IBM Launches Stablecoins, SEC Solicits Feedback and Brock Pierce's Predictions
Off the Blocks | Vol 59, Mar 19, 2019
|Mar 19, 2019|| 3|
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.
Blockchain and Enterprise Adoption
One of the most fascinating things about blockchain and crypto currencies is that new technology and business models are being launched on a daily basis throughout the globe. While the anticipation of blockchain nirvana has been building up for a long time, it now appears that the momentum is beginning to shift slowly, but surely. All the proof of concept initiatives and pilot projects launched in the last year have thrown up valuable data for enterprises to start thinking about their blockchain strategy. In fact, a major chunk of solutions that incorporate blockchain rely on traditional technologies for backend processes like authentication, data processing and Application Programming Interfaces (API). There is an increased appreciation and understanding of how distributed ledgers can work with traditional enterprise technology.
Examples of enterprise blockchain networks include R3 Corda, Hashgraph, Everledger, Hyperledger, and Quorum etc. The public blockchain platform Waves is reportedly seeking to raise $120M for an enterprise grade blockchain project Vostok.
A recent IDC report suggests that the worldwide spending on blockchain solutions is forecast to reach $2.9 billion in 2019, up 89% over last year. The market is expected to reach $12.4 B by 2022. Given the low rate of adoption so far, this implies that the number of decentralized applications and implementations is expected to grow exponentially across all industries and verticals. Startups and companies offering blockchain solutions are proactively building for the enterprise, testing creative ways to incorporate the technology into legacy systems.
Where we’re at in terms of the world for 2030 and 2050 and beyond, we have to rethink supply chains. We have to think about how do we re-imagine product in market.
- Leanne Kemp, CEO and founder of Everledger, a global digital registry for diamonds
The real value that blockchain systems aim to provide is in aligning the incentives and simplifying the workflows of all parties that choose to work together. Based on their role in the network, these parties often contribute diverse data back to keep the network operations running smoothly. As a result, this data is often in diverse formats, stored on numerous public or private clouds, with disparate access and security provisions attached to it. The opportunity with blockchains thus, is to reimagine how information flows through the network, seamlessly and with appropriate safeguards to prevent any misuse thereof.
There is a lot of effort being put in terms of creating hardened hardened industry standards that enable widespread industry wide adoption. One such effort is the Blockchain in Transportation Alliance (BiTA) that has quickly grown into the largest commercial blockchain alliance in the world, with nearly 500 members in over 25 countries. All of these companies across the global logistics landscape are coming together to discuss and develop blockchain standards for the industry.
The security issues surrounding such standards have to be thought of from a scratch, precisely because of the enterprise integration requirements with legacy technology. Some of the areas that can be of risk for compromise include:
Identity and Access: Permission based access is at the heart of enterprise solutions and critical thought needs to go into policies and role based permissions for adding/accessing information on the blockchain.
Smart Contracts: Smart contracts allow for automated execution of agreements by parties on the blockchain and should be clear of exploitable flaws
Key Management: Since all permissions are secured by cryptographic keys, policies should be in place for secure creation, management, and distribution of public and private keys associated with the network.
However, there is healthy skepticism surrounding permissioned and private blockchains favored by enterprises.
Image Source: McKinsey & Company
In an article published by McKinsey & Company in January 2019, the firm took a cynical view on blockchain’s influence. While acknowledging that there is a clear sense of that the technology is a gmae changer, the review argues that the evidence for a practical, scalable use for blockchain is thin on the ground. However this view ignores the fact that an increasing number of applications even in the enterprise space are being built as “blockchain first” solutions. The tipping point may not be as far out in the future as it may seem.
Now for some other significant news form the world this week:
Payments | IBM Launches World Wire: IBM today unveiled Blockchain World Wire, a near real-time global payments network based on distributed ledger technology (DLT) for regulated financial firms. The blockchain-based network will offer a new way for cross-border payment exchange and international settlement. The network is currently able to transfer funds to more than 50 countries using 47 digital coins backed by fiat currencies. Initially, the primary electronic currency used on the blockchain ledger will be stable coin, which is backed one-for-one by U.S. dollars and other national currencies. But network participants will also have the option of using cryptocurrency similar to bitcoin. […Read More on ComputerWorld]
It means swapping into and out of U.S. dollars or Euros or some other major currency is no longer necessary, which affects [foreign exchange] fees, settlement times and liquidity.
Gaming | Ripple’s New $100M Fund with Forte: One part of Ripple's plan to integrate blockchain technology into gaming, is a $100 million fund for developers, which will be overseen by Forte, a San Francisco company founded by prominent gaming executives, and which is backed and advised by a host of big Silicon Valley names, including Andreesen Horowitz, Coinbase Ventures and Battery Ventures. The $100 million development fund will allow Ripple to expand its blockchain services beyond its core business of financial messaging software. [… Read More on Chepicap]
Now, blockchain will help game designers who’ve had a hard time facilitating an economy that can serve all types of players. By integrating blockchain technology into their platforms, game makers could bring [such] transactions inside the game.
Exchange | Riot Blockchains Regulated Crypto Exchange: Riot Blockchain is planning to launch a regulated crypto exchange in the U.S. The publicly traded U.S. company that has faced regulatory issues for a sudden pivot to blockchain, revealed in a filing with the U.S. Securities and Exchange Commission (SEC) Friday that the new entity will be called called RiotX and will develop three main services: banking, trading and a digital wallet. For RiotX’s banking services, the company says it will launch an API created by software provider SynapseFi. Users will be able to create accounts connected to accredited banking institutions inside the U.S., allowing them to hold and transfer either fiat or crypto assets. The API will also track the location and identity of users “in order to prevent fraud and improper use of its RiotX exchange”, as explained by the company. […Read More on Coindesk]
Interoperability | Cosmos is now Live: Cosmos, a highly anticipated blockchain itself designed to improve the interoperability between any number of other blockchains, has officially released a live software. With the mining of its first block, the project has launched Cosmos Hub, the first in a series of proof-of-stake (PoS) blockchains that will be created in the Cosmos ecosystem. Normally, in a proof-of-work (PoW) system similar to bitcoin or ethereum, the validators are miners who compete for block rewards by operating computer servers and expending large amounts of electricity. Validators in a PoS system, on the other hand, are “selected” by the system based on a separate metric of staked tokens in order to participate in block creation and transaction finalization. [… Read More on Coindesk]
In order to make this whole vision of connecting blockchains work, there needs to be a set of operators who have skin in the game to coordinate this blockchain network. All of it has to be internal to the system and that’s why proof-of-stake is such a significant engineering feat over proof-of-work.
Regulations | SEC Solicits Feedback on Custody Rules: The United States Securities and Exchange Commission (SEC) is soliciting industry input as it potentially reconsiders existing custody rules in specific cases of digital asset trading and settlement. Currently, the Custody Rule (Rule 206(4)-2) of the Investment Advisers Act of 1940 determines rules that aim to protect investors who delegate custody of their funds or securities to professional investment advisors. Such custodial authority carries an “increased risk of misappropriation or misuse of [investors’] assets,” and investment advisors are thus legally bound to register with the SEC and to comply with a series of rules for sound custodial practices. The SEC states that its appeal for input regards the application of the Custody Rule to digital assets, and more specifically as to whether any revisions to the rule might be necessary “regarding the regulatory status of investment adviser and custodial trading practices that are not processed or settled on a delivery versus payment (“Non-DVP”) basis.” A DVP settlement procedure is where a buyer’s payment for a given security is due at the same time as that security’s delivery. [… Read More on CoinTelegraph]
We’re going to see big things being built, multiple applications hitting a million users. Three things [need to happen though]: They have to be scalable. They have to be fee-less and frictionless. They have to be fast. No one will use the new internet if it’s slow, costs money and doesn’t’ scale. We are building the new internet, so new standards need to be set. Timing-wise, blockchains that check these boxes are happening now within the 3rd gen protocol; EOS, Tron and Cardano, to name a few.
Gaming is going to be a huge part of it. The earliest adopters at scale of crypto were gamers … and so I think there’s a very good chance that gaming in all its forms will be one of the major drivers of the success of the ecosystem.
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.