TECHNOLOGY – BLOCKCHAIN
INTRODUCTION
Blockchain is the technology on which Bitcoin and all the other cryptoassets are based – but it has very broad applicability, and will soon be recognized as another disruptive technology that will provide great benefit to business and to the on-line world, and will contribute to substantial job re-definition and loss.
A blockchain is fundamentally an electronic ledger, shared among a number of people, which consists of a linked chain of blocks of time-stamped transactions, with special characteristics:
- They are immutable (which means that once a transaction is added, it cannot be changed or deleted).
- They are distributed on many computers (each with their own copy), and no transaction can be added to a block without consensus, i.e.the agreement of all computer owners.
- All transactions and the chain linkages are encrypted.
- The blockchain operates without relying on a central co-coordinator to provide the authoritative version of the transactions.
A blockchain allows a number of independent parties (who may not trust each other) to keep a tamper-proof and secure record of a number of transactions (involving, for example, the purchase, delivery, and payment of a product). This eliminates the need for the involvement of trusted third parties (like lawyers and bankers). Software (consisting of a sequence of ‘IF … THEN … instructions) has been developed to set out all the steps required to complete a process, and to initiate and record the completion of each step. This is called a ‘Smart Contract.’
The first description of Distributed Ledger Technology (of which blockchain is a subset) was in 1991. Bitcoin started in 2008. The first commercial application was in September 2016, when Barclays Bank facilitated a $100,000 trade of cheese and butter between Irish food company Ornua and the Seychelles Trading Company, which took less than 4 hours (compared to the current average of 10 days).
To emphasize the breadth and global reach of the technology, here are a few current applications:
- The World Bank, working with Microsoft and the Commonwealth Bank of Australia, has issued the first blockchain-based bond.
- The shipping giant Maersk, working with IBM, has developed a blockchain-based supply chain, shipping and logistics platform that 94 world-wide companies have agreed to use.
- De Beers is using blockchain to track the source and shipping of their diamonds.
- Italian insurance companies are testing a blockchain-based solution to resolve disputes involving car-liability claims,
- Wyoming farmers want to use blockchain to track what their cattle eat, and then brand their beef as superior,
- China’s first blockchain social network is the brainchild of a 24-year-old female poker player,
The lack of need for trusted third-parties will impact the demand for bankers and lawyers, and blockchains will eliminate the need for a lot of currently-printed documentation. But other applications, most as yet unspecified, will be more disruptive to the labor force. One such application occurred in March 2018 when a house in Vermont was sold using a blockchain-based platform, which only involved the buyer and seller (and not any bank, mortgage company, or legal personnel).
George Gilder, the technology futurist who predicted the iPhone 13 years before its release, and the death of cable TV 10 years before Netflix, believes that blockchain technology will be used to replace the world’s current fiat currencies (based on its security and lack of a controlling entity), and to replace the current internet infrastructure, involving technology that has already been developed. (His current book is entitled ‘Life after Google’!)
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First live blockchain-based settlement of U.S. equities (Finance/Equities - 2020-02 - CoinDesk)
New York-regulated crypto startup Paxos, in conjunction with Credit Suisse and Nomura-owned broker-dealer Instinet, has implemented the first live blockchain-based settlement of U.S. equities.
Report: The current state of blockchain use in business, and projections for the future (2019-12 - ZDNet)
Overall, views on the applicability of blockchain in business have polarized. This special report references a series of articles.
HSBC swaps paper records for blockchain to track $20 billion worth of assets (Finance/Banking - 2019-11 - Reuters)
An HSBC platform will digitize paper-based records of private placements, using blockchain to reduce the time it takes investors to make checks or queries on holdings. These records are typically held on paper and lack standardization, making access tricky and time-consuming. HSBC currently looks after up to $50 billion worth of the assets.
How blockchain will disrupt business: A special report (2019-11 - TechRepublic)
A comprehensive report on the current (November 2019) state of development of blockchain applications, including in media, health care, voting, and luxury goods. 92% of US CIOs say blockchain will positively impact their industry in the next 5 years.
Cannabis on a blockchain: Israeli Security Matters files patent for plant tracking (Agriculture/Supply Chain - 2019-09 - ZDNet)
Israeli company Security Matters’ solution can be applied to mark, track, and manage the supply chain of cannabis plants, cannabis products, and products containing cannabis-derived ingredients.
HSBC processed the first blockchain letter of credit using Chinese yuan (Finance/International Trade - 2019-09 - Reuters)
HSBC completed the first yuan-denominated blockchain-based letter of credit transaction. HSBC and other banks want to use blockchain technology to streamline the traditionally paper-based and bureaucratic business of financing trade. HSBC used the Voltron trade finance platform, developed by them and 7 other major banks.
IBM and other companies launch new blockchain network for supply management (Manufacturing/Supply Chain - 2019-08 - Reuters)
IBM announced a new blockchain network aimed at improving manual and cumbersome supply chain management. The founders of the network (‘Trust Your Supplier’) include Anheuser-Busch InBev, Cisco, GlaxoSmithKline, Lenovo, Nokia, Schneider Electric and Vodafone.
Blockchain-based platform addresses food safety concerns in China (Retail/Food Safety - 2019-06 - CoinDesk)
Walmart China has launched a blockchain-based platform aimed to address food safety concerns in China, including 23 product lines tested and listed, with another 100 planned by the end of 2019.
Walmart and IBM pilot prescription medication tracking (Medicine/Prescriptions - 2019-06 - TechRepublic)
IBM, Walmart, KPMG, and Merck were chosen by the US Food and Drug Administration to run a pilot project using blockchain to identify, track, and trace prescription medications and vaccines distributed in the US. The pilot is intended to quickly identify suspicious products and speed the recall process.
Shoppers Drug Mart to use blockchain technology to trace medical cannabis (Medicine/Marijuana - 2019-06 - CTV)
Shoppers Drug Mart plans to use blockchain technology to trace the source of the cannabis it distributes, as part of an effort to set standards for the flourishing industry. It is teaming up with Canadian software firm TruTrace to develop and deploy a pilot project to ensure the traceability of medical cannabis.
5 Blockchain breakthroughs coming in 2019-2024 (2019-06 - Singularity Hub)
Blockchain is poised to cut out middlemen, dramatically improve transparency, and increase the efficiency of countless transactions worldwide – in particular, fundamentally revolutionizing supply chains, healthcare, elections, and real estate.
Every rental contract in Malta will be registered on the blockchain (Rental Contracts - 2019-06 - CoinDesk)
Malta will require every rental contract to be registered on the blockchain. This ensures security, prevents record tampering, and ensures only authorized persons can access the records. The distributed ledger prevents there being contracts for which there is no record.
A blockchain-based real-estate transaction platform can close a traditional real estate deal entirely online (Real Estate - 2019-06 - CoinDesk)
Propy is a real-estate transaction platform that empowers buyers, sellers, their agents, and escrow agents to close a traditional real estate deal entirely online. The purchase offer, payment and deeds are uploaded to an immutable blockchain. Propy completed its first deal in 2017, its first US transaction in Vermont in 2018, and has assisted worldwide in over 60 real estate transfers.
IBM's notes as a sponsor of Consensus 2019 (2019-05 - CoinDesk)
With 500+ client engagements and 100+ active networks, IBM Blockchain includes applications in banking (clearing and settlement of cross-border payments in near real-time), financial services, insurance (slashing regulatory and compliance costs), retail, food supply (80+ clients processed 4+ million transactions), supply chain (60+ clients tracked 360 million shipping events), identity, and consumer goods.
Real estate buying and selling could be reduced from 3+ months to 3- weeks (Service/Real Estate - 2019-04 - CoinDesk)
Barclays Bank, Royal Bank of Scotland, enterprise blockchain firm R3, and others have completed a successful blockchain trial. The trial used test data to carry out simulated property transactions over a distributed ledger system over a 5-day period. This demonstrated that real estate buying and selling could be reduced from >3 months to <3 weeks.
The UK’s first digitized end-to-end residential property transaction (Service/Real Estate - 2019-04 - UKTech)
As part of the UK Land Registry’s Digital Street R&D project, Mishcon de Reya has successfully completed the UK’s first digitized end-to-end residential property transaction. The project is looking at ways of improving the home buying process in the future.
Albertsons is the latest grocery store to adopt the blockchain-based system for tracing food from farm to store shelf (Retail/Food - 2019-04 - TechRepublic)
IBM continues to expand the blockchain-based Food Trust network to improve the way food is traced from farm to grocery store, with Albertsons Companies piloting food safety measures in its 2,300 stores across the US,
Trade organization ICC supports blockchain adoption for 45 million members (Supply Chain - 2019-04 - CoinDesk)
The Paris-based 100-year-old International Chamber of Commerce has partnered with Singapore-based blockchain startup Perlin to improve supply chain processes for its 45 million members (from 130 countries), making the processes more traceable and transparent.
Tata settles securities between national depositories on a blockchain (Finance/Securities - 2019-04 - CoinDesk)
India’s Tata Consultancy Services has completed a blockchain trial of cross-border securities settlement between two central securities depositories. The successful pilot project created a set of equity and fixed income securities for Morocco’s Maroclear depository and the Kuwait Clearing Company. Segregated accounts to hold the securities were also created. The cross-border settlement instructions for these securities were matched and settled instantaneously, with confirmation notifications also arriving in real time.
French lender Societe Generale issues $112 million bond on Ethereum blockchain (Finance/Investments - 2019-04 - CoinDesk)
French financial services giant Societe Generale Group has issued bonds (to itself) worth $112 million in the form of a security token on the public ethereum blockchain: “Many areas of added value are predicted, among which, product scalability and reduced time to market, computer code automation structuring, thus better transparency, faster transferability and settlement. It proposes a new standard for issuances and secondary market bond trading and reduces cost and the number of intermediaries.”
Using blockchain to eliminate business process waste in construction projects may save 5+% (Construction/Supply Chain - 2019-04 - CoinDesk)
A World Economic Forum report indicates that, by eliminating transactional costs associated with fragmented supply chains, blockchain drives value by simplifying processes and providing greater transparency. This will lead to greater trust and collaboration in construction projects.
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