Noticing the prodigious increase in video streaming across the web and the prohibitive costs involved in transcoding, serial entrepreneurs Doug Petkanics and Eric Tang built a platform that links encoding providers with anyone who needs processing power for video services.
The infrastructure functions as a “token coordinating network,” incentivizing those with computing power to join and match the needs of those looking to stream, by offering the ability to get paid for their idle processing power in ethereum.
Currently the company has more than 30 providers of compute power on the platform, and more than 100 events have streamed video through Liverpeer. Though Petkanics told TechCrunch, those users may have been an “early-adopter, philosophically-aligned crowd.”
Livepeer is designed for developers who want to build applications that include live video, users who want to stream video, gaming, coding, entertainment, or educational courses, and broadcasters who currently have large audiences and high streaming bills or infrastructure costs.
By making use of idle processing power, Liverpeer drives down the price for encoding. Petkanics said the system is 10 times cheaper than incumbent streaming providers, equivalent to two streams for roughly 70 cents per day, compared to $3 per stream per hour of traditional streaming services.
Founders see an additional growth opportunity in bootstrapping the excess capacity of GPUs used by crypto miners, thereby further reducing costs. Though they also said the Series A funding will go towards implementing applications outside of the purview of crypto-fans to enter the larger marketplace.
The company is offering six months free for new participants as an inducement to try the platform.
Video infrastructure behemoth Brightcove’s former CEO David Mendels joined the upstart as an advisor to the company. And Houseparty founder Ben Rubin was part of the Series A round. Additionally, Digital Currency Group — which acquired CoinDesk in 2016 — Libertus, Collaborative Fund, Notation Capital, Compound, North Island and StakeZero also provided funding.
Grayscale Investments, the cryptocurrency asset manager backed by Digital Currency Group, which acquired CoinDesk in 2016 – has released a report showing what it argues is bitcoin’s potential as a hedge against global liquidity crises.
Overall, the authors suggest bitcoin ought to be considered a strategic position within long-term investment portfolios considering its transparent, immutable and global liquidity. Bitcoin has a distinct set of properties unlike any other asset, the paper says, which allow it to perform well over the course of normal economic cycles as well as market disruptions.
Additionally, noting significant shifts taking place in monetary, fiscal and trade policies around the world, Grayscale alleges politicians and policymakers may find it increasingly difficult to manage their economies – thus insinuating a need for investors to take control of their own finances.
The report examined five recent macroeconomic shocks in which the digital asset outperformed other investments as a store of value. The authors extrapolated from these case studies – including Grexit, Brexit, China’s structural devaluation of the renminbi and two Trump shocks – that bitcoin could be a useful tool in helping investors insulate their portfolios from any potential market failures.
Below are three exegesis of bitcoin’s inherent ability to hedge against liquidity crises.
Bitcoin Gains as Grexit Loomed
In the first case study, ‘Grexit and the 3-week Greek bank shutdown,’ which spanned from April to July 2015, Greece underwent a physical liquidity crisis as default of sovereign debt seemed inevitable.
In a response to financial uncertainty, the Greek government closed state banks and imposed strict capital controls on transactions, beginning on June 28, 2015.
These restrictions remained in place for three weeks, while bailout terms were negotiated with international creditors, which sparked apprehensions about the unchecked power of governments over holders of centralized assets in times of crisis.
Yet, “during the liquidity freeze, bitcoin emerged as one of the only means by which to transfer value in or out of Greece, reinforcing this new asset’s ability to return the power of control to the individual who holds it,” write Grayscale analysts.
Leading up to the resolution to the Grexit crisis on July 13, 2015, bitcoin saw returns of 28 percent versus an average of -1.7 percent for 20 other markets and currencies.
Another case study examined the People’s Bank of China’s structural devaluation of the renminbi, and China’s shift in monetary policy between August 2015 and December 2016.
Amid stock market turbulence and concerns over the health of the world’s second largest economy, the Chinese government lowered the RMB-USD reference rate 1.9 percent, signaling a shift to “market-driven” pricing and an attempt to stimulate export driven growth.
This policy-shift saw RMB’s largest single day drop in over twenty years, as well as a five-month selloff of global risk assets in favor of wealth preservation assets, according to researchers.
Again, Greyscale notes bitcoin fared much better.
“Between the day of the announcement and the trough of the drawdown, Bitcoin largely outperformed the following major markets and currencies, producing a cumulative return of 53.6 percent versus an average return of -10.1 percent.”
Bitcoin was used to hedge against Chinese liquidity risk, caused by local investors sold their assets against a structural currency devaluation.
Brexit, Bitcoin and Risk Management
The shock of the U.K.’s referendum vote to separate from the European Union was followed by a knee-jerk selloff and immediate decline in the pound sterling (GBP) and euro, as the market attempted to digest whether Brexit would portend the disintegration of the European Union.
During the first one-day global selloff, the researchers found, “bitcoin was a top performing asset, boasting a return of 7.1 percent on strong volume, versus an average of -2.1 percent for the rest of the group” of currencies.
Additionally, the researchers find cause to recommend, because the details of the transition plan still being worked out, global investors might consider allocating a portion of their investable assets to bitcoin to hedge against contagion stemming from the Eurozone, the world’s second largest economy.
You don’t have to have a Facebook account to use Libra.
That’s the hands-off approach the social media giant is working toward as it announces its new blockchain and the token of the same name that will run on top of it.
While Tuesday’s announcement is still early days, the scope of the project is far-reaching. It includes a new Facebook subsidiary, Calibra, and an independent consortium, Libra Association, backed by some of tech’s biggest names.
“Implied in this project is that wherever the Visa or Mastercard logo are accepted, Libra would follow suit,” Dante Disparte, head of policy and communications for the Libra Association, told CoinDesk in an exclusive interview. “In so many ways it’s a great leap forward for cryptocurrencies and, in many respects, a mainstreaming of this asset class.”
The Libra Association’s group of 28 founding members includes Visa, Mastercard, PayPal, Uber, Lyft, Coinbase and others.
Customers interested in holding or transferring Facebook’s newly-announced Libra token will be given a number of options to do so, the company announced Tuesday, with an initial focus on international remittances.
Calibra will develop financial services and products around the Libra network, which will eventually be fully governed by the independent Libra Association. Calibra intends to start with a digital wallet for the Libra coin, which will let users transfer funds to each other, as well as store their tokens locally.
Notably, customers will be able to access the wallet functionality through a new standalone app on iOS and Android, or through Facebook’s Messenger and WhatsApp services. The Libra blockchain is expected to launch in full sometime next year.
“The central goal here really is financial inclusion,” Disparte told CoinDesk.
Reaching the unbanked
Access to these apps could be enormously significant. WhatsApp saw 1.5 billion active monthly users in the fourth quarter of 2017, according to TechCrunch. Globally 1.7 billion adults remain unbanked. The new effort is explicitly branded to reach those populations.
“The goal of this new project … is to build a financial ecosystem that can plug in and empower billions of people,” Disparte said.
For the major tech companies and financial institutions backing the project, that may one day mean access to more customers; for those struggling to access capital, it may one day mean a new lifeline from family abroad.
“For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account, and those numbers are worse in developing countries and even worse for women,” Calibra wrote in company literature published Tuesday, adding:
“The cost of that exclusion is high – for example, approximately 70 percent of small businesses in developing countries lack access to credit, and $25 billion is lost by migrants every year through remittance fees.”
Among the payments giants, a number of NGOs are involved in the Libra Association, including Creative Destruction Lab, Kiva, Mercy Corps and Women’s World Banking. To become a “Social Impact Partner,” participating non-profits must have a five-year track record of poverty alleviation work, including digital financial inclusion initiatives in the field, and an operating budget of greater than $50 million.
While Calibra is only targeting basic fund transfers to begin with, the subsidiary plans to expand its services to allow customers to pay bills and purchase goods or services, such as coffee or public transit access.
A video demonstrating the planned user interface indicates that customers will be able to quickly send funds to their friends. While they will be sending Libra coins, the app appears to show that users will see their balance in their local fiat currency.
Further, when sending funds across borders, the app appears to show the fiat equivalent that recipients will see, with amounts denominated in their local currencies.
“Just as the internet created a world of low-friction communication and information sharing, the hope with this public ecosystem and public utility is that we can create a world of value transfer and payment that has an equal low-friction property to it without sacrificing the governance standards in the traditional economy,” Disparte told CoinDesk.
As part of its services, Calibra intends to follow various anti-money-laundering and know-your-customer regulations in the jurisdictions in which it conducts business, according to a fact sheet.
Calibra registered as a money service business with the U.S. Department of Treasury and is now working to acquire money transmitter licenses in U.S. states “that treat cryptocurrencies as the equivalent of money.”
The subsidiary also intends to follow guidelines issued by the Financial Action Task Force and other national regulators, and will not conduct business in jurisdictions which have banned cryptocurrencies outright.
“Calibra is committed to keeping illicit activity off the platform and working with law enforcement globally,” the fact sheet said.
As part of its efforts to maintain compliance, Calibra will require ID verification. However, financial data and social media profiles will not be linked, according to company officials and the Libra white paper.
“The Libra protocol does not link accounts to a real-world identity,” the white paper states. “A user is free to create multiple accounts by generating multiple key-pairs.”
Other wallet providers will be able to build products on the Libra protocol when the network launches in early 2020, Facebook officials told CoinDesk.
The Calibra wallet will use similar verification and anti-fraud procedures that banks and credit card providers currently use, as well as systems to monitor accounts for unusual behavior in order to prevent fraudulent activity.
“Authorities charged with consumer protection have an important role to play in ensuring that all consumers, including the most vulnerable, can safely take advantage of financial innovation,” the fact sheet says.
Several U.S. banks and global financial institutions have dipped their toes into the blockchain world this year by implementing systems on permissioned ledgers that only invited members can join. Now, one of Poland’s 10 largest banks is taking it a step further.
Warsaw-based Alior announced that it is beginning to offer a feature that will allow customers to check on the authentication and integrity of official documents they receive using the public ethereum blockchain that supports the ether cryptocurrency valued at more than $27 billion. While financial institutions have been historically more open to working with permissioned, private blockchains that they have more control over, this use of a public blockchain is among the very first.
“Our mission is to be disruptive, so we want to provide innovative solutions, and we want other banks to follow us as well. We welcome if somebody copied our solution,” says blockchain strategy lead Tomasz Sienicki. “We are showing that it’s possible to use public blockchain even if some people think it’s impossible.”
The reason for the unusual position is that Poland has regulations that require banks to provide customers access to documents in the form of a durable medium, and its Office of Competition and Consumer Protection ruled in 2017 that a page on a bank’s website which can be easily changed doesn’t qualify.
That interpretation pushed Alior to explore new solutions to serve customers, and it established what it calls the Blockchain Center of Excellence last October to complete the project. Sienicki, who worked at the bank as a trader since its inception in 2008 before transitioning to lead the blockchain team, said the blockchain-based system complies with all federal regulations.
“It was born in our innovation lab, but later on, we managed to convince our management that a dedicated team should be set up on just blockchain issues,” Sienicki says. “Everybody can copy this code and use it for his or her purposes. We encourage people to do so.”
Signature Bank in the U.S. launched its Signet system in December and JPMorgan, America’s largest bank, followed suit a couple months later by creating the similar JPM Coin. Both are blockchain-based features to enable real-time payments between institutional clients, but they run on a private ethereum blockchain that limits access to people with special permission to use it. Alior’s feature is different in that anybody can join the network, making it more transparent.
“We want people to verify that we did everything right and we don’t conceal anything. If we say the documents are actually verified and authentic, everybody can check it and confirm,” Sienicki says. “That’s not possible using a private blockchain.”
Societe Generale, a major French investment bank, issued a $112 million bond in security tokens on the public ethereum blockchain in April, but Alior’s management believes it is the first bank to use a public blockchain for a direct customer service solution.
The feature uses a smart contract that stores hashes of documents — a digital signature that maps documents to a unique value — and links them with their name and the block number in which they were published on the blockchain. Customers can search documents they have received on Alior’s servers and browse their history to find where those documents are located on the blockchain to ensure that they have not been changed by the bank since they were published.
“You can get the document from our servers by the name and hash it and browse its memory and compare that with the hash on the blockchain, so we know exactly in which block of ethereum the document is published. If we know the block number, we also know the timestamp,” says Piotr Adamczyk, Alior’s blockchain technology lead who was in charge of writing the code for the project. “We know that the document was published some time ago and hasn’t been changed in that time, so we can prove it hasn’t been replaced on our servers.”
The vice chairman of South Korean consumer electronics giant Samsung says the firm will seek to collaborate with platform companies on the development of blockchain, artificial intelligence and sixth-generation mobile networks. The news was reported by Bloomberg on June 16.
The vice chairman, Jay Y. Lee — who reportedly serves as the firm’s de facto leader — held discussions with Samsung executives to discuss the potential collaborations last week, according to a company statement cited by Bloomberg. A platform company is an initial acquisition by a private equity firm for the purpose of making further acquisitions within a certain sector.
Per Bloomberg, the move to pursue bleeding-edge technologies such as blockchain and 6G comes amid a rapidly changing business climate and structural changes in the technology industry, which ostensibly presents new challenges for major firms. In the statement, Lee noted:
“We should challenge ourselves with a resolution to make new foundations, moving beyond the scope of protecting our past achievements.”
Crypto and blockchain-related functionality already confirmed for the Samsung S10 will thus ostensibly be included in other Galaxy smartphone models.
A Cointelegraph analysis published earlier this month covered the burgeoning trend among South Korean conglomerates such as Samsung, Naver and NHN to pursue blockchain innovation, despite the government’s tough stance toward decentralized cryptocurrencies.
The analysis projects that blockchain applications in the automotive and aerospace and aviation industries will grow at a compound annual growth rate of 60.35% between 2019 and 2029. The study sees blockchain features such as transparency, fast transaction settlements, and removal of risk of fraud as major growth drivers. The report reads:
“The finance, payments, and insurance services for automotive industry and manufacturing and supply chain for aerospace & aviation industry is dominating the blockchain in automotive and aerospace & aviation market and is anticipated to maintain its dominance throughout the forecast period. This is mainly due to a complexity in supply chain of the automotive industry, as automotive ecosystem is highly connected, and therefore the issues of cyber threat increases.”
The currently dominating private blockchain segment will purportedly maintain its position throughout the forecasted period primarily due to the advantages of private blockchains over public and hybrid blockchains such as highly secured, permissioned networks, and faster speeds.
In terms of regional adoption, North America is expected to lead the world in blockchain application in the automotive and aerospace and aviation market.
Among issues that could stifle blockchain adoption in the aforementioned industries, the study names lack of regulatory framework, standardization, and lack of technical expertise and awareness among the industry players.
As reported in May, global blockchain spending will purportedly account for almost $2.9 billion in 2019, which is an 88.7% increase from 2018. Per market research firm International Data Corporation, manufacturing and distribution services are predicted to see spending on blockchain amount to $653 million and $642 million respectively in 2019.
In April, Cointelegraph reported that the United States federal government is expected to raise its blockchain spending to $123.5 million by 2022 — an over 1,000% increase as compared with the $10.7 million it spent in 2017. At the time, IDC Government Insights stated:
“We believe asset management, identity management, and smart contracts will be the leading blockchain solutions for government. Early spending will focus on supply chain and asset management solutions, while spending in later years will expand to include more identity management and complex financial transactions.”
Google announced in a blog post Thursday that ethereum app builders using Google software will be able to integrate data from sources outside the blockchain through a partnership with Chainlink, a company that provides on ramps and off ramps for information necessary to run self-executing code called smart contracts.
After Google made public blockchain data for bitcoin, ethereum and six other cryptocurrencies available and easily searchable in February on its BigQuery data analytics platform, Allen Day, a senior developer advocate for Google Cloud, wrote that the applications of that project are “all using the crypto public datasets as an input to an off-chain business process.”
The integration with Chainlink, which offers a service called an oracle to integrate data like interest rates and price information, from traditional finance into on-chain smart contracts, will add another layer to these capabilities, allowing processes to be implemented directly on the blockchain.
“A business process implemented as a smart contract is performed on-chain, and that is of limited utility without having access to off-chain inputs,” Day wrote. “To close the loop and allow bidirectional interoperation, we need to be not only making blockchain data programmatically available to cloud services, but also cloud services programmatically available on-chain to smart contracts.”
Day demonstrated in the post how a smart contract application for a cryptocurrency like ethereum could use the integration between Chainlink and BigQuery to settle speculative bets in prediction marketplaces, process futures contracts to reduce risk and make transactions more private. Chainlink raised $32 million in an initial coin offering in September 2017, and its facilitation of smart contracts could help enable more creative payment plans for services like airline flights when they’re delayed.
Day and lead developer Evgeny Medvedev began introducing blockchain technology to Google last year, when they added data from the bitcoin and ethereum blockchains into BigQuery. They followed that up by making data sets for bitcoin cash, ethereum classic, litecoin, zcash, dogecoin and dash this year along with more tools for how to use them.
Forbes recognized those efforts by including Google in its Blockchain 50 in April, which list 50 companies using decentralized ledgers in innovating ways.
Google still lags behind competitors Amazon and Microsoft, which were both also on the list, in cloud computing revenue, but its smart contract integration is a significant move in the tech giants’ race to maximize blockchain’s potential.
CIP, a facilitator of Brazilian banking and financial infrastructure, has officially launched its blockchain ID platform via a partnership with IBM using Hyperledger Fabric, Cointelegraph Brazil reported on June 12.
The identity solution, dubbed “Device ID,” will see participation from nine banks, and is reportedly integrated into Brazil’s domestic clearing system, the Brazilian Payment System (SPB).
Its aim is to authenticate and verify digital signatures using mobile devices, ostensibly to guard against financial crime and unauthorized use of the financial system.
“Brazilian banks have been studying blockchain technology applications for a long time, but they weren’t all together. So we decided to create a group and unify all actions, which is very important to achieve standardization to all banks,” Joaquim Kiyoshi Kavakama, director of Febraban, Brazil’s national banking association, commented. He added:
“We are now in the forefront when it comes to blockchain.”
At the same time, authorities remain vigilant about malpractice within the space, taking down a notorious fraud scheme involving 55,000 investors last month.
- With $63.2 million in fresh funding from 14 banks, Fnality is building tokenized versions of five major fiat currencies.
- The digitized fiat would be fully collateralized by cash held at central banks and is meant to solve the “cash on ledger” problem faced by other financial blockchain projects.
- The consortium says it is open to working with JPMorgan, whose JPM Coin project has similar aims.
- Fnality’s tech partner, Clearmatics, is building these systems on a private version of ethereum.
Fnality International is building the missing link in the banking blockchain.
Formerly known as Utility Settlement Coin (USC), the newly rechristened U.K.-based project is developing blockchain versions of five major fiat currencies: the U.S. dollar, the Canadian dollar, the British pound, the Japanese yen and the euro. Led by former Deutsche Bank executive Rhomaios Ram, the consortium boasts an ample budget, having just raised $63.2 million from 14 shareholder banks.
In a recent interview with CoinDesk, Ram and other bank and tech executives involved in Fnality shed some light on the previously secretive project’s plans – starting with the role these tokens, still referred to as USC, would play in the enterprise blockchain ecosystem and the wider financial world.
What’s the point of representing fiat currency, the very thing bitcoin sought to usurp, on a blockchain? According to Ram, it’s a means to an end, not an end in itself.
He pointed to the many private blockchain projects trying to tokenize wholesale markets, either at the proof of concept stage or close to production. All are lacking one thing: fiat currency on the ledger.
In other words, it’s all well and good if a stock or bond zips around on a distributed electronic network, but if the cash side of the trade is being done the old-fashioned way, it’ll still take days to settle, defeating much of the purpose.
Hence, the USC would address what many in the industry have come to refer to as the “cash on ledger” problem. To Ram, the funding round disclosed last week was an important validation of this idea. He told CoinDesk:
“The real story here is that a committed group of investors believes they have found the answer to the cash leg. Now that’s a giant marker for pushing the tokenization of wholesale markets.”
Bridge to JPM Coin?
To be sure, megabank JPMorgan Chase (not one of Fnality’s shareholders) has similar ideas for JPM Coin, the fiat-backed cryptocurrency it is developing for its clients to send each other money.
“We really think this cash token is the foundation for enabling other enterprise blockchain applications,” Christine Moy, executive director and head of JPMorgan’s Blockchain Center of Excellence, said at Consensus 2019 last month, “We’ve been researching enterprise blockchain now for about four years; many different use cases varying from supply chain finance to financial markets and all of them need a payment leg.”
But JPMorgan, massive as it is, is just one bank.
Ram said he and his team “definitely anticipate several banks producing their own individual coin for their own individual ecosystem.” Although not Fnality’s primary goal, there would still be a need for the equivalent of correspondent banking between an ecosystem of bank coins, he said.
So, if JPM Coin were to be joined by a hypothetical Barclays Coin, for example, Fnality’s token, known as USC, could operate as a bridge between these.
“As well as existing asset-side DLT projects (e.g. bond issuance and collateral tokenization), we can imagine USC being compatible with and having benefit for something like JPM Coin, where owners of the JPM Coin may want to transfer their holdings to another bank coin,” said Ram. “In other words, we could act like a tokenized correspondent channel.”
But more crucial to Fnality’s plan is connecting each decentralized market infrastructure (one for each currency jurisdiction) to a corresponding central bank.
Stepping back, trade settlement today requires businesses to hold accounts in multiple locations to handle cash and securities, splintering liquidity and leading to a mess of post-trade pipes and buffers that kick in and delay the settlement of the trade.
Cash held in reserve at a central bank being brought onto a blockchain would cut through the Gordian Knot tying up each jurisdiction, making settlement instant, removing counterparty risk and freeing up capital, Fnality reckons.
Exactly how this will be achieved involves a complex mix of regulatory and technical issues – a process Ram described as “a journey of discovery.”
On the legal side, the new name hints at Fnality’s secret sauce, according to Robert Sams, CEO of Clearmatics, the consortium’s tech partner.
Describing how the system will work, he told CoinDesk:
“Legal settlement finality is happening inside the system’s blockchain rather than across the books of a legacy settlement institution. This might appear to be a subtle distinction, but it’s what turns a cryptographic key pair into cash itself. It’s a foundational distinction.”
USC vs CBDCs
Flying under the radar for most of its four-year existence, Finality has invited speculation about how cross-border tokenized fiat will be collateralized at the central bank level.
Hyder Jaffrey, strategic investment and fintech innovation manager at Swiss bank UBS, one of Finality’s shareholders, pointed to an important difference between so-called central bank digital currency (CBDC) projects and what Fnality does.
Jaffrey told CoinDesk:
“Central bank digital currency is issued by the domestic central bank and hence backed by the central bank itself. The USC is commercial bank money. The design of it allows it to carry some of the characteristics of central bank money. Ultimately, how we are achieving that is through the cash collateral backing the USC sitting at the domestic central bank. It’s a nuance but it’s very important.”
Commercial bank and central bank money have different characteristics: the former carries credit and commercial counterparty risk; the latter carries sovereign risk. Fnality is exploring an uncharted path between the two, Sams said.
“Money is usually in the form of either commercial bank money (the liability of a commercial bank) or central bank money (the liability of a central bank),” he told CoinDesk. But USC “is a tokenized asset that has similar credit risk properties to central bank money, without being a substitute for central bank money.”
Design and roadmap
Clearmatics’ blockchain architecture for Fnality is a private version of ethereum called Autonity. A distributed state transition system, where all participants on the chain keep a continually updated record of the blockchain’s full state, is essential to ensure the system’s resiliency, Sams said.
Such a full-broadcast system has been tested at the central bank level, by the Monetary Authority of Singapore (MAS), and it raised some performance issues.
However, Lee Braine of the CTO office of the investment bank at Barclays, another Finality shareholder, pointed out that volumes in the wholesale interbank space that Fnality is targeting are very different from retail bank payments and as such the performance characteristics would also be very different.
While many market infrastructures tend to centralize parts of their blockchain solutions for the sake of efficiency, the resiliency aspect is at the heart of much central bank research with universities and others, Braine said.
Looking ahead, Fnality’s complex roadmap will see things begin to come to fruition in 2020, the company said. (Aside from UBS and Barclays, its shareholders include Banco Santander, BNY Mellon, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, MUFG Bank, Nasdaq, Sumitomo Mitsui Banking Corporation, and State Street.)
Speaking practically, the first products may be simple payments, said Braine. Then it would move to more complex currency swaps, for example, as in classic foreign exchange, or involving some kind of security, formalized as delivery versus payment (DvP), meaning both sides of the trade are completed simultaneously.
“As you move down that roadmap you get greater value, but it’s also the case that you need to integrate with market infrastructures to get more value,” Braine said, concluding:
“So you can imagine looking across clearinghouses and exchanges, and thinking ahead a few years from now, you see the scenario where more of them are using tokenized assets.”
Napster creator Shawn Fanning’s new company Helium has released its internet of things (IoT) wireless hotspot devices with a blockchain-based incentives program, according to an official blog post by Helium on June 12.
According to the post, a Helium Hotspot provides wireless connectivity to the Internet; one node on its own will cover about 1/50 to 1/150 of a city, according to the company’s research.
The nodes are intended to support a network of internet coverage, one which is decentralizedand powered by individual contributors. Contributors are rewarded by an incentives program on the Helium blockchain, which is powered by the hotspots themselves — one hotspot is one node for the blockchain.
According to the company website, the hotspots’ mining mechanism within the blockchain is much less energy-intensive than traditional consensus algorithms used for blockchains such as proof-of-work. The mining works by verifying the legitimacy of other nodes using a “Proof-of-Coverage” protocol, which purportedly is no more energy-consuming than an LED light bulb.
Energy concerns have been an issue voiced by critics of blockchain tech in the past, as a recent study suggested that carbon emissions from bitcoin (BTC) mining are comparable to the whole of Kansas City.
There are also a number of potential use cases mentioned, on the post and the website, that go beyond typical internet services via Helium’s sensors, such as using smoke or heat sensors to prevent wildfires, tracking pets, or even preventing bike theft via location-detecting sensors.
Helium Hotspots are only available for purchase in Austin, Texas upon release, but national coverage is reportedly planned for the fourth quarter of 2019. The company also intends to sell the hotspots globally in the future.
As reported by Tech Crunch, Helium has raised at least $51 million in funding for its IoT network. One issue noted in the report is that there needs to be a large number of hotspots, sufficiently spread out, in order for there to be a functioning network at all.
Last month, engineering and electronics manufacturer Bosch said that it would aid the development of the IoT space by defending it from censorship. Board member Dr. Michael Bolle said:
“We cannot accept a situation in which the overwhelming reaction to digital innovations is mistrust and fear.”
Canadian-based University of British Columbia (UBC) has announced a blockchain and distributed ledger technology training program for master’s and PhD students. UBC announced the development in a press release on June 11.
The training path is reportedly designed to build competency around blockchain tech, and is focused on its application in four public benefit areas: health and wellness, clean energy, regulatory technology and Indigenous issues.
UBC says they hope to train 139 students over a six-year period, and graduates should have the tools to evaluate blockchain solutions as well as identify opportunities for blockchain implementation.
Canadian national non-profit research organization Mitacs and 15 industry partners will provide CA$2.44 million for 156 internships and post-doctoral training projects.
As previously reported by Cointelegraph, students at UBC’s Vancouver campus founded a bitcoin (BTC) club in 2014. At press time, the club’s website stated that its goal was “ … to provide an environment where bitcoin-related ideas, projects, programs, events, and businesses can be studied and grown.”
The club reportedly focused on education and engagement, bitcoin payment options for on-campus merchants, obtaining mentorship from industry professionals, and providing incubationfor bitcoin businesses on campus.
At the end of May, Dublin City University partnered with tech company network Technology Ireland ICT Skillnet to launch a master’s program in blockchain technology, purportedly the first of its kind in Ireland.
The network, called “Visa B2B Connect,” is designed to facilitate international payments made by global financial institutions by enabling direct interbanking transactions between businesses and beneficiaries.
According to the report, the network already covers 30 trade channels worldwide to enable faster and cheaper cross-border payments, and is expected to expand to 90 markets by the end of 2019.
Visa B2B Connect is partially based on blockchain technology, containing elements of Hyperledger, the open source distributed ledger technology (DLT) developed by a group led by the Linux Foundation, the report notes.
Specifically, certain aspects of blockchain tech were reportedly used due to its capability to transfer more data on a payment than any existing payment system, global head of Visa Business Solutions Kevin Phalen said in the report.
The new network is a result of collaboration with tech global giant IBM, as well as e-payment operator Bottomline Technologies and fintech firm FIS. In order to develop the product, Visa was reportedly initially working with cryptographic ledger systems builder Chain.
Advances in cryptography are converging to help developers bring blockchain applications closer to the core decentralizing principles on which this technology is founded.
Inventions such as atomic swaps, zk-SNARKS and Lightning-based smart contracts are allowing developers to realize the dream of true peer-to-peer transactions in which neither party, nor an outside intermediary, can act maliciously. Witness the rising number of non-custodial and decentralized exchange (DEX) services for trading crypto assets.
This is exciting. But it also shines a light on another big problem that has curtailed the widespread adoption of cryptocurrency and blockchain technology: secure key management.
For too long, the most reliable means of protecting the private keys that afford the holder control over an underlying crypto asset have been too clunky, insufficiently versatile, or difficult to implement on scale. User experience has been sacrificed in return for security.
Now, some big strides in another hugely important field of cryptography – secure multiparty computation, or MPC – point to a potential Holy Grail situation of both usability and security in a decentralized system.
A keyless wallet
Progress in this field was marked last week by Tel Aviv-based KZen’s public announcement of the specs for its new ZenGo wallet. ZenGo uses MPC, along with other sophisticated cryptographic tools such as zero-knowledge proofs and threshold cryptography, to share signing responsibility for a particular cryptocurrency address among a group of otherwise non-trusting entities.
The beauty of the KZen model is that security is no longer a function of one or more entities maintaining total control over a distinct private key of their own – the core point of vulnerability in cryptocurrency management until now. Instead the key is collectively derived from individual fragments which are separately generated by multiple, non-trusting computers.
The model draws on the genius of MPC cryptography.
With this approach, multiple non-trusting computers can each conduct computation on their own unique fragments of a larger data set to collectively produce a desired common outcome without any one node knowing the details of the others’ fragments.
The private key that executes the transaction is thus a collectively generated value; at no point is a single, vulnerable computer responsible for an actual key. (KZen’s site includes a useful explainer on how it all works.)
KZen is not the only provider of MPC solutions for blockchain key management. Unbound, another Israeli company, is going after the enterprise marketplace with its MPC solutions for crypto security.
Unbound’s prolific (if blatantly pro-MPC) blog offers different angles on the same argument.
It makes a repeated case for why MPC is superior to the two preferred approaches to crypto security of the moment: hardware security modules (HSM), on which hardware wallets like Ledger and Trezor are built, and multi-signature (multisig) technologies, which are favored by exchanges.
Attacking the trade-offs
If KZen and Unbound are to be believed, MPC solutions resolve both the hot-versus-cold trade-off in key management and the dilemma of self-versus-managed custody.
Cold wallets, in which keys are stored in an entirely offline environment out of attackers’ reach, are quite secure so long as they remain in that offline state. (Though you really don’t want to lose that piece of paper on which you printed out your private key.)
But bringing them into a transactable, online environment poses an overly cumbersome challenge when you want to use those keys to send money. That’s perhaps not a problem if you’re just a HODLer who transacts rarely but it’s a serious limitation to blockchain technology’s prospects for transforming overall global commerce.
On the other hand, hot wallets have, until now, been notoriously vulnerable.
Whether it’s the relentless “SIM jack” attacks on people’s phones that are emptying out both hosted (third-party custodial) wallets and on-phone self-custody holdings, retail participants’ horror stories are legion. And, of course, we all know the stories of custodial exchanges being hacked – from Japan, to Hong Kong, to Canada, to Malta.
At the same time, the solution that regulated institutional investors are currently seeking – that custodians and exchanges build Fort Knox-like “military-grade” custody solutions – inherently contain a compromise.
Not only does this approach fail to resolve the dependence on a third-party, but there are serious doubts about whether any such solution can be forever safe from hackers, who are constantly improving their methods for getting over firewalls. In best-case scenarios, the constant IT upgrades becomes a massive money suck.
Alternative to HSMs and multisig
None of this is not to say that existing security technologies are useless.
Ledger and Trezor’s hardware devices – a more nimble form of cold wallet – are widely used by individuals who are uncomfortable with both external third-party custody and online, on-device self-custody wallets. And, separately, multi-signature (multisig) solutions, in which an m-of-n quorum of keys are required to execute a transaction, have proven robust enough to be used by most exchanges.
But in both cases, vulnerabilities have been exposed. And to a large extent those risks come down to the fact that, regardless of the surrounding security model’s sophistication, the all-important keys are always sitting at single points of failure.
Just last week, researchers demonstrated how they could hack into a remote hardware security module. The irony: the researchers were from Ledger, which relies on HSM to secure its customers’ keys.
Multisig models arguably offer protections across such attacks, because a breach requires simultaneous control of more than one key held in separate locations, but the fact is that multisig solutions have also failed because of both technical and human vulnerabilities (inside jobs).
What’s more, both solutions are inherently limited by the need to customize them to particular specifications or ledgers. Crypto developer Christopher Allen pointed out last week , for example, that HSMs are particularly constrained by the fact that they are defined by government standards.
And in each case, the ledger-specific design of the underlying cryptography means there is no support for the kind of multi-asset wallets that will be needed in a decentralized interoperable world of cross-chain transactions.
By contrast, KZen is boasting that its key-less wallet will be a multi-ledger application from day one.
Challenges and opportunities
To be sure, MPC remains unproven in a practical sense.
For some time, the heavy resources needed to carry out these network computing functions made it a challenging, costly concept to bring into real-world environments. But rapid technical improvements in recent years have made this sophisticated technology a viable option for all kinds of distributed computing environments where trust is an issue.
And key management isn’t its only application for blockchains, either. MPC technology plays a vital role in MIT-founded startup Enigma’s work on “secret contracts” as part of its sweeping plan to build the “privacy layer for the decentralized web.”
(An aside: Enigma CEO and founder, Guy Zyskind, is also an Israeli. Israel has fostered a remarkable concentration of cryptographic expertise in this space.)
It would be unwise to assume that MPC, or any technology for that matter, will provide a perfect, totally infallible solution to security problems. It is always true that the biggest security threats come when human beings complacently believe security is not a threat.
However, if you squint hard enough, and think about how this technology’s prospects for better key management can be married to Enigma’s vision for an MPC-based secret contract layer and to the broader march toward decentralized, interoperable asset exchanges, a compelling vision of true peer-to-peer blockchain-based commerce starts to emerge.
At the very least, you need to watch this space.
Although once confined largely to agriculture, blockchain technology is now making major inroads into the luxury goods supply chain market.
Luxury brands trial blockchain
Although many products in the luxury goods market are renowned status symbols found in expensive city center stores the world over, the components of their products can originate in the most far-flung corners of the globe. The nature of globalized trade means that raw materials can be sourced in one continent, collected and assembled in another, and then shipped on to be sold in any of the world’s major cities. Global shipping networks and rapidly advancing technology present ample opportunities for business and profit. However, the nature of globalized trade can often result in a creaking supply chain and dubious ethical practice when it comes to sourcing and producing the materials needed for luxury goods. As customers become more and more concerned with the ethical origins of their products and companies seek to create sustainable and profitable business models, blockchain technology is increasingly being seen as a solution to suit all parties involved.
The new platform developed by LMVH and Microsoft, named Aura, is based on the Ethereum blockchain and will use Microsoft Azure. Consensys worked on the design and development of the Traceability Smart Contracts on the project as well as the blockchain infrastructure. As per the press release, Aura is a “permissioned consortium network with privacy, based on Quorum.”
The press release states that several companies under the LMVH Group umbrella, such as Louis Vuitton and Parfums Christian Dior, are already involved in the project. Customers will be able to access a wealth of information about the origins and components of the product, taking into account ethical and environmental data, details about how to care of the product, along with general information regarding after-sale warranty services. The press release added:
“AURA makes it possible for consumers to access the product history and proof of authenticity of luxury goods — from raw materials to the point of sale, all the way to second-hand markets.”
Although the world of luxury fashion is as competitive as any other market, the team behind Aura hopes that it will bring about more cooperation within the industry. Ken Timsit, the managing director of Consensys Solutions, outlined his hope that the project would bring benefits to the luxury industry as a whole:
“AURA is a groundbreaking innovation for the luxury industry. ConsenSys is proud to contribute and to work with LVMH on an initiative that will serve the entire luxury industry, protecting the interests, integrity, and privacy of each brand, leveraging Ethereum blockchain technology in a truly decentralized way.”
Although Louis Vuitton’s relationship with blockchain reportedly spans three years to date, other luxury brands are already experimenting with the technology to help streamline their supply chains. Alyx, a luxury brand created by New York-based creative director Matthew Williams, is pairing up with the German blockchain foundation Iota in order to create a more ethically transparent supply chain.
In partnership with Iota and global manufacturing company Avery Dennison, Alyx plans to offer customers a comprehensive insight into the full extent of its supply chain. Customers seeking to find out more about their purchases will be able to scan a QR code, giving them access to data covering the product’s first stitch to point of sale.
As brands the world over are feeling the pressure to be more transparent about the way in which their materials are sourced and their products produced, Alyx is clearly seeking to assuage any doubts customers could have regarding its products. Debbie Shakespeare, senior director of sustainability and compliance at Avery Dennison, reportedly said:
“Brands and consumers can know that the information they are being shown about the garment’s creation process is 100% accurate and can be trusted implicitly.”
The decision to host supply information via the use of blockchain technology is the latest in the company’s short yet committed history of sustainability. Creative Director Matthew Williams told fashion news outlet GQ that the company’s other efforts to increase sustainability include using recycled materials and a leather-dying process, which had a smaller carbon footprint. Williams gave an outline for when consumers can expect the initiative to be launched:
“We’re taking it a step further: we’re going to be the first brand to introduce blockchain technology this month in Copenhagen. We’re doing a blockchain prototype that shows the raw material to the finished garment. Our brand is about evolution not revolution, so we work on making the things we do better”
From agriculture to high-end fashion, it seems that companies are finding solutions in blockchain. Cointelegraph spoke to two experts from the World Economic Forum, a nonprofit international organization that seeks to increase public-private cooperation, to learn how blockchain is being implemented in supply chains across the world. Nadia Hewett, lead for blockchain and distributed ledger technology (DLT) at the World Economic Forum, explained that traceability and streamlining present real benefits for companies with complex supply chain structures:
“Currently, the supply chain industry is fragmented, with parties adopting a siloed approach. Blockchain and distributed ledger technology could bring standardization and transparency. Due to an increasing demand from customers for the proof of legitimacy and authenticity of the products they purchase, there is a strong interest in the deployment of blockchain for product provenance, often referred to as pedigree. In general, blockchain has features that can help trace a product’s digital footprint. The fact that the data is timestamped (tamper-proof) provides a single source of data integrity and allows users to retrieve a full history of activities.”
Hewett added that blockchain technology presents unique advantages for large, multinational companies seeking to both streamline and tighten security over their supply chains:
“A blockchain-based platform can support the digitization of paper-based documentation, and establish an immutable, shared record of all transactions among network participants in near real time. In this sense, blockchains are ideally suited to large networks of disparate parties and are a solution to making the complexity of global supply chains much more manageable. Secure data-sharing and, specifically, smart contracts are another aspect of blockchain technology that allows for increased automation and efficiency through avoidance or redundant data entry, acceleration of transaction execution and reduction of errors and misunderstandings.”
Although international business is fiercely competitive, the blockchain industry represents a rare environment in which companies realize that collaboration can be in their interest. In 2018, international food giants Nestle, Unilever, Walmart and Dole partnered with IBM to create the Food Trust, a blockchain system based on the idea that partners and competitors should collaborate and keep a single-record system.
The most recent addition to the Food Trust is the Ecuador-based Sustainable Shrimp Partnership (SSP), according to a press release on May 6. The rationale behind the Food Trust is that failure to cooperate could create huge quantities of unmanageable data, due to the multitude of parties involved in the extent of the companies’ supply chains and could improve the overall quality and safety of the products the companies provide.
Sumedha Deshmukh, a project specialist for blockchain and DLT at the World Economic Forum, said that their current blockchain projects witness collaboration efforts from a diverse range of industries and sectors:
“We have assembled organizations from across all supply chain functions, cutting edge blockchain companies and key members of civil society in our project community. They are collaborating to shape the deployment of blockchain for supply chains towards interoperability, inclusivity, and integrity.
“They know blockchain and distributed ledger technology is coming, whether the industry likes it or not. An inclusive and multi-stakeholder approach that takes the entire system into consideration is good for all players. Given the nature of the technology, organizations are understanding that blockchain is a team sport — its benefits are maximized through collaboration. Moreover, there seems to be an understanding that collaboration is critical in thinking through any potential unintended consequences and minimizing the risks associated with its deployment.”
Whiskey whets its whistle with blockchain
Blockchain’s more recent supply chain activity has expanded from high-end fashion to another of life’s luxuries: whisky. On March 26, premium Scotch whisky Ailsa Bay became the latest brand to be tracked with a blockchain-based system, according to the liquor-related news website the Drinks Business.
Ailsa Bay’s introduction of blockchain tracking is a move intended to tackle liquor counterfeiting in the United Kingdom, something a separate report by the Drinks Business claims loses the U.K. around 218 million British pounds (over $288 million) a year. The partnership is formed by William Grant & Sons, the owner of Ailsa Bay, and blockchain company Arc-Net, which will develop the system to track the products’ journey from distillery to store. The information will also be used to collate data from customers, using mobile services to establish where the whisky is being purchased.
Another company to integrate blockchain into its supply chain is the highland Scotch whisky distillery Ardnamurchan. In 2017, the company also announced a partnership with Arc-Net to introduce a scannable QR code for its products, in an effort to increase transparency about how the whisky is produced.
Alex Bruce, the managing director of Adelphi — the owner and operator of Ardnamurchan Distillery — expressed his hope that this latest measure would bring the Scotch whisky industry into the 21st century:
“We have a vision for the future and using the platform is an integral component in our ability to capture and share production, process and product data with our customers, simply by scanning a QR code on the bottle. In addition to a growing number of countries, globally, recognising Scotch whisky’s Geographical Indication, we also believe it to be essential that the consumer is able to understand the craftsmanship of making it, and for the producer to ensure the security of their route to market. In addition, the Arc-Net platform will give us the opportunity, as a nascent distiller, to share and communicate our love for the brand and ensure our customers have the ability to visualise and validate our products as they move across the globe.”
Kieran Kelly, CEO of Arc-Net, expressed his excitement about working with Adelphi and the prospect of modernizing the Scotch whisky market:
“Blockchain enables a new era of transparency and product authentication. It’s a fantastic opportunity to work with such a forward-thinking company like Adelphi. Alex and his team are pushing the envelope of spirit and whisky production in terms of quality and traceability, and also demonstrating a realistic and pioneering approach to renewable energy and sustainability, and Arc-Net is delighted to be a part of their brand story.”
Gartner survey finds damning results for blockchain solutions
Despite the latest wave of companies turning to blockchain, a technology survey of user wants and needs conducted by Gartner reported that only 19% of businesses rated the technology as important for their businesses, according to a press release published on the company website on May 7.
Gartner, which refers to itself as the world’s leading research and advisory company on its website, states that, in addition to the 19% that see blockchain as important for their business, only 9% have actually invested in the technology. The survey found that, although blockchain enjoys popular support, it sees 90% of blockchain initiatives within the sector suffering from “blockchain fatigue” by 2023. The company said that blockchain projects are currently very limited and “do not match the initial enthusiasm for the technology’s application in supply chain management.”
Alex Pradhan, a senior principal research analyst at Gartner, mentioned that blockchain projects have mostly focused on traceability, authenticity and trust, and outlined her view that more emphasis should be place on technological capacity and standards:
“Most have remained pilot projects due to a combination of technology immaturity, lack of standards, overly ambitious scope and a misunderstanding of how blockchain could, or should, actually help the supply chain. Inevitably, this is causing the market to experience blockchain fatigue.”
The findings of the report indicated that the fledgling nature of the blockchain industry means that it is hard for projects to focus on high-value use cases and that the vendor ecosystem “is not fully formed and is struggling to establish market dominance.”
Pradhan said that the cumulative effect of the current developmental stage of blockchain projects and less-than-enthusiastic market prospects means that the solutions offered are not suitable for scale of the issues they are supposed to solve:
“Without a vibrant market for commercial blockchain applications, the majority of companies do not know how to evaluate, assess and benchmark solutions, especially as the market landscape rapidly evolves. Furthermore, current creations offered by solution providers are complicated hybrids of conventional blockchain technologies. This adds more complexity and confusion, making it that much harder for companies to identify appropriate supply chain use cases.”
Pradhan added that organizations should not rush into adopting blockchain solutions:
“The emphasis should be on proof of concept, experimentation and limited-scope initiatives that deliver lessons, rather than high-cost, high-risk, strategic business value.”
Despite the gloomy findings of Gartner’s report, both Hewett and Deshmukh are confident about the potential for blockchain to bring solutions to the supply chain industry. When asked whether blockchain simply represents another solution looking for a problem, Hewett responded:
“The past two years saw a lot of enthusiasm around blockchain in the supply-chain space. It is these high expectations that brought the blockchain topic to the board agenda — and, in many ways, this has opened the door to discussing various supply-chain system standardization issues that have long been lacking in the industry. There is also much misunderstanding and confusion about the technology in the trade and logistic spaces.”
Deshmukh said that, although there are obvious benefits for supply chains, organizations need to focus on specific issues:
“Organizations have to cut through the hype to find how it can solve a specific problem. What the Blockchain for Supply Chains project is trying to do is help decision makers cut through the hype with a framework to guide them towards interoperability and integrity in blockchain deployment. Blockchain technology can help solve some major issues in the industry. But, it is not one size fits all.”
Despite the many hurdles faced by blockchain projects that aim to make an impact on the supply chain industry, Deshmukh added that the willingness of companies to experiment with them validates their purpose:
“Supply chains have been an area ripe for blockchain experimentation because it addresses many of the pain points within the global supply chain — the volume of experimentation and interest seems to validate this. Supply chain actors are looking into a wide array of use cases ranging from product provenance and traceability to streamlining global operations.”