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The Innovator #2

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THEDISTRIBUTION
OFTRUST
ESTABLISHING SECURE
DIGITAL IDENTITIES
THE KEY TO A
WEALTH OF NEW
OPPORTUNITIES
POWER TO THE
PEOPL...
LETTER FROM THE EDITOR
If we are honest with ourselves those of us who are old
enough to recall the birth of the Internet ...
P.04 — THE INNOVATOR
NEWS
54%
NewWaystoGo
SmoothRide
With all the buzz around urban mobility during the
Autonomy event in ...
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2nd Issue of The Innovator, Les Echos' anglophone publication on technology, innovation and digital transformation.

2nd Issue of The Innovator, Les Echos' anglophone publication on technology, innovation and digital transformation.

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The Innovator #2

  1. 1. THEDISTRIBUTION OFTRUST ESTABLISHING SECURE DIGITAL IDENTITIES THE KEY TO A WEALTH OF NEW OPPORTUNITIES POWER TO THE PEOPLE CHANGING THE WAY ENERGY IS PRICED AND DISTRIBUTED BANKING ON BLOCKCHAIN FINANCIAL SERVICES WILL NEVER BE THE SAME THE TOKEN ECONOMY AN INTERVIEW WITH MIT’S JOHN HENRY CLIPPINGER Blockchain is ushering in a new world economy based on direct peer-to-peer trusted exchanges, bypassing central authorities such as banks, energy companies, pension funds and stock markets. Supplément gratuit au n°22554 du quotidien « Les Echos » du 19 Octobre. Ne peut être vendu séparément #2 – October 2017 – Autonomy Paris Special Edition Distributed at Autonomy Paris and in Les Echos #22554 DRIVING URBAN MOBILITY ENABLING AN ERA OF SHARED USE AND MULTIMODAL TRANSPORT
  2. 2. LETTER FROM THE EDITOR If we are honest with ourselves those of us who are old enough to recall the birth of the Internet will admit to having felt a certain amount of skepticism when we read about how going digital was going to change everything. In the media business we hired a few young people to post stories on the Web. Anybody worth their salt focused on what was really important to the core business: the paper newspapers and magazines that today are rapidly shrinking and even disappearing. So it is easy for me to understand the reaction of a top executive at a big bank or utility who finds it incredulous that a complicated technology the majority of people do not understand and some anarchistic kids could come out of nowhere and turn the transactional price of energy to zero, invent a new currency and – as was the case last June for one California entrepreneur – raise $35 million in less than three seconds from total strangers. The change ahead may be bigger than anything we have known. It looks set to modify the role and status of governments and companies and turn the notion of ownership and leadership on its head. That said, we are at the top of the blockchain hype cycle. My advice? Don’t follow in the footsteps of Time Warner and sell yourself to the blockchain equivalent of AOL. But don’t be too dismissive either. You don’t want to be the Jamie Dimon of your industry. Dimon, the CEO JPMorgan Chase, threatened to fire any trader “stupid” enough to trade in Bitcon. I think IMF head Christine Lagarde got it right when she advised central bankers to take the time to learn about this new technology and be open. Keep your sang froid. Pay close attention to this shift – which heralds not just technological but cultural and poltical change. And keep reading The Innovator! ByJenniferL.Schenker Editor-in-Chief,TheInnovator NEWS —O1THEDISTRIBUTION OFTRUST COVERSTORY ANINTERVIEWWITH JOHNHENRYCLIPPINGER,MITMEDIALAB BLOCKCHAINANDAI WILLBLOCKCHAINHELPDEMOCRATIZE ANDIMPROVEAI? —O2DIGITALIDENTITY ANDPUBLICPOLICY DIGITALIDENTITY —CONTROLLINGOURIDENTITIES —HELPINGHAND —WILLBLOCKCHAINALLOWEMERGINGMARKETSTO LEAPFROGAHEAD? PUBLICPOLICY —THENETHERLANDSISBECOMINGA BLOCKCHAINNATION —TOP25STARTUPSATSTARTUPFESTEUROPE2017 —FIRSTMOVERADVANTAGE —THEBLOCKCHAINOFTHINGS —O3TRADINGONTHE BLOCKCHAIN SUPPLYCHAIN CHAINREACTION FINANCIALSERVICES —BANKINGONBLOCKCHAIN —TAKINGSTOCK —REINVENTINGPENSIONS —O4REINVENTINGENERGY ISITTIMEFORASWYTCH? POWEREDBYBLOCKCHAIN —O5THENEWURBANMOBILITY MOVINGON ANINTERVIEWWITHDOMINIKSCHIENER,IOTA P.04 P.06 P.12 P.14 P.16 P.19 P.20 P.22 P.26 P.28 P.29 P.30 P.33 P.34 P.35 P.36 P.40 P.42 P.48 TABLE OF CONTENTS — P.03
  3. 3. P.04 — THE INNOVATOR NEWS 54% NewWaystoGo SmoothRide With all the buzz around urban mobility during the Autonomy event in Paris come several initiatives that aim to make driving easier and smarter. The French electric utility company Engie has announced a new electric car-sharing service, Co-move, that is accessible via an online platform. Users can book a car via theirsmartphoneorcomputer,thenuseanaccessbadgetodisconnect a car from a charging terminal and off they go. Meanwhile, ESPRIT has been testing small electric cars that can be connected, Lego-like, and charged either separately or together. They are meant to be used instead of traditional cars, but also as an easy complement to public transportation in urban and suburban zones. The German insurance company Allianz will soon announce that it is expanding a form of car insurance that tracks customers’ driving. The offer is already available via a special box installed in semi-autonomous cars, but will now be accessible to drivers of all cars though a mobile phone app. Those with good records will be offered a 30% discount on their rates Smoove, which is taking over the management of the Vélib fleet in Paris, will have bikes available for testing at Autonomy. CycleEurope is presenting a new electric cargo bike there. The company already operates the La Poste bike fleet of the French postal service (the biggest worldwide with 31,000 e-bikes). Ofo, which owns 10 million bikes in China and is expanding in Europe, will also be showing off its latest innovations. TheESPRITElectriccar Of global new car sales will be electric vehicles by 2040, according to the BloombergElectricVehicleOutlook2017, up from 35% in their 2016 forecast Togettechnologynewsincontexteveryweek,subscribetoournewsletter:http://innovator.news Portable Transport AlsoatAutonomy,anewe-scootercalled Ujet will be shown for the first time (the official launch will be early next year). The scooter is poweredbyaremovablebatterythatcanbecharged from any regular socket, and features a light frame that can be folded to fit in your office or the trunk of your car.
  4. 4. 0100 0010 DATA 20% off on your VIP Pass with the code INNOVATOR20 until 13 October 2017 www.autonomy.paris 19-21 October 2017 Paris, Grande Halle de la Villette The world stage for the urban mobility disruption Keynotes • Roundtables • Meetups Expo • Startup district • City workshops Test tracks • Live demo • Pitch sessions
  5. 5. P.06 — THE INNOVATOR —O1THEDISTRIBUTION OFTRUST
  6. 6. THE DISTRIBUTION OFTRUSTBlockchainismakingtransactionseasier, lessexpensiveandmorereliable. Buteliminatingtrustedthirdpartieswon’tbesimple. By Jennifer L. Schenker — P.07 COVER STORY Cryptocurrency may or may not represent the future of money. But blockchain, the technology underpinning it, may spell the end of capitalism as we know it. How can something as mundane- sounding as a distributed record of transactions that is maintained by a network of computers on the Internet and secured through advanced cryptography have such an outsized impact? With decentralization technology, the owner of an asset has direct control via a password, which is directly linked to the asset. No one can touch it without your consent and no one can stop you when you want to transfer the asset. “Placing trust in a network rather than a single entity like a government, a bank, or a multinational company, means that the types of assets that can be stored are limitless: intellectual property, identity information, land titles, financial assets, genetic information, social graphs, and supply chain information, to name only a few,” says Bruce Pon, the founder and CEO of Ascribe.io, a product of BigchainDB, a Berlin-based startup that is using the blockchain to provide a trackable, verifiable record of ownership between artists and their work. Bypassing central authorities such as banks, energy providers and other types of large corporations, stock markets and even governments, is a change with big consequences not just for business models but power structures. A large part of our economy is based around these intermediaries of trust, but in this new era of distributed trust we won’t need them or the armies of accountants and controllers that handle reconciliation processes. Historically, trust has been added to products or transactions as they flowed through a value chain for physical goods or services. Physical, or electronic, records trail every object to prove its origin, destination, quantity and history. Producing, tracking and verifying all this information requires time and manual effort on the part of banks, accountants, lawyers, auditors and quality inspectors. Important information is often inaccessible or lost, sometimes intentionally. And of course these intermediaries take a cut of the action, each and every
  7. 7. P.08— THE INNOVATOR time a transaction is made. When combined with cryptographically secure machine identities, blockchain is expected to create reliable, immutable records to make it easier and less expensive for suppliers and customers to transact with one another in a direct, verifiable way. The same interoperable transaction layer permits people who don’t know each other to dynamically start exchanging financial and physical values on the fly and be confident they won’t be cheated. And it permits machines to transact with each other in an automated way. Already the blockchain is being used for the trading of currencies, diamonds, medical marijuana and guns. Central banks, hospitals, shipping companies and ports, insurance companies, auto makers, charities, government and public record services are testing the technology as are musicians and artists. You can even now apply for e-residency in the South Pacific island of Vanuatu on the blockchain and pay the fee in Bitcoin, a kind of cryptocurrency. While blockchain and its use cases are evolving very fast, the technology has a number of limitations, including scalability and computing resource requirements. Still, some believe the digital ledger technology COVER STORY TOTAL FUNDING AND ROUNDS GLOBALLY SINCE 2012 2012 2013 2014 2015 2016 $ 150m $ 300m $ 450m 100 $ 600m $ 750m $ 900m 200 GLOBAL FUNDING TOTAL NUMBER OF ROUNDS Total amount in global funding in US dollars and rounds in the blockchain industry since 2012 - Credit: funderbeam Blockchain Industry Report 2017 RecordartistImogenHeaphasworkedwithblockchain-basedplatformformusic Ujotodelivertracksdirectlytofans,acceptingpaymentsincryptocurrency.
  8. 8. refugees in camps and to establish digital identities for everyone on the planet, including the 1.1 billion people who don’t have any kind of government papers. (See the stories on pages 16 and 19.) «The blockchain is the only technology that employs transparency and independence in a manageable and sustainable way,” says Marloes Pomp, blockchain ambassador for the Dutch government, which is trialing some 25 different uses for blockchain. (See the story on page 22.). “Until now technology has mostly helped businesses to achieve more for less. It never had a big impact on how people protect and exercise their rights and values,” says Pomp. “Suddenly, blockchain technology opens the opportunity for creating a new class of systems that are fueled by the principles of independence, truth and transparency of operation.” That’s why, she says, “blockchain is here to stay and will change the way people and businesses interact.» In a post-capitalist economy, knowledge rather than capital or labor is the foundation of wealth, and traditional drivers such as supply and demand and the need for profits are supplemented by more collaborative, communal models that prioritize social good alongside shareholder profits, notes blockchain expert Carsten Stoecker, a senior manager at the Machine Economy Innovation Program at the German energy company Innogy. Take the case of the SingularityNET, a new blockchain-based exchange that will allow its users to create, combine and monetize artificial intelligence at scale. (See the story on page 14.). One of the reasons it is being launched is that the founders say they do not want the future of artificial intelligence to rest in the hands of companies that are driven only by profits. The founders have agreed that they will use a portion of the evolved form of the AI the network generates to solve some of the world’s most pressing problems, a challenge they believe companies reporting to traditional shareholders are less likely to tackle. As with other blockchain-based exchanges, participation in SingularityNET requires people to buy network-specific crypto-tokens and use these to buy services. This enforces a system in which the people who use the exchange are the people who own it. Others working in the blockchain sector agree that this concept could be used to bring about positive change. “We have no incentive to solve big problems because there is zero price put on things like clean air,” is a vast improvement over the double entry accounting first invented in Italy about 500 years ago, helping give rise to capitalism. Think of blockchain as a triple-entry system, a ledger that records every single transaction, to give us an accounting of everything happening in our world, creating - at least in theory - a common shared truth. If it is as secure and transparent as advertised it will eliminate fraud and corruption, changing the way corporates and governments are run. “There is a reason Florence, Milan and Vienna grew to be so wealthy, it was because they were masters at double entry accounting,” says Ascribe.io CEO Pon. “Whichever jurisdiction or company masters blockchain and extracts value will be able to jump leaps and bounds ahead of competitors,” he adds. New Business Models and Revenue Streams There are huge productivity gains to be reaped from the efficiencies that blockchain will bring: between $90 billion and $110 billion just from global payments and trade finance, says Oliver T. Bussmann, a blockchain expert and former CIO at UBS. (See the story on page 30) But blockchain could have an even greater impact on other sectors. The research firm CBInsights estimates that there are some 30 sectors that will be massively disrupted by blockchain. They include insurance, healthcare, energy management, transportation, real estate, stock trading, government and public records and supply chain management. Dole, Nestlé, Tyson Foods, Unilever and Walmart are among companies exploring blockchain’s use in food safety and tracability. Energy companies are testing it to see if same the digital ledger technology that threatens to put it out of business will help them adapt and survive. (See the stories on pages 36 and 40.) Power To The People But blockchain is not just about efficiencies and new business models and new revenue streams – it is about the distribution of power, including the ability of people to exert their rights and values, ownership, and leadership. Blockchain is being tapped to help the stateless and the voiceless. The United Nations is using it to deliver money for food to “Whicheverjurisdiction orcompanymastersblockchain andextractsvaluewillbeable tojumpleapsandboundsahead ofcompetitors” Bruce Pon, CEO of Ascribe.io — P.09
  9. 9. P.10— THE INNOVATOR says Pon, Ascribe.io’s CEO. “ But what if we could tokenize new ideas? What happens if we could open source the Bill & Melinda Gates Foundation? Everybody could buy tokens? Why not tokenize exploration to Mars? Governments have budget constraints but what if we could marshal resources by getting supporters to put their money into tokens? This is a really hopeful and powerful vision. We all feel helpless in the face of the misuse of funds but we have the possibility to create proper governance through blockchain and tokenism.” The Token Economy In this new token economy the people starting blockchain ventures don’t need to go to venture capitalists or raise money on the stock market anymore. They just organize Initial Coin Offerings (ICOs), an unregulated means of crowdsourcing funds. More than a billion dollars in funding has been raised this way in 2017. In fact, one report estimates that more than $1 billion was raised in ICOs in the third quarter alone. The Bancor Foundation made headlines in June when it raised $153 million worth of Ether (the coin of the cryptocurrency Ethereum) in just three hours. The same month the former Mozilla CEO Brendan Eich, raised $35 million in an ICO — and did it in less than 30 seconds,. “Think of all the value that is currently captured by centralized authorities — from the banking industry to music rights holder networks to the court system,” Nathana Sharma, Program Director for Faculty Affairs at Singularity University, writes in a blog post. “If that value can “Decentralizedtokencurrencies arequestioningnotions thathavebeenattheveryheart ofthemanagementsystemthat hasbeenaroundsince corporationshaveexisted.” Philippe Dewost, Vinci Group BLOCKCHAIN STARTUPS TOWATCH BIGCHAINDB GERMANY WHAT IT DOES : A scalable blockchain database, BigchainDB can be applied to a wide range of use cases industries, helping them decentralize their data. www.bigchaindb.com BITFURY THENETHERLANDS WHATIT DOES: TheBitFurygroup startedasabitcoinminingcompany, butnowoffersavarietyofhardware andsoftwareproductsthathelp companiesandgovernmentsuse blockchaintechnology. www.bitfury.com Credit : funderbeam Blockchain Industry Report 2017 INDUSTRY CORRELATIONS NUMBER OF CRYPTOCURRENCY STARTUPS ASSOCIATED WITH OTHER INDUSTRIES 409FINANCIAL SERVICES SOFTWARE DEVELOPMENT PEOPLE AND SOCIETY SECURITY MONITORING BIG DATA & AI CONSULTING ECOMMERCE MOBILE PLATFORMS 3 3 4 4 7 5 11 104 BUSINESS AND INDUSTRY
  10. 10. to established, recognized personas who are widely accepted and respected by society. Think about the leader or leadership behind Bitcoin. Despite much speculation and detective work, the people behind it are still unknown. “So now we have a faceless leadership,” notes Dewost. The inventor of Ethereum, who was born in Russia and grew up in Canada, was 19 when he invented Ethereum, a flavor of blockchain which is now being used to build smart contracts. So now, there is this kid who came from nowhere and is leading a whole community of developers across the world, and he is doing it virtually. This brings up questions about how leadership is nurtured and formed in cooperation with others. The second impact of blockchain that current leaders need to think about is permissions, says Dewost. No one asked permission to write the first white paper explaining Bitcoin. No one asked permission to start mining them. And, he says, when blockchain startups launch ICOs they don’t have to ask the permission of regulators or courts. They don’t need lawyers. They just launch it. Dewost says “This is where the blockchain revolution is – young people who are extremely far from traditional education, leadership and controls ,using cryptocurrencies to launch ICOs.” J.L.S be shared among participants in the dominant blockchain, then how much might the tokens that underlie the dominant blockchain be worth? Expect Resistance For that reason and others don’t expect the transition to be an easy one. While blockchain looks poised to distribute power away from centralized authorities, such powerful institutions do not let go of their influence easily, Marc-David Seidel, RBC Financial Group Professor of Entrepreneurship and Associate Professor at the University of British Columbia, notes in a blog post. “I view this as one of the most interesting cultural and political challenges of this century,” says the blockchain expert Philippe Dewost, who recently took on a job as chief of Leonard, the innovation structure at Vinci Group, a French concessions and construction company. “The reason is the following: decentralized token currencies are questioning notions that have been at the very heart of the management system that has been around since corporations have existed.” One of those notions is who gets to be a leader? Until now leadership in many companies has been related — P.11 COVER STORY CHAIN UNITEDSTATES WHATIT DOES: Chaincreates partnershiptobuild,useandoperate blockchainnetworksforfinancial services.Thecompanyauthoredthe ChainProtocol,theopen-source networkbehindtheChainCore platform. https://chain.com BLOCKCHAIN LUXEMBOURG WHAT IT DOES : The world’s largest production blockchain platform, Blockchain develops products that help people use and understand the technology, including the most widely used wallet for digital currency. www.blockchain.com CIRCLE UNITEDSTATES WHAT IT DOES : Using the blockchain, AI and other technology, Circle aims to make sending money to a friend as easy as sending a text. There are no fees, and the transaction is instant and safe. www.circle.com COINBASE UNITEDSTATES WHATIT DOES: Coinbaseisanonline platformforbuying,selling,transferring andstoringdigital. Atpresstime, morethan$20billionhadbeen exchangedthroughtheplatform. www.coinbase.com InSeptemberFrench insurancecompanyAXA haslaunchedFizzy, anewservicethatrelieson blockchaintechnologyto automaticallycompensate passengerswhen theirflightisdelayed.
  11. 11. COVER STORY P.12— THE INNOVATOR AnInterview With JohnHenryClippinger, Researchscientist MITMediaLab “Weareseeing thebeginnings ofanewinternational financialsystem.” demand- backed asset like a com- modity or a unit of exchange. Ether is an example of a token you can use to purchase certain services. Smart contracts run on Ether so you could also use these tokens to keep track of and use your frequent flyer miles. To extend this further, a token can be like a virtual good: companies like (the Chinese conglomerate) Tencent create their own digital cur- rencies which are used in the game world to buy virtual goods. This has proven to be extremely successful with lots of people buying or ex- changing tokens. Imagine applying this to the business model of Facebook or Google. They have very iffy data that can’t be properly veri- fied. There could be a lot of value if the person who owns the data would agree to trade that knowing that he can benefit from that finan- cially. The notion of self-sovereign ID and data is now accepted, and companies that don’t comply will be vulnerable to heavy penalty. Tokens can be used to create a common pro- tocol on how to handle permissions to use data so companies don’t run afoul of liability laws. In a July ruling the Securities and Exchange Commission (SEC) found that the tokens in a prominent Initial Coin Offering (ICO) were in fact securities — meaning the transactions violated federal investment laws. What are the key differences between tokens and stock certificates? — J.C.: When the SEC issued an opi- nion on the DAO (decentralized au- tonomous organization) blow-up they correctly censored them be- cause really they were selling secu- rities. However if one is careful it of capitalism as we know it. — J.C.: In 1842 after (U.S. pre- sident) Andrew Jackson shut down the banks, people produced their own copper coins, called hard-times tokens. It was a bottom-up protest. There is a similar logic with bitcoin. During the 2008 banking crisis people could not trust fiat and the authorities that have oversight. There is a real distrust in the conven- tional mechanism so that is why token sales, to a certain segment, are seen as a safe haven. What exactly is a token? —J.C.:The concept of a digital token is not obvious. It is a unit for ex- change of value between two or more parties, but it is more than a transaction. It is a unit of value that binds a relationship. Digital tokens can take the form of smart contracts and be quite complex. They can take different forms under different conditions. They can be a commo- dity, a currency, a security, or all of those things. That is why there is some confusion and issues about how to regulate them. Tokens can also be an expression of trust. A token could be a credential that I use to assert something about my- self. It can be used for digital iden- tity. It can be certification of certain attributes such as age or place of re- sidence or a credential proving that you earned a diploma. Tokens can get you access to different kinds of services. They assert different forms of trust and value and can be dyna- mically updated. What is the difference between a bitcoin and a token? — J.C.: Bitcoin is a kind of token – a John Henry Clippinger, a research scientist at the MIT Media Lab Human Dynamics Group, is conducting research on trust frameworks for protecting and sha- ring information. He is the author of A Crowd of One: The Future of Individual Identity. He is also foun- der and former co-director of The Law Lab at the Berkman Center for Internet & Society at Harvard University and the founder and for- mer CEO of four software compa- nies. Clippinger regularly consults with companies, foundations and go- vernment agencies on technology, policy and business strategy. Which tokens are the new, new thing? Some say they herald the beginning of a new kind of economy and maybe even the end
  12. 12. — P.13— P.13 which allows people to buy part of a Lamborghini and have access pri- vileges at all times. This is indicative of where things are going. It’s a membership model like timeshare but much lighter and easier to do. What is an initial coin offering (ICO) and why are we seeing so many right now? — J.C.: ICOs are token generation events. There is sloppiness in how people talk about utilization tokens versus speculation tokens. An exa- mple of a utilization token is when you join a community and create a kilowatt of sustainable energy and it generates a token. How will this change in the way that companies are getting funded impact stock markets, venture capital and the global economy in general? — J.C.: We have a monetary system and fiat system that is quite ancient and not digital and does not reap the benefits of what digital tech and cryptography can do. The rate of in- novation and change is only accele- rating so it is just a matter of time before we shift to a highly decentra- lized and digital system with crypto- graphic proofs and other kinds of mechanisms to verify transactions and services. You are seeing that already in the rapid uptake of cryp- to currencies in different jurisdic- tions around the world: Singapore, Switzerland, Luxembourg, UK, Russia. There is lots of activity in China but the government there is a wildcard in this. We are seeing the beginnings of a new international fi- nancial system. Right now there are lots of issues around the technology and it is in an early phase but in my experience I have never seen such rapid speed of innovation. can be treated as an asset token. If it is a rewards program with no pas- sive income derived or voting shares then it is really not a security. When you increase the supply of a curren- cy you have to offset that by creating debt because you can’t print money. With digital currencies it is not ne- cessarily the case. If you issue tokens with specific value propositions around different sectors you don’t have to offset that with debt. There are examples of this in the sharing economy. If you look at next-genera- tion mobility services and autono- mous vehicles, it is very unlikely the vehicles will be privately owned. There will be a huge congestion pro- blem but if you can have access and that can be guaranteed then that is better than owning your own car. There is a token called Lambo coin Every week something changes. Decentralization is starting to take place. If you can avoid and control the inflation and bubble manipula- tion then you are creating a much more accurate, more transparent system than you have currently be- cause you can have analytics and ar- tificial intelligence looking at every pattern in hyper real-time speed. One of the key benefits of tokens is to align incentives among participants of the ecosystem. So far only startups have launched tokens. Is it possible to tokenize existing large enter- prises? How would that work and what would be the benefit? — J.C.: Don’t incur debt. Don’t give up equity and make customers token holders. There will be a lot of new options for public financing. Underwriting will be dramatically different. What should corporates do to prepare for the changes ahead? — J.C.: Tokens are a very powerful way of distributing control. How many companies will make the shift to a token-based economy? Big com- panies coming from China like Tencent and Alibaba understand it. The old industrial companies will fight it. They may win some battles but they won’t be able to compete because of the way they are orga- nized. The net of this is not an easy message. Corporations like to think about change being incremental and they don’t like it when I tell them that in this case it won’t be. J.L.S. “Rightnowthere arelotsofissues aroundthe technologyanditis inanearlyphase butinmyexperience Ihaveneverseen such rapidspeed ofinnovation.”
  13. 13. P.14 — THE INNOVATOR WillBlockchainHelp Democratize AndImproveAI? — SingularityNET, a new artificial intelligence exchange being built on blockchain technology, is aiming to compete with Silicon Valley giants to provide corporates with better AI, usher in an age of super intelligence, and also set aside time and resources to apply the improved technology for the global good. Companies are poised to spend billions of dollars on AI technologythat will affect the work force and the growth of economies. But today it is difficult for corporate buyers to have an overview of the best AI agents available and connect with the startups or individual developers that built them. Nor is there a way for AI agents and tools to swarm together to fulfill a request by sharing relevant skills and information. That is why SingularityNET says it is creating a blockchain-based exchange that will allow its users to create, combine and monetize AI at scale. Rather than limit AI’s development and direction to a handful of tech companiesorgovernmentresearchers,theexchange’sgoalistodemocratize the process, allowing anyone who has developed a good AI service to sell directlytocustomerswhoareSingularityNetusers,inexchangefornetwork- specific crypto-tokens. The exchange will also permit individuals to be in control of their personal data while sharing and monetizing the generalized learning with AI agents, which in turn will collaborate with each other on projects, helping AI to get smarterovertime.Ifthefounders’betpaysoff,theyhopetheopenAIexchange will help speed what is called The Singularity, a time when humans and computers essentially fuse, hence the name SingularityNET. Blockchain technology is being used for the core plumbing of the exchange’s architecture because it creates a powerful framework for different AI agents to interoperate for tasks such as flexibly configurable data security. Transactionsonablockchainarecollectivelyprocessedbyanetworkofnodes. The distributed structure is designed to ensure that no single party controls thenetwork.Theblockchainactsasatoolforregulatingcommunicationand exchanging value, allowing different AI agents to interact with each other throughself-enforcingsetsofsoftwarerulescalledsmartcontracts.Thesmart contracts allow the AI agents to exchange work, agree on the value of the exchange and pay each other automatically in digital crypto-tokens. In this decentralized open market any node is able to create smart contracts to request tasks, creating a resilient, self-organizing economy, says Simone Giacomelli,aSingularityNETco-founderandablockchainspecialistatItaly’s Vulpem Ventures. Giacomelli and his SingularityNET co-founders — Ben Goertzel, a globally recognized AI researcher and David Hanson, founder of Hanson Robotics, a company behind a series of realistic humanoid robots — have agreed that the exchange will use a portion of the evolved form of the AI it generates to solve some of the world’s most pressing problems, a mission they believe companies reporting to traditional shareholders are less likely to tackle. MeetingCorporateDemand ThefoundersareconvincedthatSingularityNETwillprovetobeaformidable competitortocurrentcorporatecloud-AIproviderslikeIBMBluemix,Amazon Web Services, Microsoft Azure and Google Cloud. “SingularityNET has the potential to profit tremendously from the now universalcorporateneedforonlineAIservices,toleveragetheusagepatterns of customers to drive the emergence of general intelligence, and to direct the profit thus generated to apply AI for global good,” says Goertzel. “Nocompany,nomatterhowlargeorsmart,canprovideasmuchAIcleverness as an energized, decentralized community of AI developers in every country around the world,” he adds. There is already a lot of open-source AI code accessible to developers in code-sharing and publishing services like Github, COVER STORY SingularityNET’sfounders,fromlefttoright: SimoneGiacomelliofVulpemVentures,theHanson RoboticsfounderDavidHanson,andtheglobally recognizedAIresearcherBenGoertzel, HansonRobotics’ChiefScienceOfficer,withSophia, ahumanoidrobot.
  14. 14. but it is not easily accessible to clients outside the technology world. Putting AI code in the SingularityNET will make it available to any customer. What’s more, it will make it possible for different AI agents to connect with each otherincomplexmulti-AInetworkstoformtheirownemergentintelligence, he says. SingularityNET is encouraging consumers to volunteer to sell their data on the exchange to enrich the AI. Thanks to the underlying blockchain infrastructure, if the transaction generates a positive benefit to a company the source of the benefit will be automatically attributed, tracked and rewarded, providing a way for users to own, control and profit from their own data. Hanson says he believes the change will motivate consumers to provide more data. That, in turn, is expected to lead to more profits for companies, because the data provided will be richer and there will be larger data sets. What’s more, because consumers will have control of their data and its usage will be transparent, the founders expect that compliance with data privacy laws will no longer be an issue. “The end result is more people willbeabletobenefitfromAIservicesandbetterandbetterAIwillbecreated faster,” says Goertzel. The decentralized network (https://singularitynet. io)isexpectedtolaunchinNovemberinapreliminaryformandbeavailable for use by customers in mid 2018. At the time of the official launch supporters will have the opportunity to participateinthenetworkbybecomingearlymembers.Thetargetedaudience for the launch will be any type of future user of the service interested in owning SingularityNET network-specific crypto-tokens in order to buy and sell on the open marketplace. The opportunity for early members is that as the AI gets smarter the network will become more valuable to its users and the marketplace – and the tokens invested in it – will increase in value. Inkeepingwithitscoremission,apercentageoftheexchange’sAIresources willgotowardwhatGoertzelreferstoas“benefittasks”thataredemocratically decidedonbythecommunityforthegreatergood,suchasusingtheemergent AI to analyze bio-medical data or to help educate children in developing countries. SingularlityNET is seeking corporate partners as well as governmental regulators to help it develop the community. “As we endeavor to bring this dream to reality, we will be navigating a technological, business, economic, political and regulatory landscape that is both more complex and more rapidly shifting than anything humanity has ever seen.” says Goertzel. “Creating SingularityNET is going be a hell of aride–andabigsuccessinthisendeavorwill,Ibelieve,significantlyincrease the odds of a positive Singularity.” J.L.S “SingularityNEThasthepotential toprofittremendously fromthenowuniversalcorporate needforonlineAIservices.” — P.15
  15. 15. P.16 — THE INNOVATOR —O2DIGITALIDENTITYAND PUBLICPOLICY
  16. 16. Some 1.1 billion people have no means of identification. They can’t vote, go to school or receive government services. Digital ID is also key to doing business. You also have to have to have an established identity to do business. But how do you implement digital ID in such a way that privacy is built in? The way forward is rife with challenges but blockchain technology – an immutable ledger that allows third parties to validate that an at- tribute has not been changed or misrepresented, is being seriously consi- dered as a way of developing, safeguarding and storing digital IDs. One of the United Nations’ Sustainable Development Goals is aiming to pro- vide every person on the planet with a solid and tamper-proof digital identity based on common, interoperable standards by 2030. As a first step, the United Nations is seeking to develop scalable iden- tity systems by 2020. An Opportunity for Developing Countries Vendors such as Switzerland’s WISeKey, Microsoft and Accenture are all working on technology solutions to try and meet that need. Solving the digital identity issue could answer some of the developing world’s big- gest problems, including financial exclusion. Digital identity services are also key to a whole array of new types of business and government services in the developed world. And they mi- ght help banks to morph into brokers of digital data. The World Economic Forum argues in an August 2016 report that finan- cial institutions are well positioned to drive digital identity systems, since they already have well-developed ways to verify user information for commercial and regulatory purposes. There is a strong business case for banks to move into such services, the report says. Doing so would allow banks to offer extended financial ad- visory services and things like behavior-based insurance. Banks could also offer “identity-as-a-service” to businesses that can’t or don’t wish to store their clients’ personal data. Other options include offering iden- tity management as a separate, fee-based service or anticipating the need for capital, pre-empting requests for financing from small businesses and providing real-time credit. Creating such services would enable banks them to create new revenue streams, helping to make up for disruptions that blockchain is causing in other parts of their business. Standardization Issues There is a need for identity to be international but establishing a stan- dard will be very challenging, says Jesse McWaters, the project lead of Disruptive Innovation in Financial Services at the World Economic Forum. “Identity is at some level it is extraordinarily cultural – in some instances you are talking about centralized government programs and in other cases there is a lack of trust in government or the ability of the govern- ment to coordinate , so in these instances a federated or distributed approach to a digital identity might be used, says McWaters. The question of you how operate and how you protect ID are separate questions, he says. It depends on what rails the service is running on. Even if blockchain is used as the technology underpinning digital iden- tity the level of control over those systems is different, says McWaters. Three different types of systems are built around digital ledger techno- logy. One is in Estonia, where almost all public service are digitalized and accessed through secure digital identities that are provided to eve- ry citizen and resident. Another can be found in Canada. There, a federated system involving a number of large financial institutions, operates a service in coopera- tion with government. When it was first announced in 2016 the Canadian project was hailed as the largest privacy-by-design consumer digital identity service initia- tive to date and among the first widespread commercial uses of blockchain distributed ledger technology by financial services institutions. The Canadian program is being built on top of the secure digital ID that banks have already established nationwide with the help of SecureKey, a start-up specialized in secure identity and authentication. In addition DIGITAL IDENTITY — P.17 Controlling OurIdentities — Will blockchain give people more say over who can see and use their data?
  17. 17. P.18 — THE INNOVATOR curity number. The entity to which they send that information retains it. The data is out there in silos and that creates both risks in terms of data loss and forces all sorts of companies that might not want to be in that position to store that information. It also creates businesses that are able to harvest that data for commercial purpose that do not neces- sarily benefit the owner of the data. “The opportunity we have around digital identity is to turn that on its head,” says McWaters, “ to put users more in control of their identity attributes and prove things to people while transferring as little information as possible.” A lot of the focus on blockchain places all of the importance on how it could enable secure digital identity. “A more valuable way of re-archi- tecting identity is to better serve consumers and offer them more priva- cy so when they hear the word digital identity it no longer means gi- ving massive amounts of data – to someone else.” J.L.S. to blockchain technology SecureKey uses biometrics to ensure the iden- tity of the person logging in. When fully launched blockchain technology will be used to allow the secure exchange of any type of personal data. The permission-based sys- tem would allow, for example, a bank to release all of the digital docu- ments needed for someone to be approved to rent an apartment. Banks would charge a fee to the business requesting the information.The ser- vice aims to make it much easier and safer for consumers to do business online with private and public sector service providers and to conduct peer-to-peer transactions with other individuals SecureKey, which has partnered with IBM, is now testing its technolo- gy in other markets. A Safer Way to Exchange The third model is being proposed by a group called Sovrin, a private-sec- tor, international non-profit that was established to “govern the world’s first self-sovereign identity network”. Self-sovereign identity is the concept that people and businesses can store their own identity data on their own devices, and provide it efficiently to those who need to validate it, without relying on a central repository of identity data. “What is more important than the underlying technology is the expe- rience that enables the user,” he adds. Today there is a conception of identity that is not necessarily best for users, says McWaters. When people want their identities to be confirmed they have to transfer a whole bunch of information such as name, date of birth and social se- TheUnitedNationsisaimingonprovidingeverypersonontheplanet withasolidandtamper-proofdigitalidentitybasedoncommon,interoperable standardsby2030.
  18. 18. — P.19 Some10,000refugees inJordan’sAzraqcamp are now able to pay for their food by means of entitlements recorded on the blockchain. Blockchain is a way of organizing data through a distributed ledger. This can speed up transactions while lowering the risk of fraud or data mismanagement. The ledger records transactions in a secure manner that cannot be changed. It allows any two parties to transact directly, and removes the need for third-party intermediaries such as banks. Robert Opp, Director of Innovation and Change Management at the UN WorldFoodProgram,sayshedecided to test digital ledger technology after speaking with the finance division overseeing the WFP’s cash transfer programs. The United Nation’s World Food Program has a $6 billion budget. Its job is to give around 100 million people in 80 countries a year some sort of assistance. In addition to deliveringfood,theUNagencydelivers in-kind emergency relief in places where there are functioning food markets. Cash assistance is loaded on a card, mobile phone or digital voucher. A Scan of their Eye Instead of Cash InthecaseoftheWFPthecashamount distributed is almost $1 billion. The WFP was transferring huge sums ofmoneyaroundtheglobetopartner banks, along with a list of those eligible for assistance. The banks would transfer the funds onto cards or vouchers that those receiving assistance could use to pay retailers. The banks would handle the reconciliation. Now, “blockchain is replacing the piece that banks would do,” says Opp. Using the blockchain the WTF canavoidbankfeesthatrangebetween 1% and 3% and the necessity of transferring a list of names to a third party.And,insteadof10,000payments to the bank on behalf of specific individuals, the organization now deals with only 200 settlements to retailers, he says. After a trial in Pakistan earlier this year WFP rolled the service out to around 10,000 people in a refugee camp in Jordan. Theblockchainserviceisnowramping up to serve hundreds of thousands of people. Because there is yet no globally recognized digital ID (See the story page 16.), the WFP’s system relies on biometric registration data from theUnitedNationsHighCommissioner for Refugees (UNHCR) and uses biometrictechnologyforauthentication purposes. Refugees purchase food from local supermarkets in the camp by using a scan of their eye instead of cash, vouchers or e-cards. The pilot aims to create a platform that the wider humanitarian community could use. Depending on the results ofthepilot,WFPwilllookatexpanding the use of blockchain technology to areas such as digital identity management and supply-chain operations. Mobile technology, biometrics and solutions such as blockchain, have the potential to transform the lives of people in need across the world and address the roots of hunger, says Opp. The WFP has opened an innovation accelerator in Munich to work on developing new tools and approaches to eliminate hunger by 2030. “New business models are needed toaddresstheproblemsofthepoorest people in the world and blockchain can be an enabler,” Opp said. J.L.S. HelpingHand — Blockchain’s distributed network of trust is helping step up the fight against hunger Peopleinrefugeecampsarenow abletopayfortheirfoodbymeans ofentitlementsrecordedonthe blockchain. DIGITAL IDENTITY
  19. 19. P.20 — THE INNOVATOR The digital ledger technology could help solve some of the developingworld’sbiggestproblems, including the recording of births and deaths,financialexclusionandinaccuraciesandfraudinpropertyregistration. More than a billion people do not have a recognized means of identifying themselves,leavingthemwithoutaccesstohealthcare,education,government assistance and financial services. The Swiss technology firm WISeKey’s CertifyID is a digital identity dual factor authentication that sits on top of a blockchain, an immutable ledger that allows third parties to validate that an original digital identity or attribute certifications have not been changed or misrepresented. This and similar new technologies could help the United Nations achieve its goal of helping everyone in the world have a secure digital identity by the year 2020, paving the way for a better life both for citizens of emerging market countries and refugees. (See the related story on pages 16 to 18.) In June the government of Andhra Pradesh, the seventh largest state in India, announced it had teamed with WISeKey to explore the use of blockchain to secure government-recorded data, including the provisioning and security of citizens’ identity. It is also considering ways of applying the technology to the local transportation sector. WISeKey, which specializes in cybersecurity, blockchain and the Interent of Things (IoT), is also building a blockchain/IoT Center of Excellence in Kigali in partnership with the Rwandan government. The center is deploying a “Trusted Blockchain as a Service” platform to enable the creation of a blockchain ecosystem in Rwanda. The project is part of the broader Smart Africa initiative with 17 countries participating, representing a market of about 360 million people. Removing Constraints On Opportunities For Growth Blockchain won’t just address digital ID. It could also help address problems caused by political instability, because unlike fiat currencies, blockchain- based cryptocurrencies do not depend on governments or the credit of the state to guarantee their value and are immune to local inflation caused by war or political crises. Blockchain technology also provides a means of exchanging capital in places where traditional banks are not present and could help provide fast and cost-efficient access to investment capital. That’s not all. The technology could potentially release some of the estimated $20 trillion worth of trapped land capital around the world. Due to the lack of trust in and corruption of land records, many banks in emerging markets refuse to accept land as collateral for loans. Two startups — BenBen, which was chosen to participate in a Barclays bank accelerator program and now counts Barclays Ghana as a client; and another called Bitland — are working on solving that issue by using blockchain as a way to allow governments to convert physical land titles into secure, transparent and easily accessible digital records. Both startups have global ambitions but decided to first focus on Ghana. The country’s paper-based land registry records are unenforceable by the court system so banks there won’t accept land as collateral, leaving millions without the possibility of leveraging their property to get loans and break out of the cycle of poverty. Supply Chain Integration Blockchaincouldalsobeacatalystforbettertradeandsupply-chainintegration, benefiting small-scale farmers. An estimated 125 million people make a living growing coffee in countries such as Ethiopia, Ivory Coast, Uganda, Rwanda, Tanzania, Colombia and Brazil. Most are small-scale farmers whose families live on $2 a day or less. Bext360, a U.S. startup using a combination of blockchain, machine vision and artificial intelligence to improve the global supply chain for agricultural products, wants to make it easier for these farmers to get a fair price, and get paid instantly. DIGITAL IDENTITY WillBlockchain AllowEmergingMarkets ToLeapfrogAhead? — Developing countries are planning to leverage blockchain to improve their citizens’ well-being and turbocharge their national economies. PeoplecelebratingduringaparadeinAndhra Pradesh,India.Thegovernmenttherehasteamed withWISeKeytoexploretheuseofblockchainto securedata.
  20. 20. to surpass Delaware and create a global corporate hub. Delaware launched an initiative in 2016 to review its state laws and start working toward implementing blockchain-based share ownership and blockchain transaction finalityforsharetransfers.Rwanda,whichhasbeenaggressivelymodernizing its corporate and investment laws to facilitate foreign investment, could take the concept further. “As blockchain technology and IT infrastructure more broadly bring the world’s entrepreneurs closer together there is a unique opportunity for a forward-thinking jurisdiction to create a legal-technical framework for online corporations,” writes Cameron-Huff. “A more trusted, transparent corporate registry could be created based on digital ledger technology,” he argues. Corporate voting could be handled on a blockchain and shares could be distributed to the public through the Rwanda Stock Exchange or a new venture exchange created for blockchain-based companies. The Rwandan Stock Exchange or some other Kigali-based exchange could become the listing venue for foreign technology companies, allowing them to easily issue shares that could be freely traded, without incurring the hundreds of thousands of dollars in legal expenses that are necessary in Canada and in the U.S. Not all corporations would want to opt for this, but many could benefit from a blockchain-based system that offers easier access to capital and a more transparent public market without onerous regulations, according to Cameron-Huff. The offer could be especially attractive to new technology organizations based around smart contracts like The DAO (digital decentralized autonomous organizations), he notes. Blockchain registration would help avoid concerns about shares not existing or the number of shares issued. The shares could be even more transparent than those in Canada or the U.S. “If the market is more transparent, more liquid, cheaper, and easier due to blockchain-based systems why wouldn’t companies from around the world set up in Rwanda?” writes Cameron- Huff. “ Perhaps this will be a next step for globalization.” And a boon to the Rwandian economy as well. J.L.S The company has built a patented kiosk machine that uses machine learning and AI to evaluate the coffee beans and divide them into grades based on quality. Coffee farmers access a mobile app linked to the machine to view offers from potential buyers. Once a farmer accepts an offer, he or she receives immediate payment for the coffee beans. The distributed ledger at the heart of the blockchain ensures payment and keeps a complete record of every transaction. Developing countries leapfrogged landlines and jumped directly to mobile connectivity, allowing suppliers and buyers to shift to digital payments processingwithoutlegacytechnologycompaniesblockingprogress.Similarily, because there are fewer legacy cross-border systems for trade, Bext360 says its mobile access allows it to implement blockchain technology directly into the supply chain for traditional supply-chain optimization, product payment, and the financing of capital equipment needed to increase the value of commodities in the country of origin, bringing more equity to local businesses and communities in emerging economies. Strengthening National Economies Blockchain’s immutable ledger and transparency would expose and prevent corrupt government practices, which are rampant in many parts of the developing world, slowing or even preventing the uptake of the technology. But there are some powerful incentives for governments to consider. Digital ledger technology could help create new revenue streams from services that areeitherimprovedorenabledbytheblockchain,suchascompanyregistrations, energy sharing and automatic payment clearing. If one pundit is right, it might even help Rwanda become the new Delaware. The American state of Delaware handles registrations for more than 50 percent of companies in the U.S. and more than 60 percent of the Fortune 500. The Canadian technology lawyer Addison Cameron-Huff notes in a blog post that there’s an opportunity for Rwanda to use blockchain technology — P.21
  21. 21. P.22 — THE INNOVATOR TheNetherlands’blockchainhackathon which claims to be the world’s largest—doesn’t just attract geeks and entrepreneurs behind hot new startups. Attendees include Prince Constantijn van Oranje,a member of the Dutch royal family, city officials and executives from large corporates. That’s because the country is on its way to becoming a blockchain nation. Some 25 different Dutch government agencies have launched blockchain trialsandDutchbanks,energycompanies,pensionfunds,insurancecompanies and the Port of Rotterdam are all testing the digital ledger technology. In addition, on September 28, during the StartUpFest Europe conference in the Netherlands, the Dutch government was given legal certification for a digital ledger solution in the healthcare sector that will allow blockchain to be used for communications between the country’s health institutions, including hospitals and government agencies. “Blockchain has a lot of promise and people are really keen to explore what the opportunities are,” says the prince, who in his role and co-founder and chairman of StartupFest Europe, acts as the country’s special envoy for startups. The blockchain activity – which includes startups, government, universities and corporates – is part of a larger effort to turn the Netherlands, which for centuries has been at the heart of global trade, into a world-class technology hub. While the Netherlands is home to high profile tech ventures in a variety of sectors such as Adyen, which has achieved unicorn status (a valuation of $1 billion or more) by providing businesses with a single solution to accept payments anywhere in the world and the Hardt Hyperloop project, which won Elon Musk’s SpaceX hyperloop pod competition. Blockchain initiatives are multiplying and growing in importance. Blockchainisexpectedtoimproveservicesandthemanagementofproduction processes as well as reduce costs, fraud and cyber risks. Its use could boost the country’s vital economic sectors which include the chemical industry, ports, agro-food, the manufacturing industry, the financial sector and the energy sector. “There are a strong set of initiatives here in the Netherlands,” says Rene Penning de Vries, a member of the Dutch Blockchain Coalition, a joint venture between industry, government and academia initiated by the country’s Ministry of Economic Affairs under the label Dutch Digital Delta. “My team is organizing cooperation between public and private partners because there are some fundamental issues that need to be solved before services are introduced into the market at scale.” Digital Identity Is Key Chiefamongthemisdigitalidentity.Blockchainsolutionsfortheidentification of persons, legal entities and objects are at the top of the agenda. “We have a number of banks on board, insurance companies and utilities and we have the Dutch regulatory authority on board and we all feel that identity is the key for all of these blockchain applications,” says Penning de Vries. “So where are we? We are at the stage of defining prototypes, defining what we really want in terms of identity management.” Working on identification processes requires a focus on both interoperability andstandardizationandrequiresthewilltoworkacrossgovernmentagencies and industries. “One of the most important aspects is to figure out how to work together with different government organizations and share data while respecting privacy,” says Marloes Pomp, project leader of the Dutch government blockchain projects. “Between government services we can build excellent services and share data and sometimes money. We think blockchain can help us do that in a better way.” One of the items on the agenda for 2017 is creating clarity about the relationship with all government organizations and the speed of rollout for those that are considering using blockchain to create identities that can be used in government registers PUBLIC POLICY TheNetherlandsIs Becominga BlockchainNation — Digital ledger technology is expected to bolster the country’s vital economic sectors
  22. 22. such as the State Service for Identity Data (RIVG), Dutch Chamber of Commerce as well as the basic registrations of the police and the Ministry of Security and Justice. That’s not all. At least seven cities are testing different ways of using digital ledger technology. For example, the Dutch city of Groningen has launched a trial – using technology developed by a local startup called Dutchchain – allowing government payments to 20,000 citizens with a minimum income to be paid in smart digital vouchers instead of euros. Academia is also playing a strong role. The Netherlands is home to Delft University of Technology, whichhostsoneofEurope’slargestresearchgroupsonblockchain technology. Its work combines running code with novel approaches to broaden and strengthen the cybercurrency field, says Johan Pouwelse, head of the university’s blockchain lab. The university is taking part in a new blockchain consortium focused on logistics involving the Port of Rotterdam, operator of Europe’s largest shipping port. The Netherlands- based effort includes support from anumberoflocal and regionalinstitutions, including Royal Flora Holland, a major floral auction house, the Netherlands Organization for Applied Scientific Research and Dutch bank ABM Amro, among others. ABM Amro has also teamed with IBM on a blockchain trial for real estate transactions to record and exchange information using an application called Torch. The bank is also exploring how blockchain might solve issues in financial auditing and compliance and in Financial Recovery and Restructuring (FRR). Banking On Blockchain ABN Amro and RaboBank are among multiple banks who have joined a project designed by SWIFT, the world’s largest financial messaging system, designed to determine if blockchain technology can help banks reconcile theirinternationalnostroaccountsinrealtime.LikeABMAmroandRabobank most large Dutch banks have intensified their blockchain initiatives in 2016– 17 and are evolving from the paper-based exploratory phase to mobilizing proofs-of-concept across different business lines, according to consulting firm Accenture. In 2016, ING, another Dutch bank, worked on blockchain projects with partners inside and outside the bank, including consortiums such as R3, the Dutch Central bank, the Dutch Payments Association and the European Banking Forum. The bank also partnered with Société Générale and trading house Mercuria to test a live oil trade using blockchain. Inall,INGhasworkedon27proofs-of-conceptinsixbusinessareas:payments, trade finance and working capital solutions, financial markets, bank treasury, lending and compliance and identity, according to Accenture. Tangible key performance indicators (KPIs) were used to validate the results and suitability of these proofs-of-concept, according to an article written by Accenture Netherlands consultants. For instance, the proof of concept on blockchain’s application to trade finance showed considerable gains in an otherwise paper-based process, resulting in potential cost savings of 10%–15% and — P.23 AscenefromtheNetherlands’blockchainhackathon, whichattractsnotonlyentrepreneursbutcityofficialsandexecutivesfrom largecorporations.
  23. 23. DUTCH BLOCKCHAIN STARTUPS TOWATCH DUTCHCHAIN THENETHERLANDS WHATITDOES: Programmablemoney softwaresolutionontheblockchain thatallowsasendertoprogramthe destinationintothetransaction, ensuringapaymentisspentfora specificpurpose.Itistestingthe technologyinthecityofGroningen. www.dutchchain.com administrating healthcare payments will be lowered by 10 times or more, predicts van Megchelen, because once a patient signals that he has used his digital wallet to pay for healthcare the insurance company is notified and a payment can be issued immediately. And finally, since transactions on the blockchain are immutable, if someone wants to try and change the data they would have to break into six different data bases, making it is nearly impossible to hack, he says. Transforming The Energy Sector Other trials in the Netherlands involve the energy sector. For example, IBM, revenue uptake of 15%. For its part, SNS Bank moved out of traditional banking areas to test the use of blockchain in addressing inefficiencies in the healthcare system, according to Accenture. Several other trials applying blockchain to the healthcare sector are ongoing and on September 28th Pels Rijcken, an independent law firm which often works with the Dutch government and other public entities, delivered the first legal certificate for a blockchain solution in the healthcare sector to Erik Gerritsen, Secretary General of the Dutch Ministry of Health, Welfare and Sport, during Blockchain Summit, a StartUpFest Europe event in the Hague. Streamlining Healthcare “Thefirstoperationalandlegallycertifiedblockchainapplicationhasarrived,” says serial Dutch entrepreneur Jeroen van Megchelen, CEO and co-founder of Ledger Leopard, a recently launched startup which built a blockchain application called Mijn Zorg Log for Zorginstituut, the Dutch government agencyinchargeofcommunicationsbetweenthecountry’shealthinstitutions. A commercial blockchain service involving a Dutch healthcare institution, a private insurance company and Ledger Leopard will be launched before the end of the year, van Megchelen said in an interview with The Innovator. Applying blockchain to the healthcare sector brings four key advantages, he says. The permission-based structure of blockchain technology puts individuals in charge of their own data, allowing them to control which information will be released to a doctor or insurance company. Secondly, the blockchain connects healthcare data, which today is very scattered, onto one digital highway, making it far more efficient. Thirdly, the cost of P.24 — THE INNOVATOR ThelaunchoftheDutchblockchainhackathonincludedPrinceConstantijn vonOrange,amemberoftheDutchroyalfamilyandthecountry’scurrentstartup envoy.
  24. 24. NESTEGG THENETHERLANDS WHAT IT DOES : Uses the blockchain to offer fractional ownership in the sustainable infrastructure that powers a person’s future, such as power from windmills and rides in autonomous cars, giving people an alternative to traditional pensions. nestegg.eu LEDGERLEOPARD THENETHERLANDS WHATITDOES: OffersanAPIlibraryfor developersandisbuildingblockchain applicationsforbigcorporatesand governmentagenciesthatdon’twant todevelopthetechnologythemselves. Itaddsblockchainasasoftware applicationthatintegrateswithexisting technology,includingmobilenetworks. www.zebra-med.com TenneT and Sonnen are working on a trial in the Netherlands and Germany that explores the use of a permissioned blockchain network to integrate flexible capacity supplied by electric cars and household batteries into the electrical grid. (See the story page 40.) And in preparation for a time when it will be possible for everybody – and everything –- to trade in energy, Dutch utility Enexis Groep is experimenting with the use of blockchain to create new platforms and economic models. In the long-term machines (such as autonomous/self-driving cars) are expectedtointeractwithothermachines(suchassolarpanels)onablockchain infrastructure. This means an electric car might obtain solar energy directly from a solar panel, making the fuel for the car free of charge. In May the innovation lab of German untility Innogy,launched a working blockchain product that tests that model. Together with Innogy and ElaadNL, Enexis Groep plans to roll out this blockchain solution in the Netherlands on a pilot basis during the first quarter of 2018. Startups present at the September 28th Blockchain Summit in the Hague are playing a role in other public and private initiatives, such as the future of pensions, says Rutger van Zuidam, CEO of the startup Dutchchain, the organizer of both the the September 28 Blockchain Summit in The Hague. And the Netherlands’ annual blockchain hackathon, which attracts around 500 hackers from over 12 countries. Dutchchain is behind the smart voucher trial in Groningen, a northern city of 200,000 people about 30 minutes from the German border. Nick Stevens, the city’s chief digital officer, says the trial is going well but is just a start. “My perspective on the trial is not about the end result, it is about learning how to think about blockchain and whether it will help us to do things better and differently,” says Stevens. “We need to determine whether it is primarily for operational efficiency or if it can also make for happier citizens.” The digital voucher trial is “low risk”, says Stevens. “If it goes wrong it is not the end of the world but when you talk about digital ID, if that goes wrong that has significant consequences. (The trial) is about learning how the technology does and does not work and how do we start upping the risks to do the big things.” Other countries are also embracing digital ledger technology, notes Stevens. “ If we really want to become a blockchain nation and lead the way we will have to be daring and bring the technology in as something fundamental and not something that in ten years time will be seen as an amendment.” J.L.S GlobalAmbitions — The Netherlands isn’t just trying to make a name for itself in blockchain. It wants to be a global technology hub. — P.25 PUBLIC POLICY Amsterdam is home to Booking. com and TomTom, two startups launched in the 1990s that went on to become global tech stars. It is also the headquarters of the payments firm Adyen, one of Europe’sunicorns,youngcompanies with a market cap of a billion dollarsormore.ButLondon,Paris, StockholmandBerlinhavetended togetmostofthebuzzandventure capital. That is starting to change thanks to efforts by StartUpDelta, an organization formed in 2014 to connect and promote the Dutch startup economy as one single hub. Neelie Kroes, a former EU commissioner in charge of competitionandthenofoverseeing the EU’s digital agenda, was StartUpDelta’s envoy for startups forthefirst18months. StartUpFest Europe, a technology conference that comprises multiple events around the Netherlands, was launched under her leadership. The Apple CEO Tim Cook was a speaker last year. Deep Nishar, SoftBank’smanagingdirector,spoke at this year’s conference, which took place September 25-28 and attracted around 15,000 entrepreneurs, investors and big corporations. Prince Constantijn Van Oranje, a memberoftheDutchroyalfamily, is the country’s current startup envoy.Theprinceleadsdelegations of Dutch startups to events such astheConsumerElectronicsShow inLasVegasandoverseesapacked action plan. Underhisleadershipallgovernment ministriesnowhaveastartupofficer tasked with ensuring that young companieshaveapointofcontact. Anentrepreneurialmaster’sdegree program is being tested at a universityandapolytechnicschool that allows students to combine biomedical courses with a year of entrepreneurial studies. The goal is to encourage the country’s best technologistsandscientiststostart theirowncompanies. AndStartup Canvas, a tool launched during StartUp Fest Europe, helps Dutch startupsimprovetheirpitchesand funding strategies. “Ministries are really talking to startups, corporates are meeting withstartups,investorsandstartups are finding ways to connect, we arechangingtheeducationalsystem to make it more entrepreneurial andwehaveanactionplantofocus onthebiggestchallenges–-gaining access to the world and access to networks for our startups and connecting all the dots in the Netherlands into a single hub,” says Anne-Wil Lucas, a program manager at StartUpDelta. “If we work together we will have more impact on the world.”
  25. 25. P.26 — THE INNOVATOR TOP25 STARTUPS ATSTARTUPFEST EUROPE2017 StartupFest Europe, a conference that took place in the Netherlands September 25–28, gathered startups, corporates and investors from around the globe. The Innovator selected a group of the most interesting startups at StartupFest’s seven events: CapitalFest, Impact StartupFest, FinTech Vortex, EnergyFest, Digital Health & Medtech, The Future of High Tech and the Blockchain Summit. ENVIRONMENT SOUNDENERGY THENETHERLANDS WHATITDOES:Using a cost-efficient and clean process, SoundEnergy claims it can take waste heat and convert it to sound and then into cold air which can be used for industrial waste heat recovery, air conditioning, cold chain shipments and data center cooling. http://soundenergy.nl/ TRANSPORTATION HARDT HYPERLOOP THENETHERLANDS WHATITDOES:HardtHyperloopwona competitionheldbyElonMusk’sSpaceXtodevelop superfasthyperlooptransport technology.Itissettingupafull-scaletesting centerandaimstobreakgroundonacommercial hyperloopbetweenAmsterdamandParisby2021. www.hardtglobalmobility.com ENERGY SONNEN GERMANY WHATITDOES:Designed to store and manage energy generated by solar panels mounted on household roofs, the sonnenBatterie claims a minimum lifespan of 10,000 charging-cycles. It is participating in a blockchain-distributed energy trial with TenneT and IBM. https://www.sonnenbatterie.de/en-gb/start ENERGY KITE POWER SYSTEMS UNITEDKINGDOM WHATITDOES:KPS is developing a low-cost solution to harness energy from the wind. Its system employs two kites flying in the same airspace so that while one is generating power the other is being retracted, ensuring energy production is constant. http://www.kitepowersystems.com/ ENERGY RAFIKI POWER GERMANY WHATITDOES:Rafiki Power supplies a containerized solar-powered solution that can bring electricity grid-style services to communities lacking power. To date it has installed and operates eight mini grid solutions in Tanzania. www.rafikipower.com ENVIRONMENT THE OCEAN CLEANUP THENETHERLANDS WHATITDOES:Aiming to start extracting plastic from the Great Pacific Garbage Patch within the next 12 months, The Ocean Cleanup has developed U-shaped screens that direct floating plastic to a central point. The concentrated plastic can then be extracted and recycled. www.theoceancleanup.com BLOCKCHAIN PARITY TECHNOLOGIES UNITEDKINGDOM WHATITDOES:A blockchain specialist, Parity develops software solutions for enterprises and industries designed to unlock the full value of decentralized technology. Its Ethereum browser is the first in a series of planned software releases. www.parity.io NEWMATERIALS MISCQ THENETHERLANDS WHATITDOES:Miscqisouttoprovethat Miscanthusgrasscanbeusedtoproducecellulose asareplacementforoil-basedequivalents. Inconstruction,itcanbeusedasaneffectivesound andheatinsulator.Madeintopelletsorbriquettes, itcanbeburntasanenergysourceorusedin agricultureinitsrawform. http://www.miscq.nl/ NEWMATERIALS PHOTANOL THENETHERLANDS WHATITDOES:Photanol uses engineered cyanobacteria to produce chemicals from CO2 and sunlight. The first compound to market is a lactic acid used to produce a biodegradable plastic. www.photanol.com NEWMATERIALS IONIQA THENETHERLANDS WHATITDOES:Ioniqahasdevelopedamagnetic smartmaterialsandseparationprocess,whichit sayscanrecycleanykindofPETplasticand produce“virgin”rawmaterials,similartothose madefromcrudeoil. www.destygo.com HEALTH OVIVA SWITZERLAND WHATITDOES:Oviva uses digital technology to help treat diabetes, obesity and food allergies. It employs virtual clinics and high-frequency follow-up to improve clinical outcomes and lower the cost of delivering care. https://oviva.com
  26. 26. — P.27 TRANSPORTATION WINDHORSE UNITEDKINGDOM WHATITDOES:Windhorse has developed a specialist aid drone that can be loaded with food and water, before flying independently to a pre-planned destination. The drone’s shell can be reused to provide shelter and the frame can be burnt safely to cook food. windhorse.aero TRANSPORTATION FARE PILOT UNITEDKINGDOM WHATITDOES:Fare Pilot uses machine learning to help Uber, Lyft and taxi drivers find more fares and earn better deals. Its data platform uses historical and live data to identify potential demand hot spots. www.farepilot.com TRANSPORTATION AMBER MOBILITY THENETHERLANDS WHATITDOES:Amber is developing a modular, autonomous, customizable electric car designed specifically to be shared. ABN Amro has signed on as a launching customer. Amber plans to have the self-driving cars on the road in Eindhoven by mid-2018. www.ambermobility.com ENERGY GENERAL FUSION CANADA WHATITDOES:General Fusion is trying to develop the fastest, most practical and cost-competitive path to fusion power. In its labs just outside Vancouver the company is developing the key components of a fusion power plant. http://generalfusion.com/ BLOCKCHAIN DUTCHCHAIN THENETHERLANDS WHATITDOES:Developingaprogrammablemoney softwaresolutionontheblockchainthatallowsa sendertoprogramthedestinationintothe transaction,ensuringapaymentisspentforaspecific purpose.Ithasco-developedsuchasmartvoucher systemwiththeDutchcityofGroningen. https://www.dutchchain.com/ BLOCKCHAIN BANCOR SWITZERLAND WHATITDOES:Built on the Ethereum blockchain, Bancor’s tokens are a type of monetary reserve that provides liquidity to other tokens. https://www.bancor.network E-COMMERCE MMUZE ISRAEL WHATITDOES:Mmuze has developed an artificial intelligence platform that can turn product catalogues into smart shopping assistants. The Mmuze chatbot can identify most discussed product features and real-time social trends that impact customers’ purchasing decisions. www.mmuze.com FUTURETECH/IOT GUARDHAT UNITEDSTATES WHATITDOES:Using its open industrial IoT platform, GuardHat has developed a smart hardhat that supports real-time location tracking, audio and video streaming, as well as gas detection and biometric data capture. www.guardhat.com FUTURETECH/AI UNBABEL PORTUGAL WHATITDOES:Unbabel supplements machine translation technology and artificial intelligence with 50,000 bilingual individuals around the world who post-edit the outputs from the automated system. https://unbabel.com/ NEWMATERIALS ENERKEM CANADA WHATITDOES:Enerkem’s proprietary technology converts the carbon contained in garbage into a pure synthesis gas (also called syngas), then turns in into biofuels and chemicals.. http://enerkem.com Compiled and written by David Pringle. Pringle is a former Wall Street Journal telecoms and technology reporter. He currently works as an associate senior analyst at STL Partners, running the Dealing With Disruption stream which covers Google, Apple, Amazon, Facebook and Microsoft, as well as the broader digital commerce market. HEALTH SKINVISION ROMANIA/THENETHERLANDS WHATITDOES:To detect early and potential signs of chaotic growth (skin cancer), SkinVision has developed an algorithm that can scan an image of a lesion and check for irregularities in color, texture and shape. https://skinvision.com/ HEALTH EYEWIRE UNITEDSTATES WHATITDOES:Tounderstandhowthebrainworks, scientistsneedtofigureouthowelectricalimpulses travelthrough85billionneurons,connectedthrough 100trillionsynapses.EyeWireiscrowdsourcing thenecessarymappingprocessthroughanonline game. https://eyewire.org E-COMMERCE PICNIC THENETHERLANDS WHATITDOES:ThegrocerydeliverystartupPicnic usescustom-builtelectricvehiclesthatfollowset routesanddeliveratsettimes,astraditional milkmendid.Asthevehiclesdon’thavetocrisscross towntodeliveratrequestedtimes,Picniccandeliver groceriesforfree. https://www.picnic.nl/ FINTECH REVOLUT UNITEDKINGDOM WHATITDOES:By offering free international money transfers and fee-free spending in dozens of currencies via a mobile app, Revolut has gained over 730,000 customers across Europe who have collectively transacted over US$3.2 billion. www.revolut.com
  27. 27. P.28 — THE INNOVATOR If you want a glimpse at the future potential of blockchain, visit Estonia, urges Kaspar Korjus, the country’s managing director at e-Residency. Almost all public services in Estonia are digitalized and accessed through secure digital identities that are provided to every citizen and resident. One of the innovations that is integrated into some of the services is a distributed ledger that can never be erased or rewritten. This kind of ledger technology is now more commonly known as a blockchain. Estonia’s digital ledger was built years before current-day blockchain existed but is based on the same principle. The distributed ledger gives citizens and residents control over their own data. “Every transaction unit is backed up on the digital ledger so no one can misuse it or change it,” says Korjus. “As a citizen no one has a right to check my data without permission. Before I had to trust some government employee. Now I put my trust in mathematics and encryption.” While digital ledger technology is secure it isn’t failsafe. In September a group of international security researchers identified a potential security vulnerability that affects the use of Estonia’s ID cards and digital IDs. The cards are used to access a wide range of digital services, from signing documents to submitting tax returns and checking medical records, as well as by foreigners who are e-residents in the country. When notified, Estonian authorities immediately took precautionary measures, including closing the public key database and being transparent about the risk. Korjus, who points out there was no actual breach, says other governments could learn from the way the country has implemented public policy to foster the use of innovative technology and digital IDs while protecting its citizens and e-residents. For example, he explains that simply having the technology to monitor who is accessing people’s data, conduct e-voting or digitally signing documents, would be pointless without a policy framework to ensure improper access of data is punished, e-votes are counted and digitally signed agreements are legally binding. Estonia’s e-residency program is another example of smart public policy, he says. It allows people from anywhere in the world to apply for a digital identity in Estonia. You can then use a government-issued identity card to sign documents, open a bank account and register companies from abroad. “It has opened up a business opportunity for Estonia,” says Korjus. The primary benefit at present is the ability to establish and manage a trustedlocation-independentcompanyentirelyonline.Some20,000companies have already opted in. Now blockchain entrepreneurs have started asking how the digital IDs can be integrated into their products and services as a way of on-boarding their customers faster and at lower cost. “Estonia is now a blockchain nation,” says former President Toomas Hendrik Ilves. “Our digital society is underpinned by blockchain technology and our securedigitalidentitiesprovideasignificantadvantagetoblockchaincompanies that need to verify online identities. Through e-Residency, Estonia is ready to support blockchain pioneers from anywhere in the world so they can build the future through our digital infrastructure, even without stepping foot in Estonia.” Estonia should take advantage of its edge while it can. Trent McConaghy, the founder and CEO of the Berlin-based blockchain startup BigchainDB, says he believes it is only a matter of time before the tiny Baltic state has some competition. “The concept of e-residency is based on the same philosophy as blockchain – spreading power,” says McConaghy. “I am sure other nations are going to start to copy them. In 10 to 15 years 10 or more nations will have e-residency programs. These nations are going to be competing on which benefits they give. As the power of nations fades and everything becomes more decentralized this movement will follow.” PUBLIC POLICY FirstMover Advantage — Estonia’s early adoption of digital ledger technology is giving it an edge.
  28. 28. Europe’sIOTAFoundationis planning to launch a blockchain- based exchange that will allow corporations to securely buy and sell data collected by devices on the Internet of Things (IoT). IOTA plans to make theannouncementatAutonomy,anOctober19-20urbanmobilityconference in Paris, says co-founder Dominik Schiener, a scheduled speaker at the event. Initial participants in the data exchange include Bosch, Huawei, Samsung, Engie Lab, SAP and Deutsche Telekom, he says. IOTA, which is developing its own flavor of blockchain, called Tangle, aims to help big corporates use the technology to create new business models and new revenue streams for the financial services, logistics and supply chain, energy, auto and healthcare sectors. The IoT is made up of applications that connect to the Internet everything from cars and factory-floor machines to home appliances and humans. All of these machines generate enormous amounts of data which, for the most part, is currently neither analyzed nor monetized. While some of this data contains valuable business insights that could be used to launch new services, there isn’t an easy, secure way for companies and individuals to start buying and selling it directly from each other. In order for businesses and consumers to safely use the IoT, each device on the network will need to have a secure digital identity, says Schiener. That’s the first challenge. Then, a settlement layer needs to be established in order to enable a new “economy of things,” allowing devices, sensors andmachines toexchange value in real-time, without automaticallyincurring fees. And, to be trusted there needs to be an immutable record of the transactions. The IOTA Foundation aims to meet all of those objectives through Tangle, its blockchain offering, which claims to be scalable and to enable the transfer of data in an authenticated, tamper-proof and encrypted fashion. The exchange will be a proof of concept to illustrate how an IoT sensor usingTanglecanselldatastreamson-demandthroughadedicatedmarketplace, Schiener says. IOTA is asking corporate and institutional partners to participate in the initiative. “The goal of IOTA is to obviously run on tiny sensors but for this proof of concept we intend to make it possible for corporates to easily submit non- sensitive data to the data marketplace,” says Scheiner. “Some of the data that is being submitted is from weather stations, environmental sensors, machines in shopfloors, cars, base stations and more.” IOTA’s technology is open source and free to use, so any one can join the foundationandusethetechnologytobuildapplications.Corporateinvolvement in the foundation is crucial, says Schiener, an Italian entrepreneur who has been in the blockchain space for more than five years. There are big use cases but IOTA isn’t sure what corporates want. “Our attitude is ‘let’s do this together,’ ” he says. The IOTA Foundation is a member of a consortium called Trusted ID Alliance that also includes Cisco, Bosch, Gemalto and Foxconn. The Trusted ID alliance is working on ways of standardizing how blockchain can be used to secure and improve IoT applications. The IOTA Foundation is also a member of the Decentralized Identity Foundation, a grouping of competitive companies, including Microsoft and Accenture, launched in May, that aims to create a universal, secure, decentralized way for data to be accessed by institutions and for individuals to verify identity. These consortia are among several collaborative efforts aimed at advancing the development of blockchain technology. TheBlockchain OfThings — Using the blockchain to exchange data generated by the Internet of Things — P.29
  29. 29. P.30 — THE INNOVATOR More than seven million container ships move in and out of The Port of Rotterdam annually carrying flowers from Kenya, oranges from California, pineapples from Colombia and a whole array of other merchandise. Europe’s largest port is always bustling because 90% of goods in global trade are carried by the ocean shipping industry each year. It is a highly inefficient process that is ripe for disruption. Maersk, the world’s largest shipping container company, found that just a simple shipment of refrigerated goods from East Africa to Europe can go through nearly 30 people and organizations, involving more than 200 different interactions and communications. So it is no surprise that Maersk has teamed up with IBM to test how the blockchain, which enables more secure, transparent monitoring of transactions, might streamline the supply chain. It is just one of a number of trials involving blockchain’s use in the supply chain. Supply chains are basically a series of transaction nodes that link to move products from point A to the point-of-sale or final deployment. With blockchain, as products change hands across a supply chain from manufacture to sale, the transactions can be documented in a permanent decentralized record – reducing time delays, added costs, and human errors. Some of the world’s biggest retailers and food companies – including ChainReaction — Supply chains are often highly inefficient processes that involve hundreds of interactions. Blockchain can help. —O3TRADINGON THEBLOCKCHAIN
  30. 30. Nestlé, Unilever and Walmart – are now working with IBM to use the blockchain to improve food traceability and transparency in the supply chain. Several blockchain startups are innovating around supply chain in other sectors, notes the research firm CBInsight. For example, SteelTrace, a Dutch startup, is using the blockchain to automatically trace steel quality from origin to end product. Another startup, Provenance, is building a traceability system for materials and products, enablingbusinesses toengageconsumersatthepointofsalewithinformation gathered collaboratively from suppliers all along the supply chain, permitting it to substantiate product claims with trustworthy, real-time data. Others startups targeting this space include Hijro, which offers an alternative platform for lending into global supply chains, and Skuchain, which builds blockchain-based products for the business-to-business trade and supply- chain finance market. Financing Trade Trade finance is also being moved onto the blockchain. The trade finance environment involves export and import, bank credit and managing the whole supply chain. “The financial payment is not linked to the supply chain so there is a paper version control issue and it adds significant cost because it is manual,” says the blockchain specialist Oliver T. Bussman, a former CIO at UBS. Another issue is that the payment stream is not linked to the supply chain from a time-to-delivery point of view. With the blockchain, smart contracts can be issued between all the involved parties, delivery can be confirmed and the payment will automatically be executed. Cost efficiency savings are estimated to be between $14 billion to $16 billion, says Bussmann. “This is an example of how blockchain allows for real-time integration not only of the banking industry but to team up with peers and non-banks and move that onto a platform to enable simplified real-time business,” he says. A group of banks, including Deutsche Bank and HSBC, have formed Digital Trade Chain, a project to build a blockchain-powered cross-border trade finance platform for small and medium-sized companies in Europe. The consortium started in January 2017 with seven European banks and is expected to grow to include additional banks from other countries as well as trading partners such as shippers, freight forwarders and credit agencies. Bank of Montreal, Caixabank and Erste Group recently announced that they are joining a blockchain-based trade platform started by UBS and IBM. The platform, called Batavia, would help banks and their clients automate the trade finance process. Among other things, Batavia will allow parties to track a transaction from when a shipment leaves a port to when it reaches its destination. J.L.S — P.31 Morethansevenmillioncontainershipsmoveinandout ofThePortofRotterdam.Cargocompaniesaswellasbigretailersare experimentingblockchain-basedservicestoimprovetraceability inthesupplychain. BLOCKCHAIN SUPPLYCHAIN STARTUPS TOWATCH PROVENANCE UNITEDKINGDOM WHATITDOES: Providesaplatform thatempowersbrandstotakesteps towardgreatertransparencybytracing theoriginsandhistoriesofproducts thankstoblockchain-based technologyandopendata. www.provenance.org STEELTRACE THENETHERLANDS WHAT IT DOES : A blockchain-based platform that enables traceability of steel quality via digital certificates. The platform enables data storage and exchange of ownership certificate in a format that machines can understand. https://steeltrace.eu/ AMBROSUS SWITZERLAND WHATITDOES: Acommunity-driven ecosystemtoassurethequality, safety&originsofproducts,combining high-techsensors,blockchainprotocol andsmartcontracts. https://ambrosus.com/
  31. 31. P.32 — THE INNOVATOR cross-border payments, including France’s Crédit Agricole, Brazil’s Bexs Banco and Uruguay’s dLocal. Banks need to be creative It also said that SEB, the Swedish bank, had used Ripple’s system to transfer$180millionbetweenSweden and the U.S. in recent months to help manage the cash balances of one of the bank’s large corporate customers. Ripple’s cross-border payments system is based on using its XRP cryptocurrency, which customers buy and sell almost instantaneously to move money between countries and currencies over the company’s system. It allows cross-borderpaymentstobecompleted within 10 to 15 seconds, compared with about three days for interbank transactions using the Swift network. But along with opportunities for improving the way existing business is done, blockchain poses some challenges. The new, decentralized business platforms unleashed by blockchain are spawning new, de- centralized business models that threaten some of banks’ core bu- sinesses. “For banks the issue is that access to capital is being disinter- mediated pretty aggressively” by initial coin offerings (ICOs), an unregulated way of crowdsourcing funds, notes Lex Sokolin, a partner and global director of fintech strate- gy at Autonomous Research. Some $2.3 billion in funding has been The finance sector is divided on the virtues of cryptocurrencies such as bitcoin. JamieDimon made headlines when he recently said he would fire any trader who was “stupid” enough to trade in them. But there is one thing that almost everyone in the banking industry agrees should be embraced: blockchain, the technology under- pinning cryptocurrencies. Banks are scrambling to hire blockchain experts and are joining technology-oriented consortia such as R3, the Enterprise Ethereum Alliance or Hyperledger. They are first focusing on low-han- ging fruit: areas where there is a lot of inefficiency such as global payments, trade finance, auto- mated compliance and post-trade processing. Potential savings from efficiency gains are between $80 billion and $110 billion, says the blockchain expert Oliver T. Bussmann, a former CIO at UBS. SWIFT, in collaboration with lea- ding global transaction banks, is de- veloping a proof-of-concept appli- cation that will test whether distri- buted ledger technology can be used by banks to improve the re- conciliation of their nostro accounts in real time, optimizing their global liquidity. But it would be a mistake for banks to regard this as just an efficiency play, Bussmann says. Blockchain gives them the opportu- nity to become the backbone of large-scale, open, decentralized bu- siness platforms, he says. A first step toward that end is for banks to organize themselves into blockchain-based business networks and consortia, such as one invol- ving the U.S. startup Ripple, an en- terprise blockchain solutions provi- der, which has built a blockchain- based direct settlement network with more than 75 banks and pay- ment providers. The company has partnered with about 90 additional banks across the globe, including Standard Chartered Bank, Banco Santander, National Australia Bank and BBVA. Several banks recently signed up to start using its technology for FINANCIAL SERVICES Banking onBlockchain — The finance sector may not agree on the virtues of cryptocurrencies, but they are embracing blockchain, the technology underpinning them.
  32. 32. — P.33 Jamie Dimon JPMorganChaseChairmanandCEO referringtobitcoinataSeptember12banking industryconferenceorganizedbyBarclays. “It’safraud… It’sworsethan tulipbulbs. Itwon’t endwell” “Notsolongago,someexperts arguedthatpersonal computerswouldneverbe adoptedandthattabletswould onlybeusedasexpensive coffeetrays.SoIthinkitmay notbewisetodismissvirtual currencies” about this negatively it is actually a bullish signal,” Solokin says. “If Jamie is being publicly negative then it means it is actually reaching him. This shows the power of the moment. This thing is really going mainstream.” J.L.S raised that way in a very short pe- riod of time and banks haven’t been involved at all. “It is the wild, wild west but crowd- funding (through ICOs) actually works. You are adding value to these projects without the existing financial system,” Sokolin says. Banks need to think creatively about how they might carve out a role in this new world, he says. They could, for example, become the on-ramp and off-ramp between fiat and crypto-currency and offer data and analytics around different new products. To remain relevant banks will need to hire skunk-work developers who can visit Internet forums and use tools like Slack and Telegram, where a lot of the conver- sation is taking place – and figure out how to get the data and how to analyze it, Solokin says.“When the number one incumbent is talking FINTECH BLOCKCHAIN STARTUPS TOWATCH BANCOR SWITZERLAND WHATITDOES:Built on the Ethereum blockchain, Bancor’s tokens are a type of monetary reserve that provides liquidity to other tokens. https://www.bancor.network RIPPLE UNITEDSTATES WHAT IT DOES : Ripple connects banks, payment providers, digital asset exchanges and corporates via RippleNet to provide one frictionless experience to send money globally. https://ripple.com/ DIGITALASSETHOLDINGS UNITEDSTATES WHATITDOES: DigitalAssetisa technologycompanythatuses distributedledgerstotrackandsettle financialassetsinacryptographically secureenvironmentwherecounter- partyriskisminimized,andsettlement timesarereduced. http://www.digitalasset.com ChristineLagarde ManagingdirectoroftheInternational MonetaryFund,duringatalkataBankofEngland conference.
  33. 33. P.34 — THE INNOVATOR FINANCIAL SERVICES TakingStock — Exchanges are finding it pays to use blockchain KaidiRuusalepp,founderandCEOofFunderbeam,whichwasrecently votedEuropeanStartupoftheyear plex. Blockchain technology helps to make the process more straight- forward. Nasdaq was among the first to em- brace the technology. Called Nasdaq Linq it uses blockchain technology to power capitalization tables, which private firms use to manage shares in their companies. The Linq takes what is typically a system of paper certificates, which then become outdated or invali- dated by newer certificates, and makes it more efficient and less prone to errors. First experiments across the globe The blockchain-based electronic shareholder voting system solves several problems. It allows people to participate and cast votes remo- tely, and it allows a shareholder to delegate those votes. Other ex- changes are also exploring uses of blockchain. transferred or the securities are now transferred’ but once the blockchain and cryptocurencies be- come the intermediaries then the function of trust is fulfilled by the technology and not by intermedia- ries.” Funderbeam launched its platform of funding and trading in April of last year. “At the start we had only four startups raising funds- and Funderbeam amongst those four – to test whether the tech and bu- siness model could get some liqui- dity for the startup companies . We proved it. We have 15 companies trading and investors from 94 countries. Now we just need to scale. “ Traditional stock markets are also investing in blockchain. The func- tioning of stock exchanges involves procedures that can be time consu- ming, cost inefficient, cumbersome, and prone to risks. The multi-laye- red processes—pre-trade, trade, post-trade and custody, and securi- ties servicing—is extremely com- Kaidi Ruusalepp, a formerCEOoftheNasdaqTallinnstock exchange, has built something akin toastockexchangeforgrowthstartups based on blockchain technology. Her company, Funderbeam – which was recently voted European Fintech Startup of the year- has created a funding and trading en- gine for growth companies which can issue tradable securities. The platform is part research tool and part investment platform, provi- ding a way for startups to raise fun- ding and for investors to invest in potentially high growth companies. Funderbeam’s underlying technolo- gy is a type of crypto-currency.“We kind of tokenize equity investment ,” says Rusalepp. “We record, every single trade on the blockchain so we don’t need clearing houses and central security depositories. The reason stock exchanges exist is to inject trust. “That’s their main business, says Ruusalepp., “to pro- vide the trust, to say ‘we can confirm that the funds are now The Australian Stock Exchange se- lected U.S.-based blockchain star- tup Digital Asset Holdings to deve- lop distributed ledger based solu- tions for clearing and settling trades and later invested in that company. The Korea Exchange is using blockchain technology to en- able equity shares of startup com- panies to be traded in the open market. The London Stock Exchange,is in- volved in ways to improve the post- trade space using the blockchain technology. And the Luxembourg Stock Exchange has already intro- duced a blockchain-enabled secu- rity system that stores a so-called officially generated signature by ap- pointed mechanism (OAM), along with document type and document URL, in the blockchain. J.L.S

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