The Future of Blockchain is the Smart Contract Sharing Economy

How Kadena’s stack turns cost centers into revenue generators

Will Martino
Dec 17, 2018 · 7 min read

Kadena is uniquely positioned in the blockchain ecosystem; we provide a complete blockchain stack allowing entrepreneurs and developers to use both permissioned and permission-less (private and public) blockchains to unlock new sources of revenue. Interoperating and securing our end to end stack sits Pact — a single, simple, integrated (and open source) smart contract language. Kadena users effectively have an out-of-the-box solution, seamlessly moving between public and private configurations depending on their tolerance and case needs for permissions and security. This technology carves out new opportunities with existing data and workflows that the current solutions cannot. The Kadena stack turns cost centers into revenue makers. Kadena allows companies to safely monetize their existing business workflows and represent them as smart contracts on a public network.

Unlocking Liquidity with the Blockchain Sharing Economy

The sharing economy is grounded in the idea that consumers have some asset, for example, a car or a spare bedroom, that they already possess but that they might not use all the time. The sharing economy allows people to monetize their assets that are otherwise a form of trapped liquidity.

At Kadena, our stack enables extending this sharing economy idea to include existing small, medium and even large-scale enterprises. Every business has their primary revenue centers; for a classic bank, the money clients store is lent out to others with interest. However, every business also has cost centers, which support the money-making element of a business, but take away from the overall profits and efficiency of the enterprise. Common bank cost centers include anti-money-laundering compliance (AML) or know-your-customer work (KYC).

Kadena’s hybrid blockchain can unlock these cost centers and transform them into revenue centers. In effect, the “blockchain sharing economy” takes the existing trend of enterprises providing APIs to its logical conclusion–done right, a public blockchain provides a common integration platform that has native support for monetization.

Examples of Trapped Liquidity Unlocked with Kadena

In one example, a bank could connect to our public blockchain Chainweb and represent their AML resources in a smart contract by an opaque identifier. The contract controls the on-chain whitelisted accounts and an API to get additional off-chain identifiers put into the on-chain whitelist. Then, other businesses that need to do AML or KYC can access that service. Private data is kept private, but the work already done to create the whitelist is re-used and monetized.

Say you run an apartment subletting social network that connects subletters and apartment hunters together, and one of the services you want to offer is security through AML. However, that service is something that, when done internally, would cost you a lot of resources without being the main focus of your company. In this example, the bank would share its AML service (a service that it does for itself regularly already), and your subletting company can query and use that service for a fee. You pay some money, they get some data, AML becomes less of a cost center for you, and your costs end up going down while their revenue goes up.

But don’t services for stitching APIs and monetizing databases already exist?

Yes, and the technical costs of integrating with these narrowly tailored services can be prohibitive for small businesses thus impeding that market’s growth. Blockchain is a broader platform for growth, one that by design doesn’t crash or require client-side servers for integration, AND one that benefits not just the user but the companies providing services of activities they already perform.

Take about another example: Rent the Runway (RTR) has the largest dry cleaning facility in North America, which they need to service all the dresses they rent out. Dry cleaning is a cost center for which RTR already has an economy of scale. There is an entire lifecycle here that lives entirely on RTR’s backend databases: a consumer makes an order, RTR sends the dress, the consumer wears the dress and returns the dress, RTR receives and cleans the dress and preps it for the next order.

If RTR were to take a unit of this lifecycle and represent it as a token or smart contract on a private blockchain, then use that contract as an “API” on a public chain, they can effectively “take a second bite of the apple.” Whenever Rent the Runway has excess capacity in their dry cleaning facilities at certain times of the year, they can offer up the excess on this public chain. A small or medium-size business that doesn’t have direct access to this massive dry-cleaning warehouse can take advantage of this by using that tokenized/contract API. Rent the Runway thus monetized this trapped liquidity, decreasing their costs and effectively turning this cost center into a revenue generator.

Unique Features of the Kadena Stack

The reason the blockchain sharing economy has not been realized on other blockchains is that other platforms lack the unique features of the Kadena stack to solve certain relevant problems. So what else is missing on other platforms to support this ecosystem?

  1. The first problems are scalability and cost-effectiveness. Without a scalable blockchain, businesses can’t rely on the system for anything crucial to their business process. Kadena’s public blockchain, Chainweb, is designed for high throughput and lower congestion/transaction fees, making it simple and cost-effective to support serious use on a public chain.
  2. The next issue is more subtle: smart contracts must interact with each other in a single transaction. True business on a blockchain doesn’t make sense if all you can do on blockchain are tokens, because you merely end up with a ledger of some stuff that you can trade back and forth and little more. Though a necessary feature, tokenization isn’t sufficient for serious business adoption. With Kadena’s stack, you will be able to chain various token workflows together into a larger functional workflow. Your linked Pact smart contract could get a dozen things off a site like Wish, handle the FedEx shipping to a service like Rent the Runway, handle the cleaning, and then also handle shipping it to you as well.
  3. Another critical problem is one of trust and control: smart contracts must be safe and upgradeable. One of the biggest problems with the sharing economy is trust — some people don’t like the idea of sharing their car with a stranger if they can’t control their use. That issue of control and trust an even bigger problem for companies. Kadena’s safe smart contract language Pact comes with upgradeable governance–the ability to designate how and who can change that contract–which allows you control over the ledger so that even if trust breaks down, you can actually fix things. If a dependent service ends up being malicious, you can upgrade your contract to cut them out of the system and upgrade the contract to fix the bug. Unlike generic APIs or database access controls, smart contracts preserve the intent of the creator without raising security concerns.
  4. The final necessary feature is about permissions: smart contracts must allow snapshotting imports. Though a technical concept, this is what’s needed to get smart contract interoperability actually working safely. The only way you’re going to get a company to take a core piece of their back-end and expose part of it to the public is if the company knows that, no matter what happens, only the code that they write will be running in anyone else’s contracts and only the code they explicitly bless to run inside their contracts will be allowed to run. There should be no way for someone to get arbitrary access to their database. Unlike other smart contract languages, Pact was purpose-built to be safe enough for business level adoption cases.

Creating A New Marketplace-Based Economy

The blockchain sharing economy, if executed successfully, will allow companies to unlock whole new sources of revenue. One larger goal of the Kadena journey is to change the way that people think about smart contracts — they will no longer merely represent tokens, but rather entire services. Under this new paradigm, smart contracts will serve business workflows. Done right, Pact effectively becomes a lingua franca for representing business workflows on a blockchain, because Pact has all the necessary features and is on top of the systems (Chainweb and ScalableBFT) that are built for scale. While I don’t believe there will ever be one blockchain to rule them all, I do believe that there will be one smart contract language that becomes the standard.

Right now it may seem that public and private blockchain are two different markets with two different software stacks, like the early days of the Internet vs. Intranet. But soon, with the launch of Chainweb in 2019, we will have institutions using Kadena with private internal chains that monetize using the public network to unlock value that was previously trapped. Eventually, we will have a world in which there is no distinction between public and private blockchain; instead, there are private chains that securely and privately expose value onto on a much larger public network. Because the Kadena platform is safer, secure, automated, and distributed, the blockchain sharing economy for businesses will become a reality.

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Kadena

the new frontier of smart contracts on blockchain

Will Martino

Written by

Co-Founder of Kadena

Kadena

Kadena

the new frontier of smart contracts on blockchain