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Benoît Abeloos, Policy Officer at the European Commission gives a
compelling glimpse into how virtual currencycould affect the economy
Finland’s Ministry of Financelifts the lid on the current phase of
rapid growth of the Finnish economy andtheir expectations for the same in 2018
James Lomax from the EconomyDivision at UN Environment offers
his thoughts on the policy priorities for globalfood systems
10 16 18
BLOCKCHAIN INNOVATION
THE RISE ANDFUTURE OFBLOCKCHAINTHE FOUNDER AND CO-FOUNDER OF THE BLOCKCHAIN FEDERATION PROVIDE INSIGHT INTO THE FUTURE FOR A BLOCKCHAIN-BASED PURPOSE-ECONOMY
IN THIS ISSUE
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INTRODUCTION
CONTENTS
The editor does not necessarily agreewith or endorse any of the views orcontents of the articles and featureswithin this document. All articles andeditorials remain the copyright of theauthors, organisations and otherrelevant authorities by whose kindpermission they are reproduced. Allinformation has been checked and iscorrect at the time of going to press.The publisher will not be liable for anyloss suffered directly or indirectly asa result of the use of or reliance onthe information contained herein.
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Jonathan MilesEditor
Production CoordinatorNick Wilde
DesignersAndrew BosworthBen Green
Welcome to the Novemberedition of Open Access Gov-ernment’s special Blockchain
supplement. This special focus under-lines the exciting world of Blockchain,with an array of exciting featuresaround the subject from many presti-gious contributors.
Blockchain technology is a very excitingarea, as highlighted for example in anexcellent article from the founder andco-founder of the Blockchain Federa-tion, who both provide a fascinatingglimpse into the future for aBlockchain-based purpose-economy.
In another feature, we discover thatBlockchain in the world of insurance is constantly growing and thereforealso has much potential, particularly in commercial lines, the reinsurancebusiness and around intra-group transactions.
There is also a very compelling glimpseinto Bitcoin – in a written piece by theEuropean Commission’s Benoît Abeloos.In this intriguing article, we learn thatthe publication of the white paper, “Bitcoin: a peer to peer cash system” in October 2008 by the mysteriousSatoshi Nakamoto (a fake identity), willbe seen in the history of technologiesas a disruptive milestone.
I hope that you find this supplementthought-provoking. I would certainlywelcome any comments you have onthis edition, or for any in the future. ■
Jonathan MilesEditor
@Jonathan_AdjDig
04The rise and future ofBlockchain
In this article, the founder and co-founderof the Blockchain Federation provideinsight into the future for a blockchain-based purpose-economy
06IBM Research Zurich and Swiss Re
08Blockchain insurance set tochange the industry
Open Access Government’s JonathanMiles explores the tremendous potentialof Blockchain in the European insuranceindustry
10 Linking consumption andproduction
James Lomax from the Economy Divisionat UN Environment offers his thoughts on the policy priorities for global foodsystems
12Ambrosus Technologies
16Blockchain: what is in it forthe European economy?
Benoît Abeloos, Policy Officer at theEuropean Commission gives a compellingglimpse into how virtual currency couldaffect the economy
18The outlook of the Finnisheconomy
Finland’s Ministry of Finance lifts the lid onthe current phase of rapid growth of theFinnish economy and their expectationsfor the same in 2018
22Tieto
24 Aalto University –Business School
BLOCKCHAIN, INNOVATION & GROWTH
4
The rise and future of Blockchain
During the years following the rise of Bitcoin in2008, Blockchain and related digital technolo-gies have spiralled into a revolutionary phase
of development, spearheaded by idealists, anarchists,and investors. This is why the authors Eddy Wagenaarand Irina S. Zimakova founded the Digital Embassy in2016, the international umbrella organisation for 16digital technology federations: 3D Printing Federation,Artificial Intelligence Federation, Augmented RealityFederation, Big Data Federation, Blockchain Federation,Cloud Computing Federation, Crpytocurrency Federation,Cybersecurity Federation, Drones Federation, FinTechFederation, ICO Federation, IoT Federation, QuantumComputing Federation, RegTech Federation, RoboticsFederation, and Virtual Reality Federation.
With the Blockchain Federation as its flagship federa-tion, the Digital Embassy aims to connect local govern-ments, businesses, and educational institutes to digitaltechnologies, anticipating future changes throughagile-like discussions to ensure a hyper-intelligent andsmooth transition into the digital era. It is puttingtogether an international digital think tank of globalthought leaders to address regulatory issues, expeditelaw-making and political shifting, and provide forsocial-economic architectures to effectively integratedigital tech into existing societies.
Blockchain has been explained many times over. Forthose still unable to understand, please think ofBlockchain as if it were a ‘digital database’, roughly onehundred times safer than Google’s infrastructure. It isbasically Bitcoin’s ‘operating system’, recording financialtransactions peer-to-peer, cutting out the middleman(bank). The ability to record almost anything onto thisdigital distributed database, is probably the greatestinvention since the Internet, which is why theBlockchain is often referred to as the Internet of Value.
In the very near future, anything and everything will beput ‘on the Blockchain’: passports, ID-cards, medicalrecords, letters of credit, freight & customs documents,hotel & flight bookings, and so on and so forth.
Everything will become transparent and immutable.There will be no more room for error, no more roomfor corruption. Society will change into a blockchain-based purpose-economy, where people subscribe toglobal peer-to-peer networks to find divergent micro-jobs they like doing, paying them cryptocurrencies by
In this article, the founder and co-founder of the Blockchain Federation provide insight into the future for a blockchain-based purpose-economy
Eddy Wagenaar and Irina S. Zimakova
5
the minute. Work will feel like a hobby. Mutual ratingswill ensure trustworthiness and reliability betweenclient (employer) and contractor (employee). Smart(automated) contracts will allow for the right type ofinsurance and paperwork for the job, matching withcontractor’s fundamental criteria. Contractors will bepaid instantly upon completion of the job, again viasmart contract, which will show at their fee-lessBlockchain smartphone.
“Society will change into a blockchain-basedpurpose-economy, where people subscribe to globalpeer-to-peer networks to find divergent micro-jobsthey like doing, paying them cryptocurrencies by
the minute.”
Effect on jobsAll digital technologies combined are expected to auto-mate up to 80% of all current business processes,resulting in many millions losing their jobs. The keyissue is if digital technologies will be able to provide forenough new jobs in time for us all to survive. It is para-mount digital technology is accommodated, facilitated,and utilised in an intelligent fashion. The genie is out ofthe bottle: slowing down the process due to loss of ‘oldpower’, would potentially be harmful to an economy’sglobal market position. Keep up with these moderntimes, that is the message.
Stiff competition from major international players suchas Dubai, Estonia, Singapore, and Switzerland is keep-ing everyone at the tip of their toes. Dubai is very muchaware of its fossil fuels ending and is anticipating onits future by means of digital technologies. All its gov-ernment documents will be on the blockchain before2020 – that’s within a little over 2 years from now.
Dubai also recently announced ‘emCash’, the first stateissued Blockchain-based digital currency, enabling itscitizens to pay for various items such as their dailycoffee, children’s school fees, utility charges, andmoney transfers. Their digital currency provides forfaster processing, improved delivery time, less com-plexity and cost, peer-to-peer lending, and credit ratingto name a few.
What's more, Microsoft recently unveiled 'CoCo': tech-nology to speed up blockchain and address scalability
issues. CoCo, short for Confidential Consortium, will beready and made Open Source by 2018. It involves com-mitment of Intel, R3, and JP Morgan aiming to makeblockchain roughly one hundred times faster, targetingto create the foundation for Blockchain for enterprises.
The future of Blockchain, Cryptocurrencies, and relateddigital technologies is not in the hands of governmentsthough and can easily spiral into riots or even civil warif not guided or addressed properly. It is imperative to balance the interests of those involved so it seemsonly logical to join the Digital Embassy or one of its 16federations.
Each federation has its own small group of C-level decision makers, operational staff, and technical staff.Also, each federation has several special interestgroups, allowing for cross-federation and cross-marketinteraction. This enables for example a UK insurancecompany in the Blockchain Federation to learn from aDutch contact-centre’s experience with Chatbots in theAI Federation. Sharing knowledge and learning fromeach other is the peer-to-peer model how to move forward in the digital future. ■
Eddy WagenaarChairman, Digital Embassyfounder, Blockchain Federation
Irina S. ZimakovaPresident, Digital EmbassyCo-founder, Blockchain Federationwww.blockchainfederation.orgwww.digitalembassy.orgwww.twitter.com/EUBlockchainFed
BLOCKCHAIN, INNOVATION & GROWTH
represent reality quite right. So, whereis the flaw in how we deal with per-sonal sensitive data? Well, insurers actas guardians of individuals’ personalsensitive data. And they shouldn’t. Thepower to decide on who can see mypersonal data should be with me. Isthat possible?
Traditionally, the answer has alwaysbeen no. There simply wasn’t a way toask consumers in real time, nor a wayto analyse large amounts of highly distributed data. So, we have becomeaccustomed to hoarding that data onour premises, and managing it as bestwe can. But with the advent of trulydistributed technologies, that ischanging. If Blockchain can distributeledgers and even the execution ofcode snippets that power in-block calculations for smart contracts, whyshouldn’t it allow us to distribute deci-sions on access to distributed data?Even distribute its analytic processing?
Power to the peopleWith that idea, a small group of curi-ous minds from Swiss Re’s IT innova-tion teams and IBM’s Rüschlikonresearch lab set out to prove or dis-prove the feasibility of a platform thatcleanly separates regulating access topersonal sensitive data from storingand analysing that data. A platformthat places decision power on accessto personal sensitive data in thehands of the individual that data isabout, and ensures full transparencyon what that data is used for, by
whom, when, and under what specificconsent. We call it “Blockchain for Sensitive Data”, or “B4S”.
Traditional implementations of thisvision are likely to fall short when itcomes to their security and privacyguarantees. Indeed, users might notfeel comfortable to hand over theirsensitive medical data to a single entity:they might (legitimately) feel that theyhave lost control of where, when andhow their data is used, and that theycannot fully exercise their right to optout or revoke data access. Fortunately,it’s Blockchain to the rescue.
A Blockchain primerTechnically speaking, Blockchain is adistributed operating system that provides an environment to executeso-called smart contracts, and tomaintain all the data structures theyrequire (a.k.a. world state).
The novelty with respect to other,more traditional, solutions to theproblem is that Blockchain maintainsits properties even in presence ofbuggy/malicious computing nodes.
Let’s use an analogy to understandwhat this means: we can equate aBlockchain environment to a set of play-ers playing a board game. The boardgame welcomes more than one player(and so the system is distributed). Theplayers are free to interact with eachother (and so they can execute bilateralor multi-lateral transactions).
Each player only needs to look at theboard and its pieces to understandthe state of the game – who’s winning,who’s losing etc. (and so there is acommonly agreed-upon world state).Crucially, the game may be designedin such a way that the players areforced to behave honestly, or be caughtcheating and banned from playing on.
Returning control over our personal data to us through the Blockchain – explored by experts from Swiss Re and IBM Research
6
PROFILE
We hate getting insurance.It’s such an impossibly convoluted process. With
all the personal data we put out thereon the net, why can’t we have a smartapp on the mobile that tells us whatwe need and lets us buy cover thesame way we buy train tickets orbooks on Amazon?
As an insurance IT professional, I knowthat dealing with personal sensitivedata can be a colossal headache. As anindustry, we put a lot into gatheringand harmonising such things as policyand claims data – and as soon as wehave it, we fret over protecting it fromourselves in accordance with ethicalprinciples and multivariate, fast-evolv-ing legislative frameworks. Tap intoother sources like fitness trackers orbuying behaviour to drive “Insurancemade Simple”? Challenging. Socialmedia? Unthinkable. Or is it?
Trust and transparencyLet’s look at the underlying problem.It all comes down to trust and transparency. Data modellers knowthat when a model causes inordinatepain it is usually because it does not
Restoring customer control, trust and•transparency over the use of personalsensitive data.
Easing the burden of data ownership•for the insurance industry.
A joint initiative by Swiss Re & the IBMResearch Lab.
Blockchain for sensitiveand personal data
Why blockchain?Among other things, Blockchain isgreat at the following scenario: a setof entities would benefit in doing business together but – because ofsecurity and trust concerns – one oftwo things happen: either they don’tdo any business, or they do it ineffi-ciently. Blockchain creates the techni-cal foundations so that mistrustingparticipants can do business togetherin a way that their actions are limitedto what they have previously agreed.
This use case fits perfectly: today med-ical data isn’t being shared as much asit could. Blockchain creates the techni-cal foundations for this to happen in away that is acceptable to all.
More specifically:
1) Blockchain helps us create a newvirtual entity that is trusted to accessmedical data on behalf of end con-sumers; for instance, this entity istrusted to access private healthcaredata stored on Dropbox and Fitbit.
Why a virtual entity? Because we havealready established that there is noreal one (person, people or company)
who is trusted by all to centrallyhandle such data, and so we need onethat is created by the Blockchain andwhose actions are constrained by therules of the smart contract.
2) Blockchain enforces this very simple,yet powerful rule: medical data can beaccessed if and only if two entitiesagree: the requester (e.g. an insurer)and the owner (i.e. the consumer); otherwise the request is denied.
Next: Build a communitySo, yes, it can be done quite nicely onBlockchain. Next, we need to thinkabout how it can be owned and managed so that end customers andregulators can fully trust it, and wecan leverage it to provide value-addingservices. We are beginning to reachout into the insurance industry, withthe intention of forming a consortiumthat can build and operate an openindustry-wide platform. Later, a foun-dation or the like could be set up,sharing control with consumer protec-tion experts and regulators.
Under the best of circumstances, thiswill take a while. By then, distributedanalytics (sending the algorithm to the
data instead of pulling the data to thealgorithm), will have taken hold andwe will be able to run analyses onwhole risk portfolios, with specificconsent by individual consumers,without having to own the data.
And what will all that mean for us? We will be able to have a smart app onour mobiles that walks us throughcovering our insurance needs in tenminutes every January. And we willknow what of our data powers it, thatwe allowed it, and that the data won’tbe (mis)used elsewhere.
And in my insurance job life, I can geton with my work without being afraidof stumbling into non-compliancebecause of a legal change somewherethat I just had the misfortune to miss.I might even get an easier time withregulators. Because, with full trans-parency and control for the consumer,they might just find they can relax abit, too.
Daniel ThyssenBusiness Partner & Digital Transformation Lead, EMEASwiss Re Life & Health
Alessandro SorniottiResearcher in security and cryptographyIBM Research – Zurichhttp://www.swissre.com/reinsurance/insurers/life_health/https://www.zurich.ibm.com/
7
ConsortiumB4S platform
Consumer Insurer
Regulator
Sensitive data
Identity provider
Blockchain for Sensitive Data
8
Blockchain insurance set to change the industry
In the view of the European Insurance and Occupa-tional Pensions Authority (EIOPA), “all stages of theinsurance value chain are being impacted by
InsurTech and more broadly digitalisation. In a round-table organised by EIOPA during April 2017, we find outthat, “insurance products are increasingly capable ofbeing purchased online, including through smart-phones that allow such purchases at any time andfrom any place.”
For example, we find out that Artificial Intelligence is atechnology with tremendous potential in insurance,especially concerning the areas of fraud detection andclaims management. In addition, we discover thatBlockchain in the world of insurance is constantlygrowing and therefore also has much potential, partic-ularly in commercial lines, the re-insurance businessand around intra-group transactions.
“Blockchain is likely to be first implemented incommercial lines than in personal lines, since the
former are not affected by privacy issues such as theright to be forgotten recognised in the GDPR, whichis at odds with the immutability of Blockchain.”
New technologies, including Peer-to-peer (P2P) insur-ance, have the potential to significantly reshape theinsurance landscape in the future. As part of thisroundtable, the second break-out session underlinedboth Blockchain and smart contracts. Blockchain is atype of distributed ledger technology we find out, thatis “characterised as a digital, chronologically updated,distributed and cryptographically sealed ledger oftransactions.”
Financial services We also learn that Blockchain technology could signifi-cantly disrupt the financial services sector (and other
sectors), as it might remove some “middle men”, as wellas by reducing data redundancy, given that all the datawould be stored in a single distributed database. Thesession also detailed examples of new use cases forBlockchain, such as European insurance and reinsuranceundertakings, as the extracts below explain.
“New use cases for Blockchains are constantly emerg-ing, underlining the nascent state of this field. Duringthe break-out sessions, other use cases discussedincluded examples around identity or document man-agement, where Blockchain could enable the automa-tion of complex verification processes allowing theprecise identification of an entity, person or documentin the Blockchain. Blockchain could also be used in thearea of regulatory reporting (RegTech), as well as forimproving the recognition of claims history statements(which are used to calculate no-claims bonuses). It may offer innovative ways to complement or replacepaper-based workflows.
“Blockchain is likely to be first implemented in com-mercial lines than in personal lines, since the former
Open Access Government’s Jonathan Miles explores the tremendous potential ofBlockchain in the European insurance industry
BLOCKCHAIN, INNOVATION & GROWTH
9
are not affected by privacy issues such as the right tobe forgotten recognised in the GDPR, which is at oddswith the immutability of Blockchain. Blockchain hasalso great potential in the re-insurance business andfor risk transfers in intra-group transactions; this is theapproach that is being tested by a private Blockchainconsortium of large European insurance and reinsur-ance undertakings.”1
“Insurance products are increasingly capable ofbeing purchased online, including through
smartphones that allow such purchases at any time and from any place.”
Finally, the session explored the role that regulatoryauthorities could play in the world Blockchain. “Inpublic Blockchains, supervisors may need to focus ona range of different issues, such as the role of minersand nodes, or security and privacy challenges. Someparticipants also noted that regulatory authoritiescould also consider addressing some of the legislativebarriers preventing the implementation of Blockchain”we find out.
In conclusion, the key findings around Blockchain fromthe EIOPA InsurTech Roundtable were that its use ininsurance is still limited, but is showing potential. It islikely that Blockchain will be implemented first of all incommercial lines, in the reinsurance business and forintra-group transactions. ■
1 https://eiopa.europa.eu/Publications/Reports/08.0_EIOPA-BoS17-
165_EIOPA_InsurTech_Roundtable_summary.pdf
Jonathan MilesEditorOpen Access GovernmentTel: +44 (0)1270 502 874www.openaccessgovernment.orgwww.twitter.com/OpenAccessGov
BLOCKCHAIN, INNOVATION & GROWTH
10
The 10-year framework of 6 programmes on sus-tainable consumption and production patterns(10YFP) is a global framework of action to enhance
international cooperation and to accelerate the shifttowards sustainable consumption and production (SCP),in both developed and developing countries.
At the United Nations Conference on SustainableDevelopment (Rio+20) in 2012, heads of state adoptedthe 10-Year Framework of Programmes on sustainableconsumption and production patterns (10YFP), a globalframework for action to accelerate the shift towardsSCP in both developed and developing countries.
One of the programmes within 10YFP is the sustainablefood systems programme (SFS), for which James Lomaxis a focal point, who starts the interview by revealingthat this aspect of the UN’s work was very much aimedat bringing these ideas into policy-making. He then tellsus about the concrete activities of the SFS programme,in his own words.
“The SFS programme is there to address the fact thatcurrent food and agriculture systems – from produc-tion to consumption are failing in many ways. Forexample, in some parts of the world they are leavingpeople hungry whereas in some places, obese andeverything in between. At the same time, the foodsystem causes much environmental degradation sowithin that brief, UN Environment is working on theactivities within the SFS programme’s 5 themes.
“The first theme is around getting people to eatbetter, which could be described as sustainable nutrition. But what does that mean? It means morebalanced diets and with less animal protein, – how toencourage people to move away from consumingprocessed foods and also to choose sustainablygrown foods. Together this would mean more sustain-able diets that are good for people and for planet. Thesecond point is around reducing food losses andwaste, indeed as you know 30% of food produced itnot eaten.
James Lomax from the Economy Division at UN Environment offers his thoughts on the policy priorities for global food systems
Linking consumption and production
BLOCKCHAIN, INNOVATION & GROWTH
11
“The third point is about sustainable supply chains andvalue, so how can they be more efficient and how canwe bring in more sustainable markets to farmers? Thefourth theme which is linked to the third, is around agri-culture and how can we make this sector more sustain-able and encourage farmers to adopt more sustainablepractices.
“The fifth is a more overarching theme, which concernsenabling conditions and how to make food and agricul-ture policy-making more integrated. How can we bringin health practitioners into discussions about food pro-duction? How do we make food sector governancebetter from a sustainability angle? While it is all-encom-passing – if all these things are done in the right way –then we can create a more transformative agenda.”
“The SFS programme is there to address the factthat current food and agriculture systems – fromproduction to consumption are failing in many ways.For example, in some parts of the world they areleaving people hungry whereas in some places,
obese and everything in between.”
Agriculture Elaborating on sustainability in terms of the processfrom farm to fork, Lomax explains that policy makersat local and national level are not thinking in a cross-cutting way. For example, there is much silo thinkingbetween agriculture and food policy makers, that pre-vent the development of holistic solutions and activi-ties that positively impact agriculture, environment,business and human health.
Lomax then offers his thoughts on the need for multi-stakeholder action and feeding this into policy makingby the public and private sectors. For example, how canfarmers be brought into discussions, but also with theprivate sector and NGOs convened by governments?
Looking back to the five themes, Lomax then under-lines that if consumers can demand more diverse andbalanced food, then that will have an impact on thesupply chain. He goes on tell us more about this.
“It will change the way retailers produce and markettheir food to consumers, so from the food waste point
of view for example, retailers have a great influence onthe way consumers value food and how it is consumedat home.
“Therefore, at UN Environment, we want there to be apositive influence from the food supply chain to con-sumers, so they understand that bad diets and foodwaste is bad for them, the planet and when it comesto food waste is bad for their pocket too.”
In closing, the conversation moves towards the tech-nology angle in global supply chains, indeed Lomax iskeen to expand this interesting point.
“Technology can play a very positive role and when itcomes to efficiencies and food waste, it’s very impor-tant. However sometimes supply chains can be overcomplicated, and technology plays a part in that – thehorsemeat scandal is a good example where the dis-tance between the consumer and production becametoo far to be traceable.”
“The connection between the way food is both consumed and produced therefore becomes too farremoved. This make it difficult for people to under-stand the inherent value it has. I think if we address thevalues we have around food, then things would changedramatically.
“There are a lot of technologies out there which arevery good when it comes to efficiencies and price, butI think we have to look at quality over quantity and iffood is priced correctly.” ■
James LomaxProgramme management officer (food systems and agriculture)Cities Unit, Energy and Climate BranchEconomy Division, UN Environment Tel: +33 1 44 37 14 [email protected]://www.un.org/www.twitter.com/10YFP
BLOCKCHAIN, INNOVATION & GROWTH
Blockchain is the new internet.2017 has been explosive forthe blockchain sector, with the
technology permeating every possibleindustry, with every country and everycorporation talking about it. Crypto -currencies have taken financial marketsby storm, with no institutional investorwithout sharp feelings about them:some calling them the future, othersa scam. With countless Initial CoinOfferings (ICO) bootstrapping start-ups,blockchains and protocols overtakingVenture Capital by a factor of 3 withinonly months of reaching its volume. The
market capitalisation of the industrygrew from $16 to $160 billion USD justthis year alone. Following the explosivegrowth in the first half of 2017, theregulations started coming in fromall parts of the world in the secondhalf of 2017 to try and reign in thebooming sector.
Being a victim of its own success,blockchain also attracted a largenumber of opportunists and fraud-sters, who abuse the unregulatedmarkets and the powerful technology,as a result leading to a lot of publicand financial sector stakeholderstaking a very careful approach when itcomes to using the blockchain. Mostof them simply united into large consortia to build their own privatedistributed databases, which they call blockchains. When it comes tocommunity-driven, public blockchains,they have to constantly prove them-selves to be legitimate stakeholders inorder to interact with the establishedindustrial and financial players.
Ambrosus: Pioneering legitimacyand rejecting tens of millions ofdollarsIn the flurry of Initial Coin Offerings in2017, most of which were conductedwith little else than a white paper and a flashy website, and many ofwhich broke countless regulations andpractices, Ambrosus was different fromthe very outset. Emerging from thetwo leading Swiss technology clusters,the Crypto Valley in Zug and EPFLInnovation Park in Lausanne, Ambro-sus secured both the financial backingand operational support from thepublic-sector entities in Switzerland; itboasted an official partnership withthe United Nations 10YFP, responsiblefor implementation of SustainableDevelopment Goals, and an endorse-ment from EIT Food.
The team includes the ex-Director ofthe biggest public sector R&D clusteron food and nutrition in Switzerland,a former project lead at the UN, an ex-Vice President at JP Morgan and
Angel Versetti, CEO of Ambrosus discusses the world’s firstblockchain ecosystem for supply chains and global trade
Ambrosus: Digitalising the Global Trade with Blockchain
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PROFILE
several world-prominent professorsand researchers from Harvard, MIT,EPFL and ETH Zurich, working togetherwith Parity Technologies, a pioneer inthe blockchain development, led bythe Founder of Ethereum, Dr GavinWood. The advisory board includessuch prominent people as ex-CIO ofUBS and President of the CryptoValley, Oliver Bussmann, Chairman ofLDJ Capital David Drake, ManagingPartner at Kenetic Capital Jehan Chu,and many other leading forces in thefinance and technology sector.
With such a line-up, partnerships andreal technology, Ambrosus already differentiated itself from any other ICOor TGE in 2017. The way it conductedits Token Generation Event was alsoremarkable, with over €32 million col-lected at the time of writing. Ambrosuswas the first major blockchain to intro-duce a comprehensive Know-Your-Customer (KYC) policy.
With anonymity being treasured bymany parts of the community, manymembers did not pass the stringentrequirements. Ambrosus had to rejectover €35 million, something that wasmet with shock and disbelief in thecrypto-industry, which wondered whywould anyone raising funds, give upsuch a big amount just to stay compli-ant. This is the price Ambrosus waspaying in order to stay compliant andsignal to other players in the industry –that this is the way the process wouldhave to be done.
And soon enough, under the regulatorypressure, the compliant way to conductICOs, paved by Ambrosus, became thenew norm in the industry, althoughimplemented by many half-heartedly,to allow as much money as possible topour in. The compliance and legitimacyof Ambrosus is what resulted in a big
outreach from various policymakers,both in Europe and in other regions toreach out and see how Ambrosuscould help transform supply chainsand trade in those regions. Witnessingthe way Ambrosus stands by its valuesgave them confidence to chooseAmbrosus as partner for their pilotprojects.
Why connecting tiny sensors toblockchain is a huge dealAmbrosus combines high-tech sensors,blockchain and distributed open-sourcesoftware to build a universally verifi-able, community-driven ecosystem toassure the quality, safety & origins ofproducts. Located in Switzerland, themost innovative country in the worldfor 6 years running, Ambrosus inno-vates within the innovation space of blockchain. It introduced Amber,the world’s first data-bonded token, towhich sensor-generated readings areassigned through an immutable ledger.It created an architecture that permitscompliance, quality control and auditsto be automated by smart contracts,creating value for both the privatesector and the governments.
If integrated in the supply chains,Ambrosus can monitor the flows ofgoods, payments and storage condi-tions, bringing transparency andaccountability to the global commerce.It can also ensure that imports andexports do correspond to norms andregulations by serving as an indepen-dent verification mechanism.
The key to making this vision work isto turn sensors into oracles, thetrusted source of information for theblockchain. Coupling the integrity ofsensor-generated data with theblockchain consensus mechanismresults in the ability to create thetruthful digital reflection of the realworld on the blockchain. The implica-tions are significant for the economy,because to build distributed economy,blockchain alone will not be enough.Linking it to billions of Internet ofthings (IoT) devices and sensors pro-ducing quadrillions of readings will bekey for any smart city or any economythat wants to run on the blockchain.Ambrosus already works on integra-tion of various third-party sensors intoits blockchain - through APIs and gate-ways and is applying all its collectivebrainpower to the ultimate quest forthe scalability of its network and seam-less integration into IoT protocols.
Applications and Use-Cases ofAmbrosus ecosystemAmbrosus is a general-purpose solu-tion, providing a trusted backbone tolink products to data. On top of thisbackbone various layers and protocolscan be built, enabling functionalitiesderived from Ambrosus blockchain,such as data analytics, data visualisa-tion, decentralised storage, paymentsettlements mechanisms, real-timeaudits and process management andtraceability. By keeping the blockchainopen-source, having various APIs anddeveloper tools in place and leveraging
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the digital token Amber, Ambrosuscreates opportunities for developersto integrate existing software or buildnew one, instantly monetising thetraction through a digital token, Amber,which serves as the unit of exchangeand as fuel on Ambrosus blockchain.Amber enables participants to derivevalue from the early adoption of thenetwork, given the fixed limited supplyof Amber. The value of adoption ofAmbrosus protocol is thus threefold:short-term marketing boost, medium-term value from rising value fromadoption of the network, long-termvalue from creating a public good, a universal repository of data for the global commerce and intelligentsupply chains.
The initial applications that werelaunched in Ambrosus ecosystem,include a peer-to-peer marketplacefor quality assured products, where anytwo parties can enter a commercialdeal, with quality parameters forproducts stipulated within the self-executable contract. Another application
has been the supply chain managementsoftware, where all the processesfrom sourcing to processing to distri-bution could be monitored and managed through smart contracts,permitting automation of the pro-cesses. We are currently working oncommodities barter platform, wheretokenised commodities with assuredquality can be exchanged securely.
Early success and adoptionof AmbrosusAmbrosus has developed use-casesfor a wide variety of markets: food & beverages, pharmaceuticals, com-modities and luxury items. For eachmarket, the supply chain will haveunique features, which can bereflected in customised smart contractsand distributed software. We have pub-lished detailed reports on protectinglabels of products, assuring qualityand tracing origins. The sensor systemcan monitor external environment(e.g. temperature, humidity, pressure,location) and internal parameters(structure of tissue, composition,
presence of foreign bodies, chemicalanalysis, DNA analysis).
Ambrosus has become the most popular blockchain in the supply chaindomain, with participants in its TokenGenerating Event hailing from over100 countries and contributing over€32 million. Worldwide community ofdevelopers, engineers, enthusiastsand supporters of Ambrosus exceeds50 thousand people, creating a livelyand dynamic ecosystem.
Ambrosus has been invited to over 30top-tier events this year, includingbeing selected by Pioneers Festival,Start Summit, Hello Tomorrow andmany others; it has been featured inover 100 media articles includingNasdaq, Vice Media, Finance Magnatesand Food Navigator. Ambrosus hasover 25 existing partnerships and over100 in negotiation, with the goal tocreate a multi-stakeholder consortiumfor its public blockchain for supplychains and global commerce.
We welcome any partners and collab-orators in our quest to transform theglobal trade.
Angel VersettiCEO & Co-FounderAmbrosusGotthardstrasse 26, 6300, Zug, SwitzerlandEPFL Innovaiton Park, Station 13, 1015, Lausanne, [email protected]
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The publication of the white paper, “Bitcoin: a peerto peer cash system”1 in October 2008 by themysterious Satoshi Nakamoto (a fake identity),
will be seen in the history of technologies as a disrup-tive milestone. By combining technologies which wereknown for years, the author created the first virtual cur-rency, and a technology – blockchain – which enabledexchange of e-money without the usual unavoidableintermediaries: banks.
Developers and entrepreneurs then saw numerousnew opportunities in the financial sector, especially asnew regulations opened new possibilities and businessmodels: RegTech, peer to peer payments, peer to peerlending, exchange of securities, crowdfunding, initialcoin offerings, debt trading, etc.
People soon realised that the broader family of tech-
nologies called ‘distributed ledger technologies’ (ofwhich blockchains are a subset) could be used not onlyto build virtual currencies or offer new financial serv-ices, but by exploiting their characteristics, explore newpossibilities in many different areas and industries,such as the Internet of Things, energy, health, identitymanagement, taxation, e-government, management ofintellectual property and copyright, smart homes andcities. These technologies provide immutability, securityand privacy of the data through encryption, whileoffering their ubiquitous distribution to all nodes.
The European Research and Innovation communitydidn’t wait long to propose, in the frame of the EU Horizon 20202 programme, blockchain based researchprojects. D-Cent3 (Decentralised Citizens ENgagementTechnologies) project, which was the first of its kind,was established as early as October 2013. The aim was
Benoît Abeloos, Policy Officer at the European Commission gives a compelling glimpse into how virtual currency could affect the economy
Blockchain: what is in it for theEuropean economy?
BLOCKCHAIN, INNOVATION & GROWTH
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to actively foster open source and distributed plat-forms to encourage direct democracy and economicempowerment.
In the same vein, Decode4 provides tools that put indi-viduals in control of whether they keep their personaldata private or share it for the public good. MyHealth-MyData5 explores the very important political objectiveto empower patients to manage their health data.Bloomen6 provides an innovative way for content creation, sharing, monetisation and copyrighting, andsymbIoTe7 a single mobile application to interact withdifferent IoT platforms. The next Horizon 2020 frame-work programme will, from 2018 to 2020, provide moreopportunities, through calls for proposals, to innovatewith blockchain, for example, in e-government, FinTech,Next Generation Internet, IoT, Smart Homes or Media.
New policiesThe Commission is also exploring the use of distributedledger technologies in relation to its policies. The firstinvestigations concern the possible creation of a finan-cial transparency gateway, with a pilot being tested, toimprove the efficiency of financial data reporting, or taxand customs data collection. Application of blockchainto the CO2 emission trading system, or the circulareconomy, could also be considered.
In this new reality and a digital market where thestance ‘the winner takes it all’ has too often become astandard, it is important for the European Commissionto put in place policies avoiding the emergence of defacto standards, which may limit competition and keepcustomers, (public and private) locked with single vendors. Moreover, it will be very difficult for serviceproviders to develop applications and services whichcan seamlessly operate on different platforms if theyare proprietary.
These are the reasons why the European Commission,as part of the Digital Single Market strategy, is active infostering the development and the adoption of inter-national standards. It has established a liaison with theISO Technical Committee 307 on Blockchain and Distributed Ledger Technologies, which has been setup recently. The Commission organised a policy andstandardisation workshop8 on 13 September 2017 withEuropean stakeholders representing the industry, governments, standards development organisations,citizens, and NGOs. European Standardisation Organ-
isations9 have been approached to take a leadershiprole to identify EU specificities with regards toBlockchain, and produce a white paper.
Is blockchain going to deliver on its promises? Is“blockchain going to help to end hunger” as I saw on aslide recently? Is it going to be the new internet? Is abubble being formed, with the frenzy of ICOs reachingsummits of capital raising? Aren’t we on the top of ahype cycle where inflated expectations are culminating?Are we going to soon reach the trough of disillusion?
All these statements probably have their part of verac-ity. The truth is that we need to validate the pertinenceof blockchain for every kind of use we can envisage,compared to existing technologies. New businessmodels need to be validated by real businesses andpilot projects. Lawyers and policy makers need to carefully assess several legal questions. Is the apparentcontradiction between blockchain immutability andthe right to be forgotten a real issue? Is the solutiontechnical or in the interpretation of law? Can smartcontracts be legally enforced, stopped, or reversedwithout changing the laws and/or the technology?What is the appropriate governance for blockchain?
The Commission will launch a European BlockchainObservatory and Forum10 (early 2018) to help answerthese questions and explore the unknowns of this fascinating domain. It will also prepare policy initiativesto help EU start-ups and established companies toseize the opportunities. And grow. ■
1 https://bitcoin.org/bitcoin.pdf2 http://ec.europa.eu/programmes/horizon2020/3 https://dcentproject.eu/4 https://www.decodeproject.eu/5 http://www.myhealthmydata.eu/6 http://cordis.europa.eu/project/rcn/211092_en.html7 https://www.symbiote-h2020.eu/8 https://ec.europa.eu/digital-single-market/en/news/blockchain-and-
distributed-ledger-technology-policy-and-standardisation-workshop9 CEN, CENELEC and ETSI10 https://ec.europa.eu/digital-single-market/en/news/eu-blockchain-
observatory-and-forum
Benoît AbeloosPolicy Officer, ICT InnovationEuropean Commission, Digital Single Markethttps://ec.europa.eu/digital-single-market/en/benoit-abelooswww.twitter.com/DSMeu
BLOCKCHAIN, INNOVATION & GROWTH
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The Finnish economy is in a phase of rapidgrowth. In 2017 the rate of economic growth willreach 3% after which the projected growth rate
slows down. In 2018 and 2019 GDP is expected to grow2.1% and 1.8% respectively, which are above the esti-mated potential growth rate. Economic growth basedon a strong increase in labour productivity will keep theimprovement in the employment moderate. Rapidgrowth increases tax revenues and strengthens publicfinances, which remains still in a deficit because ofstructural factors and general government debt to GDPratio lowers but only temporary.
Over the next few years, economic activity will bedriven by both domestic and foreign demand. The patterns differ clearly, however. Private consumptionand to some extent investment demand growth will
slow, but exports will pick up. Improving globaldemand and business cost competitiveness will boostgrowth prospects for exports.
Household consumption demand will be hampered bysubdued purchasing power. Investment growth will beheld back by a slowdown in housing constructiongrowth but accelerated by major production-relatedinvestment projects.
Globalisation and specialisation have led to a fragmen-tation of value chains, which means that the manufac-ture of individual end products is distributed acrossseveral countries. Intermediates exports as a propor-tion of total exports have consequently increased. Theglobalisation of value chains is directly reflected intrade structures.
Finland’s Ministry of Finance lifts the lid on the current phase of rapid growth of the Finnish economy and their expectations for the same in 2018
The outlook of the Finnish economy
BLOCKCHAIN, INNOVATION & GROWTH
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Finnish exports consist predominantly of intermedi-ates, which are processed into final products or inte-grated as part of larger installations in some othercountry. Intermediates exports account for aroundtwo-thirds of total Finnish exports. This is a commonfeature; intermediates are an important component ofexports in other advanced economies, too.
The growth of foreign value added in exports is indica-tive of a more specialised and internationally moreinterconnected production structure. The increasedshare of foreign value added undermines the potential
for export-driven GDP growth: not all streams of exportrevenue contribute to GDP growth in the same way.
In the medium term economic growth is projected toreturn to the level of potential output growth, that is, alittle over 1%. The slowness of potential growth is dueto structural factors in the economy. On the one hand,the shrinking of the working-age population and thepersistence of relatively high structural unemploymentmaintain zero growth in labour input despite the moreactive participation of older age cohorts in particularin the labour market.
Project ReCon Project ReCon is essentially a research project that concerns the implications and applications of (primarily)non-currency blockchain technologies, as well as raising awareness of the possibilities of blockchain technology,especially in Finland.
It started its life in September 2016, with a view to explore strange new technologies, to seek out new ideas andapplications, and to explore where very few have gone before. The team consists of 4 researchers, 4 companiesand the Ministry of Finance in Finland, the latter of which has set up a group of experts to enhance and monitorthe conditions in which financial services technologies can evolve. The group’s coordinator is ministerial adviser,Miki Kuusinen.
Back in December 2016, the Bank of Finland cooperated with the Ministry of Finance in Finland, a seminar todiscuss the possibilities that blockchain and distributed ledger technologies in different sectors of society.
At this event, 10 projects were presented, with a view of developing applications to harness blockchain technol-ogy for the needs of public administration, the financial sector and the needs of industry. In his introductoryremarks, Governor Erkki Liikanen highlighted the Bank of Finland’s vital role as catalyst and overseer of paymentand financial systems.
“Our task is to ensure the reliability and efficiency of the payment system and the overall financial system andto participate in their development. Research into, and support of, new innovations shaping the financial sectorconstitute part of this work, Liikanen said.”
The aims of the project include demystifying the blockchain. Producing actionable, understandable knowledgeabout blockchain technologies and their applications for entrepreneurs, decision-makers and the public is akey aim of the project. It also aims to demonstrate how blockchain technologies might be fruitfully used bothfor the betterment of society, as well as business applications.
In addition, the project also aims to spark discussion, which includes raising public awareness concerning theimpacts of new technologies and their development. The project also intends to educate, train and connectinterested people and parties in Finland and further afield.
Finally, the project also emphasizes producing quality academic research to find out more about the implicationsof blockchain from organisational, business, management and societal perspectives.
BLOCKCHAIN, INNOVATION & GROWTH
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On the other hand, productivity growth has slowed asthe output of high-productivity sectors has declinedsignificantly and the overall structure of the economyhas shifted towards services. In addition, the lowinvestment rate that has continued for several yearshas slowed the generation of new productive capital.
“In 2018 and 2019 GDP is expected to grow 2.1% and 1.8% respectively, which are above the estimated potential growth rate. Economicgrowth based on a strong increase in labourproductivity will keep the improvement in the
employment moderate.”
Growth and effects The continuing reasonably rapid rate of GDP growthwill have a positive effect on employment and at thesame time the number of unemployed persons willdecrease. The number of employed persons is pro-jected to increase by average 0.7% p.a. and will bringthe employment rate to 70.5% in 2019.
The activation of persons outside the labour force to
become jobseekers is likely to slow the decline in theunemployment rate. This indicates a rather high rate ofunemployment throughout the forecast period, despitestronger economic growth. The unemployment rate isexpected to fall to 7.8% in 2019.
The number of the long-term unemployed decreasedrapidly in early 2017 across all age groups. Due tostrengthening economic growth, the number of thelong-term and the structurally unemployed can beexpected to decrease further in the next few years,albeit more slowly than in recent months. The numberof the structurally unemployed is still high, almost200,000 persons according to the employment servicestatistics of the Ministry of Economic Affairs andEmployment, which will contribute to slow the reductionin the unemployment rate in the next few years.
The economic growth outlook for the 2017–2019 is farmore positive than in previous years, but the generalconditions for economic growth and the structuresdetermining these have not, however, changed toincrease the economy’s growth potential.
BLOCKCHAIN, INNOVATION & GROWTH
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The long-awaited economic growth is also improvingthe state of general government finances. Tax revenueis increasing and the decline in unemployment isreducing unemployment expenditure. The economicrebound does not, however, eliminate the structuralfactors weakening general government finances, withthe most important of these being population ageing,which increases growth in pension, care and nursingexpenditure and therefore slows down improvementsin general government finances.
Despite the economic recovery, general governmentexpenditure clearly exceeds revenue. While robust GDPgrowth will set the debt ratio on a downward trajectoryin the next few years, central government indebtednesswill still continue in 2021.
To complement the debt objective, the target of theGDP-to-debt ratio levelling off by the end of the gov-ernment term 2019 and living on debt coming to anend in 2021, the government has set specific targetsfor the general government budgetary position. Forthe targets to be reached, general government
finances will need to be more or less in balance at theend of the government term.
To achieve the targets and to ensure the long-term stability of general government finances, it is importantthat the revenue generated by economic recovery beused to balance general government finances andreduce central government borrowing. ■
Marja Paavonen Head of public finances
Mikko SpolanderHead of department
Jukka RailavoHead of macro forecasting Ministry of Finance, FinlandTel: +358 295 [email protected] http://vm.fi/en/frontpagewww.twitter.com/VMuutiset
BLOCKCHAIN, INNOVATION & GROWTH
Trust in the digital age is broken.Can you remember the last timeyou got insurance or bought
something from a private person fromanother EU country to yours? Or whenwas the last time you signed a contractor gave a power of attorney online?The chances are that you rarely have.Although our private and businesslives have become increasingly digital,we still seem to lack mechanisms toconduct these common interactionsonline. The underlying reason ofcourse is that the internet was notbuilt with trusted interactions in mind.Online nobody can verify what you sayor the information you share is true.
As the amount of data generated bypeople, organisations and devicescontinues to grow at an exponentialpace – the IDC predicts a ten-foldincrease in data generated from nowto 2025 – it is becoming essential thatwe have practical means to manageand share our data. The regulators inEurope have also reacted to this needby launching regulatory initiativessuch as Payment Services Directive(PSD2), General Data Protection Reg-ulation (GDPR) and ePrivacy directive,which share the common ambition ofempowering citizens to have access totheir data as well as being able to con-trol and share it. Through these initia-tives, the EU aims to actively enforcedata protection rules and create afairer platform for data protection, thatsupports consumers and businesseswhilst promoting innovation.
Data verifiability remains anissue in digital interactions GDPR and PSD2 regulations are signif-icant steps to the right direction ofproviding identity holders access andcontrol over their data. Both focus onenabling data portability, with the goalof enabling new digital business inno-vations. As such, they will fuel disrup-tion in the digital industry by openingexisting data silos by allowing cus-tomers to migrate their data to a newservice provider. As Erkki Poutiainen,chairman of the EBA Clearing Boardmentions, PSD2 together with newtechnology can revolutionise the payment landscape and even bankingas we know it.
While gaining access to data is anecessity for opening up competi-tion, more is required. The key issuein data portability is not only thatdata is shareable, but also that thedata retains its verifiability. Justimagine receiving a power of attor-ney digitally but not being able toprove its validity. Clearly verifiabilityis the crucial element that retains thevalue of data and as such is of criticalimportance.
Digital identities for people andorganisations, as well as verifiabledata are the fundamentals needed fordigital trust interactions. Portable dig-ital identity and data will enable us tocreate more equal and inclusive soci-ety by allowing anyone to participatein the new economy.
MyData and the newdecentralised internet holdpromise for solving the trustproblem Recently, a Nordic model for human-centred personal data managementand processing called MyData hasraised thoughts about how data couldbe managed with identity owner at thecentre. MyData brings a fundamentalchange in how we view and use data.It is an ideology, driven by three mainprinciples of:
1) Identity owner centric control andprivacy;
2) Usable data. Data must be technicallyeasy to access in a machine readableopen format accessible via standard-ised interfaces and;
3) Open business environment.MyData proposes a new identity ownercentric approach in exchanging data. Inthis concept the identity owner has asingle hub for data management. Viathe hub the identity owner can giveservices the authority to access anduse data.
A key prerequisite for all the regula-tions and models to become trulyeffective – is that a new infrastructureparadigm for managing identities andsharing verifiable data is needed. Evenif every person and organisation hasan identity, we still fail to replicate thisonline. This is mainly due to identitiesbeing fragmented over various data
Markus Hautala and Antti Kettunen at Tieto reveal how Blockchain has rapidlyemerged as one of the disrupting technologies of the digital age
Human-centred approach to data leads the way to a smarter digital age
22
PROFILE
silos. MyData and the regulations aimto remove the silos, but this is still notenough, since they don’t provide theinfrastructure which would foster truecollaboration and competition, thatare needed for the market to grow.
The rise of decentralised solutions,such as blockchain and other dis-tributed ledger technologies (DLT),have given rise to new types of ecosys-tems where businesses, public organ-isations and individuals can form trustrelationships without involving mid-dlemen. These decentralised solutionshold also great promise for solving theidentity and integrity issues prevalentin sharing and trusting on data.
Decentralised identity networkcan deliver the internet’smissing identity layer One of the most promising initiativesaiming to solve the challenge of beingable to trust information exchangedonline is Sovrin. Sovrin is a global,decentralised identity network thatdelivers the Internet’s missing identitylayer. Sovrin allows people and organ-isations to create portable, digitalidentities which they control.
In Sovrin, the identity holder formssecure digital connections with entities
(organisations, individuals or things)that can provide information about theidentity holder. This information canliterally be anything such as a personalidentification number, home address,power of attorney or – in the context ofGDPR and PSD2 – customers consentto a service provider. This informationcan then be shared forward by theidentity holder to a party that requiresthese proofs. This provides for all kindsof rich digital interactions: Know-Your-Customer, contract and transactionsigning (B2B, B2C, G2C), permits, assetownership, and so on.
Towards a smarter societycreated with new technology Blockchain has rapidly emerged asone of the disrupting technologies ofthe 21st century. We at Tieto believethat it will be one of the key ingredi-ents of success for our customers’future business and that it can be har-nessed to build more equal, inclusiveand smarter societies. With this inmind, Tieto is working on variousfronts to open up current data silosfor the benefit of Nordic organisationsand citizens.
Tieto is currently looking into how to•utilise blockchain technology withinhealthcare. Together with California-
Markus HautalaHead of Blockchain solutions
Antti KettunenSolution consultant Tietowww.tieto.comwww.twitter.com/TietoCorp
23
based company Gem, the companyis working on how to link geneticdata stored in biobanks, personalhealth records at hospitals and indi-vidual citizens to bring the benefit ofpanomics to diagnostics and treat-ment scenarios.
Tieto and Evernym, the leading•developer of self-sovereign identitytechnologies in October 2017launched a Sovrin Pilot Program,aiming to introduce the Sovrin iden-tity platform to Nordic customers.The helps businesses and publicorganisations better manage digitalinteractions, by increasing trust andreducing costs with the help of thedistributed identity network. Themulti-party initiative aims to rapidlyvalidate and implement commer-cially viable solutions that leveragethis global network.
By its design distributed ledger tech-nology introduces a new trust modelfor ecosystem collaboration. To thisend, Tieto is excited to explore newuse cases utilising the technology inclose collaboration with its customersand partners.
Read more about our thoughts on blockchain:
Self-sovereign identity delivers MyData in practice
It’s your data. Take it back. Unlocking your health data with
blockchain
In a forward-looking research projectat Aalto University’s Business Schoolin Helsinki, together with partner
companies and public organisationssuch as the Finance Ministry of Finland,we are studying one of the futurechange drivers, blockchain technology.While high on the hypecurve, the busi-ness and societal implications are notyet visible despite a lot of ongoingexperimentation ranging from healthcare, finance, and logistics.
The members of the ReCon researchproject, or “Blockchain: Disruption ofBusiness Systems and Reconfigurationof Trust” are particularly interested inquestions such as how distributed,open technologies may transform theways in which people interact. Sociallyconstituted, comparative trust scoresare familiar from internet sites rangingfrom amazon.com to the dark net. Werely on our fellow people’s evaluations.Historically, or before the Internet, werelied on institutional sources of trust –the government license to operate orthe family network. Or we took the risk.
Trust in cryptocurrency A cryptocurrency like a bitcoin requiresno trust: confidential buying and sell-ing is possible without knowing theother parties at all. This is the uniquecharacteristic behind the blockchaintechnology – it is a way of operating aneconomic system without the neces-sity to have trust among the parties,something that has been consideredessential for all economic activity. A
lack of trust adds substantially to the transaction costs. Therein lies theblockchain revolution.
The Economist magazine called it “thetrust machine”, yet the writers werealso concerned about the large soci-etal implications: “The idea of makingtrust a matter of coding, rather thanof democratic politics, legitimacy andaccountability, is not necessarily anappealing or empowering one.” (Octo-ber 31, 2015, p. 24).
When states, governments, centralbanks become irrelevant, what hap-pens to societies and their founda-tional legitimacy? Any political vacuumis likely filled with other interests. Prof.Lawrence Lessig from Harvard LawSchool in Code and the Commons,1999, p.10, has warned: “To push the
anti-government button is not to teleport us to Eden. When the interestsof government are gone, other inter-ests take their place. Do we know whatthose interests are? And are we so certain they are anything better?” Soblockchain could have some significantsocietal implications, all the way downto the foundations of our societies thatwe need to think through.
Nevertheless, blockchain has veryuseful applications. Trusting blockchainwith our health data has its advan-tages: In the era of data breaches,blockchain appears secure but alsotransparent in terms who has accessedthe data. And of course, there is noneed to carry documents from onehealth care provider to another byhand (as has happened to this authorseveral times)! No wonder many think
Disruption, pivot, 10X change – these words describe current strategic interest ineverything new, but how do we decide the future of blockchain?
The future of blockchain: Learningfrom things yet to happen
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PROFILE
that it is better to have the data on ablockchain, rather than in a nationalhealth institution’s (hackable) servers.
Similarly, blockchain applications couldsave mountains of documents andhundreds of hours required to processthe transport logistics of shipping com-panies. The origins of sensitive goods,such as diamonds can be recorded ona blockchain, and the integrity of thesupply chains, for example whetherfood has been stored properly, can be shown.
And blockchain could save significantcosts in financial transactions. Accord-ing to a McKinsey&Company (seeInternational Monetary Fund, TheInternet of Trust, Finance & Develop-ment, June 2016, 53:2), banks extractan astonishing $1.7 trillion a year, 40%of their revenue, from global paymentservices. Banks and financial institu-tions are currently developing theirown blockchain applications.
However, many issues remain to beworked on. Here are some we at theReCon research project are thinkingabout.
1. The problem of interference: Establish the linkage between a digitaltrade and its value is what blockchainis very good at. However, when thenon-digital world intrudes there is thehuman touch with the messiness ofthe physical world around us. Some-one records a value at a particulartime. Perhaps a sensor will report it.How can we trust that the person, orthe sensoring device, has the rightmeasurement and is honest, or accu-rate, about reporting it? Can we besure there are no vested interestsinterfering with the recording?
2. Blockchain applications (‘use cases’): We are surrounded by technologiesthat perform adequately or evensuperbly solving business and lifeproblems. When is blockchain at itsstrongest? What boundary conditionsare there for using the technologypurposefully and effectively?
“A cryptocurrency like a bitcoinrequires no trust: confidential buyingand selling is possible withoutknowing the other parties at all. Thisis the unique characteristic behindthe blockchain technology – it is away of operating an economic systemwithout the necessity to have trustamong the parties, something that hasbeen considered essential for alleconomic activity.”
For example, blockchain has implica-tions for the Internet of Things- orIndustrie 4.0 - infrastructures throughits smart contract capacities. A cou-pling with machine learning mightmake these capacities particularlypotent, as the system could learn orbe teachable. As a thought experi-ment: Why could cars not only drivethemselves autonomously but alsoact as separate legal units – ‘own’themselves and sell their services asde centralised autonomous organisa-tions? A car might then insure itselfagainst any traffic accidents. Overtime, it might even learn to negotiatebetter priced insurance contractsbased on its stellar driving record!
3. Beyond business: A blockchain-like technology offers apromise for a more inclusive, open,and democratic society. It is a promisethat many feel the Internet failed usand that the blockchain is the new
hope for the future. How can we useblockchain in a way that respects thelegitimacy of our societies and institu-tions, while giving the technology achance to serve its citizen-admirerswith the unique features? Disruptionis excellent, provided the transforma-tion allows for a renewal of our soci-etal constitution in both a respectableand inviting way.
These are examples of the questionswe at the ReCon research project arethinking and experimenting on. Weengage in pilot projects, hackathons,studies, workshops and keynotes. Ourmission is to describe, analyse andexperiment on the potential ofblockchain-like technologies.
Outliers Wanted! We are seeking outliers, people andorganisations that are in the forefrontof learning from things yet to happen,to connect and think with. More infor-mation regarding the ReCon researchteam and our partner organisationscan be found at recon.site.
Prof. Liisa VälikangasAalto University & ReCon Blockchain Research ProjectTel: +358 50 496 [email protected]
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