The Business Case for Blockchain in the Enterprise

hello and welcome to our webinar the business case for blockchain in the Enterprise I'm Abby Lundberg editor-in-chief at Sloan management review and I'll be your moderator blockchain's promise is an Enterprise technology has been slow to take off but as we're about to hear major businesses have worked through the challenges and are getting real value for their Investments whether in supply chain Finance or internal operations in his new book author Ravi saradi to lays out blockchain's unique capabilities and benefits for Enterprises and provides a strategy roadmap for moving forward in this webinar you'll learn how to overcome the organizational challenges of incorporating blockchain into your operations the importance of government regulation of cryptocurrency currencies and where things stand today what's getting in the way of blockchain interoperability and why the most effective cost benefit case for setting up a blockchain goes beyond pure Financial Roi Robbie Saturday is a professor of international business and strategy at the demora McKim School of Business at Northeastern University he's the author of Enterprise strategy for blockchain lessons and disruption from fintech Supply chains and consumer Industries which is part of our Management on The Cutting Edge book series with MIT press by attending this webinar you'll receive a link to Robbie's book so you can learn more welcome Robbie uh good morning everyone I'm delighted to be able to talk to you about blockchain today I am pretty sure that almost all of you are very knowledgeable about blockchain so I hope that we can learn together today about uh really two themes from my book one Enterprise usage of blockchain uh to what extent it can be stimulated what steps strategic steps might help Enterprises adult blockchain and then the second theme I want to talk about is the move from cryptocurrencies to official digital coins what are known as Central Bank digital currencies I think both of these themes are fairly critical for the future of blockchain now as you all know blockchain began to be used extensively when Bitcoin was introduced in mid-2009 and a little bit later when ethereum came along and so most people who deal with cryptocurrencies indirectly or directly deal with blockchain but what's interesting is they've not been the same level of adoption and enthusiasm about blockchain now there are of course quite a few interesting Enterprise cases for example uh trade lens which is a fairly well established blockchain based supply chain monitoring application between IBM and mersk the Container company and it's been used for monitoring shipments from the time it leaves a port to the time it arrives at another port and it's very effective in terms of providing consistent data to all users reducing delays and disputes and so forth uh you've probably all heard of NBA Top Shot when the pandemic happened the NBA had to shut down and in order to keep user engagement customer engagement with the basketball and the NBA Live they introduced gen ft base and NBA top shots which is very very successful with many of these video clips embedded in in an nft commanding fairly high prices driven by engaged NBA you know enthusiasm and and collectors uh similarly this file coin one of the I think most Innovative applications in blockchain where you have a blockchain based Market where different entities provide storage cloud storage and then other customers use an option mechanism to decide where to to launch and store their files and under what conditions how many mirror sites Etc there's also XC Infinity a video game that is based inside a blockchain where Gamers can actually add modules to the game and get rewarded into tokens within the XC Infinity game and then of course also game rewards for being successful at gameplay so there are a number of interesting applications across different uh kinds of Industries but overall I think Gartner for example in looking at the height chain for blockchain has indicated that there is still some time to go before blockchain becomes more Central in the application space within Enterprises and the interesting question is is why is that and I think there's really three reasons to think about that um foreign and before I do that perhaps I can ask you a question about uh you know blockchain itself [Music] what do you think about blockchain in terms of Enterprises is it mostly hype is it good for specific uses payments for example is it a significant promise based on the cases I've just mentioned so that it's just a matter of time or is it something that's really going to replace most Legacy applications and become the basis of Enterprise Computing and applications so Ravi I don't know if you can see the results here but what we're seeing is 45 said that there is considerable promise that's followed by 31 saying some potential a whole 21 said that they think it's going to be a significant breakthrough technology for Enterprises and only two percent said little to no value uh that's very good to know uh because uh I'm I'm exactly of that opinion that even though blockchain has not been adopted by Enterprises at scale there's significant promise and it's only a matter of time and it's partly uh useful for Enterprises to think about how to move along as I said there are some reasons why technology and economic and organizational impairments have led to a somewhat slow adoption of blockchain I think in the technological area you're all familiar with the classic trilemma that italic Butrin put forth some years ago about the trade-off between speed and scalability and decentralization or privacy and clearly that's one of one problem that enterprises need high volume applications and increasing security slow speed and increasing decentralization for better validation also perhaps compromises privacy and slows down applications I think another rather large reason is interoperability in other words there are many blockchain protocols out there like Ledger the ethereum protocol Bitcoin protocols consensus Quorum uh Corda R3 Etc and when Enterprises want to use blockchain at scale they'll have to talk to each other so then one blockchain will have to talk to another and I think the difficulty here is that once you leave the blockchain and start communicating outside the blockchain with another blockchain you introduce points of weakness areas where the application can be compromised where the data can be distorted stolen and changed and so that's I think a relatively large issue for a lot of companies I think there are also some issues with tokenization particularly when you don't have native tokens inside a blockchain but when you have assets outside the blockchain real assets for example which are being tokenized and then introduced into the blockchain for the transacting between the the various Network nodes in the blockchain so I think this tokenization can be a point of failure also and requires a fair amount of security and caution in order to move in this direction uh in the economic Arena I think the biggest question is look this is a brand new technology it requires resources to create networks uh put in encryption software uh teach people about public and privacies and then of course there are Legacy applications to consider uh sometimes Legacy applications are working fine so the ratio becomes why break it if it's not I mean why fix it if it's not broken and so very often companies will have to coexist with running Legacy applications side by side with uh the new blockchain applications and so I think when you have that sort of situation it adds to costs and it's also very difficult to easily quantify the results particularly if the results are mostly avoiding uh security dangers avoiding hacks reducing costs by perhaps avoiding intermediaries so it's much harder to quantify I think the benefits of blockchain but it is essential because otherwise uh hard-headed cios and CFOs may say wait a moment uh I don't see why I should be giving you you know five million dollars for a year in order to try to launch a pilot and and then I don't know what the results might look like so that is I think certainly an issue and then the third issue is organizational fundamentally I think we're trying to change corporate culture when you move to a blockchain you're really moving to a decentralized nodes and very often you're going to be not only decentralized within the organization uh so that you're moving away from hierarchy but you're also decentralize in terms of nodes where you're connecting with people outside your organization and so it's a it's a uncomfortable approach to doing business organizations have typically adopted hierarchical approaches and so it becomes much harder for them to accept that in a blockchain Arena they'll have to create perhaps permission nodes within a blockchain with different degrees of read write access and thus control to some extent that level of discomfort with moving to these blockchain applications um so obviously how do we decide which use cases should be uh encouraged or emphasized I think the answer is really in trying to match the two sides on the one side all of you are familiar with the very many unique capabilities of blockchain secure encryption for example uh identify a verified identity obviously the validation mechanisms make it easy to detect tampering uh the fact that you have peer-to-peer networks Etc right so the left hand side discusses these major uh features of blockchain on the right hand side we have the desired use cases so that if I have use cases but I really want to protect the data and the processes God against tax for example in my book I talk about the colonial hack that happened sometime earlier this year where the entire gas pipeline from from the south to the eastern states had to be shut down because of a hack and ransomware demands and this was not just you know a few hours this last few days and so there is really a fairly fundamental issue for large companies uh which are very data intensive to be secure in their processes and that there's also the idea of transaction repudiation and preventing double spend particularly when you're exchanging value within networks and of course that's a benefit of blockchain if you want to avoid intermediaries so for example Spotify is a very interesting application that we all use I think but one of the problems with Spotify is that relatively speaking less value accrues to the actual creatives the people who make the music and so if a use case is to try to create an application where a lot of musicians creators can directly transact with users people who listen to their music without involving an intermediary uh that could be perhaps a very interesting use case now I'm not implying that Spotify is going to disappear at all but I am saying that blockchain creates the possibility for a new kind of uh platform to emerge that allows this kind of interaction then this payment against delivery very often when you think of the way internet currently is used with the value exchange you have two parallel tracks one track where you actually do the commercial transaction and then a second track with a payment happens and very often that payment also uses intermediate reviews such as a credit card company uh debit card venmo Etc and so those intermediaries collect data and they also store information and they charge a fee and so very often trying to do away with intermediaries may be an important use case that matches with blockchain capabilities also when you're trying to do inter-organizational applications you have many contributors I'm thinking of driverless cars for instance autonomous vehicles we have people contributing uh lidar radar uh the automated vehicle driving software uh you have very computation intensive gpus on board you have Cloud connectivity cellular connectivity on-board entertainment and shopping and productivity applications all of these different users have to come together to make this application and within a blockchain you might be able to better transact through State changes how each uh user or how each producer contributes to the ultimate solution and in a sense measure and reward contributions fairly uh without worrying about uh compromised IP and security issues it also is very useful in establishing provenance obviously the data is up to date and secure and available to all nodes which means that it prevents data disputes and Assurance of payment against delivery since both payment and delivery are simultaneous within blockchain transactions so what I'm suggesting is that whatever use cases are being thought about you try to create a checklist of all of the characteristics of that use case and see if it matches well with the kind of capabilities that blockchain offers but that would be one way to start thinking about which use cases should be pushed to the top in developing these applications uh so what is the sort of strategic flow of decision making surrounding using blockchain uh as I said the first step is finding the appropriate use kits because without that I think the whole effort will fall apart second if there are Legacy systems working well I think a decision has to be made about whether the intent is to replace the Legacy system and if not how will the two systems either complement each other or how will they work in parallel which as I said would involve both more complexity on the I.T side on the customer side possibly as well as higher costs but that's a decision that has to be that thought about a third would be to think about whether the emphasis will be on primarily internal applications of blockchain for example in the manufacturing setting using blockchain to track Parts as they're worked on so that you can prove that certain processes have been followed certain safety standards have been complied with certain tolerances have been measured and verified so in a manufacturing setting an internal application might make sense versus an inter organizational settings such as let's say in healthcare we have electronic health records that have to be exchanged across multiple Providers Insurance companies payers various Specialists pharmacies and Pharmacy you know benefit managers Etc so the difficulty I think is that once you start thinking about inter-organizational applications you need cooperation whereas in an internal application you have more ability to use hierarchy and you know gently if not forcibly persuade members of the company to to join in that blockchain inter-organizational applications are harder because you have to develop you know cooperation you have to decide uh governance of that inter-organization blockchain so I think they're harder and it's certainly co-innovation and ecosystems kinds of strategic thinking become more important if you're thinking about those into organization blockchains then comes tokenization tokens are a great idea tokens come from the game theory and tokens are the idea that I can motivate certain behaviors by granting tokens which have value and of course tokens can also be digital representations of real assets which can be safely exchanged for simultaneous delivery versus payment within the blockchain nevertheless you have to think about how much will I use tokens what kinds of tokens will I use native tokens or tokens that are digital representations or physical assets and how do I decide the level of tokens to be used for rewards and in general you know a token strategy is really needed as part of the blockchain development uh then as I said economics come into the picture uh cost benefit analysis of some sort such as total cost of ownership perhaps or avoided costs uh if you have uh revenues being generated by the blockchain application then you can actually probably calculate Roi but all of these need to be thought about and probably at least scenario analysis conducted so that we can present who to the people who have the budget to approve these kinds of projects uh that here are the estimated benefits from these applications then comes preparing the organization this is both a matter of Human Resources obtaining skilled blockchain experts programmers blockchain project managers as well as I suspect Champions at higher levels within the organization uh people at the top management level top management team who understand enough about blockchain to be able to provide some some support during the period of the pilot study which might be six months a year so that you can go ahead and freely develop the Prototype run the pilots develop the results without feeling pressure because you know that you have a certain window of time in which to to try to show the results did a lot of technological choices need to be made such as choosing protocols there are many specialized protocols available depending upon the kind of application you want to choose the consensus mechanism as we all know proof of work has been the standard for quite some time particularly in blockchain in in Bitcoin and most recently ethereum moved away from proof of work to proof of stake and so there are some very interesting choices to be made particularly in a permission Network where there are fewer nodes which are highly trusted so in the mission network can validation schemes be less computation intensive and become much faster algorand for example is one such approach uh where you have individual transactions being validated rather than blocks and they use a sort of a proof of stake approach really and you know it's a very interesting algorithm uh also but they use Smart contracts which has a number of issues primarily dealing with the source of data external data from oracles which which triggered smart contracts and whether those connections can be trusted and secure uh open source because a lot of blockchain software programs are available on GitHub and so to what extent uh you know will you be able to draw an open source applications to be able to put together a mashup in a sense of the final application and then also user interfaces because remember we're moving to something very new and a lot of users have almost no experience and so we need to make it very painless very easy to use so that people are willing to adopt it rather than being reluctant to interact with it and then of course the last step uh learning from the pilots because the learning will help you then develop the next generation of iterative improvement in the application until you get to commercial scale and as part of this you might want to think about the role of data and analytics because the blockchain is likely to develop a lot of data and how would you combine that data with analytics applications with AI if needed and of course with iot Internet of Things objects which can often be a sources for great deal of data for the actual blockchain application now I want to switch gears and talk a little bit about this whole area of cryptocurrencies and what lies ahead I think most of you understand that Bitcoin came about because of turmoil in the economic space in in about 2008 2009 when the Global Financial system seemed to be on very shaky grounds and when there was a lot of distrust of government and really the libertarian ethos I think underlies the development of blockchain that government shouldn't be trusted they should have no right to interfere in our transactions and there should be no censorship of economic transactions which means therefore Anonymous transactions no verified identity no limits on on cross-border transfers no limits on quantities in a sense complete freedom and uh you know Bitcoin and ethereum came along soon after their benefits are that they meet this libertarian set of principles of Highly decentralized Global outside the control of governments with sudo anonymity and they use fairly robust encryption uh 256 bit encryption sha and proof of work which is of course you know competition intensive somewhat slow in transaction validation and as we all know also very energy intensive and with ethereum the ability to interact by linking to Smart contracts automated execution of agreements uh Stronger programmable money so that you can attach conditions to the transfer of of value with incident settlement upon you know completion of the transaction however as we all know digital currencies have been incredibly volatile just in the last year to 18 months Bitcoin has gone from about a high of 70 000 to a low of 20 000 roughly and similarly with the ethereum and most of the other uh cryptocurrencies out there which means it's hard to think of it as a transaction uh vehicle for for you know hard to think of it as money because money typically is thought of as a unit of account a store of value and a means of exchange and I think these cryptocurrencies have many merits but they don't quite meet the the needs of what constitutes money for for day-to-day economic transactions and that's when you know stable coins came along okay and we have major really two kinds of stable coins some based on fiat currency reserves uh tether there's some question about the quality of tethers reserves uh USD coin binance Etc and then we have algorithmic coins the best known of which in recent times is the whole issue of Terra and Luna as you know Tara came across as a table stable coin tied to Luna with algorithms that would allow you to burn either Terror or to burn Luna in order to keep the parity stable and Luna turn was backed by reserves of Bitcoin and other cryptocurrencies so it was a close Circle entirely within the cryptocurrency area and what happens with this algorithm algorithmic stable coins such as maker die is that the collateral ratio is very important maker typically starts off with a high collateral ratio so that if you have 150 let's say Bitcoin in collateral you're only allowed to issue the equivalent of 100 Bitcoin in a die which is meant to be kept at parity uh one to one and then the robots as well as market makers inside the maker universe that use Arbitrage to buy and sell and keep the parity the problem of course is if one loses faith in the collateral itself as happens with Taro and Luna then there's a one-way uh Market the arbitragers are reluctant to step in because they see the decline as being relatively fast and they referred to lose money in trying to do the Arbitrage and one gets into a death spiral so basically even though stable coins have the motivation and the Strategic goal of trying to be trying to maintain parity and be stable and thus be used in the D5 decentralized Finance space as the basis for Lending and savings accounts and uh creating you know derivative instruments uh through synthetics uh balance so these are some of the companies out there in the D5 space doing this uh they don't seem to work very well and the issue becomes you know how do we try to use the value of digital currencies in the economic space without the volatility and that's really where I think the whole idea of of Central Bank digital currency is comes so let me ask you what do you think of fifth okay governments around the world you know China uh Europe Canada the UK Singapore Malaysia most recently India issued a position paper on the digital rookie so what do you think do you agree that your nation whether you're from the US or elsewhere should launch uh cbdc a central bank digital currency do you strongly agree neither agree not disagree strongly disagree and that's an important question because it's not just going to affect a few people it's going to affect entire populations of countries um it'll affect companies doing business it'll affect intergovernmental economic relationships so Robbie what we're seeing in the results is that there's um there's definitely people leaning toward agreeing so 34 somewhat agree and 20 strongly agree uh 22 percent are sort of on the fence neither agreeing nor disagreeing and only Collective 23 percent disagree so 10 somewhat and 13 strongly well it's interesting to me that almost a quarter of you out there you don't feel that cbdc is a very good idea it's useful to ask why do governments want to enter this space I think fundamentally they're worried about the financial system as we saw in 2008 2009 the financial system is delicate it can collapse and so governments don't want that to happen again and they don't feel that private cryptocurrencies are the answer they want to have autonomy over their economies they want to maintain control over money supply interest rates and monetary policy because one of the interesting things about cryptocurrency is it is creating a parallel money supply especially when you have lending instruments and when you have high interest rates being promised by some of these D5 operators so you're really growing the money supply outside of the controller government which has impact ultimately when the two systems the official additional fiat currency system and the official I mean the official fiat currency system and the cryptocurrency system when they start interacting that's when the money supply gets affected and then there's also of course the the issue of what is money being used for current system teams have a lot of regulatory principles such as know your customer anti-money laundering preventing you know human trafficking and weapons dealing and so forth and so fundamentally the idea is that we want to prevent criminal activity in inside the financial system and so all of the regulated Banks and financial entities not just in the US but across the world except these principles now the question is especially those of you that didn't think very highly of cbdc is the government any more trustworthy than all of these private entities because the intent would be ultimately to replace cash which is completely Anonymous it's a barrier instrument right you'd replace cash with government-controlled and government-issued currencies it is possible that you could have private stable coins issued through regulated entities so that they would coexist with the cbdc okay and the biggest fear I think is hey wait a moment if the government issues digital currencies and we know that digital currencies are programmable and do use verified identity within them blockchain does this mean that the government has visibility into the economic transactions of each and every one of us and I think that is probably the biggest question at least for the US other countries there may be some other questions for example how do I do offline access in a country like India I think maybe 35 of the country maybe even 40 don't have access to the internet blockchain relies on the internet so if you want to issue a cbdc will this mean that you're going to shut out a portion of the people but I think what what comes out clearly is that cbdc raises a lot of questions right here's the Chinese example uh China launched its cbdc officially at the beginning of this year and they've already have about 260 million people uh downloaded this on their computer I mean on their smartphones and of course on their laptops and there's only a few banks that issue cbdc's to their clients and they work directly with the People's Bank of China so as you can see it's a very tiered relationship between the Bank of China uh the eight Banks were allowed to issue cbdc to their clients and then of course all of the payment providers and businesses and consumers who use these cbdc's right as I said one issue is the Privacy continue will people be willing to accept a potential loss of privacy the second is security the moment a country like the US issues a cbdc you're going to have Hackers from North Korea from Iran possibly Russia elsewhere trying to destroy uh the system so it has to be incredibly strong and security proof then there's a fact that the US government would get involved in the entire U.S economy could they be as Innovative as companies like Visa or PayPal venmo or alipay Etc then there's the geoeconomic consideration if China has launched one of India's on the cusp of launching one if the European Union is working closely with Canada and England to try to launch a cbdc should the US also launch one simply to maintain the importance of the dollars in geo-economic circumstances China is already trying to launch interoperability between the Chinese digital currency and other countries in other words in the cross-border remittance area and so the hope is the Chinese Yuan through the E uh EU one would become more useful in cross-border transactions gradually replacing the US dollar at least for a certain portion of global economic activities and then finally if you have all these different cbdc Pilots to what extent will you need to do harmonization so that they actually work together because Global Commerce cannot easily function if you have islands of these of these digital currencies right and of course you know in the U.S context do we really think the FED can manage a consumer wrap for for 350 million people right can they actually do this well in in real time can they manage customer relationships and will there be political support because I do think there's a lot of political angst about this issue in the U.S and not all politicians in the Senate and in the uh in Congress are willing to support a official uh digital dollar issued and controlled by the U.S

treasury and and the Federal Reserve right now this is a very quick diagram or you might want to take a look at what it really says is you could have a retail cbdc which is the idea that the Central Bank directly interacts with everyone in the economy and so you have you know theoretically 350 million accounts with the fed you have a wholesale cbdc where the Central Bank issues just like in China with a few banks in the middle who hold reserves with the Central Bank okay and then they in turn start working with users individuals Etc and then a third where you allow stablecoin providers to coexist with the cbdc so you have in a sense you know stable coin providers who who receive cbdc hold reserves with the federal bank and then issue coins of their own to various providers so you can have all of these three kinds of approaches and it remains to be seen which approach will take hold and whether different countries will form different approaches one a pure retail cbdc a kind of wholesale cbdc and then finally synthetic where you have private stablecoin issuers allowed to operate with some kind of controls and regulation under the auspices of of the Federal Reserve I'm going to wrap up now because we're going to be running out of time and I want to give lots of time for the Q a so you know there are some macroeconomic policy questions if the cbdc is issued as I said you've got to monitor the risk uh from issuing a official digital currency there's going to be possibly better control of monetary policy controlling interest rates Etc clearly a very big change in payment infrastructure rapid settlement in fact near instantaneous settlement of transactions which would reduce significantly working capital requirements and therefore make business more efficient and raise the return on Capital since you're tying up less capital for the same level of economic activity a major question would be how well can it rationalize gross border payments which are currently you know opaque and costly and time consuming so if you could have fairly quick almost instant crossbody the payments at low transaction costs that would be a huge Boon to to cross-border trade right you also want to prevent oligopolies if we allow stable coins to coexist with cbdc's you don't want one or two companies dominating that space okay the way currently visa and MasterCard essentially dominate uh the credit card space in terms of managing the entire Global Credit Card Network so there is a question of if we have digital currencies how do we maintain competition within the payment space so that very few we don't end up with a situation of a few companies dominating Global Payments how do you preserve monetary Independence and finally as I said this whole issue of geopolitical consequences okay good there are lots of implications for companies because ultimately you know this is about strategy at the individual company level so companies have to ask how will this affect payments okay they will have more control over payments because they'll be interacting directly with customers without intermediaries such as a bank or a credit card company or or you know Apple pay perhaps as I said there'll be working capital implications reduce working capital they could link their currency with smart contracts which would make for much more personalized uh interactions with customers they would have to think about the Privacy question which have already raised most consumers would be worried about you know will be the initial data stored about all of my economic transactions with all of these different entities they'll have to I think meet kyc and other kinds of compliance questions however the benefit is they would be able to access Global customers because you'd be assuming to use one or two cbdc's across the you know entire Global Market there's also the financial inclusion question which is the idea that the unbanked particularly if you have offline access where you can transact with your smartphone or your future phone without having access to the internet if that is possible that'll open up an enormous amount of access among the unbanked to the financial system right as I said before you can gather a lot of data from this new payments Channel which could be linked to Ai and analytics to give you much more insight into customer Behavior customer needs and how to shape your future development of products and services obviously you'd have to have very high security which means investment both in personnel as well as in capital for your network operations and cryptographic security and so it's important I think for all of us to think about pilots and start learning how to work in the system rather than wait for it to be official by which time some of your competitors could have moved on by learning and writing themselves for production production at scale okay so just a few things to think about there Robbie yeah okay so uh I've talked uh rather you know covered a lot of ground and I'd like to hear from you see what kinds of questions and thoughts you have uh but here's a slide that summarizes the the book as you can see uh there's an introduction with the seven other chapters so what I've talked about today is really you know a couple of major themes in the book but there's a lot more in it and uh I hope uh you get a lot of benefit from it yes and I will say to the audience and you know I know we covered a lot of content right there um but you will have access to the slides you will have access to the video to replay maybe you could slow it down a little bit and play it at a lower speed because um that was that was so much to take in and so interesting Ravi um so thank you very much for all of that great content and we do have some fabulous questions coming in um having a hard time really picking and choosing between them but we're going to start off with um there's one here on um so so you talked about the currency issues with countries but the question is for developing countries what's the approach that governments can take to take a blockchain for applications that affect large populations for example using blockchain to validate health insurance claims in India so so non-currency applications but for the large um population of the country absolutely I think as I said what are the ideal use cases you want use cases where there's a fair amount of data the data has to be updated in real time it has to be accurate and it has to be shared and I think electronic health records are absolutely perfect example of that kind of application the difficulty of course is harmonization so that you need very many different entities as I said the healthcare payer possibly an insurance company uh the people who who take who provide the care the doctors and the hospitals uh there are the the pharmacy benefit managers and so when you have three or four different caretakers you know caregivers from Individual doctors to Specialists to hospitals they all have to share those records update them and have you know similar format so that they can be easily kept within the blockchain so in order to design that kind of blockchain you need to First think about you know what is the format that I'm going to create for the data so that it can be easily updated and shared and then secondly what is the Privacy issue who's going to control what data is seen by whom okay for example in the US we have an addressing company called nebula genomics which allows individuals to have their entire genome sequenced but then kept within a blockchain over which they have control so that if the researcher or a medical pharmacy company or a hospital wants access to that they have to provide that permission and it can be automated through a smart contract and then there are tokens issued which essentially uh you know motivate that individual to decide whether or not to share the data because they get rewarded with tokens which you'll have value and can be used within that blockchain or for other kinds of healthcare applications so what I'm getting at is Healthcare is a wonderful area where blockchain can and should be used but because of the vast number of entities that provide Healthcare you need to bring them in and it becomes an inter-organizational application which means you need to create some form of incentives for collaboration as well as privacy protection thank you we have a number of questions so the questions sort of split up into two areas one really is around Enterprise implementation and and governance and all of that and other sort of more Global questions I'm going to start with the the more internal to the Enterprise kinds of questions and so Andre would like to know should all of the organization be involved in the adoption or just the I.T or software team like who really needs to be involved oh no it's the opposite I think it is going to create the application but in order to get an application accepted as well as to be useful you need to ask the users first what is your goal what are the pain points what are the areas in which existing Legacy systems are not completely satisfactory what would you like to see improved so unless you start with the user and unless you get organizational support organizational Champions you know the CFO and the CIO who both agree that this is going to be important for the company and we're willing to take the risk and provide the resources and give you the time to develop a pilot application to see where it takes us unless you do that I don't think the effort will succeed so I would say that you should don't start with the IT department if the ID department has a bright idea based on what they hear about the technology from their colleagues and other companies certainly you know it makes sense to take it to you know the chief technology officer or this Chief Information officer the CIO and say hey look this is happening in the world we're falling behind don't you think we should do something about this but you do need a strategic perspective you do need tough management involvement before I think it makes sense to proceed and you know you could have Skunk Works like we have in some other Industries but I don't know Skunk Works will will really be uh helpful in this context uh of you know Enterprise scale applications thank you so um the next question has to do with um you know as business becomes more interconnected and and organizations are participating in these different ecosystems the question is around governance so so Regis wants to know so you said you rightly pointed out that companies are used to having hierarchical control over their information systems with across organization cross-organizational system governance by infrastructure in other words smart contracts and governance of the infrastructure development and maintenance of the code behind the network are key elements what are your recommendations to managers for addressing these two levels of governance so I think governance is one of the hidden benefits of blockchain you've all heard of Dow decentralized autonomous organizations right one of the things about a decentralized autonomous organization is how do you prevent certain actors from taking control because the whole principle of a blockchain is decentralization brings efficiency it brings security it prevents tampering but in an organization that has been hierarchical for a long while I think the the difficulty is how much decentralization to accept and what happens if Dao creates very slow governance because you need to have a majority of the token holders the majority of the governance token holders to agree on changes and in my book I talk about Aragon Aragon is uh is a blockchain startup if you will that specializes in creating governance mechanisms and governance schemes so you know there's a lot to go into it and I don't know if that it's easy to parse all that in a very short amount of time but my recommendation would be that if you get a chance look up our Aragon a-r-a-g-o-n and there are other similar organizations like that but Aragon is I think a very interesting point of starting and look up how they try to create a governance that is fairly efficient and and Speedy in terms of decision making while at the same time not disenfranchising uh decentralization so because what you don't want is a blockchain which becomes nothing but a the old hierarchical organization and in a sense just it gives up on the potential benefits of having a more inclusive uh approach to to governance so in your poll we saw that a lot of people really see blockchain as as being a a disrupting technology or a very significant replacement for a lot of Enterprise applications and so Matthew is asking has anyone created a decision tree that business you know you or others that business decision makers can use to help them compare compare solutions to or their specific use case yeah I do remember seeing a couple of them the world economic Forum about I think two years ago issued a white paper on uh on blockchain and ecosystems and so that would be a place to go to because they do have I think if I recall correctly in that white paper along along the lines of you know yes no decisions along a decision tree and also Gartner Gartner is the well-known I.T consulting company and they have I know from seeing some of their documents they have both a slide presentation as well as a a document that they have issued and obviously this is a proprietary so you need to get permission to access Gartner documents but they do also have a fairly well you know thought out decision tree approach to deciding whether blockchain is the answer to the the solution that you're trying to come up with nice and the world economic Forum uh document is that is there a particular place people should go for that if you go to the WF website and search under their white papers and documents you should be able to find it I think but I can also try to find the citation and you know send it along um by by you know through the chat or email function yeah really um so we have a couple rounds security and and you know you mentioned in your wrap-up that that was an area that people need to think about so um so the first question um is around resilience and business continuity Moro said I'm surprised that is not a use case um I'm sure it may be you just didn't cover it in your presentation but she's also wondering if blockchain can be used more broadly not just to track transactions but whether it has an application for cyber security I do think that blockchain can be used as a way of protecting access to both programs as well as to data and you know there are air gapping for example is commonly used in I.T as a way of

protecting very sensitive Arenas or offline updating but I think blockchain does have the potential and there are a number of firms out there that you know specialize in trying to develop a blockchain as part of cyber Security Solutions and so I would not at all feel that this is impossible in fact I think it is one of the benefits but it can't be done if you have an application with millions of users you almost have to think about uh you know production scale you know here's the production scale system and as long as I have a verified identity that is people who enter the blockchain have some way of proving who they are and otherwise they can't enter the blockchain and then once they enter the blockchain there is a token based incentive to not cheat because the tokens incentive system has to be conceived off in a way that cheating is more costly for them than adhering to the rules of the blockchain and benefiting from the tokens so I think that's why tokens are such a big part of blockchain tokens actually are meant to discourage malfeasance by making it for example in Bitcoin if you want to take over 50 of the network the cost involved in that proof of work network is so high that it makes no sense for anybody to try to do that and that's why even today after 12 years the Bitcoin Network itself has not been hacked the wallets have been hacked but the wallets are outside the system they're outside the blockchain that's why they can be hacked and that's really poor uh user uh processes because if I'm a user I should protect my private key because without the public key and the private key shaking hands the transaction cannot be validated but if I'm a user and I'm not very careful with how I use my private key and somebody gets access to the private key then of course you know security is broken but I think that's really at the individual level not at the level of the organization now there are occasional cases where in blockchain systems for example I remember reading about XC Infinity the game company and they had a ronin blockchain that they created and they created a token specific to Ronin but the running blockchain program itself had some flaws and that's why the ruling blockchain got hacked but again that's a programmer issue if you're going to use blockchain you know you need to have it audited very definitely before it goes into production mode um sort of in a related related question um you know other than what you've just covered present in the tokenization of real assets well you know you're taking something of value to say a real estate a building a commercial building which might be worth 100 million dollars right there's a company called asset block that does this so you take a 100 million dollar building and you divide it into a million tokens and then those tokens can be translated on the blockchain so instead of buying and selling the entire building you can buy and sell a portion of the building based on the number of tokens you own point of failure is when those 100 million tokens that represent that building are being created and entered into the blockchain supposing somebody actually creates 120 million then the value of the token has been compromised because there are 20 million fake tokens out there so I think that's the real problem taking a physical asset outside the blockchain tokenizing it and putting it into the blockchain has to be done with a very careful set of security and auditing procedures if we don't have those security and auditing then you know it's it's like the old garbage and garbage out idea for it if you're going to have uh real assets being tokenized that's something that you have to pay a lot of attention to it's much easier when the asset is being created for the first time so if I'm a developer and I've just got title to land and I'm creating a whole new development of 100 houses that can be tokenized much more easily than something that's been around for 50 or 60 years because then I have to go back and Trace the entire title search to make sure that the token in fact gives you title to that asset that I'm tokenizing so you can see from the example I'm suggesting that this is a point of failure and it has to be carefully thought about before you actually use the blockchain for that purpose well I can't believe how many questions we've got for sure Ravi um they're just pouring in and we definitely won't have time for I think we have time for one or two more so um there's a number of them around the Central Bank currency question um you know will will will will the Central Bank digital currencies replace stable coins uh private bank owned stable coins or the other way around um how do you see transaction how do you see standardized transactions data value security and International Bank issued cryptocurrency I mean there's just so many I don't know how to pick which one to to ask you so maybe you can sort of think about you know what you see as the most pressing issue around the Central Bank currencies and what people should be thinking about okay I do feel that a hybrid system would be the best because I do feel that most central banks their expertise is not retail it's not managing customer relationships with millions of end users so I think the better solution would be to work with stablecoin issuers and the real problem with stable coins is the reserves if I'm issuing a hundred million stable coins and I'm saying these 100 million stable coins are meant to be worth one to one parity with the US dollar then ideally you actually have 100 million dollars in a segregated bank account at the Fed so that we know that that 100 million tokens stablecoin tokens are worth 100 billion that have been protected and put away somewhere right so I think the whole goal of a hybrid system is to allow many different private stable coin providers to compete against each other and to offer additional services on top of this table coins as long as they are regulated by the official monetary authority of that country and the regulation has to be twofold one do you have enough reserves in there so that if there's a run on your stable coin it will not collapse the stable coin has happened with the Terra you know USD a few months ago and then the second is because it's a private entity to what extent are you conforming to the rules of the Global Financial system now this is a controversial point because many cryptocurrency enthusiasts don't like the idea of censorship censorship meaning if I'm trying to send money to someone and the US government or some other government feels that this is an illegal transaction they can stop it and all of the big banks in the US all comply with laws uh that the U.S has concerning you know what money is being sent out into whom know your customer kinds of regulations so I think that as long as the stablecoin world is willing to accept the need for certain levels of Regulation which by the way also makes the consumer I think trust the stable coins because the number of problems we've had recently with some of these stable coins I'm sure has diminished the confidence of the uh you know the average digital currency uh user who's begun to wonder is my money safe is this a good idea and that may explain why you know the prices have collapsed to some of these currencies because there's less demand for them than they used to be right so I think that's the heart of it I am personally in favor of a hybrid system with the treasury or the US Federal Reserve or the monetary authority of any country interacting with the regulated well uh you know uh secure with reserves stable coin providers and then letting them go out and compete against each other and interact directly with consumers that I think would be the ideal system for a final question Robbie I'm going to come back to the Enterprise topic and we had a lot of questions from different Industries but I'm going to pick this one because I think if you know the answer to this one will answer questions for a lot of people and this is from Laura who's in the defense industry she says super important for me to know if blockchain can be used to protect Secret Sauce IP in modular open systems architecture and I'm just going to wrap that up with a final question which is when will blockchain be ready for prime time at Enterprise scale okay I think the defense industry is probably one of the best areas for blockchain application because remember in blockchain you don't have to have completely decentralized uh uncommissioned notes unpermissioned is the classic idea of blockchain where anybody can join the blockchain and operate that's Bitcoin permission nodes are where you trade off a certain level of benefits of pure decentralization uh for the sake of you know I know these people these nodes are trusted people these are defense contractors I've worked with them for a long time so I can work with them and then the second is what I think is implied in this defense question is that you have private blockchains interacting with public blockchains and I think that's again the interoperability question the private blockchain where the IP is critical to be protected that is done with permission nodes inside the private blockchain and then when that interacts with the public blockchain you know how do you tokenize and in my book I talk about some of these approaches to interoperability uh two companies come to mind one is called uh polka dots okay and polka Dot's a fascinating company in terms of how they approach this interoperability uh issue and the other one I think is quantum overlayer if I recall correctly and that's both of these are mentioned in my book when I talk about some of these technological obstacles and resolution so I would suggest that thinking about making sure that you have a private permission blockchain and then you have the bridge from the private to the public blockchain using some of these new interoperability advances that I do think are are you know I don't know if they're completely secure as yet but they're certainly a big evolution in that direction and that brings me to your question which is when is the blockchain be ready for prime time I think it depends on the use case but I suspect that in the payments world blockchain will probably be fairly Central within the next three years or so so by say 2025 but for broader applications maybe not even till 2030. if I look at Gartner Gartner has a very interesting you know hype cycle that they put out every year they look at blockchain as being coming out of a trough of disillusion so there was a point where companies almost gave up on blockchain threw up their hands but as the technology is getting better more robust some of the problems are being solved with interesting things like side chains and sharling the lightning Network interoperability advances uh like polka dot uh you know algorand with its interesting algorithm for faster validation without using proof of work seeing all of these advances make it more and more feasible for Enterprises to begin piloting and developing internal applications but full-scale commercial implementation where you need different parties to cooperate in order to get the blockchain uh working that's going to take time so I suspect 2030 might be at the time when blockchain really is fully adopted at scale in large Enterprises great that's really helpful so Robbie thank you so much so much I wish we had more time to cover it and get to all those great questions I I thank you in the audience for your questions I'm sorry we didn't get to more of them but we are out of time so have a great rest of your day everyone thank you thank you everyone for taking the time to listen I hope you found it useful

2022-11-21 21:27

Other news