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Proceeding Paper

Risk and Return Management through Smart Contract Profit Redistribution

Concordia University, Institute for Information Systems Engineering, 1455 De Maisonneuve Blvd. West, EV 7.640, Montreal, QC H3G 1M8, Canada
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Presented at the 3rd annual Decentralized Conference, Athens, Greece, 30 October–1 November 2019.
Proceedings 2019, 28(1), 3; https://doi.org/10.3390/proceedings2019028003
Published: 21 October 2019
Investing into a new product or service is a high-risk, high-return activity. This is best symbolized by the observation that the return over investment distribution of startups is a power law. Introduction of new products or services to the market might fail to generate profit even though there is a demand. Early adopters are also penalized, as they often pay a high price for something which will end up being cheaper, and might lose their warranty if the firm goes bankrupt. Innovation is slowed down. We propose to equally redistribute part of the generated profit at the end of a predefined time period to previous customers using Ethereum smart contract. Because customers are aware of the amount they would get back, their behaviors will change. The return over investment distribution and therefore the risk and return balance of the firms will also be affected. We formally define both a classic market and a market that is using our proposed system, and present an architecture to deploy such system. A preliminary numerical simulation is provided.
Keywords: smart contract; blockchain; ethereum; demand function; redistribution; return over investment; risk and return; factory; wealth inequality; bass model; power law; vilfredo pareto; cryptocurrency smart contract; blockchain; ethereum; demand function; redistribution; return over investment; risk and return; factory; wealth inequality; bass model; power law; vilfredo pareto; cryptocurrency
MDPI and ACS Style

Deleau, V.; Yu, J.Y. Risk and Return Management through Smart Contract Profit Redistribution. Proceedings 2019, 28, 3. https://doi.org/10.3390/proceedings2019028003

AMA Style

Deleau V, Yu JY. Risk and Return Management through Smart Contract Profit Redistribution. Proceedings. 2019; 28(1):3. https://doi.org/10.3390/proceedings2019028003

Chicago/Turabian Style

Deleau, Victor, and Jia Y. Yu. 2019. "Risk and Return Management through Smart Contract Profit Redistribution" Proceedings 28, no. 1: 3. https://doi.org/10.3390/proceedings2019028003

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