Financing Infrastructure through Blockchain Tokenization

Abstract

Infrastructure is critical to enable society to function and economies to thrive, but there is an increasing mismatch between the need for infrastructure investments and available capital. This is a consequence of constraints on public resources and limited capacity to leverage private sector co-financing under the current system. Spurred by the urgent need to close the infrastructure gap and the availability of emerging technologies such as blockchain, this research investigates the potential for blockchain-enabled tokenization in infrastructure investment and development. This research is built upon the extensive literature on infrastructure financing and tokenization. A single case study was performed to analyze the process of the tokenization of private equity (security) of a start-up energy company in the U.S. Through the multiple case study analysis, twenty-one tokenization projects in the energy sector were analyzed to investigate the diversity of tokenization of infrastructure arrangements (payment, utility, and security). A Delphi-based scenario analysis was applied to gather long-term forecasts and assessments of a research panel consisting of experts in blockchain tokenization and infrastructure development on how tokenization would influence the future of infrastructure finance and to identify future scenarios of potential applications in this field. Three groups of scenarios were created based on quantitative (the probability of occurrence and impact of occurrence rated by the research panel) and qualitative analysis (verbal inputs), which offer thought-provoking and holistic insights of tokenization’s future in infrastructure. Building on desk research, case studies, and the Delphi analysis, a conceptual framework for the tokenization of infrastructure was developed and validated. The framework addresses how various blockchain structures (permissioned and permissionless), consensus protocols, finance, level of centralization, construction phases (greenfield and brownfield), and exchange methods could affect the potential application of tokenization models in different infrastructure projects. The impacts were analyzed from the perspective of regulation, technology, society, economy, and environment. Major stakeholders were discussed and summarized. The process of tokenization in infrastructure was illustrated. This research contributes to the transfer of general technical-driven blockchain-enabled tokenization knowledge to infrastructure-specific tokenization knowledge and to the emerging field of technology-enabled financing models.