New FROM PILOT TO PRODUCTION: THE BLOCKCHAIN STATE OF … · 2019. 3. 19. · ©2018 Blockchain...

FROM PILOT TO PRODUCTION:

THE BLOCK CHAIN S TATE OF PLAY FOR 2019

A BLOCK CHAIN S TATE OF PLAY FOR 2019

BOB TAPS COTT

CE O TAPS COTT ADVIS ORS

CONTRIBUTOR BLOCKCHAIN RE S E ARCH INS TITUTE

BOB@ TAPS COTT.COM

© 2018 Blockchain Research Institute

• The definitive investigation into

blockchain strategy, opportunities and

challenges

• 80 Projects

• Led by 40 of the world’s leading

blockchain thinkers and practitioners

• S ponsored by many of the world’s most

important companies and governments

© 2018 Blockchain Research Institute

Blockchain Vertical Transformations

F inancial

S ervices

Technology

E nergy

& Resources

Media

& TelecomRetail

ManufacturingHealthcare Government

© 2018 Blockchain Research Institute

Blockchain Horizontal Transformations

1.. lockchain and the / 9h: a aking the / ase for

5isruption, Leading the Transformation

2.. lockchain and the / hh: A sset / hains –the Cuture

of Supply / hain a anagement

3.. lockchain and the / Lh: Smart / ontracts and the

Legal System

4.. lockchain and the / Ch: Triple 9ntry A ccounting

and / orporate Cinance

5.. lockchain and the / a h: The bext 9ra of Sales and

a arketing

6.. lockchain and the / Lh: 9nterprise Technology

A rchitecture

7.. lockchain and the / I wh: a anaging Talent in a

5istributed 9conomy

© 2018 Blockchain Research Institute

BR I Members

The Dawn of A New E ra

© 2018 Blockchain Research Institute

Machine

Learning

Animating the

Physical World

Autonomous

Vehicles

Distributed

E nergy

Technology in

Our Bodies

Virtual Reality

Drones &

Robotics

Technologies of The Fourth Industrial Revolution

. Lh/ Y/ I A Lb

© 2018 Blockchain R esearch Institute

A S HORT HIS TORY

Trust

Image by S tarline / F reepik (CC BY 2.0)

© 2018 Blockchain Research Institute

A HIS TORY

International Payments and Trust

Dutch E ast India Trading Company British E ast India Trading Company

© 2018 Blockchain Research Institute

International Payments Today

Payer

$

US -Based

Bank

US Federal

Reserve

Correspondent

Bank

Correspondent

Bank

Bank of

England

UK-Based

Bank

Recipient

£

CLS

© 2018 Blockchain Research Institute

International Trade Payments Today

Foreign

Buyer

Buyer’s

Bank

Adv ising

Bank

Reimbursing

Bank

S eller’s

Bank

S eller

Freight

Forwarder

Nominated

Bank

Goods

L/C

Goods

Payment

Payment

Reimbursement Claim

Reimbursement

Documents

Reimbursement

Authorization

L/C

&

D

ocu

me

nts

De

bit

Do

cu

me

nts

L/C

A

pp

lica

tio

n

© 2018 Blockchain Research Institute

© 2018 Blockchain R esearch Institute

© 2018 Blockchain R esearch Institute

FOR BANKS IN FX

Is That Trust Warranted?

•$7.77 trillion in Fed loans and guarantees to save the banks post 2008

•2015 C itigroup, Barclays, J PMorgan Chase, and RBS , pleaded guilty to rigging FX

currency rates, and agreed to pay $5.8 billion dollars in penalties

• U.S . District J udge S tefan R . Underhill said “when the market is rigged, folks who play by

the rules are suckers.”

•E quifax 143 million Americans private information exposed

•HS BC to pay $175 million for questionable FX practices

•Western Union to Pay $586 Million Over Failure to S top Fraud

•Citibank to refund $700 million to credit card customers for unfair and deceptive

practices

• William K. Black’s book

© 2018 Blockchain R esearch Institute

IN (Y E S ) BILLIONS AAA US

F ines to Banks S ince the F inancial Cris is

a hw9 Cwha a A wY9TW A

• Bank of America $76.1

• J PMorgan Chase $43.7

• Citigroup $19

• Deutsche Bank $14

• Wells Fargo $11.8

• RBS $10.1

• BNP Paribas $9.3

• Credit S uisse $9.1

• Morgan S tanley $8.6

• Goldman S achs $7.7

• UBS $6.5

https://www.marketwatch.com/story/banks-have-been-fined-a-staggering-243-billion-since-the-financial-crisis-2018-02-20

© 2018 Blockchain R esearch Institute

Is There a Better Trust Argument?

•Trust in mathematics / S HA-256 cryptographic hash functions

•R alph Merkle, Whitfield Diffie and Martin Hellman

•Trust in immutability of a shared sequential ledger

•If cryptocurrencies are liquid and stable then FX moving through them faster and

lower cost than status quo

•S hould reduce the costs by orders of magnitude

•S hould speed up funds transfers (that now can take weeks) down to a few minutes

•Could give total transparency to the movement of funds

•Dan S chulman. CE O of PayPal on Change

TODAY ’S PAY ME NTS MODE L

Handshake illustration by Aidan J ones (CC BY-S A 2.0)

THE BLOCKCHAIN IS THE NE W S UPPLY CHAIN

Image by S tarline / F reepik (CC BY 2.0)

Artificial Intelligence Vs. Deep Learning

Gartner Hype Cycle August 2018

© 2018 Blockchain R esearch Institute

Are ICOs Proving to Be S peculative?

Crypto S tartups

•“S uccess Rate” 56 percent of funded crypto startups die within

four months of their initial coin offerings.

•a Boston College study determined that only 44.2 percent of

startups survive after 120 days from the end of their ICOs.

(Hugo Benedetti and Leonard Kostovetsky based on 2,390 ICOs)

https://www.bloomberg.com/news/articles/2018-07-09/half-of-icos-die-within-four-months-after-token-sales-finalized

Open

Networked

E nterprises

(ONE )

Decentralized

Autonomous

E nterprises

(DAE )

S mart

Contracts

Autonomous

Agents

CONNE CTIVITY and CR E ATIVITY

DRIVE NE W BUS INE S S MODE LS

AUTOMATION

CO

MP

LE

XIT

YL

ow

Hig

h

Low High

S mart Contracts and The Blockchain

https://arxiv.org/ftp/arxiv/papers/1710/1710.06372.pdf

3. U tility tokens

5. batural asset

tokens

1. / ryptocurrencies

7. / rypto-fiat

currencies and

stab lecoins

CRYPTOASSET CATEGORIES

2. t latforms6. / rypto-

collectib les

4. Security tokens

© 2018 Blockchain R esearch Institute

Funding Remains High for S ome ICO’s

© 2018 Blockchain Research Institute

Funding Remains High for S ome ICO’s

© 2018 Blockchain R esearch Institute

E OS

© 2018 Blockchain R esearch Institute

The ICO that Never Was

© 2018 Blockchain R esearch Institute

Digital Asset S ervice Provider

© 2018 Blockchain R esearch Institute

© 2018 Blockchain R esearch Institute

But The Market is Beginning to Decline

https://www.bloomberg.com/news/articles/2018-09-10/crypto-ico-funding-dropped-in-august-to-lowest-in-16-months

© 2018 Blockchain R esearch Institute

The (crypto) assets of the future

•Need have:

• S trong governance

• Data controls

• Compliance with regulatory

requirements

• S tandardization

• Identity framework

• S ecurity and cyber defense

•Need have:

• Reliability

• S calability

• Widely held, easy to use

• S table in value

• F iscal policy

• Monetary policy

© 2018 Blockchain R esearch Institute

Currency S tability

https://www.oanda.com/fx-for-business/historical-rates? utm_ source=average_ rates

GBP E UR CAD AUD

© 2018 Blockchain R esearch Institute

What Has Changed in 2018?

https://www.cryptocurrencychart.com/

© 2018 Blockchain R esearch Institute

VE NE ZUALA

F iscal Policy Mismanaged

https://www.oanda.com/fx-for-business/historical-rates

© 2018 Blockchain R esearch Institute

Country L ist Government Debt to GDP %

J apan 253%

Greece 179%

Lebanon 149%

Italy 132%

Portugal 126%

Cape Verde 125%

Congo 117%

S ingapore 110%

Bhutan 109%

United S tates 105%

J amaica 103%

Belgium 103%

E gypt 101%

S pain 98%

Cyprus 97%

France 97%

J ordan 96%

Djibouti 91%

Bahrain 91%

Canada 89%

https://tradingeconomics.com/country-list/government-debt-to-gdp

© 2018 Blockchain R esearch Institute

F iscal Policy Differences By Country

© 2018 Blockchain R esearch Institute

Bank of E ngland

Distributed ledger technology

- with potential benefits

- although there are challenges to overcome

- before it can be implemented in critical services

- such as the BofE high value payments service

- “We are not planning to create a central bank-issued

digital currency”

- Virtual Digital Gold S tandard Monetary Amnesia – Deflationary

© 2018 Blockchain R esearch Institute

Bank of Canada Initiative

Payments Canada and Bank of Canada Objectives:

• Faster payment options

• Data R ich Payments

• Transaction transparency

• E asier payments

• Cross border convenience

• Activity based oversight

• Open and risk based access, and

• A platform for innovation.

Built two DLT prototypes (on Corda, and E thereum)

© 2018 Blockchain R esearch Institute

In Conclusion

Trust is moving from institutions to mathematics, inevitably

Distributed Autonomous Organizations S eem Inevitable

The wild ride of unregulated crypto speculation is likely coming to an

end

Investors recently burnt will be twice shy

Currencies and cryptocurrencies will likely merge

The cryptocurrency of the future has yet to materialize

BOB TAPS COTT

CE O TAPS COTT ADVIS ORS

CONTRIBUTOR BLOCKCHAIN RE S E ARCH INS TITUTE

BOB@ TAPS COTT.COM

416.274.5468