24 Hot Blockchain Topics

Price Waterhouse Coopers (PWC) defined blockchain as a ‘distributed, decentralised transaction ledger’. Blockchain is also immutable, resilient and secure.

• “Bitcoin”: Although the most popular use case for blockchain is in the financial services many people have the misconception that blockchain is bitcoin, but this is of course not true. Blockchain is not a cryptocurrency, it is the foundation that a cryptocurrency is built on.

• “Regulated”: Blockchain is a technology being adopted by many regulated sectors, such as the Financial Services, but blockchain itself is not currently regulated.

• “Easy to understand”: Blockchain technology is complex, and to a layman, even to a professional, can be rather difficult to understand. We are seeing this as one of the barriers to the speed of blockchain adoption. For those new to the topic, take a look at this ‘Blockchain for Dummies’ webinar.

One of the advantages of blockchain is that it is understood to be 100% secure, however, in 2016 we saw The DAO hacked for $60 million (read more). What does this mean for the future of blockchain security and how will measure be put in place to prevent hacking and threats?

Blockchain is like a complex type of Lego, and it needs to be adapted to fit specific business requirements. Various use cases makes it difficult to have one simple architecture so we will need to create different versions of blockchain applications and architecture that will suit the individual needs of the business/industry.

There are many opportunities and threats in the blockchain space, some of which we have broken down in the diagram below:

First it is important to understand what a smart contract is. Smart contracts are coded, self-executing digital contracts which help you exchange money, property, shares, or anything of value in a transparent, conflict-free way, while avoiding the services of a middleman. Smart contracts can exist without the blockchain but most smart contracts naturally sit on the blockchain layer to enhance traceability and trust.

We all agreed that there are many blockchain use cases in the insurance industry. Improved customer satisfaction is a big opportunity that lies on the blockchain due to the following enablers:

• Automated claims processing
• Removal of middle men and third parties
• All personal data is bought together (no more policy silos)

International payment services have offered the most promising starting point for blockchain from a speed, cost and security point of view. Global payments nowadays take days to settle for a number of reasons, including manual processes and cumbersome regulatory compliance. They also lack transparency and often fail on account of messaging errors. Santander is leading the way here in the UK.

No one owns the blockchain, instead we envisage blockchain being used as the foundation for many different, customisable off-the-shelf solutions from a vast amount of vendors globally. Service providers such as Microsoft and Amazon AWS have already started to deploy Blockchain as a Service.

The most popular blockchain use case to-date is the cryptocurrency, Bitcoin. There are now over 700 cryptocurrencies available but in theory, blockchain technology is not actually required to create one.

Many of the top global banks are adopting blockchain and are heavily investing in research and development. Blockchain promises to optimise and automate all back-end operations.

Some major use cases for the banking sector are customer lending, corporate payments, p2p and cash pooling. The mortgage industry also has a use case for blockchain whereby banks can store valuation data and make issuance of loans much quicker.

But some are cynical – The Bank of England say there will be no banking revolution just yet, and many in our December Meetup claimed there will be no revolution at all if banks continue to buy out their start-up competitors.

Brexit was a hot topic in 2016 and there is a mixed opinion on how it may impact blockchain. Some say that Brexit will not have a huge impact on blockchain as this will give the UK an advantage over the EU; and if the UK continues to lead as a fintech hub then there will be more investment, workforce and business fuelling the economy.  

On the other hand, the UK risk losing some great talent as EU-employees may be reluctant to move to the UK post-Brexit, or UK-based businesses may leave for the EU.

Despite the imminent trigger of Article 50, the UK’s Financial Conduct Authority (FCA) has set up a FinTech incubator set to help fintech and blockchain startups thrive, so for now we predict little change on UK’s blockchain influence.

There are many ways blockchain can be applied within the energy sector. The major one is producing electricity from the comfort of your home, becoming a “prosumer” (see Energy Prosumers & Blockchain Technology). E-mobility is another use case discussed, where you can use the blockchain to share your car-ride with other commuters nearby.

From a business perspective blockchain can be used to store smart meter stats, allowing consumers to know how much money they have spent. Businesses can also use this information to forecast sales and revenue based on the data these smart readers are storing on the blockchain.

“Blockchain is Internet 3.0”. As such there are no set standards as people don’t know what blockchain is fully capable of. Some believe there will be a maximum of two types of blockchain and the rest will be like smaller intranets.

Regardless, it’s becoming apparent that blockchain will be available open source for anyone to adapt and customise to suit their own needs (with R3 recently releasing the source code to their new platform Corda).

When it comes to ‘Knowing Your Customer’ (KYC) and Anti-Money Laundering (AML) use cases the blockchain will drastically reduce operational costs by auto-verifying an individual’s identification using a wide range of available data sources.

As a result, blockchain can streamline account opening process and reduce fees, fraud and time spent on verifying identification (hence why fully digital banks are already launching). However, some noted that your data can be made public if your private keys are leaked, making your personal data and identification vulnerable.

Currently there is no regulatory framework for blockchain and there are also no jurisdictions. Since code is not law we ask whether code will stand up in court?

Given the nature of blockchain the question really is who, how and what will be regulated? What will the implications be if it remains unregulated both domestically and internationally?

Existing supply chains are complex, slow, distributed, involve many parties across the world and they usually don’t even trust each other (hence the need for trusted third parties such as banks and clearinghouses to mediate).  Automatically executing Smart Contracts on the blockchain to transfer titles to goods and money removes the need for banks to provide products such as Letters of Credit, drastically reduces costs by cutting out the middlemen (and their fees) and creates a trusted network of assured authenticity and origin of products being supplied.

Health data is extremely sensitive and must always be kept up-to-date and secure. Falsified or misplaced health records and prescriptions can cause major issues when accurate information is needed. Enter blockchain. Blockchain can create a strong centralised system for storing patient information where their data is secure and cannot be tampered with.

Nearly everyone who listens to music now downloads it online, many pay per track or via subscription services but there is still an issue with illegal downloads. Storing music on the blockchain will prevent this widespread industry problem, meaning artists, producers and record labels can get paid instantly for the music they own, without any conflict. The musician, Imogen Heap, is leading the way in this industry revolution.

We think developing countries have the opportunity to adopt blockchain at a much faster rate than developed countries; one reason being that there are fewer legacy issues holding them back. Mobile banking and payments are already dominating these regions and storing this information on the blockchain will inevitably follow.

In the real estate industry blockchain can be used to store and manage asset information and ownership. All transactions can happen on the blockchain promoting trust, efficiency, transparency and reduce operational and HR costs by cutting out third parties and their fees. As each block on the blockchain is unique the end-to-end transactions can be stored and verified making it tamper proof.

The government can use blockchain for many different purposes both with Government-to-Consumer and Government-to-Government processes. One very simple, but ground-breaking use case is in the UAE – by 2020 the UAE want to store all of their documents on the blockchain.

The UK is also exploring the use of blockchain to manage the distribution of grants. Monitoring and controlling the use of grants is incredibly complex, and subject to potential fraud or abuse. A blockchain, accessible to all the parties involved, is a better way of solving that problem.

Blockchain is in the very early stages and people first need to understand clearly what the blockchain use cases are before mass adoption begins. At the moment the speed of development is very slow as a result of knowledge gaps and limited talent in the blockchain industry.  Some within our discussion group believed that people were reluctant to embrace change and they often see it as a burden, rather than an advantage. But, in today’s digital age this is beginning to shift and those willing to innovate will jump leaps and bounds ahead of their competitors.

The blockchain discussion will continue to snowball this year as more understand and develop the technology and it’s capabilities and applications.

Investment into blockchain is continously on the rise and we are seeing many new start-ups sprinting into this space attracting new investment. For example, China just recently announced a $1.5bn fintech fund of which blockchain will be a focus.

What we are also seeing is the growing interest and involvement of regulators amid concerns over governance and cyber-crime and how to prepare as they try to figure out what is really new about blockchain in case it really takes off.