16 October 2017
Carlo R.W. De Meijer

Blockchain Observations

Carlo R.W. De Meijer - MIFSA

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Towards smaller and more focused blockchain consortia

27 February 2017  |  11306 views  |  0

There is a tremendous amount of activity focused on blockchain.  Several blockchain-related organizations and consortiums have been formed all across the globe, to study this and contribute solutions in a collaborated way. But the recent announcement of a number of big banks to leave the bank-backed R3CEV consortium has raised the question of the viability of large scale consortia and the need of more smaller-sized and more focused alliances.  


Deloitte stated in an annual report that banks and financial institutions must form consortiums in order to pursue the implementation and commercialisation of blockchain technology.

Deloitte annual report

In its annual report released in December last year Deloitte stated that banks and financial institutions must form consortiums in order to pursue the implementation and commercialisation of blockchain technology.

“Industry consortia will be critical to unlocking mass-scale value and keeping Blockchain relevant in 2017. With more than 20 consortia in place already, we are on our way to success.” Piscini, principle at Deloitte

As there exist numerous conflicts the technology will have to deal with and in order to provide solutions for complex issues, such as regulatory disputes, major firms must come together to produce collaborative projects. According to Deloitte that could optimize the implementation phase of blockchain.


Are blockchain consortiums necessary?

The necessity of large consortiums is however debatable. Some say the present consortium model, which proved helpful for building industry consensus around blockchain, showed its limitations.

End of last year, major banks including JPMorgan and Goldman Sachs and some others announced their leave from the R3CEV consortium after the organization “failed to provide any commercial implementation of their technology”.

Yet, Deloitte’s Piscini still firmly believes that the emergence of consortiums is crucial for the development of the technology and its mainstream adoption. According to him the formation of consortiums enables startups to test their blockchain technologies and platforms with large-scale corporations, such as financial institutions and banking groups.


From R3 to blockchain mini-consortiums

As R3 reworks its membership model, Goldman Sachs has created a wave of other companies leaving the consortium and breaking out on their own to form mini-consortiums with 2-3 banks and non-bank intermediaries. According to these banks:

 “Smaller consortia are critical for one simple reason: If you are on your own in Blockchain, the value is extremely limited. They need to include a small subset of key players at first, what we call the ‘minimal viable ecosystem.”

Ethereum co-founder Joe Lubin and Sandeep Kumar, Managing Director of Synechron, on what’s next for blockchain in financial services in 2017.

Given this, they expect to see considerable movement in blockchain ecosystems around shared use cases across a small number of parties like insurance claims or mortgage processing where multiple parties in the transaction come together to create straight through processing using blockchain. 

New blockchain consortiums

The number of industry-specific working groups and consortia around the globe has grown firmly since pioneer, R3 set the trend when it started its bank-backed consortium R3CEV in September 2015. Its collaborative approach to blockchain development quickly spread, leading to the emergence of a growing number of blockchain-focused collaborations, to develop and implement distributed ledger solutions in their respective domains.

There are nowadays – as we know – more than 100 sorts of consortia or other collaborations in the blockchain area. Not only on a global scale but increasingly centered on geographic regions. Consortium efforts have sprung up in Canada (Project Jasper), Russia (Russian Banking Blockchain Consortium July 2016), China (China Ledger Alliance April 2016 and Financial Blockchain Chenzen Consortium May 2016) and Japan (Ripple Japanese Bank Consortium August 2016). The majority of these consortiums or partnerships can be found in the financial industry. But now also collaborations are popping up in other areas such as insurance, commodities, healthcare etc.

The most known consortiums are R3CEV, the Hyperledger Project and the Post Trade Distributed Ledger Group (PTDL). I described them already in earlier blogs. Here we will look at the most recent collaborative initiatives that arose since September last year.

September  2016

CULedger (Financial Industry)

A group of credit unions and service providers have launched the CULedger initiative (former CU Blockchain). Its stated goal is to develop and create a private, permissioned distributed credit union shared ledger network to be used by credit unions for a range of functions potentially including smart contracts, identity management, money movement, etc.

To date the CULedger Blockchain, led by the Credit Union National Association (CUNA) and Mountain West Credit Union Association (MWCUA), has enlisted more than 60 credit unions as participants, as well as four of the system’s largest credit union service organizations, a number of selected 3rd party technology firms, and Associations from the domestic U.S., Canada and Europe.

The project will focus on protecting members' identities. Aim is to build “an open-source global identity network on a permissioned distributed ledger.” CULedger organizers view their initial blockchain prototype as a digital identity platform built around member data held by participating credit unions. Called a “sovereign digital identity,” the platform would give credit union members control of their identities, with credit unions serving as the centralized authenticator.

There are currently two tracks of evaluation regarding the CULedger project. Sovereign identity is the first track of the CULedger project. The second will focus on scouring the blockchain industry to find the third-party provider that would be best to work with for the project in the long-term. The group aims to develop a working model by next spring. The plan is to have those two tracks meet in the middle by May, with the proof-of-concept proven out and the top potential blockchain providers identified.

  • Kinakuta (Standards and Platforms)

Microsoft has revealed it is organizing a working group dedicated to improve security using smart contracts. Named Kinakuta, the group aims to make it easier for the industry to share information and tips about smart contracts and in turn provide smart advice on contracts.

"We feel there’s a huge opportunity here to involve the community. Kinakuta is the community building around Microsoft best practices and elsewhere, to collect best practices and tools and involve developers in creating these best practices." "We wanted to explore the ability to potentially write smart contracts in a language where from the onset your smart contracts would be secure," Gray, Microsoft

A list of 35 developers and companies that Microsoft wants in the group has been drafted. These include organizations like the Ethereum Foundation, the bank-backed R3CEV consortium; and startup BlockApps.

  • Swiss Industry Consortium (Financial Industry)

Launched in September 2016, the Swiss Industry Blockchain consortium is aimed using blockchain technology for the facilitation of selling shares outside of a stock exchange. The Consortium includes a number of Swiss companies amongst its ranks, including telecom operator Swisscom, exchange operator SIX and Zürcher Kantonalbank, the country’s fourth-largest bank. The group is receiving support from Switzerland’s Commission for Technology and Innovation (CTI), a research organization supported by the federal government.

Now, the companies have jointly developed what they call an “encryption module” that prohibits certain types of information from being seen by other parties. At the same time, the module’s design is said to allow for law enforcement agencies to gain access to that information during investigations. Among those involved on the regulation side of the project is the Swiss National Bank, the country’s central bank, which is reportedly overseeing development of the OTC platform.

 

October 2016

  • B3i (Insurance Industry)

Within insurance, the most influential blockchain consortia is currently the blockchain insurance industry initiative, B3i. B3i was established in October 2016. Founder members are AEGON, Allianz, Munich Re, Swiss Re and Zurich.

Goal is to explore the potential of DLTs to better serve clients through faster, more convenient and secure services. This by sharing ideas, testing use cases and pursuing concepts related to the wider insurance sector. This consortium will explore and develop ways blockchain can be used to improve processes in the insurance sector.

The B3i Consortium recently has added 10 new members as it prepares to test the emerging technology in a data-sharing experiment. New members joining the Initiative (B3i) include Hannover Re, Assicurazioni Generali SpA, Ageas NV, Liberty Mutual and Japan Nipponkoa Insurance.

The group will cooperate for a pilot project. Aim is to streamline paper work and reconciliation for (re-) insurance contracts and accelerate information and money flows, while greatly improving auditability. The consortium will thereby test whether blockchain can improve the way that data is shared between reinsurance and insurance companies, a process that is still very cumbersome and manual. For that the pilot project will involve transacting reinsurance contracts among the 15 member firms. They are therefore using anonymized transaction information, and anonymized quantitative data, in order to achieve a proof-of-concept for intergroup retrocessions by the use of blockchain technology.

With this feasibility study, the founding members aim to explore whether blockchain technology can be used to develop standards and processes for industry-wide usage and to catalyse efficiency gains in the insurance industry.

  • Fundchain (Financial Industry)

The Luxembourg-based Blockchain consortium, called Fundchain was initiated in October 2016. The Fundchain initiative was set up by Scorechain, a Luxembourg-based company providing Bitcoin and blockchain services. It now includes ten key market players of the fund industry as members: BIL, BNP Paribas, CACEIS, European Fund Administration, HSBC, ING Luxembourg, Pictet, RBC Investor & Treasury Services, Société Générale Bank & Trust, and PricewaterhouseCoopers (PwC) Luxembourg, and the University of Luxembourg (SnT).

Fundchain is aimed to explore the potential of blockchain technology to improve efficiency and create new business opportunities in the asset management industry. Goal is to develop solutions using Distributed Ledger Technology and smart-contracts to act as innovation pioneers for the fund distribution value chain in Luxembourg.

Fundchain is now ready to unveil its first outcomes following 6 months of collaborative work. The group decided to initially focus its research on the fund distribution value chain. The aim was to introduce an easy to replicate Proof-of-Concept to the fund ecosystem, the Smart TA. Overcoming the main challenge of replicating the fund distribution value chain specifications through a Distributed Ledger Technology (DLT) infrastructure, the Smart TA is a Blockchain-based platform enabling digital share transactions. The next step will be to assess the regulatory challenges of the Smart TA business model. Fundchain intends on presenting the Smart TA over the coming weeks to the regulator. 

  • Hashed Health Blockchain Consortium (Health Industry)

Hashed Health, a new collaborative healthcare innovation company, initiated the Hashed Health Blockchain Consortium in October last year. The Hashed Health Consortium include a broad range of types of organizations: payers and providers, EMR (electronic medical record) and other data companies, supply chain companies, revenue cycle companies and middlemen, pharma, services and consulting.

It’s mission is to bring together leading healthcare enterprises in order to advance distributed ledger solutions that address the unique issues and regulatory regimes of the healthcare industry. Goal is to accelerate the commercialization of blockchain / DLT solutions in healthcare by providing development, technical, regulatory, and other necessary services as needed for our members. Active projects include supply chain, claims lifecycle, payments, medical records, insurance, and other use cases.

These industry leading healthcare organizations participate in working groups in order to solve concrete business problems in the healthcare industry, addressing a multitude of issues such as revenue cycles, data sharing, payment reform, insurance and supply chain provenance.

A Development Studio has been established focusing on protocol-level implementation structures for those healthcare initiatives that have the most potential for immediate commercial traction. The Consortium will feed its ideas into the Development Studio, which will then seek to engineer those solutions from the proof of concept (PoC) stage through business-level application development, and eventually go on to full product development and commercialization.

Hashed Health will focus on growing the initial consortium membership, with the intention of holding its first Hashed Health Consortium membership meeting in Q1 of 2017; the Development Studio will be gearing up for PoC production within that same timeframe, with a goal of producing four PoCs, per year beginning in 2017.

  • Hyperledger Healthcare Working Group (Health Industry)  

Hyperledger announced the formation of the Hyperledger Healthcare Working Group (HLHC Working Group) in October last year. The HLHC Working Group includes participants from organizations including Accenture, Gem, Hashed Health, Kaiser Permanente and IBM.

The HLHC Working Group’s mission is to house and foster technical and business-level conversations about appropriate applications for blockchain technology in the healthcare industry. If appropriately scoped and resourced, these conversations could lead to one or more proposals for new software development efforts to be hosted at Hyperledger.

The HLHC Working Group, will center around discovery and exploration of healthcare-related blockchain use cases that address real world problems. Initially, the group will focus on fundamental Distributed Ledger applications, such as establishing registries, interoperability and identities. Technical opportunities will also be discussed. In time, the discussion will expand to more advanced topics, such as smart contracts and process automation.

 “The healthcare industry needs to be organized in order to realize the potential for blockchain technology,” “The Hyperledger Healthcare Working Group is a destination for those who want to contribute to the development of technical standards necessary for blockchain innovation to be meaningful.  The team at Hashed Health is extremely excited to join the Group as a founding member driving development efforts with our peers.” John Bass, Founder and CEO, Hashed Health.

  • Revolution 4 (Financial Industry)

Online retail giant and upstart blockchain innovator Overstock started its own blockchain consortium, called Revolution 4 last October. This consortium is focused on blockchain solutions for small businesses, and is looking for new partners including FinTech firms and startups. The Revolution 4 project is envisioned as a way for the company,  to share its technology and regulatory expertise as it relates to the blockchain technology. 

"The hope is we can use this innovation marketplace as a backbone and then, we can work with members to strategically partner," "The idea is not to sell something back to our members, it's to make all participants' overall product offering better." Tabacco, Overstock

 

November 2016

  • Dutch Logistic Group (Transport-Logistics)

Companies in the Netherlands are experimenting with blockchain technology through a 16-partner consortium. This is the first time in the world that blockchain technology is being launched with various partners in the logistics chain. Partners on this project include TU Delft, Windesheim, the SCF Community, TNO, Centric, Exact, ABN AMRO, SmartPort, Royal FloraHolland, the Port of Rotterdam, FBBasic & Cirmar, BeScope Solutions, NBK, Innopay, and TransFollow.

Led by TKI Dinalog, a Dutch Institute for Advanced Logistics, the consortium is looking to explore how distributed ledger technology can advance operations to bolster efficiency and effectiveness, and reduce supply chain footprints. The consortium has the goal of developing three concrete use cases such as chain financing, supply financing, and circular economics. In the project, the use of blockchain technology for logistics purposes will be concretely set up, tested and live tested.

 “If you ask me, using bklockchaintechnology for the financial routes routes in logistics is just the beginning”. “I see this as a stepping stone towards a logistics sector with improved collaboration throughout the entire chain.” Martijn Siebrand, supply chain finance program manager

In the coming two years, the project will focus on developing the contours of a new information infrastructure based on blockchain technology, uniting operational information, financial flows and contracts.

  • JPX Blockchain Consortium (Financial Industry)

Tokyo Stock Exchange (TSE), Osaka Exchange (OSE) and Japan Securities Clearing Corporation (JSCC) have formed a consortium of Japanese financial institutions to continue proof of concept (PoC) testing and discuss the possibility of applying blockchain technology to capital market infrastructure.

The JPX group companies will cooperate with a wide range of stakeholders, such as financial institutions and blockchain engineers, to make steady progress in verifying the technology. The group will also consider a structure for efficient information sharing between the blockchain engineer community and financial institutions through efforts such as training in blockchain technology by blockchain engineers and training in operational workflows by financial institutions. 

  • Nimbrix Blockchain Consortium (Financial Industry)

London-based technology vendor Nimbrix has launched a new blockchain consortium aimed at increasing buy-side participation in the development of distributed-ledger technology. The consortium, comprised of Nimbrix, Thomson Reuters, Microsoft and consultancy KPMG, and led by a number of industry veterans from institutions such as BlackRock, UBS and BGI, aims to launch a buy-side blockchain platform leveraging cloud, open-API, software-as-a-service (SaaS) and blockchain technologies running on Microsoft Azure.

"It's a revolutionary approach to software for the financial services sector. Traditional solutions for this industry take years to deploy and transition to, but you can bring up a Nimbrix platform in minutes, and then transition to it in months, and because it's SaaS, running on Microsoft Azure, firms can avoid huge, upfront capital costs”. Simon Bullers, Nimbrix CEO

  • Ripple Japanese Blockchain Consortium (Financial industry)

The Ripple Japanese Blockchain Consortium launched November 2016, with 42 financial institutions and SBI Holdings joining, is led by SBI Ripple Asia. The consortium’s banks include Aomori Bank, Awa Bank, Shinsei Bank, Bank of Yokohama, SBI Sumishin Net Bank, Mizuho Bank, and many more.

The consortium will concentrate on researching distributed ledger technology to enhance the cross-border payment industry. The consortium will focus on research and development, and will cover domestic and foreign exchange services by utilizing blockchain technology. The plan is to build a 24-hour real-time remittance infrastructure, and a proof-of-concept by next March.


January 2017

  • DTC-Blockchain consortium (Financial Industry)

Early 2017 seven European banks have joined forces to develop a blockchain-based platform designed to simplify domestic and cross-border commerce for small and medium-sized enterprises (SMEs). Representatives from the banks—Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit— signed a memorandum of understanding, agreeing to collaborate on the development and commercialisation of a new Digital Trade Chain (DTC).

The DTC product is based on a prototype trade finance and supply chain solution, which was created by KBC and has been tested to proof-of-concept stages. It is intended to connect the parties involved in a trade transaction online and through mobile technology, thereby making the managing, tracking and securing of trade transactions easier. The consortium members will initially focus on building a consumer base in Belgium, Luxembourg, France, Germany, Italy, the Netherlands and the UK.

·         IoT Blockchain Consortium (Internet of Things)

In January a number of leading tech players such as Cisco Systems, Bosch, and Foxconn set up a consortium to work on using blockchain to secure and improve the "internet of things". Other participants in the consortium include Bank of New York Mellon, Gemalto — a security company and other blockchain startups like ConsenSys, BitSE, and Chronicled.

 “What’s missing today is a solution that provides trusted, tamper-proof guarantees for any title deed, public record, compliance event, or transaction, building on the way paper documents are used currently.” Alex Batlin, head of blockchain at BNY Mellon.

These companies will be working in collaboration to create a shared blockchain-based IoT protocol, which would improve the inter-operability and security of their systems. This protocol can connect everyday objects of all sizes to the internet (from washing machines to shipping containers). These networked objects will be able to send and receive data. The blockchain technology will be utilized by the consortium to ensure the security of the connection between various IoT devices. The consortium hopes to define and implement  a smart contracts protocol layer across several major blockchain systems.

The consortium hopes to define and implement  a smart contracts protocol layer across several major blockchain systems.

“If we want to secure the Internet of Things we need to standardise how we identify, manage and communicate with internet enabled devices through blockchain technology. With a standardised protocol, more people will be able to share in these benefits.” Patrick Dai, CTO at BitSE.

·         Seam’s Blockchain consortium (consortium)

US-based commodity brokerage The Seam, is forming a blockchain consortium in conjunction with IBM for the billion dollar global cotton industry deployed on the Hyperledger Fabric. The Seam’s consortium is among the first to address commodity markets.

The Seam’s intention is to lead an “industry-wide collaboration” to create a supply chain and trading ecosystem. The Seam website-based exchange is open to all industry players. Along with the exchanges launch, the partners have called on the rest of the cotton industry to sign up as consortium members, placing their order books on the unified exchange.

“This new technology will be transformational for the cotton industry. There are numerous organizations, processes, systems and transactions involved from field to fabric.”" Situated at the intersection of agriculture, finance and technology, The Seam with the help of IBM, is uniquely positioned to introduce blockchain technology to cotton-affiliated businesses worldwide.” Mark Pryor, The Seam Chairman and CEO of The Seam

 “Blockchain offers enormous potential to drive innovation throughout the cotton industry. A consortium approach using IBM Blockchain and the Hyperledger Fabric can help create greater efficiency and serve as the foundation of a robust system for massive collaboration.” Arvind Krishna, Senior Vice President, IBM Research.

·         Global Blockchain Business Council (Governments)

The formal establishment of the Global Blockchain Business Council (GBBC) was at the yearly Davos meeting held on January 17. The first national team members include senior executives of World Bank Mariana Dahan, former Estonian President Toomas Hendrik Ilves, former Prime Minister of Haidi Laurent Lamont, former Economy Minister of Ukraine Aivaras Abromavičius. 

Compared with R3 blockchain consortium that is dedicated to the banking transaction and settlement, the main purpose of the Council is to create a more widespread mechanism for global blockchain consensus and communications among countries.

GBBC will influence more governments and enterprises to know blockchain, and provide a communication and cooperation platform for businessmen and technical experts researching blockchain application areas.

 

February 2016

  • Ethereum Blockchain Consortium (February 2017)

In February the Enterprise Ethereum Group was created. The Enterprise Ethereum group is a consortium-style group of companies looking to build private implementations of ethereum with an eye to also help improve the public version of the technology.

The newly formed Enterprise Ethereum group is considering a more distributed approach to self-management, rather than the more traditional leadership structure adopted by competing blockchain consortia like R3CEV and Hyperledger. The consortium is exploring the possibility of using blockchain-based governance technology to help its members vote on various measures. The consortium is currently exploring a number of possible governance structures "at different levels of the organization". The founding members of that group – including JP Morgan, Santander and BNY Mellon – are currently considering using smart contracts to effectively build its decision-making process into the ethereum blockchain.

·         India Bank-Chain Consortium (Financial Industry)

The State Bank of India (SBI) has taken the initiative to set up Bank-Chain, India’s first Blockchain exploration consortium for banks. Bank-Chain has been formed in collaboration with Primechain Technologies, a young Indian startup with a core focus on blockchain. Axis Bank, Central Bank of India, DCB Bank, Deutsche Bank, HDFC Bank, ICICI Bank, IDBI, Kotak Mahindra Bank and Saraswat Bank have also shown an interest in collaborating with Bank-Chain. Bank-Chain will enable banks to explore, build and implement Blockchain solutions which can minimize fraud and maximize efficiency, security & transparency.

  • Blockchain Consortium for Technology Carriers (Technology)

Japan-based SoftBank, U.S.-based Sprint Corporation and U.S.-based TBCASoft, a startup company developing consortium-based Blockchain technology specifically for telecommunication carriers have announced they agreed to aim for a technology partnership jointly developing Blockchain technology for telecommunication carriers.

The partners will promote research and development with the aim of building a cross-carrier Blockchain platform for various services, such as secured clearing and settlement, personal authentication, IoT applications, and other services provided by telecommunication carriers. The three companies will collaborate closely on issues related to technology, business and the regulations of various jurisdictions.


Some final remarks

It is expected that the grow of number of blockchain consortiums or co-operative alliances will further accelerate. This development will not be dominated anymore by the financial industry, but we will see more of this collaboration efforts in other segments including healthcare, logistics, commodities etc. These however will be smaller in size compared to R3CEV and the Hyperledger project and more focused on specific common issues.

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