A Socio-Technological Analysis of the Use of Blockchain in Financial Systems

The key paradigm of blockchain is the assertion that two parties that do not trust each other can transact directly in a secure manner. No intermediaries who are capable of taking advantage of their position are needed. A number of cases of overpricing or, in some extreme cases, abusive practices of irresponsible intermediaries, show that this argument against intermediaries is not entirely unfounded. On the other hand, a number of issues with blockchain use have been identified in practice-some of themost prominent being processing efficiency, cryptocurrency heists, and smart contracts abuse. They clearly show that both blockchain technology and the social context in which it is used for financial transactions processing need to be better understood and further developed. In this paper, we analyze key components of blockchain technology and its supporting business processes to better understand the requirements that blockchain has to meet to be used as a technologically reliable and business trustworthy financial platform. Economic, behavioral, technological, and security aspects are considered. The objective is to identify the strengths and weaknesses of blockchain-based financial systems and suggest some topics for further research, and to find solutions for issues that are not being currently addressed.