Technologie vs. Institutions? Blockchain as a threat for the banking system.

• Applicant: Professorin Dr. Barbara Brandl
• Subject Area: Empirical Social Research
• Term: from 2018 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 406907010

Banks are fundamental institutions of capitalist economies. However, the digitalization of financial services opened a window for new players in the financial industry: FinTechs, an acronym for start-ups, which take on tasks and functions previously reserved for banks, such as lending, payments, or investment. The most radical form of this innovation is represented by FinTechs based on Blockchain technology. Blockchain, the technology behind Bitcoin, is a distributed digital ledger, in which all transactions are recorded and, therefore, cannot be manipulated ex post. In other words: Blockchain is basically a new form of accounting, characterized by fully transparent accounts and transactions, recorded by a digital ledger that does not have to be validated by a trusted third party such as a bank or a state. Given these features most experts regard Blockchain as the most substantial innovation since the emergence of the internet. The possibility of settling transactions (such as payment, lending, or the contractual stipulation of property rights) on a purely peer-to-peer basis contains hopes and visions of different kind. Actors from a background in NGOs or social movements (like Coin Center or Blockchainhub) envision a financial system that is actually transparent, which would allow the realistic taxation of assets and inheritances as well as a more effective fight against corruption. Commercial actors (such as banks, accounting organizations or software companies) on the other hand, are looking for solutions for the outdated IT infrastructure of the financial system. The project focuses on the question whether Blockchain will revolutionize the central element of the banking system: trust (or its institutionalized forms). To approach this broad question the project aims to study which type of actors are capable to appropriate this new and therefore, undefined technology. The project comprises three modules. The first module aims to understand the risks and potential of the Blockchain technology by conducting qualitative interviews with experts. The second module attempts to supplement the understanding of the innovation dynamics in the field of Blockchain by the econometric analyses of patent data. The processes of appropriation of Blockchain by different actors will be mapped in the third module by studying the Mergers & Acquisition (M&A) activities of Blockchain start-ups.

• DFG Programme: Research Grants