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Building the Hyperconnected Future on Blockchains Paper Released at World Government Summit

| by Kent Weare on Mar 04, 2017. Estimated reading time: 11 minutes |

At the recent World Government Summit, Hexayurt Capital and ConsenSys released a paper called “Building the Hyperconnected Future on Blockchains”. The purpose of the paper was to provide an Internet of Agreements (IoA) strategy for the next wave of innovation in order to drive Globalization 2.0.

The World Government Summit hosts 3000 world leaders, policy makers and experts from more than 130 countries. Speakers at this summit included Elon Musk (Tesla and Space X), Travis Kalanick (Uber), Reid Hoffman (LinkedIn) and Sheikh Mohammed bin Rashid Al Maktoum (Crown Prince of Dubai and Prime Minister of the United Arab Emirates).

Blockchain is an emerging technology that uses a shared ledger for the recording of transactions. Ethereum, one of the more popular blockchains, supports smart contracts which allow for agreements to be represented in code and subsequently executed alongside the blockchain. There are many large organizations backing a new Enterprise Ethereum alliance including Accenture, Banco Santander, JP Morgan Chase, Microsoft and Intel.

InfoQ has reviewed the paper and has highlighted many of the key messages from the paper below. The first part of the Building the Hyperconnected Future of Blockchains paper was written by Hexayurt Capital and focuses on the following topics:

Fair Play in a Decentralized World

Blockchain is seen as a way to reduce, or eliminate, the need for intermediaries. Hexayurt Capital describes it as: “a technology for fair play in a globalized world” by promoting the following three fairness advantages:

Everywhere is the same

There are no central clearing houses to move computers closer to. Transactions clear in the same amount of time regardless of where in the world they were issued. This means fair play for everybody regardless of their location. This is achieved by running transactions in small batches called “blocks".

The record is permanent

A benefit of decentralization is extremely strong cybersecurity. The process which lets many computers all over the world process transactions together also means that if a machine is compromised, it does not affect the rest of the computers holding the blockchain. A blockchain is a secure sequence (“chain”) of blocks.

Nobody is in charge of the global blockchain

It is operated by a fair consensus (algorithm) which makes all participants equally responsible and equally capable. Local blockchains can be run by a sovereign entity or a company, and they can choose who can participate, similar to an existing corporate network, but more secure. Global blockchains work more like the internet itself: anybody can participate, but without compromising the inherent security of the blockchain.

Registers

Blockchain and its ability to be provide a decentralized ledger lends itself to being able to act as a register of value. For example, “A blockchain allows one to check if an item is provably unique: exactly one owner for a car, or building, or domain name.” One such domain that can benefit from a register on the blockchain is in government. Hexayurt Capital explains:

When we created the initial ideas which grew into the Dubai Blockchain Strategy, our intention was to build on the pre-existing strengths of government. Secure record keeping is a core competence of the state. New technology allows government to extend its services in new ways. The original conception inside of Bitcoin and Ethereum (two leading blockchain projects) was that many government-type services could be provided without strong reliance on state support.

Sharing Economy

Another domain that is being targetted by blockchain projects is the sharing economy. While companies like Uber and Airbnb are often brought up when discussing the sharing economy, Alex Tapscott, author of Blockchain Revolution, considers them to be aggregators. In the case of Uber and Airbnb, they perform the function of a central clearing house where they link the consumer with the service provider and take a percentage of the transaction for bringing the two parties together. Robin Chase, founder of Zip Car, describes in her book Peers, Inc that this model can be challenging for service providers. Robin explains that it is difficult for:

Peers (service providers) to get a square deal from the Inc in the center. Because the Inc is a company with a few thousand staff, and the Peer is typically an individual with a little sliver of resources to share, in the event of a dispute they are not evenly matched.

Hexayurt Capital draws a similar comparison of the ride sharing economy to major financial and credit organizations:

This pattern replicates between market makers and vendors at all scales. SWIFT and VISA are quite powerful compared to their member banks: being barred from either network would be catastrophic for many financial institutions. Dee Hock, the founder of VISA, tried and failed to build an interbank network before VISA was created because of these commercial dynamics.

In order to level the playing field Hexayurt Capital feels changes are required, such as:

A collective representation or altered ownership model, or regulation from the government. A future can be envisaged in which peers are formed into collective bargaining blocs a little like labor unions, or a future in which peers own the Inc structure which represents them, or a future in which the government regulates sharing economy companies quite strictly to ensure a fair deal for all.

As a result, Hexayurt Capital suggests that a lot of cost can be removed from these transactions across peers:

When the cost and complexity of running a sharing economy market for cars, housing or some other resource drops by 90% or 95% because of automated contracting infrastructure on blockchains perhaps the natural economic equilibrium will favor many small actors working together in networks rather than larger single corporate bodies.

Government adoption of blockchain

ConsenSys, a venture production studio building decentralized applications and tools for blockchain ecosystems, also contributed to the paper and offered the following advice for Governments looking to adopt blockchain:

Governments, like any potential blockchain user, should look at the pain points in their business processes and try to re-envision them as processes taking advantage of smart contracts and the blockchain.

One of the gaps that exist with this emerging technology is education at both the executive and IT staff level. Determining which business processes are suitable for blockchain will require some experimentation. As a result, ConsenSys suggests:

There should be a place where IT professionals can experiment with the technology, ‘get their hands dirty’, and learn fast. Microsoft has implemented this type of sandbox environment on the Microsoft Azure cloud, where developers can spin up an Ethereum blockchain sandbox in 10 minutes and get to work, and the ecosystem is full of developer tools, platforms and templates to get started with blockchains and smart contracts.

In addition to the prior advice, ConsenSys also offered the following strategies:

Image Source: https://worldgovernmentsummit.org/api/publications/document?id=c5717dc4-e97c-6578-b2f8-ff0000a7ddb6

Research Challenges and Cost-Effective R&D

Beyond sandbox environments where developers can experiment, ConsenSys also offered the following approach to drive adoption:

In addition to requests for information, hackathons, research challenges and labs are good ways to investigate blockchain technology.

As an example, in August 2016, the U.S. Department of Health and Human Services had a “Use of Blockchain in Health IT and Health-related Research Challenge” which received more than 70 submissions.

Privacy, Performance, Customization

Blockchains come in multiple forms, including Bitcoin, which is an example of a public blockchain. Blockchains can also be private, for consortium members running on shared infrastructure. For organizations looking to highly customize a private blockchain, they run the risk of future problems. ConsenSys suggests that organizations proceed cautiously:

The blockchain ecosystem at present is brimming with new innovations. Some companies are building customized blockchains for enterprise use cases ranging from finance to asset tracking. As custom private implementations may hinder future interoperability, consortiums such as Enterprise Ethereum are being formed to discuss this.

Identity

Managing identity is one of the perceived benefits of blockchain. In today’s banking sector, inefficiencies exist which slow down customer processes and add cost. ConsenSys feels:

There is no standardization in identifying information customers must submit to financial institution and these institutions often duplicate effort in performing Know Your Customer (KYC) checks. This imposes very high transaction costs on both banks and customers without actually adding much security to the global financial system.

A solution to these problems may be found within blockchain. ConsenSys explains:

Digitally signing claims about others, known as attestations, allows for other identities or institutions to verify and attest to the validity of an identity’s profile data. This can be useful for Know Your Customer where a bank can attest to customer data it has verified such as age, address or other attributes.

ConsenSys has offered the following use cases where a blockchain identity system may provide benefit to end users to:

  • Own and control their personal identity, reputation, data, and digital assets
  • Securely and selectively disclose their data to counterparties
  • Login and access digital services without using passwords
  • Digitally sign claims, transactions, and documents
  • Control and send value on a blockchain
  • Interact with decentralized applications and smart contracts
  • Encrypt messages and data.

There may also be benefits to enterprises in the following areas:

  • Establish a corporate identity
  • Easily onboard new customers and employees
  • Establish an improved and transitive Know-Your-Customer process
  • Build secure access-controlled environments with less friction for employees
  • Reduce liability by not holding sensitive customer information
  • Increase compliance
  • Maintain a network of vendors
  • Establish role-specific, actor-agnostic identities (i.e. CTO) with specific permissions.

Smart Cities

Blockchain offers opportunities for many cities and businesses making investments in smart cities. For example:

Chinese automotive giant Wanxiang recently invested $30 billion USD in a new smart cities initiative that includes using blockchain technology to essentially securitize the batteries that are used in electric cars.

In this scenario, Wanxiang leases batteries to vehicle owners rather than requiring customers to purchase these batteries up-front. This model does provide cost reductions, but it also allows for the monitoring of battery usage for performance and maintenance purposes. This telemetry data also allows batteries to be “treated like assets which can be sold to investors, smoothing the financing of new technology for consumers and manufacturer alike.”

Deploying a business model like Wanxiang’s may not be feasible using traditional business practices, due to the complexities involved in fiat currencies and existing credit facilities. Using blockchain allows for “smoother payment flows between devices, people and businesses. Smart contracts allow us to specify the logic of payment flows between the parties to the transaction that occurs every time an electric car, for instance, goes to a battery charging station.”

Other opportunities also emerge in smart cities with the advancement of blockchain. Another example that ConsenSys has provided is with blockchain enabled autonomous vehicles:

If a car or taxi wanted to go faster than the cars around it, it could pay more and get a faster route, automatically negotiating the economic interaction with the other vehicles around it. For governments, the ability to charge flexibly for road use at certain times or in certain places can reduce congestion or pollution, and encourage optimal use of the available roads.

Energy

There are many blockchain use cases emerging in energy. Opportunities exist in managing energy credits and reducing the double counting problem wherein: “utilities receive RECs verifying that a local source of power is renewable and then sell these RECs to other utilities. When a renewable electricity generator sells electricity, it sells the juice — then sells the credits separately.” By using blockchain, these energy credits may be exposed in a more transparent manner by recording the transactions on a public ledger.

Blockchain also provides many opportunities for emerging Microgrids. The increase in solar power generation and smart meters have created opportunities for consumers to reduce their dependency on large, centralized power generators. The result is consumers can use the blockchain to generate excess energy and exchange their own green energy credits with their neighbors. One such blockchain microgrid project that ConsenSys was involved in is the Brooklyn Microgrid.

Health Care

The Health Care industry also stands to benefit from broader blockchain adoption. While many jurisdictions have embarked on Electronic Medical or Health Records (EMR or EHR) programs, many have been unsuccessful and have created exposure for patients and hospitals. The challenges are, in part, due to the fragmentation of providing health care. For example:

The average U.S. patient has approximately 19 distinct medical records and in a 2010 survey, reported seeing 18.7 different doctors during their lives.

Blockchain is poised to address the information sprawl that may be found in existing EMR/EHR solutions as:

Patients can have their medical information follow them wherever they go rather than being scattered amongst disparate providers and health systems. Authorized medical professionals can retrieve a patient’s relevant medical history at the point of first contact rather than relying on telephone calls and paper files. Improved patient records would allow providers to communicate better care and monitor treatment progress more accurately.

In order to achieve a distributed ledger of medical records, security must be taken care of. To address this need, ConsenSys feels:

The blockchain can be a repository of access-controlled information securely shared across organizations. As a new archetype for Health Information Exchange, all of this data can be made portable for patients in a cryptographically secure way.

Blockchains can also be used to aid in the integrity of medicine, as it makes its way through the supply chain and especially in medical trials. An example the ConsenSys has provided is in the area of Trial protocols which: 

“Can be published and timestamped on a distributed ledger to prevent manipulation of data after the fact. Samples and specimens can be fingerprinted and asset tracked as they are sent to other labs for analysis and experiment verification. A single sample can then be used for multiple trials.”

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