal 35
1 35 mins - N/A N/A changes in
(ABC), city2 Banking mins
business
branch Depart.
processes
brought about by
its
implementation
Director,
65
Financial 1 65 mins -
People’s Bank mins
Service Dept
of China,
Director, N/A 3 To examine the
municipal receptivity of the
branch Monetary 24
1 24 mins - potential
Finance mins
Office blockchain-
enabled
Director, interbank
Industrial and Personal 33
1 33 mins - transfer system
Commercial Banking mins
Bank of China N/A N/A users
Dept.
(ICBC), city2
branch Department 20
1 20 mins -
director mins
1,326 514 1,963
Total 31 43 123 mins 3 168
mins mins mins
1335
Appendix B
Table B1. Coding Examples
Examples of participants’ words Open coding and axial coding Selective coding
ChainArchitect
Value Creation Logic
• To me, blockchain is still at an infancy stage. The technology
is not stable and the business environment is not prepared as
well. But at the same time, it is both a challenge as well as an
opportunity. Consequently, what is special about our
company is that we focus on the fundamental technology. We Offer an open
have our own projection of the potential of blockchain as well innovation
as our own thoughts about how the technology should platform
develop.... Our core competence is based on our own
developed L0 distributed ledger system [and] we try to figure
out plausible business models based on the system…. Our
innovation is the framework we proposed, where a tree-based [Platformer]
blockchain network can achieve almost 300 thousand tps. Delivering a generic
(CEO, ChainArchitect) platformized
• We have worked together with a provincial People’s Bank of solution with core
[Value Shop]
China on a project about cross-bank money transfer. It is technological
Resolves
mainly about information sharing of serial numbers on components that
problem posed
Renminbi (RMB).... We established a connection from the Provide business circumvent the
by current
central bank to every bill circulating in the economy such that solution based on current limitations
blockchain
all information pertaining to each bill can be viewed through self-developed of the blockchain
architecture in
our distributed account book.... What we have accomplished blockchain architecture in
recording
is much more than just identifying fake currencies. What we platform supporting the
transactions at
could achieve is to trace every single bill in the economy, not transactional needs
a speed
only between banks but also between retailers and customers. of modern business
necessary for
(CEO, ChainArchitect) applications and
modern
peripheral elements
business
Value Capturing Mechanism that can be
applications
• Our company’s mission is to supply fundamental blockchain customized to fit
technology to aid customers in developing business the requirements of
applications that cater to their competitive needs and market distinct
environment.... Open source is the trend. I believe that all Acting as the organizations
software will embody properties of open innovation in the nexus for
future. The same applies to blockchain because it is a system realizing
built on trust of multiple parties.... It has the potential to innovation
become a standard protocol layer that relies on the internet
for value exchange. Therefore, the more basic the technology Setting primary
is, the more open and innovative it should be.... We have a technique
general solution, whether you are an e-commerce platform, standards
a financial institution, or a social media platform does not
matter. You can utilize our solution as a foundation and
develop the application or service layer by yourself. (CEO,
ChainArchitect)
ChainFinance
Value Creation Logic [Value

[Disintermediator]
• Repeated usage of the system [blockchain-enabled interbank Network]
Rebuilt the Delivering a
transfer system] can lead to an accumulation of data on Alters the
interbank cash blockchain-enabled
interbank cash transfers. In turn, this data can generate value network
transfer interbank transfer
by improving the cash demand forecasting for commercial relationship
information system that strives
banks. Beyond this, the system [blockchain-enabled among
network to supplant the
interbank transfer system] is useful in compelling commercial
clearing and
commercial banks to adhere to the clearing requirements banking
1336
stipulated by the PBoC [People’s Bank of China] because institutions as supervisory roles of
data on interbank cash transfers cannot be uploaded onto the well as incumbents
blockchain ledger unless the cash has been fully cleared. between
(Director, Business Division, ChainFinance) commercial
• The system [blockchain-enabled interbank transfer system] banking
not only reduces the regulatory expenses of the PBoC institutions
[People’s Bank of China], it also enhances the supervision Disintermediation and the
capability. Before the introduction of the system [blockchain- People’s Bank
enabled interbank transfer system], the PBoC [People’s of China in
Bank of China] cannot monitor the cash flow among interbank cash
principal banks, but now, they can obtain real-time data on transfer
interbank cash transfers effortlessly. (Section Chief,
Provincial People’s Bank of China)
Value Capturing Mechanism
• The system [blockchain-enabled interbank transfer system]
not only resolves the problems in interbank cash transfer, but
it also delivers other value added services. For example, in
City2, commercial banking institutions combine their large
amount cash withdrawal business with the system
[blockchain-enabled interbank transfer system]. Customers
can withdraw cash, which have been cleared and packaged
properly, without having to recount it, thereby simplifying the
cash withdrawal process for bank counters while reducing Enable future
the wait time for customers. (Director, Business Division, interorganization
ChainFinance) innovation
• The system [blockchain-enabled interbank transfer system]
can be utilized as a pilot test for future development of
legalized digital currency. Because at such an early stage,
developing a system for legalized digital currency or even
testing it with real money would inevitably lead to high cost
and risk. In this sense, the system [blockchain-enabled
interbank transfer system] is a perfect choice to experiment
with, for example, how digital currency could replace check
transfers. (CEO, ChainFinance)
ChainNova
• Beidahuang is a listed company who owns the largest grain
production base in China.... Beidahuang, supported by
Heilongjiang Production and Construction Corps, owns
more than 10 million acres of land and has equipped Reintegrating the
hundreds of farmers with Internet of things (IoT) sensors. We traditional rice
are now cooperating with them to construct the rice supply chain
traceability system.... The Blockchain Farm project is aimed
at providing end consumers with safe and traceable rice via [Value Chain]
blockchain technology.... Our core objectives in the project Enables
[Transformer]
are to (1) achieve quality assurance of production process informational
Delivering tailored
and the ensuing products, (2) facilitate logistical distribution, transparency
applications that
and (3) boost farmers’ real income. (CEO, ChainNova) among
upend preexisting
existing
Value Capturing Mechanism business practices
network of
in traditional
• We hope we can exploit the traceable feature of blockchain supply chain
industries
to help traditional industries in China transform and partners
innovate.. .... By employing the blockchain, we can create (1) All supply chain
a set of systemic standards for product traceability such that participants can
these standards can be duplicated and promoted in other be benefited
areas, (2) an e-commerce platform with traceability Scalable platform
components to guarantee the quality [of products offered], solutions
and (3) a business cooperation platform which combines the
blockchain with IoT devices and best industrial practices.
(CEO, ChainNova)
ChainSecurity
1337

• We discovered that ABS is the best business scenario for
blockchain applications. First, pricing ABS by data-driven Restructure the
method has a natural advantage. Second, securities are not ABS network
standardized, and keeping track of transaction among a [Value
massive number of participants would be extremely tedious. Trustworthy
Netwok]
Third, sellers and buyers do not trust each other. (General Restructures
Manager, ChainSecurity Structured Finance Department) the interaction
[Mediator]
Value Capturing Mechanism and flow of
Changing the way
transactional
• Benefits would differ for each participant. For example, for information
exchanges among
originators, the system offers a financing channel by which it multiple parties in
among
can separate its assets from those of its credit clients . Beyond Increasing conventional value
originators,
this, through the blockchain, originators can enjoy a transaction chains transpire
investors, and
reduction in financing costs since each asset is registered in transparency
regulators of
the blockchain and the whole process is completed on the asset-backed
blockchain. As for investors, one advantage is that the Mediating
securities
blockchain system can provide a better understanding of exchanges among
asset risk. Through more precise pricing of assets in relation multiple parties
to their risks, investors can estimate profits more accurately,
and reduce their investment risk. (Chief Product Officer,
ChainSecurity Structured Finance Department)
ChainDraft
• Our focal technology is the fully autonomous domestic
consortium blockchain platform: Draftchain. The Draftchain
consortium blockchain platform delivers enterprise level
blockchain solutions for enterprises, governmental agencies
and industry alliance by meeting the requirements of
enterprise level applications in terms of performance, Developing
permissions, privacy, security, reliability, scalability, blockchain
maintenance, and so on and so forth. Key features of solutions for
Draftchain include high performance robust consensus different business
algorithm, dynamic membership management and privilege scenarios
control, dynamic data failure recovery mechanism, multilevel
encryption mechainism, smart contract engine, and platform
monitoring. ChainDraft supplies general industrial [Value Chain]
[Co-Innovator]
blockchain applications like the e-draft system, data trading Enforces
Cocreating service
system, supply chain finance system and securities asset better
applications that
system. (Founder and Vice President, ChainDraft) governance
operate exclusively
over
Value Capturing Mechanism on its self-
exchanges
developed
• When collaborating with financial institutions, we first among payers
proprietary
provide the fundamental blockchain platform through an and payees of
blockchain platform
authorizing mechanism. Then, based on Draftchain, we work bank drafts
with these financial institutions to codevelop the upper layer
service applications. For projects demanding high levels of
confidentiality, core system development will be conducted
by the financial institutions themselves, we are only Codeveloping
responsible for providing bottom layer interface and services
performing work on the periphery, such as developing mobile
applications.... We supplied all kinds of API interface, such
as Java and Python. Institutional clients can easily access
our blockchain platform and utilize its functions without
expending extra effort on blockchain development....
Essentially, our profit model conforms to an authorizing
pattern whereby enterprises have to buy licenses. (Founder
and Vice President, ChainDraft)
1338
About the Authors

Alain Yee Loong Chong is a professor in information systems and dean of the Graduate School at the University of
Nottingham–Ningbo, China. He obtained his PhDs from University of Nottingham and Multimedia University
Malaysia and was a postdoctoral research fellow at Hong Kong Polytechnic University. His current research interests
include social media analytics, digital transformations, and mobile computing. His work has appeared in Information
& Management, Decision Support Systems, Transportations Research Part B: Methodological, Annals of Operations
Research, International Journal of Operations and Production Management and Information Systems Frontier, among
other journals. He currently serves as the co-editor of Industrial Management & Data Systems, senior editor of Decision
Support Systems, and associate editor of Information & Management.
Eric T. K. Lim is a tenured senior lecturer in the School of Information Systems & Technology Management at UNSW
Business School, UNSW Sydney. He investigates how technologically enabled open innovations in crowd platforms
and social media can be harnessed to benefit society. His research has been published in leading information systems
journals such as Information Systems Research, Journal of Management Information Systems, Journal of the
Association for Information Systems, Journal of the Association for Information Science and Technology, European
Journal of Information Systems, Decision Support Systems, and Information and Management, among others. He
currently serves as an associate editor for Internet Research and as an editorial advisory board member for Industrial
Management & Data Systems.
Xiuping Hua is a professor in finance at the University of Nottingham–Ningbo, China. She serves as a director of the
UNNC-NFTZ Blockchain Laboratory, executive deputy director of Ningbo Centre for New Structural Economics, and
Secretary-General for Centre for Inclusive Finance co-founded by People’s Bank of China Ningbo Branch and the
University of Nottingham–Ningbo, China. Prof. Hua’s interests include financial technology, innovation finance, and
inclusive finance. Her research has been published in The European Journal of Finance, Journal of Accounting,
Auditing & Finance, Review of Quantitative Finance and Accounting, and International Business Review, among other
outlets.
Shuning Zheng is currently a PhD candidate at the University of Nottingham–Ningbo, China and completed her
master’s degree at Durham University. Her research focuses on digital transformation, and in particular on digital
platforms and financial technology in the area of blockchain. Her work has been published in Industrial Management
& Data Systems.
Chee-Wee Tan is a professor in the Department of Digitalization at Copenhagen Business School. His research
interests center on design and innovation related to the delivery of digital services in various contexts such as e-
commerce, e-government, e-health, and m-commerce. His work has been published in leading information systems
journals including MIS Quarterly, Information Systems Research, Journal of Management Information Systems,
European Journal of Information Systems, Decision Support Systems, and Information and Management, among
others. He currently serves as a senior editor for MIS Quarterly, an associate editor for Information and Management
and Journal of Management Analytics, as an editorial advisory board member for Industrial Management & Data
Systems and Internet Research, and as an editorial board member for IEEE Transactions on Engineering Management
and Journal of the Association for Information Systems.
Copyright © 2019 by the Association for Information Systems. Permission to make digital or hard copies of all or part
of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for
profit or commercial advantage and that copies bear this notice and full citation on the first page. Copyright for
components of this work owned by others than the Association for Information Systems must be honored. Abstracting
with credit is permitted. To copy otherwise, to republish, to post on servers, or to redistribute to lists requires prior
specific permission and/or fee. Request permission to publish from: AIS Administrative Office, P.O. Box 2712 Atlanta,
GA, 30301-2712 Attn: Reprints or via email from [email protected].
1339

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Business on Chain

A Comparative Case Study of Five Blockchain-inspired Business Models

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Business on Chain: A Comparative Case Study of Five

computerized transactional protocols devised to economy will be driven by the emergence of

Figure 1. Impact of Blockchain on Preexisting Business Models

Figure 2. Example of Ledger1.0 Network with Three Layers and 13 Blockchains

ChainFinance has successfully applied blockchain to

banknotes as a bunch, 10 bunches as a implementing the blockchain-enabled

Figure 3. Blockchain-Enabled Interbank Transfer System

Figure 4. Blockchain-Enabled Traceable Rice System

ChainSecurity to be a key beneficiary of blockchain uploaded to the blockchain via

Figure 5: Overview of Traditional System for Issuing Asset-Backed Securities (ABS)

Figure 6: Overview of Blockchain-Enabled System of Issuing Asset-Backed Securities (ABS)

Conceivably, the blockchain-enabled ABS solution [The blockchain-enabled] ABS system

Figure 7. Overview of Blockchain-Enabled E-Draft Management System

Table 1. Typology of Blockchain-Inspired Business Models

Crosby, M., Pattanayak, P., Verma, S., &

banker.com/opinion/dont-believe-the-hype- from http://eprints.lse.ac.uk/85309/1/business

Director, www. To examine the

Value Creation Logic [Value

Value Creation Logic

About the Authors

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