Research paper

Unchaining Social Businesses - Blockchain as the Basic Technology of a Crowdlending Platform

Studying a crowdlending social business, the paper derives 17 objectives for a blockchain-based crowdlending prototype and evaluates the prototype against a non-blockchain solution, deriving generic knowledge on blockchain applications for social business.

Paper

Overview

Publication metadata and narrative from the current library record.

Authors: Andre Schweizer, Vincent Schlatt, Nils Urbach, Gilbert Fridgen
Year: 2017
Venue: ICIS 2017 Proceedings
Methodology: Design science research; case study of a crowdlending social business; 17 solution objectives; prototype and evaluation vs. non-blockchain solution.
Publication: View publication
Design knowledge: View design knowledge on GitHub

blockchaincrowdlendingdesign-science-researchfintechplatformssocial-businessunchaining-social-crowdlending

Summary

Artifact

A blockchain-based crowdlending platform prototype for social businesses.

Methodology

Design science research; case study of a crowdlending social business; 17 solution objectives; prototype and evaluation vs. non-blockchain solution.

DSR grid

Six dimensions represented in the current paper record.

Problem description

Social businesses face conflicting objectives (social purpose versus competitive advantage and financial sustainability), and crowdlending platforms need trustworthy, low-cost infrastructure.

Input knowledge

The Peffers et al. DSR process; social-business and crowdlending literature; market-design parameters; blockchain and smart contracts.

Research process

Design science research (Peffers et al.): a case study with a founder interview, a prototype, and evaluation against a non-blockchain solution.

Key concepts

Blockchain, social business, smart contracts, crowdlending, design science.

Solution description

A blockchain-based crowdlending platform prototype for social businesses. Solution-space representation: Instantiation (prototype) driven by seventeen design objectives (model / nascent design knowledge).

Output knowledge

Seventeen objectives for the blockchain crowdlending prototype, plus generic knowledge on blockchain for social business.

Paper design map

The default semantic design map canonicalizes stored design relationships; Raw links retains the complete technical Markdown-link view.

Design-knowledge map

17 stored concepts / 0 canonical semantic relationships

Concept types

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Design knowledge

Directly linked concepts, grouped by their represented design-knowledge category.

17 Design Objectives

design-knowledge/unchaining-social-crowdlending-do1

DO1 - Financial sustainability

Since the social business is not based on donations, it must support the recovery of costs (Yunus et al. 2010). Thus, a balanced profit equation between cost and revenue is needed (Boons and Lüdeke-Freund 2013). Further, the startup's management indicated that, owing to their long-term commitment to investors and students, financial sustainability is necessary.

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DO2 - Social purpose

Social businesses act as a change agent for the world and pursue the creation of social benefits (Yunus et al. 2010). Thus, although the prototype is required to cover its costs, the social perspective and more cause-driven character are first priority (Boons and Lüdeke-Freund 2013).

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DO3 - Allow small amount investments

The crowdlending platform needs to allow the investment of small financial amounts (Lins et al. 2016). Therefore, low transaction costs are necessary for achieving a cost-efficient social business investment model.

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DO4 - Provide editable information about funding projects

The crowdlending platform needs to provide details about projects in search for funding, as information is seen as a crucial factor of the funding success (Lins et al. 2016; Overby et al. 2010). Furthermore, the ability to update the auction with recent project information has a positive effect on the funding outcome (Agrawal et al. 2014; Ward and Ramachandran 2010).

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DO5 - Provide mechanism to establish and measure user reputation

To address the market design parameter of user reputation the platform needs to provide a feedback function, enabling that a user can provide insights about their experience with a specific user after a transaction (Cabral; McDonald and Slawson 2002).

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DO6 - Define and enforce platform rules

The platform needs to be designed to act according to predefined rules (Agrawal et al. 2014). To adhere the existing standards, we follow industry regulation standards and define a maximum invest per investor as well as a maximum funding amount per student project. Furthermore, we evaluated and confirmed that assumption through the interview with one of the founders.

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DO7 - Crowd due diligence

Research studies on the crowdfunding platform Kickstarter suggest that a greater number of perspectives available to recognize something amiss are a useful tool to detect fraud (Agrawal et al. 2014). Thus, our platform must allow for comments to a project by any user.

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DO8 - Provision point mechanism

The provision point mechanism is a common practice in crowdlending platforms to address the free-rider problem, where investors wait and observe what others do before investing. Thus, our platform needs to include a parameter for minimum funding, which needs to be reached before funding is provided to a student (Agrawal et al. 2014).

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DO9 - Provide reporting functions

For regularly reporting and statistics on the social business development, the prototype must provide the functionality to run reports on the transactions of a specific period.

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DO10 - Transaction time

As soon as the funding limit is reached, the subsequent transactions should be executed for student projects to start. As the management interview indicated, to date, this has required an active trigger from staff. A time gap existed due to the intermediary bank.

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DO11 - Data persistency

To ensure transparency, traceability, and archiving requirements, the prototype needs to store data persistently and immutably. According to management, to date, this has only been done in centralized systems with classic backup redundancy.

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DO12 - Transaction volume

Currently, the volume of funded projects is fairly low; thus, the number of transactions should be manageable without constraints. However, an improved solution must be scalable.

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DO13 - Trust and personal identification

Trust and personal identification mechanisms should be seamless and should not represent an entry barrier for potential users.

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DO14 - Reduction of manual activities

The manual activities involved in the processing of the transactions and the management of project lifecycles should be further automated to reduce costs and the possibilities of fraud. Management especially mentioned cross-company activities with intermediary institutions.

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DO15 - Reliable and trustworthy transaction processing

To avoid malicious changes of funding related data, the prototype must be able to process transactions in a reliable and trusted way.

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DO16 - Stability of credit currency

To ensure a stable and calculable payback amount, the credit currencies should not be subject to high fluctuations.

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DO17 - Avoidance of complex interfaces

To reduce the implementation efforts and system maintenance, and to increase independence from legacy applications, the prototype must be developed in a way that avoids complex interfaces.

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Publication metadata

Additional metadata represented in the current library record.

Show additional metadata

{
  "type": "paper",
  "title": "Unchaining Social Businesses - Blockchain as the Basic Technology of a Crowdlending Platform",
  "description": "Studying a crowdlending social business, the paper derives 17 objectives for a blockchain-based crowdlending prototype and evaluates the prototype against a non-blockchain solution, deriving generic knowledge on blockchain applications for social business.",
  "resource": "https://aisel.aisnet.org/icis2017/TransformingSociety/Presentations/8",
  "authors": "Andre Schweizer, Vincent Schlatt, Nils Urbach, Gilbert Fridgen",
  "year": 2017,
  "venue": "ICIS 2017 Proceedings",
  "methodology": "Design science research; case study of a crowdlending social business; 17 solution objectives; prototype and evaluation vs. non-blockchain solution.",
  "dsr_grid": true,
  "dsr_solution_space": "Instantiation (prototype) driven by seventeen design objectives (model / nascent design knowledge).",
  "tags": [
    "unchaining-social-crowdlending",
    "social-business",
    "crowdlending",
    "fintech",
    "platforms",
    "design-science-research",
    "blockchain"
  ]
}