Finance infrastructure through blockchain-based tokenization
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RESEARCH ARTICLE
Yifeng TIAN, Zheng LU, Peter ADRIAENS, R. Edward MINCHIN, Alastair CAITHNESS, Junghoon WOO
Finance infrastructure through blockchain-based tokenization
© Higher Education Press 2020
Abstract The infrastructure finance gap has long-standing implications for economic and social development. Owing to low efficiency, high transaction costs, and long transaction time, conventional infrastructure financing instruments are considered to be major contributors to the increasing mismatch between the need for infrastructure development and available financing. Implemented through smart contracts, blockchain tokenization has shown characteristics that are poised to change the capital stack of infrastructure investment. This study analyzed the first SEC-compliant energy asset security token, ZiyenCoin, from the perspective of the key participants, relevant regulations, and token offering procedures. Results show that tokenization can improve infrastructure assets liquidity, transaction efficiency, and transparency across intermediaries. Conventional infrastructure financing instruments were compared with blockchain tokenization by reviewing the literature on infrastructure finance. The benefits and barriers of tokenizing infrastructure assets were thoroughly discussed to devise ways of improving infrastructure financing. The study also found that the potential of tokenization has not yet been fully realized because of the limited technical infrastructures, regulation uncertainties, volatilities in the token market, and absence of the public sector. This study contributes to the present Received November 29, 2019; accepted September 9, 2020
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Yifeng TIAN ( ), R. Edward MINCHIN, Junghoon WOO School of Construction Management, University of Florida, Gainesville, FL 32603, USA E-mail: yifeng.tian@ufl.edu Zheng LU Center for Buildings, Infrastructure, and Public Space, Columbia University, New York, NY 10025, USA Peter ADRIAENS Center for Smart Infrastructure Finance, Department of Civil and Environmental Engineering, University of Michigan, Ann Arbor, MI 48109, USA Alastair CAITHNESS Ziyen Inc., Cheyenne, WY 82001, USA
understanding of how blockchain technology can be implemented in infrastructure finance and the role of tokenization in the structure of public–private partnership and project finance. Keywords infrastructure asset, blockchain, tokenization, security token offering, smart contract, public–private partnership, project finance
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Introduction
As fundamental aspects of facilities and systems, infrastructures, such as roads, railways, ports, airports, power, and communication, play a vital role in social development. Infrastructure connects people, businesses, and communities to support economic growth and improve quality of life. A study by the European Bank for Reconstruction and Development (EBRD, 2017) revealed that every dollar invested in infrastructure has a 60-cent return on investment in the short- and long-term productivity of an economy. Although the state of a nation’s infrastructure system plays
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