Business Models for Blockchain-based Ventures

1. BUSINESS MODELS FOR BLOCKCHAIN-BASED VENTURES Enrico Ferro, Michele Osella, Riccardo Rostagno

3. Copyright © 2018 ISMB 6 RESEARCH QUESTIONS Along which dimensions can the blockchain ecosystem be mapped? What are the key archetypal actors and their strategical positioning? What are the emerging business models enabled by blockchain?

4. Copyright © 2018 ISMB 7 METHODOLOGY LITERATURE REVIEW Business Models: Academic literature, Strategyzer Blockchain: Academic papers, Whitepapers CASE STUDIES Long list of 1326 cryptocurrencies Mixed sampling approach: • Theoretical sampling • Empirical sampling 32 projects under lens CROSS CASE ANALYSIS Identification of 20 business models

5. 8Copyright © 2018 ISMB VALUE ECOSYSTEM FRAMEWORK BASIC INFRASTRUCTURE • Distributed ledger • Consensus algorithm • Coin as validation reward ON-CHAIN APPLICATION LOGIC • Decentralized platform that runs smart contracts executed on a virtual machine • Programming language UTILITY/ CRYPTO EQUITY TOKEN • Provides access to the services network • Guarantees voting and dividends rights OFF-CHAIN APPLICATION LOGIC • Back-end app-blockchains connection • Front-end user interface Please quote as: Ferro, Osella, Rostagno (2018) «Blockchain Value Ecosystem Framework» Link to blog post

7. Copyright © 2018 ISMB 10 SINGLE CHAIN CROSS CHAIN OFF-CHAIN APPLICATION LOGIC Decentralized applications Providers Financial Platform ProvidersUTILITY/CRYPTO EQUITY TOKEN ON-CHAIN APPLICATION LOGIC Protocols Providers Protocols Innovators BASIC INFRASTRUCTURE VALUE ECOSYSTEM MATRIX + +

8. Copyright © 2018 ISMB 11 SINGLE CHAIN CROSS CHAIN OFF-CHAIN APPLICATION LOGIC Services binders Liquidity providers Crowd aggregator Marketplaces enablers UTILITY/CRYPTO EQUITY TOKEN Exchanges Prediction market orchestrators Attention Monetizators ON-CHAIN APPLICATION LOGIC Miners Blockchain connectorsPayment services providers BASIC INFRASTRUCTURE Turn-key technical developers Scalability providersDevelopment tools providers FROM REAL-LIFE ACTORS TO ARCHETYPES + +

9. Copyright © 2018 ISMB 12 SINGLE CHAIN CROSS CHAIN OFF-CHAIN APPLICATION LOGIC Services binders Merged services Membership-based p2p lending Liquidity providers Crowd aggregator Distributed assets as a service Fly liquidity Marketplaces enablers Light intermediation UTILITY/CRYPTO EQUITY TOKEN Wallet to Wallet Exchanges Prediction market orchestrators Collective Oracle Centralized ExchangeAttention Monetizators Prosumer platform Three-sided markets ON-CHAIN APPLICATION LOGIC Miners Solo mining Cross-chain atomic swaps like Blockchain connectors Pool mining Smart Bridges Cloud mining Cross-chain messaging Mining Marketplace Decentralized exchange BASIC INFRASTRUCTURE Turn-key technical developers ICO as a service Trusted off-chain transactions Scalability providers EMERGING BUSINESS MODELS + +

10. Copyright © 2018 ISMB 14 SINGLE CHAIN CROSS CHAIN OFF-CHAIN APPLICATION LOGIC Services binders Merged services Membership-based p2p lending Liquidity providers Crowd aggregator Distributed assets as a service Fly liquidity Marketplaces enablers Light intermediation UTILITY/CRYPTO EQUITY TOKEN Wallet to Wallet Exchanges Prediction market orchestrators Collective Oracle Centralized ExchangeAttention Monetizators Prosumer platform Three-sided markets ON-CHAIN APPLICATION LOGIC Miners Solo mining Cross-chain atomic swaps like Blockchain connectors Pool mining Smart Bridges Cloud mining Cross-chain messaging Mining Marketplace Decentralized exchange BASIC INFRASTRUCTURE Turn-key technical developers ICO as a service Trusted off-chain transactions Scalability providers BUSINESS MODELS MATURITY + +

11. Copyright © 2018 ISMB 15 SINGLE CHAIN USERS’ BASED VALUE GENERATION VALUE APPROPRIATION CAPABILITY CROSS CHAIN OFF-CHAIN APPLICATIONLOGIC Services binders Merged services V V V Crowd aggregator Distributed assets as a service V V V Marketplaces enablers Light intermediation V V V Prediction market orchestrators Collective Oracle V V X Attention Monetizators Prosumer platform V V X UTILITY/CRYPTO EQUITYTOKEN Three-sided markets V V V V V V Membership-based p2p lending Liquidity providers V V V Fly liquidity V V V Wallet to Wallet Exchanges V V V Centralized Exchange ON-CHAIN APPLICATIONLOGIC Miners Solo mining V V V Pool mining V V V Cloud mining V V V Mining Marketplace V V V Turn-key technical developers ICO as a service V V V BASIC INFRASTRUCTURE V X X Cross-chain atomic swaps like Blockchain connectors V X X Smart Bridges V X X Cross-chain messaging V V X Decentralized exchange V X X Trusted off-chain transactions Scalability providers MATURITY MODEL FRAMEWORK + + BUSINESS MATURITY LEVELS

12. Copyright © 2018 ISMB 16 MARKET VALUE DISTRIBUTION VALUE APPROPRIATION CONCENTRATION Infrastructure & Exchanges > 97% Dapps & Innovators < 3% BTC 63.93%ETH 14.98% BCH 8,69% DASH 1,73% BTC ETH BCH DASH BTG LTC ADA XMR ETC NEO EOS QTUM LSK ZEC USDT NXT MONA BCN DCR VTC PIVX DOGE WTC EMC2 BTCD DGB C4 = 89,34% Source: Coinmarketcap

13. 17Copyright © 2018 ISMB CONCLUSIONS • The actors operating in the blockchain ecosystem may be mapped against two main dimensions: ◦ position in the technological stack ◦ number of blockchains with which they interact. • Eleven archetypal actors have been identified leveraging four strategic positions: ◦ Dapps providers ◦ Protocol providers ◦ Financial platform providers ◦ Protocol innovators • Twenty business models have emerged from the case studies conducted showing different levels of maturity in terms of: magnitude of the user base, clarity of the value generation and appropriation mechanisms. • From a business model perspective, three types of innovation were found: ◦ The birth of blockchains-specific business models such as mining ◦ The convergence of activities previously conducted by different players (eg: payment & reputation) ◦ Light intermediation promoting a fairer redistribution of resourses through revenue sharing mechanisms

14. innodev.ismb.it Enrico Ferro, PhD Head of Innovation Development Area ferro@ismb.it @egferro Michele Osella, PhD Head of Business Model & Policy Innovation Unit osella@ismb.it @MicheleOsella ISMB | INNOVATION DEVELOPMENT AREA

16. 20Copyright © 2018 ISMB DISTRIBUTED ASSETS AS A SERVICE Advisors with strong reputation Providers of «under utilized asset» Providers of «under utilized asset» Requestors (asset seekers) Under utilized asset exploitation Access to a cheaper asset marketplace Human resources Marketing ICO fundings Commission for every smart contract between users Github repository Two-sided platform Long term standardized Platform management Smart contract deployment Providers community Smart contract developers

17. 21Copyright © 2018 ISMB THREE-SIDED PLATFORM Platform management Publishers Improved revenues, better reporting, less fraud Users Advertisers Cheaper customer attention, better penetration Strong Privacy, No malvertising Utility token Human resources Marketing ICO fundings Share of advertizing expenditur e Long term customized Community platforms Search engines Network of volunteers for the social media management Brave browser Free & Open source browser

18. 22Copyright © 2018 ISMB LIGHT INTERMEDIATION Ethereum Advisors with strong reputation Sellers (asset holders) Access to a distributed marketplace Human resources Marketing ICO fundings Commission for every smart contract between users Short term standardized Platform management Smart contract deployment Smart contract developers Buyers (asset seekers) Access to an open marketplace Utility token Compensation for external solutions Publishing platform (e.g medium, telegram, slack) Two- sided platform

19. 23Copyright © 2018 ISMB MERGED SERVICES Value added payment system Human resources Marketing ICO fundings Commission for every payment Github repository Two- sided platform Long term standardized Platform management Smart contract deployment Application developers Smart contract developers Merchants (optional) Users Compensation for external solutions E- commerce platform Dapps

20. 24Copyright © 2018 ISMB ICO AS A SERVICE Vocational education Software developers EnterprisesExpert consultancy Workshop & Hackathon Direct company channels Short term standardized Long term customize d Product or service revenues Human resources Outreaching Software houses «Crypto stock» options Technical design and development Support Strategical designers Software & Smart contract developers

21. 25Copyright © 2018 ISMB SOLO MINING Electrical energy Mining hardware Block reward Mining Mining hardware Cryptocurrency’s users Cryptocurrency’s client Short term, anonymous Peer-to-peer electronic cash system Other miners on the same network Wallet and exchanges

22. 26Copyright © 2018 ISMB POOL MINING Mining pool partecipants (hardware holders) Facilitation in cooperative mining Medium/Long term standardized Community platforms Software developers Pool management Partecipants coordination Mining pool partecipants Fee collected for every block mined Pool operators Pool maintainance Risk diversification enabled by cooperative mining

23. 27Copyright © 2018 ISMB CLOUD MINING Multi- algorithm cloud mining services Long-term standardized Company website direct channel Small – medium investors Mining hardware Electrical energy Mining hardware Hash-rate contracts Mning pools Renting hardware for mining Hardware maintenance

24. 28Copyright © 2018 ISMB MINING MARKETPLACE Exchanges Sellers (asset holders) Regular recurring income Software developers Marketing Short term flexible Platform manageme nt Buyers (asset seekers)Flexible mining enablers Mining software Wallet manageme nt E-wallet Fees for selling hashing power Fees for buying hashing power Withdrawal fees form the wallet Deposit fee to the wallet Mining pools Publishing platform (e.g medium, telegram, slack) Two-sided platform

25. 29Copyright © 2018 ISMB MEMBERSHIP BASED P2P LENDING Two-sided platform Software developers Marketing Membership tiers price Lenders Borrowers Investment with liquid collateral Provision of new way to access the value of blockchain based asset without liquidationCommunity network Community engagement Platform manageme nt Capital on demand without liquidation Utility token ICO fundings Blockchain- based payment circuits Long term, standardized

26. 30Copyright © 2018 ISMB FLY LIQUIDITY Payment circuits ( e.g. VISA, Mastercard ) Multi- currency wallet Wallet management ICO fundings Apps developmnet Software developers Token appreciation Issuing and withdrawal fee Human resources Marketing Crypto owners and users Communit y platforms Medium- long term standardized Crypto currencies usability for every day life

27. 31Copyright © 2018 ISMB CENTRALIZED EXCHANGE ICO fundings (optional) Arbitrage on exchange rate Transactions’ fee Users Short term standardized Security Server maintenance Company website App Provision of cryptocurrencies’ trading platform Platform management Trading economics management Network community Utility token (optional) Banks Payment circuits

28. 32Copyright © 2018 ISMB WALLET-TO-WALLET EXCHANGE Arbitrage on exchange rate Provision of instant bitcoin and altcoin conversion Merchants Company website App Very short term standardized API’s Platform management Users Development’ s costs Cryptocurrency’s reserves

Business Models for Blockchain-based Ventures

Business Models for Blockchain-based Ventures

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