Training Course on Blockchain Application Session 11: Implementation of Blockchain Ecosystems Kenji Saito, Ph.D. Professor, Graduate School of Business and Finance, Waseda University, Japan Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.1/21 

In This Session, We will explore the roles and perspectives of nine categories of stakeholders within the blockchain ecosystem, including industry pioneers, venture capitalists, developers, governments, regulators, leaders, and end users Participants will learn about the realities, needs, and values of the stakeholders in the blockchain ecosystem, in fact grouped into nine categories, and then further grouped into three broad categories There does not seem to be a settled idea of the classification of the stakeholders that make up the blockchain ecosystem, so the classification in this session is original work, but I believe it is comprehensive Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.2/21 

Outline Stakeholders and their realities, needs and values, and interactions with others They fall first into three large categories and then into nine medium-sized categories Within these, there are even more detailed and specific entities Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.3/21 

Stakeholders Users — who participates in the peer-to-peer networks (end) users, exchanges, validators/miners Developers / Operators — who provides the technology to play with core technology (open source) developers, business developers Mobilizers / Immobilizers — who provides resources and/or influences others regulators, investors, news media, suppliers One may take multiple roles Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.4/21 

Dependencies Among Them (deliberately incomplete) validators / miners (also special users) (end) users users developers / operators mobilizers / immobilizers economic value transaction platform transaction platform user base user base money talks media scream hardware resources software resources core technology core technology adoption adoption exchanges (special users) core tech (open source) developers business developers regulators investors news media suppliers regulations influence investment / return user base / utility Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.5/21 

Users — who participates in the peer-to-peer networks — (end) users, exchanges, validators/miners They join the peer-to-peer network and actually become part of the blockchain, typically owning the cryptocurrency and expecting its price to rise However, for smart contract users, an increase in the market price of the cryptocurrency (hence the gas price) is undesirable, so an incentive mismatch exists Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.6/21 

(End) Users Cryptocurrency holders They are basically people who hold cryptocurrency in the hope that its value will rise Crypto whales are accounts that hold large amounts of cyptocurrency, who can single-handedly influence the currency markets Smart contract users They benefit from the execution of smart contracts This includes cases where the primary asset is held as ERC-20 tokens, etc., in addition to the native cryptocurrency (ETH) for use as a gas usage fee There is an incentive mismatch between them and other users because as the market price of the cryptocurrency increases, so does the effective gas price At the same time, if the native cryptocurrency crashes and the blockchain stops, for them, the execution base for smart contracts would come to a halt for reasons that are unjust and indirect Many individual stakeholders may also be users who hold positions by owning cryptocurrencies, and this may influence their behavior Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.7/21 

Exchanges Businesses that allow customers to exchange cryptocurrencies for other assets such as fiat money or other cryptocurrencies The revenue source is the fees for the service Having a large number of customers is their asset In the case of customer-to-customer transactions, often blockchain is not used, as it is usually just written to their database (to save transaction fees) Possession of large amounts of cryptocurrencies makes them easy targets for attacks Attacks typically exploit web service vulnerabilities They can turn cryptocurrency into a financial asset that can actually be used in the local community, and thus be in a strong position against validators/miners Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.8/21 

Ponzi Scheme? Let us take this opportunity to look at the similarities between cryptoeconomy via exchanges and the Ponzi scheme “A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors” (SEC) The flow of money on the exchange is such that those who buy cryptocurrency first (existing investors) receive a larger amount of money from those who buy cryptocurrency later (new investors) when they sell it In the meantime, the exchange is just flowing money from right to left and is not involved in any production activity Existing investors will benefit because the more investors that appear later, the higher the price of the cryptocurrency will rise (cf. session 4) This could be considered like a Ponzi scheme, no matter the intent, so perhaps we should be careful not to help ourselves to cryptocurrency advertising Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.9/21 

Validators/Miners They maintain the blockchain through proposing and validating new blocks and executing transactions, including smart contracts If the blockchain is viewed as a DAO, they are humans employed by the protocol and rewarded with the internal asset, namely the native cryptocurrency Their actions are highly dependent on the cryptocurrency trading market, as how much this reward will be depends on the trend of the market price of the native cryptocurrency Since they maintain the blockchain, it is possible for them to refuse protocol updates proposed by developers In fact, Bitcoin soft fork (a forward-compatible protocol update) involves a process in which miners vote for or against a proposal by writing their approval or disapproval in the blocks they generate Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.10/21 

Attackers This may possibly be the tenth category, but of course attackers also affect the blockchain ecosystem Usually, an attacker attempts to illegally acquire cryptocurrency, so the broad category is users in the sense of being a user of cryptocurrency Much of the effort of exchanges and other business developers/service providers is spent on countering attackers Attackers also influence the behavior of suppliers in the sense that they exploit vulnerabilities in software libraries Library builders must continue to update their libraries to address vulnerabilities, and developers must continue to apply such updates to the software they create and maintain Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.11/21 

Developers / Operators — who provides the technology to play with — core technology (open source) developers, business developers They provide the technology to the users and are satisfied with contributing to the users and/or trying to make a profit from the use of the technology Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.12/21 

Core Technology (open source) Developers They design (the updates for) the blockchain and write its code The source code is distributed free of charge (this is necessary for the blockchain to ensure verifiability) They do not make their living selling the code itself or their ability to write code (although companies may hire them to write open source code) This independence from incentives helps for the sustainability of the code base This is contrary to the web3-like argument that developers should be incentivized to issue tokens to increase their market price, which potentially allows the censor to disincentivize the developer’s development activities At the same time, this means that if a core technology developer is a cryptocurrency position holder, a collapse in its market price could reduce the level of development activity It might even be said further that developers’ having cryptocurrency reduces their ability to come up with new and innovative ways of doing things that do not rely on cryptocurrency Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.13/21 

Business Developers (including service providers) They set up blockchain-based commerce and offer them to users Often this involves developing and deploying smart contracts Exchanges are a special case of this, but it is a separate category because of its significant role Possession of large amounts of smart-contract-based tokens makes them easy targets for attacks Attacks typically exploit smart contract vulnerabilities Financial applications (including exchanges) are heavily influenced by regulation by financial regulators There are cases where DAO-ification is carried out to obscure the main entity of business operations, possibly with the aim of avoiding the influences of regulations Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.14/21 

Mobilizers / Immobilizers — who provides resources and/or influences others — regulators, investors, news media, suppliers They influence the overall environment, shape the way users and developers/operators behave, and even try to get a return on their investments Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.15/21 

Regulators They impose legal and ordinance-based regulations on the behavior of all entities Although the administration is the main regulator, it is the legislature that makes the rules, and law enforcement is also involved In addition, consumer groups can also be involved as players to influence the regulators Moreover, standardization bodies (e.g. for cryptography) have a similar impact They have a responsibility to protect users, businesses, and the fairness, and to ensure that innovation is not stifled by undue tightening They need to understand technology Since blockchain is a global entity, they cooperate and also compete internationally with foreign regulators Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.16/21 

Investors They provide financial support to all business entities, betting on the potential for large future returns They can be venture capitalists, collective individuals, government subsidy programs, etc. They need to be careful not to fall for the scams, since they are moving huge amounts of money They need to understand technology In particular, they need to know what is impossible It does not mean that we cannot approach the impossibility at all, but we need to be able to determine if it is a way around the impossibility that could work appropriately Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.17/21 

News Media They influence people’s behavior by providing information about market conditions and new technologies It could be mass media, independent crypto-specialized media, or even individual influencers They say money talks, but the media scream and can have a powerful influence Cryptocurrencies whose supply does not respond to changes in demand will go straight up in price when demand is stimulated (cf. session 4), so care must be taken to ensure that the media is not used to manipulate prices and that they are sensitive to price manipulation Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.18/21 

On Price Manipulation It is important to note that price manipulation may not be in the form of an obvious scam, but rather a subtle and possibly unconscious effort One example is the self-fulfillment of a prophecy Later this month, the mining rewards in Bitcoin will be halved from 6.25 BTC to 3.125 BTC Theoretically, since the supply from the source is halved, the price doubles if demand remains unchanged This merely points out a theoretical view, but those who take it on faith may try to buy bitcoin early, which would actually double the price because demand would be supported Because even just explaining what could theoretically happen could be perceived as inciting the market players, I try not to have any cryptocurrency to make my neutrality clear as a researcher (except for a small amount of ETH as gas fees that I use for experiments) We should know that talking only about the (possibly embelished) bright side of blockchain technology without mentioning its myriad challenges has a similar effect This is because it arouses interest in participating in the blockchain ecosystem and creates an atmosphere that cryptocurrencies are safe to buy and sell Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.19/21 

Suppliers They provide hardware and software resources to businesses and end users Resources can be semiconductors (ASICs), ASIC-equipped mining equipment, FPGAs, GPUs, hardware wallets, or software wallets It is also important to supply (updated) software libraries to developers Therefore, other open source development projects (on cryptography, for example) on which blockchain technology relies can be said to fall into this category As for the supply of mining equipment, it is literally mining the miners Since ever-increasing hash rates are essential to maintaining the strength of the blockchain based on proof of work (cf. session 4), this mining the miners mentality has helped the blockchain succeed But of course this can never be sustainable Their failure could slow down or stop the entire ecosystem, making them as important a stakeholder as any other Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.20/21 

Conclusions The blockchain ecosystem is composed of the following stakeholders: users who become part of the blockchain and support it, developers/operators who provide technology in the form of blockchain itself or application services (often via smart contracts), and mobilizers/immobilizers who provide resources or regulate the behavior of individuals and businesses The fact that the blockchain appears to motivate many people and sustain itself through incentive mechanisms is generally well received However, it is important to keep in mind that since it is supported by external motivations in the form of incentives, when events occur that undermine the value of these incentives, like the crash of cryptocurrencies, the whole structure is likely to crumble fragilely Session 11: Implementation of Blockchain Ecosystems — APO Training Course on Blockchain Application — 2024-04-04 – p.21/21