Strategic Trends Update - November 2018

Enterprise Adoption, Distributed Applications & Blockchain Energy

Welcome to the BlockSense strategic trends update for November!

If this is your first time reading, these updates are designed to give a ‘top-down’ look at the distributed ledger ecosystem as a whole, and track some of the ‘mega trends’ which we often miss just reading the daily news.

While the cryptocurrency market has been relatively stable (apart from a controversial chain split on Bitcoin Cash), the rest of the blockchain space has been anything but. It seems that with the calm on exchanges and the fact that the veneer has finally worn off the ICO market, people have been able to get on with the only thing of real value – building.

Indeed, it seems there’s a lot of demand for anyone possessing blockchain experience, with online recruitment firm Glassdoor reporting that they’ve seen a 300 percent increase on their site in job openings for blockchain developers. Similarly, gig-economy site Upwork reported that “blockchain” was the fastest growing skill set in terms of demand on their platform, growing a whopping 3,500 percent from the previous quarter.

Demand is high, and the ecosystem as a whole is expanding. Below are several significant trends for November.

 

The Evolution of Enterprise Distributed Ledgers

The enterprise world has stepped into blockchain in a big way this year, and that’s increased in the past few months. For those unfamliar with the difference between ‘enterprise’ blockchain and networks like Ethereum and Bitcoin, offerings from companies like Microsoft, Amazon and IBM are usually ‘permissioned’ or ‘private’ distributed ledgers. This means that while they are a shared, immutable database, the users and nodes (host computers) are usually limited to whoever is allowed on the network. It’s an attractive proposition for consortiums or business networks, but does lose much of what makes public blockchains so attractive as a unified means of commerce.

Nevertheless, there’s been some significant movement in this area. We’ve seen several large consortium networks come online, from Walmart’s Food Trust to QCGU’s Smart Cane initiative. Walmart are of particular note, as after a recent food safety incident which cost millions due to a lack of food traceability, they’ve given all of their leafy-greens suppliers one year to migrate to the Food Trust system. The consortium blockchain developed by IBM also includes Unilever and Nestle. Walmart Vice-President Frank Yiannas had this to say about why implementing their pilot supply-chain system will save significant time and money:

 

“This is a smart, technology-supported move that will greatly benefit our customers and transform the food system, benefitting all stakeholders”

 

IBM’s Food Trust runs on the open source HyperLedger Fabric blockchain software

 

It hasn’t just been limited to supply chains though. Australia’s Commbank, in conjunction with the World Bank, recently issued the world’s first ‘bond on the blockchain’ – a system which they’ve dubbed ‘Bond-i‘. Indeed, many incumbent financial institutions are beginning to test ways in which they may harness blockchain technology to either limit distruption to their own financial models, or create new opportunities for themselves.

Likewise, we’re increasingly seeing Governments trial blockchain technology. From Chicago’s Real Estate ledger system to IBM’s efforts – in conjunction with Data 61 (the guys that invented Wi-Fi) – to build a ‘national blockchain backbone,’ administrations seem to be warming to the idea of a distributed future.

At the management level, Microsoft successfully implemented a Proof-of-Authority algorithm for Ethereum in their Azure Blockchain Workbench, which caps off a stellar year for Microsoft in fleshing out their permissioned blockchain offerings through Azure. With their expansion of Cryptlets (ready-made smart contracts), third-party integrations, simple user management and one-click deployment, they likely offer the most complete, consumer-level enterprise offering in the market.

That’s not to say the competition has been slacking. The last few months have seen many other enterprise cloud operators rush to assure customers that they “can do blockchain too”. Amazon, SAP and IBM have particularly expanded their blockchain offerings, and a dark horse has also emerged – Ethereum development powerhouse Consensys now have their own enterprise offering as well. Dubbed Kaleido, it’s designed to wrap the various dApps developed by Consensys into one deployable package. So far, I’ve got to say I’m impressed – I deployed my own private OpenLaw instance in about 5 minutes with minimum fuss.

 

Consensys enters enterprise blockchain with their Kaleido platform

 

Samsung has even got in on the game. Earlier this year I covered autonomous ports and looked at several ports which were running blockchain pilots for managing their processes. The Port of Rotterdam, Europe’s busiest seaport, likely the furthest along – and they’ve recently partnered with Samsung to expand their blockchain pilot program to track shipping containers.

I’m still of the view that this iteration of enterprise blockchian is simply a ‘stepping stone’ to everything being on public networks eventually, but while the public networks aren’t ready for prime time, this is a reasonable compromise. Once we start seeing the power of true programmable money (something that can only have wide utility on a true public network), I believe you’ll see a lot of these permissioned implementations migrated over to the wider networks. This is definitely a trend to keep an eye on, and we’ll follow it with interest.
 

 

Work Continues on Cross-Chain and Inter-Chain Interaction

One of the biggest motivating factors for the original creation of blockchain technology was the ‘siloing’ of so much financial information. Between the banks, financial networks, exchanges and even payment processors like Paypal and Stripe, visibility into the supply, status and transferring of money has been murky at best.

Bitcoin was a proposed solution for this, but it’s become clear that current blockchain networks may be suffering from some of the same issues as legacy financial and data storage systems. While most public ledgers are open and auditable, getting them to talk to each other in any kind of trustless manner has proved nigh on impossible. Likewise, while some distributed applications (dApps – programs on a blockchain) integrate directly with each other, others have significant difficulty (as do exchanges.)

We’ve seen some significant progress on this in the last few months. Projects like Consensys’s Chainlink and Bitgo are making great strides in connecting traditional finance and Bitcoin to the Ethereum blockchain. Initiatives like Onramp and USD Coin are aiming to allow developers to inject relatively stable fiat currencies into smart contracts (something that, if successful, could mean that wide-scale enterprise participation in smart legal agreements). Even the blockchain-based VR startup High Fidelity (backed by Mike Novogratz’s Galaxy Digital) is working to implement a USD ‘stablecoin’ on their Metaverse network.

Even more intriguing though has been watching how upstart blockchains are providing utility on their network. In the EOS world, for example, Bancor has successfully enabled a cross chain liquidity network. The network was developed with block producer LiquidEOS, and creates a ‘bridge’ between the Ethereum and EOS networks. Through the BancorX protocol, developers and users can ‘freely move tokens between two chains.

 

Bancor Network Infographic – source

 

Likewise, EOS block producer shEOS has successfully developed a protocol which will allow projects to swap their smart contracts from the Ethereum network over to EOS. The protocol is designed to allow developers to build truly ‘cross-chain’ applications, which can harness the features of different public networks to suit the unique needs of their applications. It makes sense, as Ethereum is still notoriously slow and burdened with a confusing ‘gas’ system, which makes it hard for certain developers to build the functionality they truly want.

We’re seeing similar developments from other networks. Cardano is still working towards enabling any smart contract to be re-deployed on their network – in a more secure form – via the ‘K’ Framework. Tendermint Cosmos, a dark horse within the blockchain world even now, continues to work on a ‘tethered’ Ethereum node which can communicate with all other blockchains in the network. That’s not to mention the various ways that the enterprise clients are managing their inter-chain communications with custom-built oracle programs.

Considering the sheer manpower and effort being dedicated to this, it’s likely that we’ll have a workable solution for true cross-blockchain communication within the near future.

 

dApps Continue to Make Encouraging Progress

It’s not just the blockchian platforms that are seeing significant development activity. Distributed Applications or dApps, which are programs built on top of blockchain platforms using smart contracts, have also seen some very encouraging advances in the last few months.

Aragon is a project we’ve been following since their capital-raise early last year. It’s a platform designed to make the establishment, operation and expansion of decentralised autonomous organisations (DAOs) a relatively simple task. Running on the Ethereum network, they envision a future where governance, finance and the day-to-day operation of companies, co-ops and charities will occur primarily on-chain.

The team at Aragon have recently released AragonOS 4.0, which allows DAOs to perform functions like voting, governance and management of wallets with multiple signatures entirely on the Ethereum Blockchain. Through the system, DAOs can issue tokens to their members (which may represent a stake in the entity itself), run transparent votes on resolutions, add employees, make recurring payments and even run institution-wide surveys. Someone has even suggested a future where DAOs manage personal finances based on smart contract rules. While we’re definitely not there yet, it’s a truly robust system with a lot of promise.

 

Aragon OS 0.4

 

Brave are another organisation looking to really shake things up through blockchain technology. Those who’ve paid attention to the world of cryptocurrency in the last year may have heard of their Basic Attention Token, and the rumours that Coinbase may be looking to support purchases of the tokens in the near future. Brave is a privacy first browser with a built-in crypto wallet designed to give users more choice in how they browse. They’ve successfully integrated an advertising platform running on Ethereum where users can ‘tip’ their favourite sites instead of viewing ads, and where advertisers can pay BAT directly to the user for viewing their ads.

They’ve also announced a partnership with Civic, the identity system which is using a distributed ledger for secure verification of ID. Civic has recently released the first iteration of Civic Libre, a KYC application which companies can use to validate customer identity without needing to take on the usual swathe of private information and deal with all the risks of storing that user data in a post-GDPR world.

On the finance front, decentralised exchange project 0x continues to move forward in leaps and bounds. 0x is a ‘backbone’ protocol for decentralised exchanges (or, exchanges which aren’t run by centralised organisations) on the Ethereum network to use. It allows users to engage with an exchange (buy and sell) directly from their Ethereum wallet, without having to register with a third party. More importantly, 0x allows all decentralised exchanges to have a shared order book and ‘liquidity pool’, meaning that you can set a ‘sell’ order on one exchange and buy it on another.

0x has recently developed the technology for custom, permissioned liquidity pools (like pools of tokens cordoned off from the majority of the public) and integrated support for the ERC-721 non-fungible token standard. This is a big deal, as the computer gaming world is picking up the trading of non-fungible assets in a big way. Gods Unchained, an Ethereum based trading card game recently sold 1 million cards, and startup blok.party, who raised 10 million USD in capital, will be using 0x as the backbone for their board game console.

Speaking of gaming, open-world project Decentraland continues to forge ahead with their vision of a truly decentralised version of Second Life. Earlier this year, they allowed participants to begin buying parcels of land within their virtual world. Since then, they’ve spend a great deal of effort building a robust Software Development Kit (SDK) so the community at large can get involved. Indeed, their documentation page may be the largest of any dApp in the market.

 

Decentraland

 

They’ve also been fleshing out their Marketplace, which hooks directly into Ethereum accounts and now allows land holders to parcel up their individual blocks into Estates. Sounding familiar? Well, they’re also working on a mortgage smart contract so you can be just as encumbered in the virtual world as the real one! It’s a good thing then that a number of games are also looking to integrate with Decentraland – including Cryptocarz (which will be building a racetrack) and CryptoBeasties (which will let land holders host questing areas where users can earn rewards which apply to both games).

 

Energy Sector Eyes Blockchain

Chatter is increasing from the energy sector, particularly in renewables, about the potential for blockchain technology to bring significant improvements in the way energy is managed, traded and purchased between network participants. Foremost among this has been the development of the Energy Web – a project of the Energy Web Foundation and a number of industry partners. The energy Web is billed as an “open-source, scalable blockchain platform specifically designed for the energy sector’s regulatory, operational, and market needs. Market players like AGL, Shell and Blockchain Capital are connected to the venture, as is the Australian Energy Market Operator (AEMO), responsible for the overall management of Australia’s energy network.

 

EWF Timeline – source

 

The platform is based on the Ethereum network, and relies heavily on the Parity protocol – a large, open-source private Ethereum standard. The vision for the Energy Web is to create a ‘shared layer of truth’ for businesses to run their various applications on, with a view to being carbon-trading compliant and able to handle strict regulation through on-chain governance. How this works in practice remains to be seen, and there are some significant challenges that must be overcome before an energy network can be properly represented on a distributed ledger.

At a more consumer level, companies in Singapore are now able to engage in renewable energy certificate trading, thanks to a blockchain-based solution by utility SP Group. They claim that the platform allows for a more transparent and lower-cost system for parties either seeking to off-set their carbon emissions or trade their carbon certificates.

Even individuals are finding ways to mix energy and blockchain, with news recently that a German developer built an electric bike that is powered by Bitcoin micropayments transmitted over the Lightning Network.

This is an emergent trend, and judging by the state of the Energy Web and other similar projects from other areas in the world, still very much in its infancy. We’ll keep track as it develops – make sure to subscribe to the newsletter for full coverage.

 

The Blockchain and Smart Contracts Masterclass – February 2019

We’re now taking registrations for the updated and expanded Blockchain and Smart Contracts Masterclass, scheduled for Brisbane, Sydney, Melbourne and Canberra in February of next year. Designed for business owners, executives, professionals and managers, it’s a full-day workshop covering the breadth of distributed ledger technology including:

  • The Fundamentals of Blockchain Technology
  • The Basics of Ethereum and Smart Contracts
  • Deeper Blockchain Concepts
  • Live Demonstrations of Smart Contracts in Action
  • Working with Programmable Money
  • Smart Contracts in Enterprise
  • EOS, Cardano and Emergent Blockchain Platforms
  • Permissioned and Private Networks
  • Security Considerations and Legal Questions
  • Planning a Blockchain Project
  • The Future of Distributed Ledger Technology

We had a great response to the masterclasses this year, with delegates commenting they went away with a far deeper understanding of distributed ledger technology. Class sizes are kept intentionally low, so tickets are very limited. Full details and sign up can be found here.

That’s it for this Strategic Update. If you have something specific you’d like to see covered, please let me know. If you’d like to get notified the moment the next Strategic Update is live, please sign up for the mailing list.

Otherwise, until next time – take care of yourself and see you soon.

Best,

Matt

 

Addendum – Business & Technology Law

While I spend a significant amount of time consulting and educating in emergent tech through BlockSense and The FOMO Show, I’m still a ‘normal’ lawyer for the remainder. I am somewhat unique, however, in that I provide fixed-fee and retainer-based legal services with a strong focus on business and technology law. If you’re looking for legal advice from someone who understands the realities of business and the unique challenges presented by technology, please don’t hesitate to reach out via email and we can discuss further.

 

Matthew Shearing

Matthew Shearing

Matt is a lawyer, consultant, podcast host and speaker. His passion is helping individuals and businesses understand, manage and overcome the challenges of doing business in the digital age.

He advises companies on many aspects of business and technology law, with a particular focus on commercial relationships, cyber security, risk management, compliance and brand protection. He also runs a podcast, hosts a meetup and consults in the area of blockchain technology.

If you’re looking for legal advice, please get in touch below.

* Note –  The views express here are my own and are opinion only. They don’t constitute legal advice, and shouldn’t be relied upon without first obtaining specific legal advice catered to your situation. Neither do they constitute the views of any other party, including any employer or company.

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