Two Sides of the Same Coin? Decentralized Versus Proprietary Blockchains and Digital Currencies


Academy of Management Discoveries: September 2020, Vol. 6, No. 3
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Two Sides of the Same Coin? Decentralized Versus Proprietary Blockchains and the Performance of Digital Currencies
By Carmelo Cennamo, Cecilia Marchesi and Tim Meyer

There is a shared view among practitioners that the blockchain is a revolutionary, decentralized technology that will have a larger impact than the internet. Firms are increasingly using blockchains for various applications; the most prominent of which to date are digital currencies. In this paper, we aim to increase our theoretical understanding of the driving forces behind the success and volatility of digital currencies. We use a detailed dataset of 345 digital currencies for our explorative analysis and identify some of the key factors that can explain their performance. We find that the success and volatility of digital currencies depends on their business type (i.e. whether they relate to a platform business or not) and on their technology type (i.e. whether they are based on their own specialized blockchain technology or on a third-party standardized platform blockchain). Our findings suggest that, paradoxically, to obtain the promised benefits of this decentralized technology, firms need to centralize part of it to retain control over critical strategic dimensions (data and rules for transaction). We discuss the implications of our discovery for other contexts undergoing digital transformation.

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