Exploratory Study on Business Models for Blockchain-based Ventures

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

2. Copyright © 2018 ISMB 2
WHY BLOCKCHAIN IS RELEVANT?
«What internet did for communications, I think blockchain
will do for trusted transactions»
Ginny Rommetty, CEO of

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

6. Copyright © 2018 ISMB 9
Bitcoin Ethereum Coinbase BAT Steem
OFF-CHAIN
APPLICATION LOGIC
UTILITY/CRYPTO
EQUITY TOKEN
ON-CHAIN
APPLICATION LOGIC
BASIC
INFRASTRUCTURE
VALUE ECOSYSTEM EXEMPLIFICATION

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
+
+

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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

15. 19Copyright © 2018 ISMB
ANNEXES: BUSINESS MODEL CANVASES

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