Section 4: Investment and use-case by industry
Here are highlights of the latest DLT applications by sector. Note that this section has no intent to propose an exhaustive view, given the abundance of major projects going on.
A subsidiary of Ripple in Asia, in cooperation with a local banking company, has launched a money transfer service between Japan and Vietnam.
HSBC has announced it has completed two blockchain letters of credit transactions — one between firms in Saudi Arabia and Bahrain, and another between companies in Oman and Abu Dhabi. HSBC declared: “As the world’s leading bank for trade finance, HSBC is actively supporting the adoption of technologies such as blockchain to make global trade faster, safer, and simpler.” There is no particular technical prowess here, but to mention, the technology used is Corda.
Accenture and SAP have unveiled a Corda prototype for real-time gross settlement systems. Its promoters describe it as “another payment channel for central banks. And the idea behind this is to use tokens for settlement purposes.” Corda is the platform used for the project: the solution will run alongside existing systems enabling tokenized payments to be received as regular payments by a non-participating bank. The distributed ledger technology component is integrated with the existing SAP Payment Engine.
The Swiss bank, UBS, is leading a team of four of the world’s biggest banks in developing a system to enable financial markets to make payments and settle transactions quickly using blockchain technology. It will rely on a “Utility Settlement Coin” (USC), which is a digital cash equivalent of each of the major currencies backed by central banks, such as the dollar and euro. The USC will be convertible at parity to a bank deposit in the corresponding currency, making it fully backed by cash assets at a central bank.
Trading and settlement
Many initiatives that propose trading platforms for business continue to blossom. Enerchain is one for energy trading; VAKKT is another that was developed in Portugal for oil trading; DBS (a Singaporean bank) is also partnering with Trafigura to build a commodity trading platform. The objective is straightforward and the same with all of the proposed systems: remove manual processes, paperwork and reconciliation jobs, and automate accounting. We can be sure that such systems are the future for trading platforms.
Marco Polo is a project that is particularly interesting to highlight. Built directly by R3 since 2017 and running on Corda (though not yet in production), it keeps attracting new actors from all horizons, which lately include the National Australia Bank and Mastercard. Marco Polo differentiates itself from other blockchain trade finance networks, because it proposes integration with enterprise ERP systems, hence bringing trade finance options to the fingertips of corporate treasurers. Twenty-five companies are currently members.
One pain point that blockchain has the potential to solve, in addition to removing the middle man, is the pricing of commodities. A typical example is gold: the process leading to the fixing of the gold price is currently quite opaque, involving only a handful of well-identified trading offices that set the price and exclude all other market participants. In the twenty-first century, this is hardly understandable: the current system is surprisingly relationship-focused and prone to manipulation. Allowing for more transparency thanks to a DLT-based system would allow for much more efficient price discovery, more dynamically and accurately reflecting bids and offers.
Please also refer to the paragraph on the Ownership of Crypto Assets.
The U.S. Federal Emergency Management Agency (FEMA) now recommends using blockchain to expedite insurance payouts in the event of a disaster. It considers that “blockchain for parametric insurance is well suited because smart contracts can automatically trigger payouts if certain conditions are met.” One of the reasons for the recommendation is the observation that hurricanes Maria in Puerto Rico, and Harvey in Texas, have caused citizens to lose essential documents such as insurance policies, land ownership records, and personal identification needed to file a claim – problems that DLTs can solve.
B3i is now live, after having switched from Hyperledger Fabric to Corda. This year, a round of funding among the sixteen participants raised 22 million euros. The developed solution is called CAT XL; for now, it purely focuses on the placement of the reinsurance contract – but the purpose is to ultimately handle accounting, payments and claims. And as a first step, rather than requiring integration with participant systems, the data is entered via a web browser. But being able to share the contract, associated files, and the negotiation process is a big step.
Walmart Canada has announced it will begin using blockchain technology to track deliveries, verify transactions, and automate payments and reconciliations between the retailer and 70 thirdparty trucking companies. The system, set to go live at all third-party carriers in Canada by February 2020, will use a shared ledger to integrate and synchronize supply chain and logistics data in realtime. The platform will enable real-time invoicing, payments and settlements while integrating with each company's legacy systems. [scsoluionsinc. com]
Aeronautics supply chain is among the most demanding in the world; hence it comes as no surprise that a transition of component traceability
and follow-up management to the blockchain is envisaged for this demanding sector: for an aviation component, several events occur, including approval, production, removal, testing, repair, reinstallation, etc. An initiative called FLYDocs has been launched with a multiparty approach allowing anyone to join, from all areas of the industry.
A borderline supply chain initiative called Travelport, using Hyperledger Fabric to track hotel bookings made through travel agents, to track and hopefully rationalizing fees paid to agents, based on the value of the accommodations reserved through their intermediary. This is an interesting move, originating with an idea to use traceability to claim compensation for a referral service; however, these intermediaries may well fear that the transition of the booking business to blockchain could reduce their share of the cake, as an efficient DLT-based platform to handle hotel bookings may reduce their business territory, re-centering them to the provision of assessment and advice, and be compensated, not with a commission, but a fixed fee.
KPMG has launched “KPMG Origins,” a platform to compete with EY’s OpsChain to serve as an infrastructure to provide transparency and traceability, initially for agriculture, manufacturing, and financial sectors. This shows that auditing companies are increasingly contemplating how they should position themselves in a world where accounting systems can shift to a blockchain, and maybe even envisage offering their services as a platform of trust, industry by industry.
Please also refer to the standardization chapter regarding efforts in the industry to capitalize on the various pilots conducted so far.
INFORMATION AND TELECOMMUNICATIONS
Tencent has announced that it will launch a blockchain-based virtual bank. The company’s blockchain chief, Yige Cai, has revealed that the Hong Kong Securities and Futures Commission (SFC) has approved a new license and that the company is setting up a team to support the platform. [pymnts. com]
Huawei is approaching technology at large with an approach that involves “smart cities”; in this regard, blockchain is one aspect of their fintech adoption.
MEDIA, INCLUDING SOCIAL NETWORKS
In the cryptosphere, some players, like eToro, have called for Facebook to integrate existing stablecoins into the platform, instead of pushing Libra. And indeed, there is no doubt that if Facebook endorses any cryptocurrency on the platform, it will trigger an immediate and colossal adoption!
According to Gartner, an American information research and advisory firm, by 2023, up to 30% of
world news and video content will be authenticated by blockchain ledgers. This comes as a prediction aimed at tackling the “fake news” phenomenon, which is increasingly used by some governments to manipulate public opinion and elections: indeed, traceability is essential to almost everything, and can be applied to information as well!
However, Korean social media appears to be moving in the direction that Facebook wanted to go. Yeo Min-soo, the CEO, has stated that his firm’s Klaytn blockchain is way ahead of Libra in its development, with similar intentions.
An application, Pepo, claims to be the first DApp approved for use on Apple-Pay. It consists of a wallet, coupled with a platform that enables the tipping of content (video) creators.
The reader can refer to Alpiq’s publications.
Air Canada is following the trend of other airlines (Etihad, AirFrance-KLM, S7 and Norwegian) as outlined in the previous Quarterly, in building a blockchain-based platform for its agents and customers to purchase and manage tickets.
In November, a German company, Hahn Air, also moved to issue tickets on the blockchain.
Volvo has declared that it is examining DLT-based solutions to track its supply chain of Cobalt. Electric car production is increasing the demand for this mineral, and mines that employ children will be banned from the procurement circuit.
The Port of Marseille has completed a blockchain pilot led by Marseille Gyptis International and startup, Keeex. The Port Authority has declared that the project “demonstrated that harmonization of the digital transport chain improved fluidity, reliability, and competitiveness of pre- and post-forwarding on the crucial hinterland axis.”
In healthcare, blockchain is moving slowly from proof of concept to real implementations. After pilots of a range of use cases, including supply chain, consent management, and patient data management, we are starting to see the first set of use cases moving into production. The Swiss pharmaceutical company, Novartis, has indicated that it intends to ramp up its focus on blockchain in 2020, and will go live with its first two use cases; third-party risk management, and digitizing manual processes to increase efficiency.
Consortiums are growing, such as Synoptic, Hashed Health (Professional Credential Exchange), Insureum, and MediBloc. Novartis is also leading a blockchain healthcare consortium as part of the Innovative Medicines Initiative. So far, 28 entities are onboard, including 11 pharma companies.
This European-funded program aims to establish a typical blockchain ecosystem for pharmaceutical development, manufacturing and distribution that provides an incentive and serves as the basis for all participants to engage, adapt and benefit from. The project will initially establish a practical approach and governance organization to enable continuous improvement and open competition among service providers while ensuring that critical factors such as data integrity, privacy, regulatory compliance and efficiency are built into a ‘Healthcare Foundation’ that serves as an integration layer between underlying blockchain technologies and the business application layer.
ADMINISTRATION AND POLITICS
Canada and the Netherlands have announced that they are working on a pilot project with the World Economic Forum and consulting firm, Accenture, to replace passports with smartphones. Blockchain will help to store the information securely.
Blockchain is being used for military purposes. The Indian Defense Minister has declared that “emerging technologies such as blockchain have the potential to define the war industry over the coming decades. Data and data sharing will be critical for warfare in the future, particularly with the development of artificial intelligence.” Specifically, the focus is on protecting weapons from hackers. Using distributed ledgers to record the status of equipment, and logs of all interventions could, for instance, help to ensure that no attacker can modify missile launching software without being detected. Authentication on a blockchain will be required to do so.
The potential for verification of diplomas and certifications through records on a blockchain is increasingly being recognized by university administrators, with the hope of reducing the administrative costs of manual checking.
GAMING AND ENTERTAINMENT
Obviously, since Cryptokitties there has been no on-chain game success story. For a sector that tends to adopt technological changes, and with all the effort and investment in this sector, this says that, for a range of reasons, including maturity, technical and financial, at this point, there is no case for blockchain-deployed games.
CONCLUSION ON INDUSTRIAL APPLICATIONS THROUGHOUT SECTORS
Overall, there is no shortage of pilots and projects under development worldwide and across a range of industries. The most active sectors are still finance/banking and supply chains.
All in all, we observe a catch-up by corporations in the tech domain, compared with start-ups that made much noise initially, but which are currently struggling to achieve their dreams. Worth noting, in terms of research, is the number of patents applied for, which is an interesting indicator. The top three companies by the number of issued blockchainrelated patents are Alibaba, IBM and Mastercard.
Otherwise, we can only confirm the trend that we highlighted in the previous issue of BQ: consortiums and joint work by all actors in any given ecosystem are more and more observable, as we reckon they are critical to the definition of DLTbased infrastructure, which can be then used by competitors to build their applications. Please refer to the standardization section regarding this aspect.