2016–2017 Key Blockchain Events & Projections
The following is an excerpt from Think Consortium’s 2017 Outlook -Blockchain Impacts On Enterprise & Government.
On the first day of June 2016, the Federal Reserve chairwoman Janet Yellen met with the heads of over 90 central banks to discuss blockchain technology and the future of banking. Meanwhile, on the other side of the United States, a team at Disney painstakingly worked on the entertainment giant’s own blockchain in Seattle.
As bankers and government officials discussed asset transfer and the world’s largest entertainment company was changing the way intellectual property licensing could be issued, an unknown hacker laid out plans to steal over $60 million (USD) worth of cryptocurrency on the second largest public blockchain in the world. That hacker (or group) would be successful in this pursuit on the Ethereum blockchain 25 days later.
While most of these actors in the theater of blockchain were focusing on innovations outside of the world’s oldest blockchain, Bitcoin, one of the largest e-commerce websites on the planet issued the very first SEC-approved bond on the Bitcoin blockchain 3 days after the conclusion of the ninety member central banker conference in Washington D.C.
2016 saw the first major reversal of transactions in an immutable blockchain database following the aforementioned heist. Likewise the world’s largest bank announced that it was building its own banking platform based on the source code from that very same blockchain where the hack took place. That company was J.P. Morgan. The banking behemoth coined their permissioned blockchain, “Quorum” while simultaneously joining a consortium called Hyperledger along with IBM who launched yet another blockchain, and — the stories go on…
The following is a list of key events in the 2016 Wild West Frontier of blockchain, describing announcements and implementations of the distributed ledger technology that are leading to the institutionalization of blockchain in 2017 and beyond.
Highlights & Analysis
Since the 1980s, SWIFT has been the leading money transfer system between banks, with the first transfer occurring in 1977, two years after the company’s founding in Brussels. The main benefits of SWIFT were a worldwide processing service and liability protocol, both of which allowed banks to seamlessly transfer fiat currency. Since 2003, the company also provided the ability for banks to transfer equities and other securities in a similar fashion.
Visa was formed as a joint effort by many banks to unify lines of credit between consumers and stores in the 1960s. Prior to the 2000s, Visa operated as several companies in geographic locations owning a similar license. In 2016, Visa partnered with Chain, a startup building a revolutionary blockchain technology to pilot a program aiming at allowing businesses to transact directly with each other without necessarily needing a banking intermediary. Visa’s B2B Direct Blockchain service will be opened to select merchants in 2017 who will find enormous cost savings remitting money between each other locally and overseas, with the ability to bypass SWIFT transfers. To win in this market, Visa will need to keep fees competitively low, build great ecosystems of pilot merchants in the international manufacturing and distribution sectors, guarantee security of its platform, and begin to open up to more strategically significant merchants rapidly.
In 2016, the world’s largest entertainment company, Disney, discontinued distribution of its corporate scrib, Disney Dollars. This coincided with its announcements and foray into blockchain technology, potentially set to replace and track new forms of corporate currency at Disney. With the open-source release of its blockchain technology, called Dragoncoin in late 2016, Disney is positioned to enhance its margins in the coming years with B2B settlements according at the time of transaction between departments, reducing back office costs. Additionally, as Disney focuses on becoming an industry leader in the emerging virtual reality industry, intragame/environment virtual currency is needed for users to exchange value.
Disney’s road to cost saving and adding additional revenue via blockchain technology in 2017 will be defined by its ability to integrate virtual currency into its games and allow the the sell of digital content via Disney-tokens backed by its blockchain. It is likely Disney will continue to invest in early stage startups that are innovating in this area, as they did with rising VR startup LittlStar. As Disney grows in this area, it is also positioned to work closely with other large entertainment companies and its own subsidiaries to develop platforms for managing royalties more efficiently for content distribution. These investments into blockchain technology has the potential to add to Disney’s bottomline tremendously in the coming years.
3. Dubai’s Initiatives to go completely blockchain by 2020
The ratio of credit for non-productive GDP to productive GDP is a long standing yard stick for determining financial bubbles, ever since the collapse of the Japanese economy in the 1990s, and as was seen throughout the 20th century in the US and Europe. The United Arab Emirates has seen skyrocketing real estate prices, matched with a credit explosion, bringing massive investment into products and services of the future.
Liquidity is necessary for the growth of an economy, and Dubai is using its excess capital in interesting sectors. For example, besides having offices built completely with 3D printers and building some of the world’s smartest cities, the United Arab Emirates has been on a shopping spree snapping up financial technology companies and incorporating the benefits of blockchain into it future plans for growth. In this regard, it was no surprise that in late 2016, the Crown Prince of Dubai announced the UAE’s intention to transfer all official documents and perform all government transactions on a blockchain by 2020.
The impacts of this announcement are enormous. Lately, startups such as Loyal as worked with the government to promote tourism in the form of blockchain-based loyalty points (called Dubai points) to provide and track deals based on customer interactivity with certain location which can drive up local businesses outside of the top 3 tourist attractions there, such as the Burj Khalifa. Dubai’s, and ultimate the UAE’s, impact will be rooted in its ability to partner with nearby countries, as it has already begun doing with a recent partnership regarding remittance with India’s ICICI. Additionally, with help from fast-paces innovators from around the world, Dubai is poised to reach its goal of full blockchain integration by 2020. In this regard, Dubai is attracting innovators with a friendly government environment, that parallels almost none around the world with regards to cooperation between the public and private sectors.
Central Security depositories (CSD) play one of the most important roles in the exchange of any asset in the world. Every government typically has one major CSD which holds a majority of certificates or representation of certificates, so that it can easily orchestrate with major exchanges to keep track of ownership based on trades on said exchanges. Regarding China and Russia, and agreement has been reached between the major CSDs to share research on Blockchain technology in a move to develop systems to link settlement of transaction on the technology.
To most traders, the effects of this will be felt in the coming years as user experiences begin to track in real-time transaction hashes that match trades to events occurring on blockchains to prove ownership or rights and allow for more transparency in the financial services industry. This lowers costs for settlements, but also paved the way for startups and other companies working in the space to build products that recognize these transactions and can track them in a way relevant to investors and exchanges. As trade relationships between China and Russia strengthen, it can also play an integral role in linking the two economies allowing for greater cohesion on economic policies, ease of reciprocal investment tracking and ease of monetary transfer among corporations in the two nations.
5. T0 issues first publicly traded security via ETC and Keystone Capital
Overstock, a survivor of the 2000 tech bubble and influencer on the e-commerce retail space, takes in an approximate sales volume of $3 million (USD) a day. Notably, it has also begun representing 500,000 of its preferred shares on the Bitcoin blockchain. In mid-2016, Overstock became the first company in history to sell a bond that was issued on a blockchain. With its latest partnership with Electronic Trading Co and Keystone Capital, shareholders can purchase and track shares on Overstock’s t0’s platform. The CEO, Patrick Byrne, has recently accused Cede & Co of actually possessing ownership of over 98% of American issued stocks while consumers have a “right”, “like a polaroid snapshot”, of those shares. With the t0 platform, he hopes to issue shares directly to brokers and have them tracked by their purchaser’s number.
The Bitcoin blockchain, via the Blockchain’s Colored Coin feature, lays the groundwork for new and existing companies to issue shares on the platform. 2017 is likely to see major players place their shares on the world’s oldest Blockchain, with those drawing significant press and potential investors interest outside of the conventional interests of Wall St. venture capitalists, potentially driving up shares in those companies in the short-term. With increased confidence in ownership of those shares, the blockchain-based share may serve as a premium factor and add to valuation metrics, pushing shares in those companies higher. Companies joining the t0 platform will be a phenomenon to watch in 2017.
6. IBM’s massive investment partnerships involving blockchain
IBM, in September 2016, announced all of its business units would have some aspect of them involving blockchain technology. In a public report, they outlined their vision to become trailblazers in the blockchain industry predicting that more than 15% of financial institutions would be on the blockchain by 2017. Given such enthusiasm about the blockchain, IBM has focused their business on garnering innovative solutions through their Bluemix Blockchain Garages located in 4 cities: Singapore, Tokyo, London and New York. At these facilities -usually located in co-working spaces to leverage the startup mentality- IBM consultants and C-level executives work with potential clients to leverage IBM design thinking and workshop new ideas in order to develop proof of concepts for clients in the price range of $200,000 to 300,000 (USD). From there, IBM seeks to integrate current solutions or build new solutions.
IBM’s channel to success in this arena will be very much tied to its ability to grow its developer community around its technology, Hyperledger Fabric. This approach is slightly hindered, however, by a lack of a truly open-source approach. Rather, IBM relies on a large group of esteemed consultant and sale teams to pursue potential government clients. IBM Blockchain representatives, for example, have appeared in from of US congressional leaders to make the case for investigating blockchain in government such as IBM VP, Jerry Cuomo, earlier in 2016.
While IBM has contributed its Fabric Blockchain code to the Hyperledger Project, other firms such as R3 are competing for dominance in the blockchain sector based on their technology and partnerships. IBM’s success, regarding the bottomline, will be tied to its ability to tap developer interest to build out solutions on top of its technology, further develop its current platform, and sell this solution to specific customers, including government, healthcare institutions, manufacturing companies, exchanges, and military units.
IBM has the opportunity to leverage its current relationships, and 2017 will be a significant year as their activity collaborating with other firms will determine whether they can garner the right use cases to nail a foothold in the blockchain space.
Other stories that had a large impact on blockchain this year include:
R3’s continued growth in partnership with leading banks and the Hyperledger Project
Ethereum Blockchain’s own $80 million (USD) heist that turned into a $4 million (USD) heist
South Korea eying Blockchain for everything financial
Accenture CEO publicly criticized the use of Blockchain
Georgia’s Government issued and transfered land deeds via the Blockchain
US Government opens office prompted by advert on Blockchain technology
Federal Reserve governor proposes use of Blockchain technology by the central bank
NASDAQ inches closer to full blockchain integration for equity trades and files patents
2017 Impacts
The key impacts for the enterprise in 2017 is new demand from investors for blockchain-backed securities stemming from a sense of immutable ownership and transfer control. More enterprises will be solicited by blockchain enabled counter-parties to transact with data and assets on blockchains to lower costs in compliance and enhance transparency along with speed. Financial institutions will continue investment and acquisition of blockchain startups in order to cut future costs. More internal teams within larger financial, insurance, manufacturing, pharmaceutical, and energy firms will emerge to investigate and develop proof-of-concepts to test Blockchain technology. Wider awareness by non-technical professionals will propagate from these activities.
The key impacts of the latest trends with regards to government will come from more calls to run pilot programs for streamlining validation processes agencies throughout the world. In developing nations, NGOs and political parties will put an increasing pressure on officials to stamp out corruption and enhance systematic confidence of citizens via immutable distributed ledgers to drive enhanced security for property purchasers.
Read more in the 2017 Outlook.
