Conventional blockchain implementation, which would unlock the advantages of interoperability and the technology’s network effects, needs substantial expansion processes. To do this, there should be stakeholders interested in investing in technology.
Maximizing profit is a powerful driver of technological change if the expected profits are positive thereby technological change drives investment.Catalini, Christian and Gans, Joshua S., Some Simple Economics of the Blockchain (April 20, 2019). MIT Sloan Research Paper No. 5191-16.
Blockchain is an innovation in ICT, which improves the productivity of various processes but also creates new markets by decreasing transaction costs.
The increase in productivity is the result of purposeful investment in research and development in endogenous technological change. The emergence of digital currencies is another concrete example of a fresh marketplace, for instance, Bitcoin has not only developed a fresh value representation, but also entirely new sectors, including Bitcoin mining businesses, wallets, and exchanges that attracted investment and led to technological change. This could result in investments in start-ups that attempt to challenge current business models.
Changes in technology can be external or internal, internal change needs the investments which expect favorable yields. This implies the technology should produce savings through productivity effectiveness or take fresh income sources from new marketplaces. An internal change like organizational effectiveness gains can often be attributed to the source of product effectiveness. Altering the organizational type by which value is generated, blockchain decreases manufacturing expenses, often wiping out layers of activity that is no longer required. Online trade and investment, for instance, involve ownership verification, checks, and balances. Blockchain reduces the cost of verification, according to Catalini and Gans (2019) increases the effectiveness of these operations. From a single entrepreneurial perspective, the method is complicated but Catalini and Gans cautioned in their working papers, that the failure of a new startup or existing new firms to achieve all the technological advantages may lead to underinvestment.