Update on Blockchain and Beyond: The Future of Distributed Ledgers

Update on Blockchain and Beyond:
The Future of Distributed Ledgers

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Distributed ledger technology (DLT)

may have started off as the basis for bitcoin, but it already promises to be much more than a cryptocurrency. That’s why treasury and finance professionals need to pay attention, experts said at a panel discussion at Faster Payments 2017, the US conference and exhibition event organised electronic payments association NACHA.

Christopher Mager, CTP, managing director and head of global innovation for BNY Mellon, said that his bank is collaborating with other financial institutions on several proofs of concept, include Utility Settlement Coin, which aims to digitise fiat currencies for exchange on a distributed ledger. BNY also is one of the several banks working with SWIFT on its nostro account reconciliation POC, which is part of the global payments innovation (gpi) initiative,

he said.

“Dubai and Singapore are the two countries where they’ve embraced the technology throughout the whole ecosystem—banking, corporates and the government”

“2016 was a lot of proofs of concept, 2015 was a lot of talk about how blockchain is different from bitcoin. But now we’re in the world of reality,” said James Wallis, vice president, payments industry and blockchain, global industries for IBM. He said IBM and Northern Trust launched in Europe a distributed ledger that services the private equity market. Wallis added that the trade finance community is keenly interested in DLT. “Last I counted there were at least a dozen trade finance initiatives in the world, and at least two of those are looking to go into production this year,” he said.

Beyond process improvement

Microsoft is one organisation that is using DLT for trade finance. However, panellist Peter Hazou, director of business development for Microsoft, is more interested in blockchain’s potential beyond trade finance and payments. “It’s the smart contracts, how it connects to people, how it changes in a transformative way for the better—not just a simple process improvement to do the same old, same old,” he said. “That’s where the thinking has to go.”

Wallis agreed, noting that while there is validity in process improvement, “you’ll see uses for DLT that you can’t even think of today.” However, the success of DLT will hinge on the willingness of the different players in the ecosystem to collaborate. “It involves a level of sharing that hasn’t really existed before,” he said. Collaboration is happening. IBM and SecureKey Technologies have teamed with Canada’s largest banks on a digital identification solution that uses DLT. “The banks are collaborating to share, on a blockchain, data about clients,” Wallis said. “It will enable Scotiabank, for example, to offer a loan much quicker. You apply on your mobile phone, you authorise your other bank to provide information in a very secure way, and you can get the loan approved instantly.”

Interoperability and regulation

For DLT to truly advance, there needs to be interoperability between competitors, Mager noted. Currently, there are a number of digital ledgers that are emerging, such as Hyperledger’s Fabric, R3’s Corda, Ripple, and more. “You’ve got a lot of ledgers out there that don’t talk to each other,” he said. “Until interoperability occurs, or one of them emerges as the leading code base, that’s going to impair the network effect.”

The other missing piece is regulation. Thus far, regulations around blockchain and DLT apply only to digital currencies. Regulators have yet to tackle distributed ledger as a book of record. This creates a legal quandary: Is settlement that happens on a ledger final and legally binding? “That hurdle has to be overcome before you’ll see large scale enterprise applications with a distributed ledger underpinning them,” Mager said.

Once standardization, regulation and interoperability are sorted out, the use cases for distributed ledger technology are potentially endless

Regulators in the United States and the UK have largely taken a wait-and-see approach to blockchain and DLT, given that they don’t want to stifle innovation. However, some governments have been a bit more proactive. “Dubai and Singapore are the two countries where they’ve embraced the technology throughout the whole ecosystem—banking, corporates and the government,” Wallis said. “In Dubai for example, one of the proofs of concept was around trade. It was two banks, an airline, a shipping company and the port authority trying to figure out what a new ecosystem might look like.”

DLT tomorrow

Once standardisation, regulation and interoperability are sorted out, the use cases for DLT are potentially endless. Whereas there will be “low-hanging fruit” like Know Your Customer (KYC) and digital identity management, Mager also sees much more exciting prospects, such as a convergence of technologies. “The Internet of Things and DLT have a lot of potential overlaps,” he said. “Smart contracts and artificial intelligence have a lot of potential overlaps. I think you’re going to see a convergence of these technologies emerge in the coming years.”

Hazou agreed, noting that DLT has hit the collective consciousness. But it’s just one of many technologies. “Advanced analytics, predictive analytics the Internet of Things, artificial intelligence—there are so many profound technologies that are going to interact,” he said. “It’s a matter of how one navigates this brave new world.” “I think that’s a matter of thinking through what the potential use cases are, and experimenting with it.”

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Suddenly, Spotify Goes Blockchain, Aims to Improve Tracking of Royalty Payments

Suddenly,
Spotify Goes Blockchain,
Aims to Improve Tracking of Royalty Payments

  

Spotify, the largest European streaming music platform,

has announced its decision to acquire Blockchain-related startup Media chain. According to Investopedia, the main objective of the acquisition is to improve Spotify’s tracking and processing of royalty payments thanks to the distributed ledger technology.

What’s Media chain?

Media chain has launched in 2016 thanks to seed funding received by Andreessen Horowitz and Union Square Ventures. The New York-based startup created a peer-to-peer database to register, identify and track the online distribution of creative works. This was made possible through Blockchain technology, which works as a timestamp and certification of the ownership of content. Through its new partnership with Spotify, Media chain wants to enhance the ability of musicians to prove ownership over their composed music, in order to also receive payment of royalties.

Royalties payments: who earns them?

This is one of the biggest problems that Spotify currently faces. In the case of independent musicians and labels, understanding who owns the rights to a particular composition is difficult for streaming platforms to determine. In order to solve this issue, Media chain indicates that "a music blockchain would be a single place to publish all information about who made what song, without have to trust a third-party organisation." In assisting artists to receive royalties payments through the use of Blockchain technology, Media chain could help Spotify to obtain a competitive advantage over its competitors, reaching more producers, artists and labels.

Blockchain and music

In addition to the specific case of Media chain and Spotify, Blockchain could revolutionise the music industry. That’s what Benji Rogers, founder of PledgeMusic, had in mind when he decided to create dotBlockchain, a company with a desire to disrupt the music sector thanks to a new media format. In fact, dotBlockchain wants to develop a new media and architecture to benefit musicians, composers, among other artists. This format will be created via an open source protocol and licenses, leveraging the Blockchain in order to have a fair and transparent way for music artists to express their rights and wishes for commercialising their art. Also, it should prove useful in improving the efficiency in which music is delivered worldwide.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain Can Be China’s Global Tech Breakthrough: Bitbank VP

Blockchain Can Be China's Global
Tech Breakthrough:
Bitbank VP

  

China's appetite for Blockchain technology

is getting bigger and the world needs to be ready for the breakthrough that the country may come up with, says Virgilio Lizardo Jr., vice president at Bitbank Group. Lizardo Jr has been in China for nine years and currently lives in Shenzhen where he handles international business development and other services for companies under Bitbank including BW and Bter. He says it remains to be seen how Blockchain-related developments will translate into successful products or services in domestic markets. “They have a much greater chance of being successful in China because it’s for domestic use,” Lizardo Jr. states.

He adds:

“Shenzhen, where our office is located is poised to be the digital currency experimentation zone and could be an example for other places. The factors for international success goes beyond just this industry, China is yet to develop a globally recognizable brand/product/service but perhaps Blockchain technology could lead to that breakthrough.”

Bitcoin plays a major role

Earlier in the cryptocurrency space, China has been known for its interest mainly in Bitcoin. Now, there is a growing interest from the government, corporate organisations and startups to explore the potentials of the distributed ledger technology. The Blockchain spreading in China is being accompanied by the introduction of more altcoins in the Chinese market. Most of them identify with Blockchain technology though Bitcoin still plays a major role in the crypto landscape in China.

Rise of interest in Ethereum

In the case of Ethereum and Ethereum Classic both of which enjoyed a rise in China lately due to greater Chinese interest in these two coins, Lizardo Jr. said he was not expecting such a dramatic rise. He expects the prices of ETH and ETC to continue rising in the long-term barring any major setback due to the hype and the organisation of the developers/community.

He says: “At this point, it continues to be mostly speculative, though the news of large tech firms starting to use Ethereum for projects could lead to some real world use. Bitcoin will remain the reserve currency for entering the altcoin market not only in China but the world for some time. Though at a website we do offer ETH and ETC/CNY pairs as we are the largest ETH/ETC market by volume, in China, we are seeing a big demand for these two tokens in the last couple months. China does have a very developed altcoin market domestically of projects and altcoins that do not make it to the international markets. Teams from overseas also market their projects for the Chinese market regularly. The desire of young tech-savvy investors and the sheer size of the market makes it that projects can be hugely successful simply in the China market.”

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

How Encrypted Weather Data Could Help Corporate Blockchain Dreams Come True

How Encrypted Weather Data Could Help Corporate Blockchain Dreams Come True

Banks and investors have sunk millions into the idea that blockchain programs called smart contracts can make finance and other industries more efficient.

  

In the era of fake news,

professor and cryptographer Ari Juels is preparing to launch an online service designed to provide the most trustworthy information on the Internet. But Town Crier, scheduled to launch Monday, is for the benefit of machines, not humans. The downside is that a smart contract is only as trustworthy as the data it draws on. JJules a professor at Jacobs Technion-Cornell Institute in New York, says that is limiting progress on making the concept practical. Smart contracts can’t simply scrape data from the Web, because existing systems don’t provide a way to verify that the data a contract is acting on hasn’t been tampered with, he says: “Because you don’t have good sources of data, there’s not a lot you can do right now with smart contracts.”

The Town Crier service launching next week is designed to showcase software of the same name that Juels and colleagues at Cornell say offers a solution. Their system pulls in data such as weather reports over an encrypted connection, and repackages it into feeds for use by coders building smart contracts. Town Crier’s feeds wrap data in cryptography that allows outsiders to verify the data’s source and confirm that it hasn’t been altered. Smart contracts are a favourite idea of the banks and venture capitalists that have ploughed millions into blockchain technology, an approach to managing data and money inspired by the digital currency Bitcoin. Town Crier is built to integrate with Ethereum, a cryptocurrency and smart contract platform with a total value of $8.4 billion, which has been endorsed by corporate giants including UBS and Microsoft.

Vitalik Buterin, co-founder of Ethereum, hopes Town Crier can help translate more of the enthusiasm about smart contracts into action. “The lack of data feeds from the outside world is definitely a large impediment, and Town Crier could go far in mitigating this issue,” he says. The Cornell researchers plan to release Town Crier as open-source software for others to use. The demonstration service launching next week will provide feeds of data including stock prices, weather reports, flight information, cryptocurrency exchange rates, and UPS package tracking. Longer term, a commercial version is planned.

Town Crier’s design also allows smart contracts to hide the data they are using for everyone but the parties to the contract. The default on blockchain systems like Ethereum is generally for all transaction data to be visible to all.

Do you think blockchains will really catch on?

David Yermack, chair of the finance department at New York University, says those privacy features could help address another challenge for financial companies interested in blockchains. “Privacy is a huge issue for people looking into distributed-ledger technology,” he says. “The clients, banks, and regulators put a very high premium on secrecy.”

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain and bitcoin: Trustees urged to adapt to change

Many are still unfamiliar with the concept of bitcoin and blockchain, but experts say the pensions industry must engage with technology and accept change to adapt to an increasingly digital world.Nearly 40 percent of senior executives in the US know little or nothing about blockchain technology, according to a 2016 Deloitte survey.

Change is happening, no matter how uncomfortable human beings are with it

Martin Bartlam, DLA Piper Similarly, PwC’s global fintech report found that 57 percent of respondents, including chief executives and chief investment officers at banks and asset management firms, are unsure about or “unlikely to respond” to blockchain.

What is blockchain?

Blockchain is a digital ledger that can record digital currency transactions publicly. It is the technology behind bitcoin, which is a digital currency that was invented in 2008 involving peer-to-peer payment through digitally signed messages. This 'cryptocurrency' is created and held electronically and is seen as an easier, cheaper and more efficient way of spending money because it removes the need for a middleman, such as a bank or credit card company. The Bank of England defines blockchain as “a technology that allows people who don’t know each other to trust a shared record of events”. It explains that the distributed ledger “is a genuine technological innovation which demonstrates that digital records can be held securely without any central authority”. 

Transactions cannot be deleted or altered, and private blockchains and strong encryption exist to improve security. Nevertheless, the technology is not immune to cyber attacks. Companies using digital currencies, such as Bitfinex, have been targeted by cyber criminals during the past year. In 2016, former minister for welfare reform Lord Freud announced that the Department for Work and Pensions had started a trial of distributed ledger technology to pay welfare benefits, but despite blockchain being described as very secure, the announcement still sparked privacy concerns.

Cybersecurity

Speaking at the Pensions Management Institute’s annual conference on Thursday, Dinis Guarda, founder and chief executive of Humaniq, a company that provides blockchain-based financial services, argued that blockchain is “a revolutionary technology that is replacing the internet as we know it”. Guarda explained that all aspects of the economy, including the pensions industry, are in the process of being “digitalised”, with blockchain usage increasing. However, he also said that despite blockchain technology being particularly safe, cyber security was still an issue.

Andy Agathangelou, founding chair of both the Transparency Task Force and the Technology Task Force, noted that “in many ways, in operation terms, the pensions industry is built on data” so the topics of data integrity and data protection “are fundamental issues for our industry already”. Martin Bartlam, a partner at law firm DLA Piper, said that “initially there was a lot of distrust” when it came to the concept of virtual currency. But over time, regulators and other established industry bodies were getting more involved and starting to realise that because it is a system with a permanent record, blockchain is “a good way of checking what’s actually happening”. Blockchain is “a powerful tool [and] it’s the way people use it that will determine whether we see scams”, he said.

Adapting to change

In terms of advice for pension professionals looking to adapt to an increasingly digitalised world, Hossein Kakavand, chief executive of Luther Systems, a company that leverages blockchain technology to help financial institutions’ transaction management, highlighted the importance of organisations “engaging aggressively in developments in technology”.

Forget about robos and chatbots – a bigger tech wave is breaking 

Forget about robos and chatbots – these are just the froth on the crest of a much bigger wave of technology change sweeping through financial services.While Bartlam argued that engaging with technology is helpful, he also said it was a good idea for industries to generally accept change.“Change is happening, no matter how uncomfortable human beings are with [it], whether it's processing, whether it’s globalisation, whether it’s technology,” he said. He noted that the insurance, banking and pensions sectors, in particular, are likely “to witness a huge amount of change over the next five to 10 years”. Guarda said that “as everything becomes digitalized, there will be more visibility and transparency, and that will be great for all of us”.

Chuck Reynolds
Contributor

 

Alan Zibluk Markethive Founding Member

Cryptocurrency Ethereum soars by 900 per cent as stellar performer gets Chinese boost

Cryptocurrency Ethereum soars by 900 per cent as stellar performer gets Chinese boost

Cryptocurrency Ethereum soars by 900 per cent as stellar performer gets Chinese boost
 

A CRYPTOCURRENCY that allows users to move value around as well as represent the ownership of property has rocketed by 900 per cent in just a year.

Ethereum, which uses apps that run on a custom built blockchain, an enormously powerful shared global infrastructure, is attracting serious investor interest over its incredible financial returns.

The blockchain app, which claims it allows developers to create markets, store registries of debts or promises and move funds all without a middle man or counterparty risk, was launched in August 2014.

It was developed by a Swiss nonprofit and crowdfunding campaign which has in turn catapulted it to huge success.

With a current market capitalisation of more than £7billion, the digital currency is outperforming its main rival Bitcoin, according to market data.

Now analysts say it has been of particular interest to the Chinese market which is embracing the explosion in digital currency with gusto.

Blogger Andrew Keys said: "I was fortunate enough to be invited to the city of Hangzhou for the Global Blockchain Financial Summit.
"During this trip to China, I learned about the burgeoning Ethereum communities in Beijing, Shanghai, Nanjing and Hangzhou. Every night we hosted an Ethereum meetup and it was standing room only in each city.

"Peking University is creating an Ethereum Laboratory to work on protocol improvements and application use cases that effect China, specifically in supply chain and energy markets.

"The Royal Chinese Mint is experimenting with the ERC 20 token standard and Ethereum smart contracts to digitise the RMB".

Meanwhile Silicon Valley based Martin Frohler, who runs Quantiacs, told Express.co.uk that the cryptocurrency is set to revolutionise the way the world trades thanks to the advent of blockchain infrastructure following the news that Bitcoin surpassed $1,800 to a fresh record high today.

It rose more than $100 in just two days, driven by comments from policy makers and positive noises around the future of the cryptocurrency.

He said: "You can think of a Blockchain as an identical database of transactions (or other information) stored on hundreds of computers around the world.

"Every new transaction that's entered into the system has to be verified by the majority of the computers. Since no single person, government, or institution controls that majority it is close to impossible to hack a transaction.

“The process of verifying transactions through computing power is called 'mining'.

"The miner receives the right to create a very small new unit of that currency as reward.

"Depending on how much Bitcoin already exist that new unit becomes smaller and smaller over time.

"There is an absolute limit of the number of Bitcoin that will ever exist: 21 million. Bitcoin is by construction a deflationary currency, which makes it an attractive store for value.

"Anybody with internet access can buy or sell bitcoin at a bitcoin exchange or with a digital wallet".

The digital currency is trading at $91.20 (3.11%) today.

 

David Ogden
Entrepreneur

 

By SIOBHAN MCFADYEN

Alan Zibluk Markethive Founding Member