Section 4: Investment and use-case by industry
Here are the highlights of the latest applications of DLTs by sector. Insight: some elements relevant for this sector review can be found in the paragraph that reviews tokenized assets.
Let’s highlight here that Visa and Mastercard are participating in the Libra initiative.
Tokenized financial titles
•Société Générale, the French bank, has issued bonds to the value of €100M on the public Ethereum blockchain. A fun fact was that a sole entity acquired the bonds, and guess what? It was Société Générale itself! As the proverb goes: “On n’est jamais si bien servi que par soimême.” [You are never so well served than by yourself.] With this amount of bonds involved though, it is hardly just a PoC, and the bank has explained that it gains overall because of increased transparency and reduced likelihood of errors arising from the complexity and the number of intermediaries involved in issuing covered bonds using traditional means.
A group of 14 banks (European, Japanese, etc.) led by UBS, launched a trade settlement platform based on blockchain.
Another consortium of banks, in conjunction with the London-based Finality International, is organizing the creation of a dedicated cryptocurrency for cross-border transfers and settlement among themselves.
This all indicates that banks are trying to build, by cluster, their solutions to compete with Ripple and with the JPM dollar, in a bet to avoid being overtaken, especially by JP Morgan. This domain continues to be at the forefront of use cases at banks and is increasingly competitive: the trend continues. Interestingly, for the moment, neither JP Morgan nor others are considering issuing their currency to the public – which sets them apart from Ripple.
Custody and management of crypto-assets
The Korean institution, Kookmin Bank (KB), is moving towards proposing custody of tokenized assets/cryptocurrencies.
Banking crypto-related businesses
Overall, the divide between crypto banking and traditional banking is only increasing, with the two worlds often willing to avoid interfacing with each other, and crypto businesses being pushed to find alternative solutions on their side. Consequently, the crypto world is incentivized to develop fast.
In Israel, the crypto start-up battle for general banking services is embodied by “Bits of Gold”, an exchange that is being taken to the judicial courts. Banks are not legally obliged to serve a client, and there are only a handful of banking institutions in the country.
Grain trading, supported by a blockchain infrastructure, is being tested in Colorado. Promoters of the initiative quickly realized that they needed to extend the outreach of participants to have a chance of enabling their solution to gain momentum.
Two American insurance companies, USAA, and State Farm, are engaging in a process leveraging blockchain to pay each other when two of their customers are involved in an accident. It is foreseen that regular settlements will be made between the companies, resulting in savings in processing, reconciliations, and error reduction.
Allianz SE from München is developing a blockchain-based ecosystem to facilitate cross-border insurance payments for its corporate customers.
Salesforce, a software editor, is detailing the benefits of blockchain when full supply-chain traceability is implemented: thanks to great customer satisfaction capture, faster and better selection of providers can be achieved, which in turn can help to better target markets. Who said that we lived in a world fueled by data? One could object that it will take a long time to achieve effective data collection throughout the value chain systematically and reliably. Not to mention that Salesforce would be acting as the retributed data management, the third party!
Carrefour’s blockchain tracking system enables customers to track the origin of 20 goods, including meat, milk, and fruit, from farms to stores. Customers will appreciate the ability to avoid products with genetically modified content, antibiotics, and pesticides, and the likelihood of commercial success looks positive, based on reports of increased sales. The brand expresses the intention to add 100 more products in the system this year.
Nestlé, which had been participating in the Food Trust blockchain initiative (with IBM), has launched another project to serve its supply chain monitoring. Of course, Nestlé is a big enough player to work on its tool, which would then be imposed on its suppliers. However, it remains to be seen if other supply chain initiatives ultimately emerge, which will probably need to interface with Nestlé, or if the Nestlé’s one will be robust enough to be expanded to other competitors, depending on whether they are willing to accept the Swiss company’s head start. All industries are likely to face this sort of configuration, with big companies trying to front-run while it only makes sense to implement a system if all the market participants can participate…
Swiss luxury watch companies are researching ways to register their products on distributed ledgers. The eternal question here is, if a watch has just a serial number on it, while all relevant data on provenance, manufacturing processes, sales channels and owners is trustworthy and quickly recorded, what prevents a counterfeiter from putting an existing serial number on a watch and pretending that it’s real? Here, the reasoning gets interesting. To customers that buy luxury, expecting the product to be genuine, it may be easy to implement some information about the current owner and make sure to check the identity of the seller to ensure a match. And thus, a unique serial number that only the manufacturer can create proves the point. But to the customer that is happy to buy a cheap counterfeit that looks precisely the same, checking the source of the object is not a priority – a market for such goods will still exist. The point is that, for enforcement, it could become more natural to ask customers for their blockchain registered proof of property. So, in principle, this can work. We’d point out that luxury clients are usually not interested in the burden of managing a private key and finding it when needed, nor are luxury retailers likely to displease their high-worth customers by asking them to prove they own genuine products. Furthermore, counterfeit is sometimes part of the marketing strategy of some brands (a component of their popularity). To connoisseurs, the difference is noticeable, and the real luxury world is all about that.
Still, on the subject of tracking valuable goods, another approach is to attach a connected device to the item, that is, a miniature IoT cryptographically identified on a DLT. The issue is then, how to make sure that the IoT device cannot be detached from an old or broken object to be put on a counterfeit; otherwise, of course, this approach provides more than the serial number, by feeding even product lifecycle data to the manufacturer, if so designed.
INFORMATION AND TELECOMMUNICATIONS
Apple and Samsung seem to be competing to embed crypto asset management in their respective devices. The Korean chaebol has a lead, as it already integrates a hard wallet able to manage private keys in its upper-end products, and it is reported to be working on a Samsung coin based on Ethereum, while Apple is maintaining its stance against cryptocurrencies. This again exemplifies the relative advance of Asia over America in the field of DLTs.
Google’s blockchain activities have been surprisingly discreet, although it is hard to believe that many of the IT giant’s teams are not enthusiastic and pushing the technology. The dearth of information that is filtering through shows that blockchain positions exist in the company and are increasing. However, the focus of the company is instead on studying how to provide services to companies, due to either direct public proposals or to improve its processes.
Microsoft has launched a decentralized identity tool on the Bitcoin blockchain. Baptized Ion, this open-source project is supposed to handle the decentralized identifiers of a given user when they choose to use it to access a website. Scant information is available on how it works, but one can infer that the choice of Bitcoin is essential to anchor the system on the most secure blockchain (most hash power for validation); and then probably a root of the Merkle tree is anchored in empty transactions, while the client gets a sequence of combined hashes. So that combined with the password and identity data, one can prove their identity.
IBM has applied for a patent for a blockchainbased web browser. Other initiatives have already proposed seamless integration of a wallet in internet browsers that allow for easy integration with decentralized applications; but in IBM’s case, the attempt is to use blockchain to track and ascertain session data, mainly so that the user data is placed back in its control (see the paragraph on personal data management, the same principles apply).
MEDIA, INCLUDING SOCIAL NETWORKS
“FaceCoin” (nicknamed “ZuckBuck”) is now out of the woods, and official. With its official name Libra, this is arguably the most critical piece of crypto news regarding social media, as FaceCoin is backed 95% by Facebook. Embedding a type of payment system has probably been on Zuckerberg’s to-do list for a long time, even if it’s not to lag too far behind WeChat. For a more detailed analysis of Libra, please refer to the “Payment Functionality” section.
The Korean messaging app company, Kakao, has launched its blockchain. Applications on it may follow; the real question is, if this is about a singlecompany infrastructure, what is the actual difference compared to a centralized database?
Otherwise, Voice, a social media platform, is being launched on EOS by Block.One. Everything posted and shared on the platform will be public (and stay there forever). Let’s see how the public reacts to this…
Etihad has partnered with a Swiss start-up, Winding Tree, to create an Ethereum-based system to support its flight times, travel itineraries, baggage tracking, etc. This will allow to cut overpriced third-party data management services. Back in October 2018, Air France-KLM also approached Winding Tree to work on the definition of a DLT-based system. The question remains whether an industry-standard can emerge from private initiatives of this kind.
Russian airline S7 has revealed it is using a distributed ledger to issue air tickets. The interest in using blockchain is to securely connect the ticket booking system to the banking system, speeding up payment processing and slashing the amount of manual paperwork traditionally required.
Another airline, Norwegian, has got its hands on a crypto exchange, to accept a range of cryptocurrencies for payment of airplane tickets.
Bosch is partnering with the Germany-based electric utility company EnBW (Baden Württemberg) to test a prototype of blockchain-based car charging stations.
As one of the most straightforward use cases for blockchain logistics, the shipping industry is still in the lead. The sector is now collaborating to produce the definition of a standard. The fact that ports enter into the landscape makes it essential to have a genuinely global approach that would not be the property or led by any particular market participant – a general trend with all ecosystems, as we will sum-up later.
Consultants and observers have different economic projections for the “blockchain healthcare industry”: €800M in 2023; a 70% annual compound growth; €1.5Bn in 2026; leading to savings in the healthcare sector as a whole of €100Bn. Now, all of this looks difficult to achieve, especially with all the world’s economic uncertainties, but one thing is sure – everybody agrees there is money to be made!
The Plastic Bank, a non-profit organization, claims it will be turning plastic waste in the oceans into a currency. The plan is to reward people for collecting plastic (in some countries, a cynic could say that it is almost a conflict of interest! – why throw it away in the first place…). The hope is that environment friendly activists around the planet will purchase these tokens, thereby conveying value to them.
ADMINISTRATION AND POLITICS
To sum-up how DLTs are bound to change the way populations rely on their governments, the following can be identified:
If the property and contractual engagements of civil parties are notarized (and potentially settled) on a blockchain, then it should bring some reliability to official recordings, that today, in many jurisdictions, are not satisfactory, too slow or even missing. Increased clarity and reliability will, in turn, reduce disputes or ease their resolution.
Cryptographically secure identification of citizens can open the way for more direct democracy, as opposed to almost always representative democracy, as we know it.
Transparency and even traceability of financial allocation by public officials would be a new thing. We can imagine a world where officials are made much more accountable – not to mention assisting the fight against corruption.
Some commentators have expressed the view that blockchain has the potential to simplify taxation significantly. If automation of taxable cash flows eventuates, and we can directly submit the tax component to authorities, then the cost of handling tax payments could be reduced, which is of particular interest to businesses. So yes, but maybe the tax laws should be simplified first!
In HR functions as well, blockchain is being seen as a means of transformation, especially when it comes to transparency of pay equality, more effective and feeless wages payment (especially abroad), and smooth and instantaneous checks on the educational background of new hires.
GAMING AND ENTERTAINMENT
A developer company is working on a game based on Star Trek, where spaceships embodied in ERC721 non-fungible tokens would be for sale. The game, CSC, will be an open-universe game where players command the starships.
Gambling and casino applications are still among the most popular because verifying the code running on the distributed virtual machines allows participants to ensure that the service provider is not cheating.
CONCLUSION ON INDUSTRIAL APPLICATIONS THROUGHOUT SECTORS
For some time now, the general feeling gained from producing this Quarterly is the remarkable and even striking observation that news on blockchain, in general, is tilting more and more towards highlights and press releases from companies and start-ups that communicate on DLT applications in their businesses.
The number of projects being reported is increasing almost exponentially. There are so many, across a range of industry sectors, that it becomes impossible to track even the most prominent. Back in 2017, or even mid-2018, in this Blockchain Quarterly report, we could be confident of presenting all of the initiatives that were worth mentioning. Today, this is no longer achievable: hence, we highlight the most significant and can only give a general description of the development atmosphere. As of the second half of 2019, it is intense, particularly in the field of traceability, and interbank settlements. Nowadays, the quantity of updates and new initiatives is enormous, which makes it essential to choose a few to present at the expense of others, let alone those that aren’t advertised. Hence, we are tempted to gear towards a general sum-up of the situations, sector by sector.
Technological applications in the various sectors (and banking is not specified in this respect) are continuously promoted, their authors thinking their achievements are worth being proud of, and this has taken the media space from cryptocurrencies and above all from Bitcoin.
However, concerns have been raised about the fast obsolescence of early-developed solutions. Gartner, a research and advisory firm, is particularly concerned about this: it claims that a vast majority of enterprise projects will be abandoned for just this reason.
Another claim that is voiced by individuals involved in building infrastructures is that blockchain will shortly be everywhere, but invisible, as a foundational layer, as a protocol that runs and is relied upon by applications that will interface with it.
As a final comment, several “common” DLT projects are being reported, that is, there are fewer and fewer genuinely new ideas being presented, and more and more competitive use cases.