Crypto Market's Best Quarter, New Age Marketplaces, and Tracking Whiskey

Off the Blocks | Vol 61, Apr 2, 2019

This newsletter is our weekly roundup of some of the significant blockchain news, that provides an overview of the rapidly changing blockchain landscape to help you map your blockchain strategy and be aware of regulatory announcements globally. Get your friends to Subscribe Here.

The Age of New Marketplaces

Online marketplaces are big business. The top 100 marketplaces in the word sold about $1.86 trillion worth of goods in 2018 and accounted for over 95% of the global marketplace sales. The top 5 players are either based in China (Taobao & Tmall, both owned by Alibaba and or the US (Amazon and eBay). These centralized marketplaces hold an enormous amount of power over consumers and merchants alike. Immune from genuine competition, these players have evolved into large platform monopolies that can dictate extremely lopsided terms and conditions favorable to their operations. Merchants are left with little to no choice but to accept these unfavorable terms as there are literally no alternative distribution points.

Nowhere is it more pronounced than in the digital assets, content, SVOD and entertainment marketplaces. The problem with online markets in entertainment is that artists barely have any means to protect their copyrights and receive fair compensation for the content they produce. The profitability of content platforms often comes at the expense of the content providers in a non-transparent, “zero-sum” game. In order to grow their profits, these marketplaces have to continue to squeeze the costs incurred, which eats into the earning potential and profits of the content creators. For example, Amazon Video, faced significant backlash from independent filmmakers after it whimsically slashed the royalties payments by 60%.

If you do the math for our film, we would have to have 11 people watch the entirety of the film to make a dollar. We don't know if it's worth it.

Amazon does not necessarily single out digital goods. The Amazon Squeeze is felt across all categories of products that the retailer sells through its online stores. The issue here is simply that the company’s incentives are just not aligned with their third party sellers. The incentive gap between its shareholders and stakeholders is growing.

Blockchain technology offers viable alternatives to these exploitative business models. It is now possible to create a decentralized, distributed marketplace and return competition to the marketplace functions. For example, key information about inventory, buyers, sellers, lead times, customer reach, demographics etc can now be made available in a public and transparent fashion. As a result, a blockchain based marketplace can inherently provide for trust, a key component negatively exploited by centralized marketplaces. Smart contracts can add an additional benefit of guaranteed payments that further align incentives amongst the stakeholders.

Last year, Listia transformed its internal stored-value credit system into a blockchain platform based on Ink Protocol. Listia saw the need for a tool that allows users to access the data and reputation they’ve accumulated on its platform and created Replin, to share it openly. Utilizing Replin, buyers can leave feedback for every transaction, helping sellers not only improve any trouble areas, but also ensuring they carry over their hard-earned good reputation across platforms. Unlike current systems, reputation and feedback data is stored in  a decentralized, blockchain-based reputation system,  so no centralized third-party owns the data.

Prospective buyers are now able to easily look up any seller’s public reputation on every marketplace before deciding whether or not to buy from them. This creates a global trust and reputation network that works across all kinds of marketplaces, eradicating uncertainty and reducing the risk associated with P2P online shopping.

ContentsDeals just launched a beta version of their platform. It aims to be a decentralized content exchange platform that enables users and creators (e.g., singers, artists, writers, etc.) to trade and distribute genuine, exclusive content transparently via blockchain. The marketplace aims to ensure fair profitability to artists, content creators as well as contributors to the network while simplifying the complex distribution structure prevalent in the entertainment industry, with a long list of distribution intermediaries.

This new marketplace model is beginning to take hold even in countries like India that have been very skeptical of blockchain and crypto-currencies. Coffee growers in the country will soon have a say in deciding the price for their beans. A pilot blockchain-based marketplace launched by the Indian Coffee Board helps growers connect to buyers directly, eliminating middlemen by bringing growers, roasters, exporters and traders under the same umbrella. If the grower agrees with the price quoted by the buyer(s), the financial transaction and real time settlement can get concluded immediately.

The traditional way of financing drug development is also going through a makeover. Agenus may soon become the first biotech company to issue a blockchain-based “digital security.” According to the company’s January announcement, this asset will represent “a portion of potential future US sales” of a drug called a PD-1 inhibitor, which is now in clinical trials.  As such, blockchain can democratize fund-raising by issuing and managing all kinds of assets faster, cheaper, and more transparently than traditional financial institutions can.

These are just a few examples and a lot of applications are under development in every industry conceivable. These blockchain based marketplace business models are simultaneously solving issues related to information transparency, access to opportunities and liquidity options while providing a secure environment to build trust amongst the stakeholders. This is a tall order for any emerging technology and requires patience and conviction until the new marketplace models gain traction and network effects start to kick in.

Image Source: Point Nine Capital

Now for some other significant news form the world this week:

  1. Crypto Markets | The Best Quarter That No One Noticed: With stocks and bonds booming, not to mention the constant theatre in Washington, it’s no surprise that many failed to notice the crypto rally in 1Q 2019.  If a tree gains 20% in the forest, and no is around, did it still happen? According to Messari, 24 altcoins including major projects like Binance Coin (BNB), Tezos (XTZ), Ontology (ONT), Basic Attention Token (BAT), and more have posted gains that surpass 100% in the last 90 days. Part of the 1Q rally can be attributed to the strength in centralized crypto exchanges.  While Coinbase, Gemini and Kraken garner much of the attention in the U.S., achieving massive equity valuations, most crypto volume occurs on Binance. […Read More on Arca]

    Image Credit: Arca/Delphi Digital
  2. Payments | Coinbase Expands Into Cross-Border Payments: Coinbase customers can now transfer funds to any user with a Coinbase account around the world using Ripple (XRP) and the exchange’s stablecoin USDCoin (USDC) with no fee. The development reportedly enables users to send and receive money instantly, as well as convert them into local currency. March saw several new developments at Coinbase, including a service linking user accounts on its main platform to its Coinbase Wallet app, and a new market structure for the exchange’s professional trading platform, Coinbase Pro, which aims to increase liquidity, enhance price discovery and ensure smoother price movements. [… Read More on CoinTelegraph]

  3. Technology | Blockchain is better than a database for tracking tuna: The first company to use SAP's Cloud Platform Blockchain, Bumble Bee was able to roll out the  tracking system in about three months, enabling it to store shipment data and create a tamper-proof supply chain history. Bumble Bee CIO Tony Costa believes more companies will go the same way as food traceability and transparency becomes more important to suppliers and the public.  [… Read More on ComputerWorld]

    The last trip we were there about eight weeks ago, we’re sitting there and the whole village is out and the fishermen are coming in with the fish and there are two kids – probably nine years old, a boy and a girl – and they’re literally holding computer tablets. The boy showed us his tablet, he’s running Minecraft and he’s building boats with this application because he says he likes the challenge.If you look at it from this perspective, technology is already there. That generation will be the next generation of fisher. So us introducing that technology is just a natural progression.

  4. Commodities | London Metal Exchange Backs Plan to Track Physical Metals With Blockchain: The London Metal Exchange (LME), which boasts the world’s largest market for metal derivatives, is said to be supporting an initiative to track physical metals using blockchain. The initiative, dubbed “Forcefield,” is also supported by banks such as Macquarie and ING, according to the report. The blockchain-based system aims to help buyers in the industry track the source of their metal, as well as help metal traders prove ownership of their stock. The LME has 500 “approved” warehouses in 34 locations across the world, where it stores metals on behalf of holders. However, it has “no approved” warehouses in China, the world’s largest consumer of metals, which makes it difficult for traders and consumers to be sure of metals’ provenance, as well as the general state of supply and demand. [… Read More on CoinDesk]

    [In a blockchain-based system] you know where your metal is, you have proof of your metal, but nobody can see what your metal is and where your metal is.

  5. Identity | Blockchain Can ‘Support Europe’s Unity at a Fundamental Level’ Germany's Federal Office for Migration and Refugees (BAFM) has found that blockchain has far-reaching potential to improve asylum procedures. Following a successfully completed proof-of-concept (PoC). The PoC focused on evaluating blockchain’s potential to support two crucial aspects of asylum procedures: the creation of reliable and secure digital identities and improving communication and cooperation between authorities at a municipal, state and national level. It outlines that blockchain can enable the creation of tamper resistant digital identities for refugees that arrive without ID documents, based on biometric data collected at the moment of their initial registration in the receiving country. This immutable blockchain-based identity would then support further aspects of the asylum procedure and ensure the consistent and secure identification of each asylum applicant across multiple organizations. [… Read More on CoinTelegraph]

    Blockchain could be the ‘digital enabler’ of European federalism in the asylum context. [...] A European platform for the decentralised management of asylum procedures [...] would enable the transparent storage of a person’s place of initial registration. [...] Digital identities are per se nationally agnostic and could thus support Europe’s unity at a fundamental level.

The Final Word | Blockchain-based System Tracks Whiskey From Source to Store

Image Source: Coingeek

Ailsa Bay, a brand from the William Grant & Sons a liquor company, has partnered up with Arc-net, a blockchain tech company, to release what it believes to be the world’s first scotch whiskey tracked with a blockchain-based system. This system will allow consumers to trace the origins of their whiskey by using an innovative web experience, which is individually tailored to each bottle. The move is aimed at tackling liquor counterfeiting in the United Kingdom. The system will also allow the company to gather data from existing and potential customers by making use of location systems to check where the products are purchased. Reportedly, this might help save the wines and spirit industry in the UK, which loses £218 million (over $288 million) every year to copycats.

[The system can] capture the full distilling and manufacturing process, allowing customers to track their whiskey from source to store; ensuring authenticity and traceability. We’re doing something now that we hope will set the bar for the future experience of spirits, and we look forward to seeing how other brands follow suit as innovation within the industry continues to develop in the next few years.

About Proteum
Proteum is a global blockchain advisory firm that works with public, private and start-up companies to help them transition into the world of blockchains and decentralized applications. We help companies strategically build their ecosystem and unique capabilities so that they can own and control their future. ProteumX, our accelerator program, invests in and accelerates the time to market for companies building blockchain solutions. |  | Twitter: @proteumio | ProteumX