Paper Number

ICIS2025-1177

Paper Type

Complete

Abstract

Crowdfunding has become an increasingly important funding mechanism, with transaction volumes growing steadily in recent years. However, significant information asymmetries between backers and project initiators challenge its sustainable development, particularly in incentive-based crowdfunding. Backers lack critical insights into initiators’ motives, capabilities, and project specifics due to the anonymous nature of these interactions. Using principal-agent theory, we analyze existing problems between backers and project initiators and highlight the information asymmetries between them. These asymmetries result in backers suffering from adverse selection and moral hazard, threatening campaign success. To address these problems, we propose integrating blockchain technology into crowdfunding campaigns. Our results show that blockchain contributes to increased transparency, security, traceability, and decentralization. Based on a literature review and expert interviews, we examine the technological potential to reduce information asymmetries, strengthen trust between backers and project initiators, and contribute to improved governance mechanisms and innovative ways of implementing crowdfunding more securely.

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22-FinTech

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Dec 14th, 12:00 AM

Towards Safer Incentive-Based Crowdfunding: A Blockchain-based Approach

Crowdfunding has become an increasingly important funding mechanism, with transaction volumes growing steadily in recent years. However, significant information asymmetries between backers and project initiators challenge its sustainable development, particularly in incentive-based crowdfunding. Backers lack critical insights into initiators’ motives, capabilities, and project specifics due to the anonymous nature of these interactions. Using principal-agent theory, we analyze existing problems between backers and project initiators and highlight the information asymmetries between them. These asymmetries result in backers suffering from adverse selection and moral hazard, threatening campaign success. To address these problems, we propose integrating blockchain technology into crowdfunding campaigns. Our results show that blockchain contributes to increased transparency, security, traceability, and decentralization. Based on a literature review and expert interviews, we examine the technological potential to reduce information asymmetries, strengthen trust between backers and project initiators, and contribute to improved governance mechanisms and innovative ways of implementing crowdfunding more securely.

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