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NFTs in Practice – Non-Fungible Tokens as Core Component of a Blockchain-based Event Ticketing Application

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Abstract and Figures

Non-fungible tokens (NFTs) are a new type of unique and indivisible blockchain-based tokens introduced in late 2017. While fungible tokens have enabled new use cases such as Initial Coin Offerings, the potential of NFTs as a valuable component remains unclear. This paper addresses this gap in theoretical and practical knowledge and demonstrates the efficacy of NFTs in the domain of event ticketing. We follow a rigorous design science research approach of designing, building and thoroughly evaluating a prototype of an event ticketing system based on NFTs. Thereby, we demonstrate the usefulness of NFTs to tokenize digital goods, prevent fraud and improve control over secondary market transactions. Further, we contribute generalizable knowledge of the benefits and challenges of NFTs and derive implications for both researchers and practitioners. Finally, this paper proposes managerial recommendations for building applications utilizing NFTs and enables other researchers to draw on its findings and design principles.
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Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 1
NFTs in Practice
Non-Fungible Tokens as Core Component of
a Blockchain-based Event Ticketing
Application
Completed Research Paper
Ferdinand Regner
FIM Research Center
University of Augsburg
86159 Augsburg, Germany
ferdinand.regner@tum.de
André Schweizer
FIM Research Center
University of Bayreuth
95447 Bayreuth, Germany
andre.schweizer@fim-rc.de
Nils Urbach
Project Group BISE of Fraunhofer FIT
University of Bayreuth
95447 Bayreuth, Germany
nils.urbach@fim-rc.de
Abstract
Non-fungible tokens (NFTs) are a new type of unique and indivisible blockchain-based
tokens introduced in late 2017. While fungible tokens have enabled new use cases such as
Initial Coin Offerings, the potential of NFTs as a valuable component remains unclear.
This paper addresses this gap in theoretical and practical knowledge and demonstrates
the efficacy of NFTs in the domain of event ticketing. We follow a rigorous design science
research approach of designing, building and thoroughly evaluating a prototype of an
event ticketing system based on NFTs. Thereby, we demonstrate the usefulness of NFTs
to tokenize digital goods, prevent fraud and improve control over secondary market
transactions. Further, we contribute generalizable knowledge of the benefits and
challenges of NFTs and derive implications for both researchers and practitioners.
Finally, this paper proposes managerial recommendations for building applications
utilizing NFTs and enables other researchers to draw on its findings and design
principles.
Keywords: Blockchain, Tokenization, Smart Contract, Non-Fungible Token, Ticketing
Introduction
Blockchain technology is a radical innovation with the potential to challenge or even replace existing
business models relying on third parties for trust (Beck and Müller-Bloch, 2017). The concept of blockchain
was introduced in 2008 through the release of the Bitcoin whitepaper (Nakamoto, 2008) and primarily
used as the technology behind cryptocurrencies during its first years. In 2014, a second generation of
blockchains (e.g. Ethereum) was introduced, which allows to program and execute software so-called
smart contracts on all participating blockchain nodes. Consequently, any user is enabled to create and
deploy programs on a shared global infrastructure (Buterin, 2014; Wood, 2014). This has led to the
realization of new concepts designed to simplify human interaction and collaboration on a large scale across
several industries (e.g. supply chain management, international payments, international trade finance,
energy markets, and notary services) (Christidis and Devetsikiotis, 2016; Morabito, 2017; Wüst and
Gervais, 2017). Particularly, the use cases of Initial Coin Offerings (ICOs) that re-invent crowdfunding
through the use of blockchain and its ability to tokenize assets, is drawing public attention (Fridgen, Regner,
Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 2
Schweizer and Urbach, 2018). The spectacular success of ICOs, where globally an estimated 12 billion USD
has been collected, has been enabled by the ERC-20 standard (AutonomousNEXT, 2018). This standard,
which specifies a common interface for fungible tokens that are divisible and not distinguishable, was
mutually agreed on by the developer community to ensure interoperability (Vogelsteller, 2015).
In contrast, non-fungible tokens (NFTs) differ from fungible tokens in two important aspects. Every NFT is
unique and it cannot be divided or merged (Voshmgir, 2018). This new form of token was first introduced
with the ERC-721 standard in late 2017 (Entriken, Shirley, Evans and Sachs, 2018). ERC-721 variates
significantly from the ERC-20 standard as it extends the common interface for tokens by additional
functions to ensure that tokens based on it are distinctly non-fungible and thus unique (Entriken et al.,
2018). For practitioners, these distinct properties of NFTs enable a variety of new use cases. It particularly
improves the tokenization of individual assets which is not feasible with fungible tokens, as they cannot
digitally represent uniqueness. Thus, practitioners have conducted a multitude of experiments in the past
months using NFTs to represent both digital goods such as virtual gaming assets, digital artwork and
software licenses as well as physical assets such as luxury goods and cars (Butcher, 2018; Griffin, 2018).
NFTs are seen as key to unlock the market for collectibles which has an estimated global market size of USD
200 billion (Fenech, 2018).
However, aside from the existence of first experimental use cases, a deeper understanding of NFTs would
be beneficial from the viewpoint of IS research in three main aspects. First, solidified descriptive knowledge
about the general characteristics of NFTs and the differences from fungible tokens enables a better
understanding of the benefits and resulting opportunities. Second, improved prescriptive knowledge about
the process of designing and evaluating applications based on NFTs benefits both researchers and
practitioners. Third, increased awareness of practical challenges enables future researchers to better focus
on solving remaining challenges. Unfortunately, in-depth investigations of NFTs by academic researchers
touching these aspects are still missing. Further, the current body of knowledge lacks best practices,
development project experience, and insights to blockchain-based software development (Delmolino et al.,
2016). Thus, we conclude that a clear research gap exists. We aim to bridge that gap by demonstrating the
applicability of non-fungible tokens in a specific domain and answering the following research question:
What are the benefits and challenges of practical use of NFTs?
We answer the question by following a design science research (DSR) approach and developing the use case
of an event ticketing system. Doing so we present a new way to create, manage, transfer, and track the
ownership and usage rights involved. We have chosen tickets as persuasive example because 1) current
solutions typically face problems such as fraud, counterfeiting and limited control over secondary
transactions (Waterson, 2016), 2) due to heavy reliance on third parties for trust there is a potential for
disruption through blockchain technology (Beck and Müller-Bloch, 2017), and 3) the use case is limited in
scope and thus suited for DSR prototype building. Therefore, we design and implement a prototype based
on NFTs for a decentralized, blockchain-based event ticketing system that aims to replace the existing
centralized ticket applications. By evaluating the prototype and its use, we gain valuable insights, discover
challenges and draw conclusions that enable both a technical-oriented and management-oriented audience
to benefit from it. The creation and evaluation of a prototype are central activities of the DSR approach we
follow, which has been taken several times by IS researchers when dealing with blockchain use cases (Beck
et al., 2016; Notheisen et al., 2017; Schweizer et al., 2017). Further, building an instantiation in a specific
domain is a well-recognized practice when confronted with new technology (Hevner et al., 2004). Lindman
et al. (2017) specifically propose the development and analysis of blockchain-based prototypes using a DSR
approach. As thorough evaluation is key to prove the correctness and applicability of the resulting
prototype, we follow an iterative build and evaluate approach (Hevner, 2007; Gregor and Hevner, 2013).
Further, we draw on extant literature and expert interviews to assess the suitability of the artifact to its
intended purpose and to gain insights into the benefits and challenges of NFTs. This approach has proven
its suitability and is in line with various recent publications in the blockchain and DSR domain.
Our theoretical contributions and practical implications are threefold: First, through creating a working
prototype as resulting artifact, we demonstrate the feasibility of a blockchain-based solution with NFTs as
a core component for the domain of event ticketing systems. Thereby, we illustrate that many existing
problems in the ticketing industry such as fraud, lack of trust and limited control over secondary grey
markets can be overcome by switching to a blockchain-based solution that utilizes NFTs. Second, by
exploring NFTs from a technological and economic perspective, we generate generalizable knowledge and
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Fortieth International Conference on Information Systems, Munich 2019 3
insights. Thus, we contribute both descriptive and prescriptive knowledge to the young research domain
concerning NFTs. Given that theoretic knowledge about opportunities and challenges in the area is scarce
and best-practice approaches are lacking, we lay ground for further research and higher-theory (Gregor,
2006; Glaser, 2017). Third, we enable practitioners to gain insight into an efficient building process and
enhance their understanding of NFTs and associated consequences of its use including potential benefits
and challenges.
The remainder of this paper is structured as follows: The next section provides a brief introduction into
NFTs as a novel building block in the blockchain space and the current problems in the domain of ticketing.
Subsequently, we outline the DSR methodology the paper adheres to in order to address the research
question and lay out the application step by step. Thereafter, we describe the resulting artifact and present
its software architecture and design. The second last section deals with the evaluation and discussion of the
obtained results before we present our conclusion in the final chapter.
Background
Blockchain and Non-Fungible Tokens (NFT)
Blockchain is a fairly new technology and first gained popularity as the protocol behind the cryptocurrency
Bitcoin, which was introduced in 2009 at the peak of the financial crisis (Nakamoto, 2008; Zohar, 2015).
Aside from this first instantiation and the use case of cryptocurrencies, a broader range of applications
emerged a development that is mainly attributed to the possibility to run pieces of software code on a
blockchain (Beck et al., 2016). These so-called smart contracts, a term coined by Nick Szabo in 1994, allow
parties that do neither know nor trust each other to securely perform transactions. The correct execution is
ensured by a consensus protocol that runs on all participating nodes of the underlying blockchain and
provides consistency (Szabo, 1994; Glaser, 2017; Sillaber and Waltl, 2017).
The first and most popular blockchain protocol, that supports a virtual machine with which Turing-
complete scripting languages can be executed is Ethereum, which was first introduced in 2014 (Buterin,
2014). As Ethereum is a public, permissionless blockchain protocol, it allows any user to create and deploy
programs on its shared global infrastructure (Wood, 2014). A vibrant community has evolved that runs a
multitude of pieces of software code (smart contracts) on the Ethereum blockchain. To foster
interoperability, the community agreed on multiple application-level standards so-called Ethereum
Requests for Comments (ERCs) (Ethereum Foundation, 2018). The most well-known standard, called ERC-
20, specifies a standardized interface for fungible tokens which have been widely used to provide holders
with certain access or governance rights, and to facilitate ICOs, a novel form of crowdfunding (Vogelsteller,
2015; Rohr and Wright, 2017). The spectacular popularity of ICOs, which raised over USD 7 billion in 2017
and more than USD 12 billion in 2018, has contributed to the global popularity of tokens in general
(AutonomousNEXT, 2018; Pichler, 2018). A search on Etherscan, a popular Ethereum blockchain explorer,
returns over 140,000 token contracts deployed on the public Ethereum main chain (Etherscan, 2018),
indicating that tokens represent an important component for blockchain use cases. While fungible tokens,
such as tokens based on the ERC-20 standard, have been widely used, a new class of tokens was introduced
in late 2017 with the ERC-721 standard. The ERC-721 standard specifies a standardized interface for so-
called non-fungible tokens (Entriken et al., 2018). The motivation behind the creation of this new standard
was that a crucial difference between fungible tokens and non-fungibility tokens exists. The term fungible
refers to the interchangeability of each unit of a commodity with other units of the same commodity, i.e.
two parties could swap the same amount without any gain or loss. While fungibility the ability to be
substituted in place of one another is an essential feature of any currency, non-fungibility is the opposite
as every token is distinguishable and thus also cannot be divided or merged (Merriam-Webster, 2018;
Voshmgir, 2018). This also has implications for tracking the ownership of tokens as each NFT needs to be
tracked separately. The ERC-721 standard specifies that every NFT has a globally unique id, is transferable,
and can optionally include metadata. NFTs were created for a specific purpose to represent ownership
over digital or physical assets (Entriken et al., 2018). While the concept of “colored coins” as a
representation of real-world assets on the Bitcoin blockchain has been discussed before the advent of
Ethereum, with the creation of the ERC-721 standard this idea has first been realized (Wang, 2017).
The first application based on NFTs to reach widespread adoption was a virtual online game called
CryptoKitties. The game took up more than 70% of the transaction capacity of the Ethereum network at one
Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 4
point and the most expensive NFT that represents ownership of such a cat was sold for over USD 100,000
in late 2017 (Tepper, 2017; AutonomousNEXT, 2018; Muzzy, 2018). Over 100 similar digital collectibles
such as virtual card games or unique original digital art have been created by the community in the past
year and the number is expected to grow further (Tomaino, 2018). However, while digital items arguably
only have value in the context of their ecosystem, NFTs also can help to facilitate the tokenization of real -
world assets, such as artwork (Voshmgir, 2018). Multiple experiments on tokenizing software licenses,
luxury goods and even cars through the use of NFTs have been conducted in the past months (Butcher,
2018; Griffin, 2018). The accounting firm EY has stated in a press release that they use NFTs to facilitate
private equity transactions (Khatri, 2018). NFTs also play a key role in scaling the ability of Ethereum to
process a high number of transactions using state channels (Coleman, Horne and Xuanji, 2018). Yet, despite
the existence of a multitude of ideas and experiments to use NFTs for a variety of additional use cases such
as tokenizing educational certificates like academic degrees, copyright enforcement, supply chain tracking,
or Know-Your-Customer (KYC) procedures, peer-reviewed studies dealing with the topic remain scarce
(Voshmgir, 2018). As no empirical study of the use of NFTs is available so far, the benefits and challenges
remain largely unexplored. While NFTs on their own do not have any value per se, they might enable new
use cases that were not possible so far and create utility for users (Sparango, 2018). Thus, we treat NFTs as
a potentially valuable building blocks and utilize a specific use case to check if this assumption is valid and
to gain theoretical and practical insight on usage, benefits and challenges.
Event Ticketing systems
Tickets represent a mechanism to demonstrate entitlement to access to any event such as sports or culture.
They come in many forms, ranging from physical paper to electronically readable codes on paper or chips
embedded in smart cards or wristbands (Waterson, 2016). Tickets can be bought on the primary market
directly from the event organizer or from authorized sellers such as appointed agents, mostly for a fixed
price. Secondary markets also exist, with the notable difference that any price can be charged and buyers
and sellers often directly engage in business or rely on secondary ticket sale platforms, which typically take
25-30 percent of secondary sales in fees (Waterson, 2016). Ticket resale is a growing business globally,
totaling 8 billion USD in revenue per annum (Courty, 2017). However, while platforms and third parties do
well, the status quo is not satisfactory for the two central stakeholders the event organizer and the
customer as multiple complaints at consumer protection agencies show (McMillan, 2016; Courty, 2017;
NZ Herald, 2017). Consumers have to trust third parties when buying tickets on secondary markets and
thus face the risk of purchasing fraudulent or invalidated tickets, which are counterfeits or might be
cancelled (The Australian Government the Treasury, 2017). Using QR-codes or barcodes, which encode
information, but do not encrypt it, is not sufficient to make tickets truly tamper-proof. Further, consumers
lack the possibility to validate if the barcode on their ticket is valid. In various cases, the same barcodes
have been sold multiple times or been obtained by extracting it from pictures of a ticket posted online
(Tackmann, 2017). The problem of ticket fraud is not exactly small: An estimated 12% of ticket buyers get
scammed, which amounts to an estimated yearly damage of USD 2 bn (Waterson, 2016; Leonhart, 2018).
Ticket prices on secondary markets are taken to extremes, partially through the use of bots which
automatically drive up prices to earn a profit by reselling them at the highest possible markups (Courty,
2017). Thus, multiple governments are considering bans of ticket resale for profit altogether, however,
economists remain skeptical about outright resale bans (Courty, 2017). From the event organizer’s point of
view, a major problem is the limited control over secondary transactions. Neither does the use of static
codes on a ticket permit to link a ticket to the owner if it is resold, nor is it desirable to strictly bind a ticket
to a person and prohibit reselling completely as costly and time-consuming entry checks must be performed
(Waterson, 2016). Summing up, a clear lack of transparency and trust is evident, and stakeholders are
currently in search of efficient and effective solutions to tackle this problem (Waterson, 2016; Tackmann,
2017).
Searching for current projects in the area of event ticketing systems, we found some idea proposals and
early-stage projects involving blockchain technology from companies like aventus, GET Foundation and
IBM (GET, 2017; Tackmann, 2017; aventus, 2018). However, a first analysis of these proposed solutions
revealed that each of them relies on fungible tokens at the core and the core features are not build on an
immutable ledger but rather off-chain by the company. This means that tickets are not truly represented by
unique identifiers on a trust-free blockchain and the potential improvement using NFTs as a core
component has yet to be assessed. The problems in secondary markets in the domain of ticketing are
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Fortieth International Conference on Information Systems, Munich 2019 5
prototypical and apply to many other industries. Current literature suggests that industries with heavy
reliance on third parties for trust are a potential target for disruption through blockchain technology (Beck
and Müller-Bloch, 2017).
Research Method
To design, implement and evaluate a blockchain event ticketing system prototype, we follow a DSR
approach. DSR, which historically originated from engineering, involves the creation of an artifact which
has not existed previously and serves a meaningful human purpose (March and Smith, 1995). Typical
characteristics of such research efforts are strong reliance on creativity and trial-and-error search (Hevner
et al., 2004). In the DSR context, the creation of a prototype depicts an instantiation of a blockchain-based
IT artifact (March and Smith, 1995). Through artifact instantiation, we demonstrate both feasibility of the
design process and the designed product and enable researchers to learn about the effect of the artifact on
the real world and appropriate use (Hevner et al., 2004). This approach has been taken several times by IS
researchers when dealing with new aspects of blockchain technology (Beck et al., 2016; Notheisen et al.,
2017; Schweizer et al., 2017).
Hevner et al. (2004) list seven guidelines for applying DSR in the IS space: It requires the creation of an
innovative artifact that fulfills a specific purpose (1) for a specified problem domain (2). It is crucial to
thoroughly evaluate the artifact with respect to providing a solution to the specified problem (3). A clear
and verifiable contribution such as solving an unsolved problem or solving a known problem in a more
effective or efficient manner is also mandatory (4). It requires rigorous definition, formal representation,
coherence, and internal consistency of the artifact (5). Through the creation of the artifact, we construct a
problem space along the process and a method to find an effective solution for it (6). Finally, we must
communicate the results effectively (7). In Table 1, we map our approach to meet these seven guidelines.
Guideline
Contribution
Design as an
artifact
The prototype we build during our research instantiates an NFT-based artifact that
allows trust-free creation, management and transactions of event tickets.
Problem
relevance
We address a research gap in scientific literature regarding the question whether NFTs
are suited to represent scarce digital assets (such as event tickets) and additionally try
to gain insight into the benefits and challenges of the use of NFTs, which are yet to be
determined by researchers. Regarding the use case of event tickets, we aim to address
the problems of fraud, lack of trust, lack of control over secondary market
transactions, low transparency and high dependence on intermediaries.
Design
evaluation
To evaluate the prototype in terms of functionality, formal completeness, consistency,
accuracy, reliability and efficiency, we follow the approach of Hevner et al., 2004, who
state that the first and foremost aim is to show that (1) the solution works (proof by
construction) and (2) characterize the environments in which it works (illustrative
scenarios).
Research
contributions
Our contribution is to demonstrate the usefulness of NFTs in the domain of event
tickets in scientific rigor. Through artifact instantiation, we demonstrate both
feasibility of the design process and the designed product and enable researchers to
learn about the effect of the artifact on the real world and appropriate use (Hevner et
al., 2004). Additionally, we aim to lay ground for further research and higher-theory
in the area of NFTs and blockchain-based application development (Gregor, 2006;
Glaser, 2017).
Research rigor
As this table shows, we closely follow the guidelines by Hevner et al., 2004 regarding
the DSR process in IS. Additionally, we draw on best practices by other IS researchers
that have dealt with similar approaches when evaluating new aspects of blockchain
technology (Beck et al., 2016; Notheisen et al., 2017; Schweizer et al., 2017). To
determine if our artifact design is complete, we follow a strategy of satisficing,
meaning the solution is satisfactory regarding solving the requirements and
constraints of the problem we state for the selected use case (Hevner et al., 2004).
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Fortieth International Conference on Information Systems, Munich 2019 6
Design as
search process
We follow an iterative build and evaluate approach. To further assess suitability of the
artifact to its intended purpose and gain insights into the benefits and challenges, we
additionally draw on extant literature on both the application and solution domain as
suggested by Hevner et al. (2004) and perform semi-structured expert interviews
(Schultze and Avital, 2011). As peer-reviewed literature is scarce in this new area of
research, we also make use of publicly accessible Internet sources such as open-source
code repositories, whitepapers and blog articles, which strengthens our domain
knowledge and ensures the recency of this paper.
Communication
of research
We aim to provide clear information to both the management-oriented and
technically-oriented audiences. The former benefits by the schematic UML diagram
and theoretical reasoning about benefits and challenges, while for the latter we publish
the entire source code of the project on GitHub, including all formal tests. This enables
technical researchers and practitioners to replicate our work and/or build on it.
Table 1. Mapping of DSR Guidelines by Hevner et al. (2004) and our Contributions
Prototype Design and Development
In this section, we present the design and development of our blockchain-based event ticketing system
according to the DSR guidelines by Hevner et al. (2004). First, we briefly outline the verified problem
statement and the design objectives for the prototype. Second, we elaborate the fundamental design
decision that led to the choice of the Ethereum blockchain and NFTs as core component of the prototype.
Finally, we present an overview of the resulting prototype design and briefly explain its application.
Problem Statement and Derivation of Design Objectives
Our literature analysis revealed the current problems in the event ticketing industry. To recap our findings,
the status quo is not satisfactory for the two central stakeholders the event organizer and the attendee, as
multiple complaints at consumer protection agencies show (McMillan, 2016; Courty, 2017; NZ Herald,
2017). Following the relevance cycle laid out by Hevner (2007), we additionally validated our findings by
interviewing the CEO of a ticketing firm, who contributed valuable expert knowledge. He largely confirmed
our preliminary findings and added that it would be desirable for event organizers to directly interact with
event attendees rather than the need to rely on intermediaries for trust and that an open protocol would be
preferable over the opaque status quo. Table 2 gives a brief summary of the identified main problem areas.
Problem area
Description
Lack of Trust
Consumers have to trust third parties when buying tickets on secondary markets and
thus face the risk of purchasing fraudulent or invalidated tickets, that face the risk of
being cancelled or are counterfeits (The Australian Government the Treasury, 2017).
No control over
secondary
market prices
Consumers ticket prices on secondary markets are taken to extremes, partially
through the use of bots which automatically drive up prices to earn a profit by
reselling them at the highest possible markups (Courty, 2017). From the event
organizer’s point of view, a major problem is the limited control over secondary
transactions.
Dependence on
intermediaries
Event organizers are dependent on intermediaries and bear financial risks while
being cut off from windfall profits and direct relations with event attendees.
No immediate
validation
Attendees cannot easily verify if their tickets are valid (Tackmann, 2017).
Lack of
Transparency
A lack of transparency in the secondary market is evident in the event ticketing
industry (Waterson, 2016)
Table 2. Overview of Identified Problem Areas
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Fortieth International Conference on Information Systems, Munich 2019 7
Based on these findings and additional literature, we derived the desired design objectives for the prototype.
Compliant to the relevance cycle proposed by Hevner (2007), we defined our design objectives and
subsequent acceptance criteria for the evaluation of the research results based on Hevner et al. (2004).
Table 3 lists the design objectives and the proposed evaluation criteria and methods.
Design Objective
Description
Evaluation
1. Digitization
1.1. Digital storage of
all data
1.2. Digital exchange of
all data
Portability for tickets independent from a physical
medium should be achieved (Fujimura et al., 1999).
All data has to be stored and exchanged in a purely
digital way (Nærland, Müller-bloch, Beck and
Palmund, 2017).
Validation of efficacy
and completeness
though simulation and
descriptive methods.
2. Control over
secondary market
transactions
2.1. Managing
transactions
2.2. Prices caps
2.3. Charging
transaction fees
The event organizer should be able to manage ticket
transaction and earn transaction fees from any paid
ticket transfer among attendees. Management
policies should be determined by the ticket issuer
(Fujimura et al., 1999). This includes pausing all
transactions and capping ticket prices for secondary
market transactions.
Functional analysis of
the prototype to assess
efficacy and reliability
through testing and
simulation.
3. Independence
3.1. Decentralization
3.2. Trustfulness
No centralized broker or authority should be
assumed to sell tickets (Fujimura et al., 1999). Event
organizers should be able to conduct business
independent of intermediary parties.
Assessment of efficacy
and validity through
testing and descriptive
evaluation.
4. Security
4.1. Availability
4.2. Integrity
4.3. Privacy
A secure environment is characterized by the
accessibility of resources (availability), the
authenticity of data (integrity), and the prevention of
access to illegitimate users (privacy) (Vacca, 2013).
Consistency and
reliability should be
verified using testing,
simulation and
descriptive evaluation.
5. Validation
5.1. Verifiability of
ownership
To increase trust in the integrity of the system, ticket
ownership should be verifiable in a simple way at any
time.
Functional testing and
simulation to assess
the reliability.
6. Transparency
6.1. View current ticket
ownership
6.2. Access to
transaction history
Ticket transaction history should be fully
transparent. Current ownership status and any state
change, from the creation and transfers between
attendees to end of its lifecycle, should be publicly
viewable.
Analysis of accuracy
and completeness
through simulation
and descriptive
methods.
7. Automation
7.1. No manual
interaction required
after setup
The event organizer should not be required to
perform any manual action after an initial setup. Any
policies set by the organizer should be enforced
automatically.
Functionality and
reliability should be
assessed through
testing and simulation.
8. Cost Efficiency
8.1. Efficient cost
structure
The fixed and variable costs of the system should be
economical from the event organizers point of view.
Assessment of
efficiency through
simulation.
Table 3. Design Objectives
Fundamental Design Decisions
A well-designed system architecture provides the roadmap for the subsequent development process
(Nunamaker, Chen and Purdin, 1990). Before trying to apply a blockchain-based solution right away, we
first ensured that our fundamental design decisions are well grounded. Thus, we followed the decision
model by Wüst and Gervais (2017), which helps to decide if the use of blockchain technology is useful for a
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Fortieth International Conference on Information Systems, Munich 2019 8
specific scenario. It guides the user through sequential decision criteria in form of questions. As the key
question if all interacting parties can inherently be trusted was clearly answered with no, a blockchain
solution is advisable according to the model. Since we positively answered the follow-up question if publicly
available verification is necessary, the model advised making use of a public permissionless blockchain. Our
design objectives provided a valuable guideline to select a blockchain with desired features. The Ethereum
blockchain is a public and permissionless blockchain that supports smart contracts, and has the largest
community of developers and rests on more than 60.000 nodes that run the network without a central point
of failure (Beck et al., 2016). These properties enabled us to build an automated application that inherits
the key features of the underlying blockchain such as decentralized trust, integrity, transparency, non-
repudiation, and availability. Ethereum developed its own high-level programming languages which
compile into bytecode that can be run on the Ethereum virtual machine; its most popular being Solidity
which features a JavaScript-like syntax (Tikhomirov, 2018). Thus, we chose to develop the smart contract
code for the prototype in Solidity. We relied on the development framework Truffle, which contains tools
for the deployment of contracts and the testing library Mocha as well as ganache-cli, which provides a local
Ethereum blockchain for testing (Truffle, 2019). Additionally, Infura provides access to public Ethereum
test networks such as Ropsten without requiring us to set up our own full Ethereum node (Consensys, 2019).
This toolkit proofed essential for efficient development, which is characterized by being test-driven and
quick iterations (Janzen and Saiedian, 2005). Each of these choices is well-recognized and well-tested in
the blockchain community, with more than 1 million users each (Mougayar, 2018). We used NFTs as the
fundamental core component of our prototype, as they contribute to fulfilling our design goals thanks to
their properties of uniqueness, indivisibility and transferability (Entriken et al., 2018). We reused the well-
tested, audited and community-reviewed implementation of the ERC-721 standard by OpenZeppelin, which
we extend by additional functions needed for our specific use case (OpenZeppelin, 2019).
Resulting Prototype
Adhering to the design objectives and design choices we had specified, we built a prototype that addresses
the concerns of both the event organizer and the attendees. Following the DSR cycle laid out in the previous
section, we took to an interactive approach and started with a very basic design to resolve a highly simplified
and abstracted problem. After evaluation of the preliminary results and performance of unit tests, we
refined the requirements and the design needed to solve it respectively. The resulting prototype should be
viewed as a basic implementation that focuses on core features necessary to meet the design goals we
specified. Figure 1 depicts an UML diagram that outlines the main functions of the prototype.
Figure 1. UML Diagram (simplified)
As the UML diagram shows, the only two entities participating in the simplified process are the event
organizer and the event attendees. They conduct business solely by interacting with the smart contract
the need for a middleman is eliminated completely. The only requirement for the two parties is to own an
account on the Ethereum blockchain, funded with some of its native cryptocurrency Ether, to interact with
the smart contract. The sequence of interactions is numbered with 1-3 as depicted in the diagram.
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Fortieth International Conference on Information Systems, Munich 2019 9
(1) Setup phase: First, event organizers deploy a smart contract for a specific event. Initial parameters,
such as the name of the specific event, an initial ticket price, a maximum price factor for tickets, the event
start datetime, the maximum amount of tickets available and an initial transaction fee for secondary ticket
transactions are provided to the constructor() as specified in the contract deployment script. A screenshot
of the console log during the deployment of a sample event is pictured in Figure 2. The event organizer is
the owner of the smart contract and thus can change these parameters later by interacting with the smart
contract, in addition to withdrawing its balance and pausing transactions of tickets at any time.
Figure 2. Console Log of Contract Deployment on the Ropsten Test Network
(2) Primary market: After contract deployment, event attendees can buy tickets until the supply limit is
reached, by sending a transaction containing Ether to the payable function buyTicket(). The function first
checks if the amount transferred is sufficient and then calls the internal function _createTicket() which
“mints” a new NFT that acts as the virtual representation of a ticket. Each ticket is unique as its id can only
exist once per contract and its ownership can be verified at any time by calling the function
checkTicketOwnership(id). The total number of tickets owned can be obtained by calling balanceOf().
(3) Secondary market: Ticket owners can offer their tickets for resale by calling the function
setTicketForSale(). They can use the function setTicketPrice() to charge any price that does not exceed the
maximum price as defined by the event organizer. Any user with access to a blockchain-enabled web
browser can purchase tickets from current ticket owners once approval has been set by the ticket owner
through the call of approvedAsBuyer(). The buyer can now transfer the required amount of cryptocurrency
to the payable function buyTicketFromAttendee(), which finally transfers the ticket to the buyer. The
transaction fee set by the event organizer is automatically deducted and kept by the contract, where it can
be withdrawn only by the contract owner. Once the event has started, the modifier EventNotStarted() will
prohibit the use of any setter functions. Thus, no more tickets can be created or transferred after the time
specified in eventStartDate. The organizer can call setTicketToUsed() to validate a ticket at the venue.
While the scope of this prototype does not feature a front-end for retail users, its full compatibility with the
ERC-721 standard enables users to use any compatible wallet or NFT-marketplaces like OpenSea to
facilitate peer-to-peer transactions in an easy manner (OpenSea, 2019). The prototype is deployed on the
Ethereum test network Ropsten and thus allows any user with access to an Ethereum node to invoke the
smart contract and use it. The source code of the implemented prototype including instructions for
deployment is publicly available on GitHub
1
.
Evaluation and Discussion
For the evaluation, we linked back our resulting prototype to the design objectives and the evaluation
criteria (see Table 3). Our evaluation is not limited to a single activity conducted at the end of the build
phase, but rather represents an iterative process and encompasses multiple methods and perspectives
(Pries-Heje, Baskerville and Venable, 2008).
Testing and Experimental Evaluation
For a thorough analysis of our prototype’s functionality, structure, formal completeness, consistency and
quality, we relied on algorithmic white box testing, such as unit tests (Hevner et al., 2004). To refine and
optimize our prototype, we followed a test-driven approach and iterated between testing and improving
(Janzen and Saiedian, 2005). We utilized the Truffle framework containing the Mocha testing library and
1
https://github.com/ratio91/NFT-event-tickets
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Fortieth International Conference on Information Systems, Munich 2019 10
Chai assertion library for structural testing, unit tests and functional tests (Truffle, 2019). To ensure the
consistency and quality of each public function and all modifiers our prototype contains, we wrote several
unit tests. Additionally, we created a series of integration tests to simulate the complete workflow, allowing
us to test the formal completeness and functionality of our prototype. In total, we created 33 tests within
289 lines of JavaScript code to ensure that our prototype behaves correctly during state changes. A
successful test run with artificial data, simulating the fully automated completion of the entire process as
laid out in the previous section, thus serves as proof of construction and shows that our solution works
(Nunamaker et al., 1990). Further, the simulation of the realistic test scenario yielded an estimated cost of
5 million gas for the deployment of the system. In addition to running tests and performing simulation, we
also used the code linter Solhint and fixed all reported issues (Protofire, 2019). To avoid security holes and
potential defects in our code, we searched recent literature covering security issues for smart contracts such
as Atzei et al. (2017) and Fröwis et al. (2017) and amended our code where necessary (e.g. setting some
public functions to private). To allow other researchers or practitioners to verify our prototype and to
enhance it further, we open sourced the entire project.
Expert Evaluation
Aside from simulation and testing, we relied on additional sources such as relevant literature and expert
interviews to make informed arguments (Hevner et al., 2004). To assess our artifact and discuss different
scenarios regarding implications for our prototype and NFTs in general, we selected nine experts with
different backgrounds based on their previous knowledge of NFTs and event ticketing as shown in Table 4.
Id
Short Description
Current Position
1
Blockchain consultant specialized in asset tokenization
Managing Partner, Consulting firm
2
Subject matter expert in mobile ticket applications
CEO, Ticketing software company
3
Deep tech analyst specialized in the blockchain industry
Analyst, Venture capital firm
4
Blockchain researcher specializing in token ecosystems
PhD Candidate, University
5
IS researcher focused on blockchain-based identity research
Researcher, Research Institute
6
Behavioral economics researcher with blockchain focus
PhD Candidate, University
7
Technical advisor specialized in blockchain prototypes
Senior Consultant, Consulting firm
8
Blockchain programmer specialized in asset tokenization
Developer, Blockchain startup
9
Venture capital fund manager with a focus on blockchain
MP, Venture capital firm
Table 4. Expert Interviews
We introduced all experts to our research beforehand and followed a semi-structured interview guide
(Holstein and Gubrium, 1995). We digitally recorded the interviews and analyzed them afterwards
according to scientific standards (Schultze and Avital, 2011). Our interviews consisted of two main parts
and typically lasted about 30 minutes. First, we focused on the recommended descriptive evaluation
approach of assessing an artifacts efficacy and utility through the creation of illustrative scenarios around
it (Hevner et al., 2004; Akoka, Comyn-Wattiau, Prat and Storey, 2017). We discussed the suitability of our
prototype regarding our specified design objectives and invited the interview partners to come up with
realistic scenarios and explore implications on our prototype. Second, we also asked open questions to allow
for an open discussion of the general aspects of NFTs. Exemplary questions were:
How can the implications NFTs have on the use case discussed be generalized in your opinion?
What do you see as the main benefits of NFTs?
In your perspective, what disadvantages does the use of NFTs have?
What challenges remain and how could they be addressed in the future?
Depending on the technical background of the interviewee, we also included analytic questions regarding
the perceived fit of our prototype into existing technical IS architecture (Hevner et al., 2004).
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Fortieth International Conference on Information Systems, Munich 2019 11
Evaluation Results and Discussion
DO1 Digitization: Our simulation reveals that the whole workflow can be processed without the need
for any physical representation of the data. Full digitization is achievable in principle, especially for the
process of buying and selling tickets [expert #5]. However, fallback mechanisms are advisable to include
less sophisticated users such as generating QR-codes that encode the id of the ticket. The user could then
decide whether to print out the ticket or show it digitally on the phone [expert #1].
DO2 Secondary Markets: NFTs enable us to embed logic in digital assets such as event tickets
themselves, rather than embedding logic in the applications that control assets. The prototype shows that
embedding business rules for transfer on event tickets works and enables event organizers to stay in control
of the process, set price limits and charge ticket sellers a defined fee. A hard-coded logic is superior to
governance or regulation that requires the monitoring of actual user behavior and enforcement of rules by
human actors (Waltl, Sillaber, Gallersdörfer and Matthes, 2019). It is much easier to collect a fee from the
seller of a ticket if it is automatically deducted or to prevent transactions altogether, rather than requiring
the seller by law to obey certain rules (Davidson, Novak and Potts, 2018). Thus, we consider the prototype
as both more effective and more efficient than currently existing ways to control secondary market
transactions. The only weakness we discovered is a scenario, where users circumvent the system altogether
by transferring the private key of an Ethereum account that owns an event ticket itself, rather than
exchanging the ticket within the system [expert #6, #7]. This could be prevented by the implementation of
KYC measures, which verify the identity of a user of a blockchain address [expert #6, #7]. KYC itself is a hot
topic among practitioners and researchers at the moment and could also be realized using a blockchain-
based system (Parra Moyano and Ross, 2017).
DO3 Independence: To become independent of intermediaries, event organizers and event attendees
require a system that operates in a trust-free way. Using blockchain technology, users can trust the rules
which are enforced automatically and cannot be manipulated (Beck et al., 2016). As every Ethereum node
processes and validates transactions independently, the only trust required is in the underlying blockchain
protocol (Glaser, 2017). However, trustlessness is not only a property of the platform but also of every
individual smart contract (Fröwis and Böhme, 2017). Our interview partners generally agreed that
independence from intermediaries can be achieved and the design objective is met. However, several
experts highlighted that the most realistic use case for our NFT-based prototype would be the integration
with existing platforms to benefit from the aggregation of users. Existing dependencies on intermediaries
are replaced with a new dependence on technical intermediaries such as smart contract developers [expert
#5].
DO4 Security: Our literature research revealed that security of a blockchain-based system is dependent
on the general security of the underlying blockchain protocol and the security of individual smart contracts.
The former faces security risks such as a 51% attack, where a single entity holds the majority of computing
power (Choi et al., 2016). Operational risks include forks, that can happen if the developer community
disagrees over important issues. This can result in several competing versions of the code base and could
compromise the integrity of a blockchain protocol (Lindman et al., 2017). The latter faces security risks that
origin from coding errors, a fact that we acknowledged at the beginning of our process and tried to mitigate
as far as possible. The use of well-audited code from OpenZeppelin as a basis for our implementation is an
effective measure to reduce the attack surface of our smart contracts [expert #4]. Despite these measures,
it cannot be ruled out that the application is vulnerable. Penetration tests by security professionals would
be a valuable contribution (Vacca, 2013). Operational errors, such as the redeployment of new smart
contract versions open further possibilities for human error. Yet, a scenario where users are misled to
interact with an outdated or even a fraudulent version of the smart contract, instead of the valid one, could
be imagined and poses a problem. Additionally, the account security of the event organizer could be
compromised in case the private key securing it is obtained by a malicious party [expert #1]. Thus, trust in
the security measures taken by the event organizer is critical for the overall security of the system. We tried
to limit the potential damage of such a scenario by effectively restricting the options of the owner to change
parameters and pause transactions. Ownership of tickets itself would still be protected in such a case, thanks
to the use of NFTs, which embed rules to only give current owners certain permission (Entriken et al., 2018).
NFTs also help to ensure the integrity as they guarantee uniqueness of tickets by design [expert #4]. The
prototype does not provide a high level of privacy for users, as the Ethereum blockchain is public and uses
pseudonymous identities. Researchers have shown that with limited effort, privacy based solely on
Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 12
pseudonymity can be overcome (Tschorsch and Scheuermann, 2016). Several interviewed experts indicated
potential legal issues as data privacy laws might be breached. Aside from integrity and privacy, availability
is a key factor of a secure system (Vacca, 2013). The Ethereum blockchain which is the protocol used as the
basis for our prototype ensures virtually no downtime (Vermeulen, Fenwick and Kaal, 2018).
DO5 Validation: Verifying the ownership of tickets worked fine in our simulations. Due to the
transparency of all transactions conducted with the smart contract, users are able to verify the correctness
of their actions at any time (Beck et al., 2016). The only prerequisites are internet access and the possession
of the cryptocurrency Ether, as function calls are not free from transaction costs. If not enough gas is
provided, which has to be paid for using the cryptocurrency Ether, interactions with the smart contract will
fail (Delmolino et al., 2016). However, as a recent proposal shows, it is also possible to set up a network of
smart contracts to pay the gas costs instead of the user (Weiss, Tirosh and Forshtat, 2018). Additionally,
the propagation time for the use of access control at the event location of takes time which might not suffice
for scenarios where low latency is required (Cai et al., 2018). As reading all ticket permissions directly from
the blockchain might not be feasible, caching of data just before the start of an event could be a workaround.
DO6 Transparency: As the transaction data is immutably stored on the blockchain, a record of ticket
ownership is maintained. The open nature of the Ethereum blockchain allows anyone to view and thus
verify the current owner of a ticket at any given time. However, viewing ownership only returns the
Ethereum account or smart contract owning a ticket. Due to the pseudonymous nature of the blockchain,
no details on user identity are known, unless effort is taken to uncover the true identity behind the account
or perform KYC to identify users beforehand (Cai et al., 2018). To achieve full transparency KYC is necessary
as any entity can own multiple Ethereum addresses [expert #3]. Higher transparency would be met with
resistance by many event organizers due to fear of uncovering illegal side deals, such as withholding special
contingents of tickets not visible for the public that are dealt behind the back for special favors [expert #2].
DO7 Automation: As our simulation successfully showed, the event organizer is free from the need to
take any manual action after the initial deployment of the smart contract. However, in case of errors being
made in the setup phase, the event organizer can only correct these by sending transactions to the smart
contracts which cost transaction fees. Thus, the organizer needs to properly fund the account in advance.
DO8 Cost efficiency: Simulating the deployment of the prototype showed that the expected gas amount
required of 5 million gas costs about 0.01 Ether. The corresponding amount in fiat currency such as USD
or EUR depends on the current exchange rate, which is highly volatile (Rimba et al., 2018). At the time of
our simulation, it corresponded to about 1 USD (EthGasStation, 2019). Rising Ether prices could increase
the costs substantially and lower cost efficiency [expert #6]. For event attendees, transaction fees for each
interaction with the smart contract are substantially lower. However, despite lower costs, the fact that users
are constantly reminded that any interaction with the prototype comes with a small fee might lead some
users to prefer a centralized solution, where prices are more hidden instead (Beck et al., 2016).
Discussion of General Benefits and Challenges
Aside from our findings related to the use case of event ticketing, our literature research and expert
interviews revealed further benefits and challenges for NFTs in general. We briefly discuss these discoveries
here and present potential ways to overcome each of the problems we discovered.
A key benefit of NFTs is representing uniqueness better than any blockchain-based instruments before
[expert #3]. They can help to make assets programmable and enhance liquidity and security. Even for assets
with certain fungible aspects, a better differentiation can be achieved if NFTs are used rather than fungible
tokens [expert #3]. Thanks to these benefits, NFTs enable new use cases for blockchain technology and
have the potential to improve existing blockchain systems by simplifying it [expert #1]. Two main use cases
can be distinguished. First, tokenization of digital goods is a perfect fit for NFTs as they can guarantee
authenticity and uniqueness [expert #4]. Tickets could be considered as a bundle of rights and thus the
tokenization of rights in general could be considered a viable use case for blockchain-based systems and
specifically NFTs as well [expert #3, #5]. During research of grey literature, we found several use cases that
provide further evidence that NFTs are useful such as the enablement of new business models for software
licenses and new form of ownership in digital art (0xcert, 2018; Griffin, 2018). Second, NFTs are ideally
suited to represent physical assets in the digital sphere [expert #4, #7, #9]. A resulting increase in the
Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 13
transparency of ownership benefits regulators [expert #6]. However, to bridge the gap between the physical
and the digital world, additional components such as intelligent sensors are necessary [expert #7, #8].
Yet, using NFTs poses several challenges. As they are nothing more than a standardized piece of
software code executed on a blockchain, they are highly dependent on the properties of the underlying
blockchain protocol. As one expert explained, anything you can do with NFTs is enabled by Ethereum,
and everything you cannot do is not enabled by Ethereum” [expert #1]. One of the most notable challenges
of Ethereum is its limited scalability (Eberhardt and Tai, 2018). However, we found that solutions that
overcome this challenge already exist, such as using state channels (Coleman et al., 2018). If this issue is
resolved, NFTs should be extremely scalable, as tests revealed that a single contract can handle 2128 NFTs
without problems (Entriken et al., 2018). Another challenge is the design dilemma of privacy vs.
permissionless blockchain (Corten, 2017). Multiple researchers have shown that privacy is not guaranteed
as it is possible to make sense out of pseudonymous data on public blockchains, where transparency and
public access is a key feature (Tschorsch and Scheuermann, 2016). Yet, development of new promising
technologies such as zero-knowledge proofs (ZKP) is ongoing and will solve this issue in the future (Koens,
Ramaekers and Van Wijk, 2018). ZKP is a cryptographic method allowing to proof to another party certain
properties without revealing them (e.g. proving that you’re of a certain age, without revealing your actual
age) (Koens et al., 2018). Early proof that privacy is feasible for NFTs has been achieved by a dedicated team
of the firm EY, which used ZKPs in combinations with NFTs to facility private equity transactions (Khatri,
2018). Further, NFTs lack easy accessibility for retail users as they are a backend component and do
not provide a user-friendly interface [expert #1]. The requirement of paying gas for each function call, which
is priced in Ether complicates the use of blockchain-based systems even for experienced users (Rimba et
al., 2018). Thus, users are required to purchase cryptocurrency upfront to pay transaction fees, even in case
the business model would generally not charge the retail users (Cai et al., 2018). However, a recent EIP
(Ethereum Improvement Proposal) called “Gas Stations Network”, enabling smart contracts to pay the gas
costs instead of the user, shows that this problem can be resolved (Weiss et al., 2018). Not only the price of
gas fluctuates but also the price of the cryptocurrency Ether is highly volatile (Rimba et al., 2018). This
makes it very hard for retail users to calculate costs based on fiat currencies such as USD. A potential way
to overcome this challenge is to use decentralized stablecoins such as Dai, that try to resemble the value of
fiat currency and thus free users from the currency risk and mental effort of fluctuating exchange rates (Ito
and O’Dair, 2019). Another important challenge for the use of blockchain-based systems in general is
limited legal enforceability (Christidis and Devetsikiotis, 2016). While token owner can rely on
authenticity, legal ownership and consumption of the rights represented by NFTs are a different matter
[expert #3, #7]. For a blockchain-based system to be truly trustless, legal correctness and legitimacy within
the current institutional environment are required (Hawlitschek, Notheisen and Teubner, 2018). Further,
as NFTs are a very young phenomenon, people who understand NFTs are very scarce and the language used
in the blockchain space is very technical and generally not well understood by the public [expert #1, #5,
#9].
During the construction of the artifact, we revealed a typical issue for NFTs regarding the creation of
tokens. Unlike for fungible tokens, for NFTs it is not possible to create many tokens right away. Minting
NFTs one by one is cumbersome and inefficient since it requires lots of computational power and thus high
gas costs occur. One solution we found and applied is to create the tokens only when demanded and paid
for by buyers. This strategy is called “user-mintable” tokens (Stehlik and Vogelsang, 2018). Another
challenge is the two-stepped process of approving transactions before the actual transaction can happen
(Entriken et al., 2018). While a solution that is commonly used is to transfer NFTs temporarily to a
marketplace contract that takes care of the transactions, this approach has some disadvantages. The fact
that token ownership is temporarily transferred away from the owner poses a problem for some use cases
and security can be negatively affected. What is more, every additional transfer costs gas and reduces
efficiency. Further, the nature of smart contracts generally makes it easy to extend the system with new
features. However, upgrading existing smart contracts bears multiple technical and operational risks and
costs money. Relying on development frameworks like OpenZeppelin and Truffle significantly simplifies
upgrade procedures and reduces risks.
Summing up, NFTs enable new beneficial ways to digitally represent digital and physical assets. Yet, many
challenges remain to be solved. NFTs are based on blockchain technology which is still in its infancy and
not yet ready for a mass market of retail users, who demand simplicity, user-friendly interfaces and legal
clarity. These demands cannot be solved by NFTs but need to be addressed on the level of the underlying
Non-Fungible Tokens as Event Tickets
Fortieth International Conference on Information Systems, Munich 2019 14
blockchain protocols and legal institutions. Further, public knowledge about NFTs is still scarce. For these
challenges, we expect its role to be restricted to a backend component rather than being directly visible for
retail users. Nonetheless, we consider NFTs a highly valuable component for blockchain-based systems with
the potential to enable many more practical use cases apart from the one discussed in this paper.
Conclusion
We have investigated NFTs as an emerging phenomenon and evaluated NFTs as a core building block for a
blockchain-based event ticketing system. We followed a design science approach based on the guidelines
by Hevner et al. (2004) and iteratively developed a prototype. Through the process of designing, building,
and evaluating the NFT-based prototype, we were able to generate several relevant findings regarding
benefits and challenges of the new token type. We found that NFTs can help to overcome the current
weaknesses of existing non-blockchain event ticketing systems, such as susceptibility to fraud, lack of
control over secondary market transactions and validation of ownership. Further, our findings indicate that
the use of NFTs currently poses several challenges, mostly inherited from the underlying blockchain
protocol. Since we have shown that work on solutions to overcome these challenges is currently in progress,
we propose further research to re-assess the state of these challenges in the near future.
Before highlighting the contributions of our research, we must consider its limitations. First, by considering
a specific use case in detail and following a rigorous research process to draw generalizable implications
from it, we may have missed on certain insights that might have been discovered in different use cases. The
use case itself is limited to a strongly simplified model of requirements for an event ticketing system and
does not capture the role of other stakeholders and related processes in detail. Our architectural choices
may narrow down the generalizability further (Koens and Poll, 2018). Second, despite our attempt to
address the issues of user experience, legal implications as well as technical and operational risks, we
acknowledge its limited role in this study (Governatori et al., 2018). To reveal more insight into user
acceptance of a system based on NFTs, we thus suggest complementary studies on other use cases of NFTs,
including extensive field experiments with retail users and legal experts as key parts. Therefore, our findings
should merely be perceived as a preliminary step towards a better theoretical and practical understanding
of NFTs.
Despite these limitations, our research is one of the first scientific attempts to address the questions if NFTs
are useful in practice and how they can help to improve existing systems in real-world domains. The
valuable insights we generate for practitioners are threefold: First, we highlight the differences between
NFTs and fungible tokens and provide best practices for the development and evaluation of systems using
NFTs. Second, we demonstrate the usefulness of NFTs for the use case of event tickets and provided proof
by construction through a successful implementation of a working prototype (Hevner et al., 2004). Third,
we elaborate on the consequences of its use and highlight practical challenges. In addition to these practical
insights, we add descriptive knowledge to an emerging field of research where scientific studies are scarce.
We extend and complement existing studies in the literature on blockchain technology by adding new best
practice approaches on how to build and evaluate a blockchain-based system using DSR (Glaser, 2017).
Finally, our research serves as a foundation for future theoretical and practical research on NFTs, enable
other researchers to draw on its findings and design principles and lay ground to higher-theory
development (Gregor, 2006).
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... There can, however, be seen some work developing around the use and application of NFTs in other fields as well (Regner et al, 2019;Popescu, 2021;Dowling, 2021a;2021b). ...
... These rights are created through the establishment of a smart contract on the Ethereum blockchain (Dowling, 2021 a). Non-Fungible Tokens came into inception through the ERC-721 standard in 2017 (Entriken et al, 2018) which prescribes an improved way of tokenization of individual assets which was not possible with fungible tokens because of their inability to represent uniqueness (Regner et al, 2019). Being non-fungible means a particular NFT has a unique value. ...
... NFTs, in a way, provide a Proof-of-Asset, its indivisible and hence cannot be divided into smaller components, its accurately verifiable since it is connected to a blockchain, and its record is immutable for the same reason (Popescu, 2021). It also improves the tokenization of individual unique assets which is not possible in fungible tokens (Regner et al, 2019). NFTs can be programmed to pay royalties, they can provide the records of ownership for in-game items, they can be used to prevent digital content piracy over the Internet and can also be used as collateral to borrow Stablecoins like DAI (Popescu, 2021). ...
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Non-Fungible Tokens (NFTs) are a new development in blockchain technology. News around NFTs is surrounded by skepticism because unrealistically high prices are being paid online for these NFTs which are in the form of apparently simple digital arts and photographs. It is not clear if this is a trend, a hype, a bubble, or a legitimate novel way of holding and trading value. A literature review of peer-reviewed scholarly studies, performed in the context of business and management, is presented here. Moreover, we also discuss open issues, and challenges, and present future research directions. Analysis of these studies reveal that schools of thoughts are divided on the validity of this form of digital tokens. On one hand, there is a lot of criticism but on the other hand, we can find novel business models and applications of NFTs especially the feature of smart contracts. It can, therefore, be concluded that NFTs, even if not in their current form, are here to stay and may promise new ways of protecting digital assets in an immutable and easily traceable form.
... Also, tickets on the secondary market are sometimes offered several times, and there is no way for fans to check their validity (Waterson, 2016). This exposes users to the risk of paying for an invalid or a counterfeit ticket (Regner et al., 2019). ...
... To improve ticket ownership verification and secondary market control, blockchain technology has been suggested (Cha et al., 2018;Li et al., 2019;Regner et al., 2019;Tackmann, 2017). In connection with automated and rulesbased transaction processing using smart contracts and nonfungible tokens (NFTs), event organizers can transparently record ticket ownership and define rules and price limits for secondary ticket market transactions (Regner et al., 2019). ...
... To improve ticket ownership verification and secondary market control, blockchain technology has been suggested (Cha et al., 2018;Li et al., 2019;Regner et al., 2019;Tackmann, 2017). In connection with automated and rulesbased transaction processing using smart contracts and nonfungible tokens (NFTs), event organizers can transparently record ticket ownership and define rules and price limits for secondary ticket market transactions (Regner et al., 2019). Yet this approach is hard to align with data protection regulations, such as the GDPR, particularly regarding the "right to be forgotten." ...
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... NFT is a piece of information that is stored over a blockchain [8] which confirms that a virtual asset is unique. Therefore, it is non-interchangeable, even as offering a distinctive virtual certificate of ownership for that NFT. ...
... NFTs are using blockchain technology with a purpose to confirm who owns the real of a digital product (maybe even out of several copies). They are a distinctive token of ownership which also has its own value [8] . Hence, whilst people are shopping for NFTs, thereby also promoting them, they actually are shopping for and selling their digital possession over something. ...
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Non-Fungible Tokens (NFTs) are digital properties and/or assets that would be something like an artwork, a collectible, an in-game purchasable object etc. They may be traded online, often in exchange for cryptocurrency, and are encoded within digital contracts on a blockchain. Masses assumed that it could revolutionize the society in some way, and this is precisely the reason why they've such high sale/resale price. However, there is not much available information about the general structure and evolution of its marketplace, like how this contemporary trend is sweeping the internet worldwide, how are they selling for such large costs, or how an easy 5-word tweet become capable of selling for about 2.9 million USD, or why a JPEG photograph is offered for 69 million USD. And if that wasn't sufficient, the National Basketball Association the (NBA) itself is promoting and selling little moments of its basketball matches for loads of thousands of dollars. Those are all kinds of digital matters, and people are shopping a version of them by paying a lot of money. Apparently, people are inquisitive about it. And all of this is plenty bigger than a $600,000 CAT gif. We analyzed the NFT marketplace and are presenting a short document on what this trend is all about. Why these NFTs are both an exceptional invention and a trouble, and the correct method to put your money into NFTs.
... It particularly improves the tokenization of individual assets which is not feasible with fungible tokens, as they cannot digitally represent uniqueness. Thus, practitioners have conducted a multitude of experiments using NFTs to represent both digital goods such as virtual gaming assets, digital artwork, and software licenses as well as physical assets such as luxury goods and cars [12]. NFTs are powered by Smart Contracts. ...
... The game took up more than 70% of the transaction capacity of the Ethereum network at one point and the most expensive NFT that represents ownership of such a cat was sold for over USD 100,000 in late 2017. Over 100 similar digital collectibles such as virtual card games or unique original digital art have been created by the community in the past year and the number is expected to grow further [12]. ...
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... The investigation of the most relevant BC-based ticketing management systems reveals the following one: Origin Protocol [6], GUTS [7], Blockparty [8], Aventus protocol [9], and Blocktix [10]. A few other less related ticketing solutions exist such as [11] which explores the potential of Non-fungible tokens of Ethereum in identifying tickets or the work of [12] that is based on a BC called Consensus. Finally [13] proposes a mobile ticketing system exploring the potential of multi-signature features offered by SCs of Ethereum. ...
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... NFTs are also used for decentralized gaming (e.g., Ubisoft Quartz), where items earned by playing can now be owned and traded as tokens on a market amongst players instead of just being items that are rigidly bound to a player's account (Blockonomist, 2021). In addition, NFTs offer properties that could be useful for the ticketing industry by being a representation of an on-chain ticket with easily verifiable ownership history (Regner et al., 2019). However, many challenges in the ticketing industry -such as secondary market controlcan arguably not be solved with NFTs alone and instead require strong identity binding to be enforceable (Feulner et al., 2022b). ...
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