Exploring Blockchain Technology for Capital Markets: A Case of Angel Fund
Shuchih Ernest Chang, Siao Yin He · 2018
The perennial shortage of capital for small and medium enterprises (SMEs) and start-ups is a critical issue in the policies of many governments. However, due to an atmosphere of public mistrust toward financial systems, governments throughout the world have exerted effort to tighten regulations of financial activities after the 2007-2008 global financial crisis. Thus, SMEs and start-ups face increased difficulty in raising capital through traditional financing channels. In this study, we explore how blockchain technology could be applied to capital markets through an angel fund. Blockchain data structure and its consensus algorithm create trust among untrusted entities. This condition enables untrusted parties to interact without the involvement of middlemen, thereby reducing transaction costs and promoting efficiency and transparency of transactions. Furthermore, smart contracts deployed on the blockchain are used to reduce agency problems caused by third-party matching service providers. Based on these ideas, this paper proposes a distributed angel fund matching platform based on blockchain.