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2018 Washington State Government discussion: Blockchain - International competitiveness

Presentation / testimony delivered by Mark Mueller-Eberstein of Adgetec Corporation at the Legislative Committee on Economic Development and International Relations in July 2018 on Blockchain technology and cryptocurrencies

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2018 Washington State Government discussion: Blockchain - International competitiveness

  1. 1. 2018 WA State: Blockchain presentation - International competitiveness WHY WA STATE CAN UNLOCK THE ECONOMIC POTENTIAL OF BILLIONS WITH BLOCKCHAIN TECHNOLOGY Mark Mueller-Eberstein Founder and CEO of Adgetec Corporation Twitter: @MarkMEberstein
  2. 2. Mark Mueller-Eberstein • SHORT: Connecting business leaders and the IT for 2 decades. Investor, keynote speaker, best- selling author in 12 languages, Digital Transformation leader for Blockchain, Crypto currencies, IoT, AI and cloud computing. Former leadership positions in HP and Microsoft. • Mark Mueller-Eberstein is one of the world’s leading experts on how businesses can leverage key technology trends, transform organizations and to drive a competitive advantage. He is focusing for many years deeply on the potential of Blockchain including and beyond crypto currency technologies as investment and economic structure transformer and lead the discussions e.g. at #FIF2017 with CEOs of the largest financial institutions. Mark is an internationally renowned business leader, entrepreneur, investor, best-selling author, and shares his insights frequently through executive level engagements as well as broad global events like TEDx, Inbound, Rutgers’ Business School and even (Business Leadership courses for Blockchain, AI, VR/AR, IoT, Digital Transformation). Mark deeply appreciates working with international organizations like the Shenzhen (China) based Qianhai Institute for Innovation Research (QIIR) and APEC (Peru 2016 summit) and is a member of the “Washington State IoT Council” advising the Governor and state legislators. • Mark is the founder of the Adgetec Corporation’s consulting business since 2010 and guiding many entrepreneurs in advisory positions and as their investor. 2 ✓ Immigrant and Washington state residence since 2001 ✓ Globally active (Montreal – Davos – London -...) ✓ Motivated to help my home state ✓ Adgetec: Helping business and Government leaders to make sense of tech and their impact since 2010 ✓ Teacher at Rutgers exec program ✓ Angel and property investor ✓ Deep in Blockchain for 4 years
  3. 3. We have functioning, (relatively expensive) global financial, insurance and commodity trading systems. But only for the well connected 3
  4. 4. Of the 7 billion people in the world… 7 6 5 4 3 2 1 0 Cell phonesToothbrushes Unitsinbillions Mark Mueller-Eberstein & Adgetec Corporation
  5. 5. But only 20% (1.4B) have currently access to the banking system Mark Mueller-Eberstein & Adgetec Corporation
  6. 6. Billions are left out from the economic befits of global trade and access to capital instruments • Billions of People without access to financial system • Billions of people do not have an ID • Billions of people do not have a record of their property • Costly and in efficient transfers • Property can be taken away / confiscated without records of original ownership • Property can not be put up as collateral for investment loans • Billions of People making their living by producing commodities • Billions of small farmers globally, without ability to achieve real market prices or to ensure future crops yields • Wars are fought over commodities, but customers (including companies like Intel) want “conflict free” materials • Very few commodities traded on global markets 6
  7. 7. China moves from “cash society” to “mobile payment for more than 800 million people” within a few years Private innovation (WeChat and AliPay) with government “permission” 7
  8. 8. 8 Blockchain in the real world - TODAY
  9. 9. Categories of Block Applications 9 Users Complexity Currency Value Added Services Smart Contracts Decentralized Autonomous Organizations Billions Millions 100’s thousands Thousands Transfers Payments Tips Crowdfunding Naming Identity Ownership Membership Voting Wagers Bounties Family Trusts Performance Proofs Escrow Transportation Online Storage Mesh Networks Healthcare Source: 2015 William Mougayar
  10. 10. Blockchain technology as the scaffolding of accountability, efficiency, transparency in all aspects of society, governance and institutions 10
  11. 11. Blockchain Technology allows old and new players to offer new services to their customers GLOBALLY
  12. 12. Blockchain and Equality are the hottest 2018 WEF and Horasis topics for leaders and innovators 12
  13. 13. Why do organizations implement blockchain based solutions? • They key areas where organization using blockchain technology are finding value in implementations are: • Increase efficiency, transparency and security • Lower cost • Increased Compliance • Less graft • Increased scrutiny of supply chain • Digital identities (of people and things (“IoT”)) 13
  14. 14. 14 Blockchain has the potential to affect many business functions in the enterprise Blockchain in the Enterprise • Accounting • Efficient, auditable and authenticated transactions • Smart contracts can encode complex accounting rules • Finance • ICO is a mechanism for raising funding with crowdfunding properties • Stock exchanges (T0), on-chain token exchanges (DEX) • Supply chain management • Provide auditable and authenticated trail of shipments without a need to trust 3rd parties • Marketing • Tokens can represent club membership, loyalty points or benefits with complex rules • Multiple companies can share loyalty tokens with full visibility and real time accounting • Manufacturing • Embedding "Crypto-anchors" into products helps combat counterfeits • Retail • Cryptocurrencies can be accepted at point of sale transparently to the merchant • Corporate governance • Tokens can have stock-like properties including voting rights
  15. 15. For those that have experienced PCs, Internet, Mobile, Social Media and Cloud computing revolutions…. … Blockchain is FASTER 15
  16. 16. 16 Working Examples are everywhere Banking Government & Public Records Retail Education & Academics Industrial IoT & MeshComputing Law Enforcement Manufacturing Healthcare Messaging Apps Commodity Backed Currency Critical Infra- structure Security Internet Identity & DNSHedge Funds Voting Ride Sharing Human Resources Charity Wills & Inheritance Media/Entertain- ment Rights &IP Cloud Computing Crypto Exchanges Stock Trading Crowd Funding Gift Cards & Loyalty Programs Car Leasing and Sales Sports Management Internet Advertising 3D Printing Gun Tracking Insurance Business & Corporate Governance ! Real Estate
  17. 17. Global organization with lots of different business units, secure IoT and logistics needs
  18. 18. Even Disney does (their own, open source) Blockchain
  19. 19. 19 Examples of Blockchain in the Enterprise Company Use Case Area Samsung SDS Transfer Samsung’s entire global supply network to Blockchain (in 2018:incl. 488,000tons of air cargo and one million shipping containers) Supply chain Walmart Walmart Inc. plans to record food suppliers on the blockchain to help reduce waste, better manage contamination cases and improve transparency. Supply chain, inventory management McDonalds Thailand McDonalds Thailand is testing a blockchain based POS solution to streamline the digital payment income stream for mobile and online food services. Payments JP Morgan JPMorgan announced in October that it would be using Quorum to build an interbank payments platform alongside Australia and New Zealand Banking Group Ltd (ANZ.AX) and the Royal Bank of Canada (RY.TO). Accounting, Finance VISA VISA plans to use blockchain based technology for B2Bpayments sending transactions over Visa’s network from the bank of origin directly to the recipient bank. Payments, B2B MasterCard The Mastercard blockchain technology will complement the company's existing capabilities including virtual cards, Mastercard Send and Vocalink to support all types of cross-border, B2Bpayment flows - account-based, blockchain-basedand card-based. Payments, B2B UN The UN is looking into multiple blockchain scenarios including food assistance to refugees at World Food Program, promoting gender equality at UN Women, storing education records at UNICEF, increasing aid transfer efficiency at UNOPS and reducing remittance Costs at UNDP. Identity management, accounting, payments City of Zug (Switzerland) The city of Zug, Switzerland is looking to store residentialIDs on the blockchain, enabling access to e-services such as proof of residency and online voting. Identity, voting BP and Royal Dutch Shell A consortium including energy companies BP and Royal Dutch Shell will develop a blockchain-baseddigital platform for energy commodities trading expected to start by end-2018. Accounting, Finance Coca Cola Coca-Cola Co (KO.N) and the U.S. State Department are launching a project using blockchain’s digital ledger technology to create a secure registry for workers that will help fight the use of forced labor worldwide. Supply chain DHL, Accenture DHL is doing a proof of concept with Accenture on the life sciences and healthcare industry with the goal of utilizing the inherent irrefutability within blockchain technologies to highlighting tampering, reducing the risk of drug counterfeits. Supply chain General Electric Engineers at GE Global Research are looking for ways to use blockchain to connect consumers and producers of electricity with batteries supplied by wind and solar farms. Payments UPS, BNSF UPS and BNSF have joined the Blockchain in Trucking Alliance (BiTA), with the aim to “increase transparency and efficiency among shippers, carriers, brokers, consumers, vendors and other supply chain stakeholders." Logistics BMW, Ford, General Motors BMW, Ford and GM have joined the Mobility Open Blockchain Initiate (MOBI), with focus varies from payments, data tracking, and supply management, to consumer finance and pricing, and more futuristic areas like autonomous vehicles and ride-sharing systems. Supply chain, payments, finance
  20. 20. Blockchain is real 20
  21. 21. “Companies will chose Blockchain Technology based solutions and business models because they work well for them and their CUSTOMERS ”
  22. 22. 22 Blockchain Tech and Governments
  23. 23. Blockchain is “cloud services” for human coordination 23
  24. 24. 24 The CFO slide History of accounting? • Single entry accounting: (trusted) person starts a list, and add in entries that describe each asset. • No auditability; trust in “the account” is essential •  foundation for e.g. taxation in the first cultures • Double entry accounting (Luca Pacioli; 1494): • You can't have an asset that comes from nowhere, nor can you have a liability that comes from nowhere. • Clear strategy to identify errors and to remove them (auditable) • Enables global trade  progress from renaissance until today • Triple entry accounting (Prof. Yuji Ijiri; 1989 and Ian Grigg; 2005): • You have three entries: the credit, the debit and the receipt (the cryptographic signed acknowledgement of the transaction verified by the crowd.) • The signed Receipt is the Transaction •  completely new economic models
  25. 25. IT innovations and how they shift value creation and capturing • Phase I: Value is in Hardware (IBM…) • Electric circuits —> micro processors —> COMMODIZATION (HP, Compaq, Dell,…) • Phase II: Value is in proprietary software (Microsoft, Novell) • proprietary software —> open source (Internet; Linux) • Phase III: Value is in the data (Google, Facebook, Amazon) • —> central data —> decentralized data • Phase IV: Value is in the governance (TBD….) • Centralized governance to decentralized governance? Usually not the first but the best wins in every cycle! Based on Joel Monegro; Partner at 25
  26. 26. Yes – Blockchain Technology is THIS fundamental 26
  27. 27. Overview of the industry in Washington/impact to economy (companies that operate, economic activity, potential for growth) 27
  28. 28. Mining – Managing Consensus and Ledger - Bitcoin Mining example • Bitcoin mining is the process of checking and adding new transactions to bitcoin’s immutable ledger—its blockchain. • Proof-of-work: Miners must compete with one another to be the first to find a new block. In return for performing this work, which requires massive processing power and incurs hefty electricity costs, miners are rewarded with a certain number of bitcoins for each block they add to the blockchain. • Current reward: 12.5 bitcoins per block, and a new block is found roughly every 10 minutes. 28
  29. 29. SIDENOTE / Pitch ALERT: And yes… we (Adgetec) do have business partners interested in building mining operations in WA state 29
  30. 30. Microsoft Amazon Google Facebook T-Mobile (and IBM, Salesforce, SAP,…) 30
  31. 31. ©Mark Mueller-Eberstein & Adgetec Corporation Blockchain companies in WA State (selection) • Bittrex • Dragonchain • New Alchemy • RChain • Storm • Coinme • SHOP/Every • Uptoken (associated w/CoinMe) • iPayYou • Luxoft • Tymlez • 4Block Solutions • Nori • Unikrn • Strix Leviathan • • Evernym • LifeID • BlocknKey • Onda • Trusted Key • Sirqul (moving into blockchain. CEO is technical founder of AWS) • Stably • DigitalTown • Vulcan (starting a major bc project 31 WA State (SOS) business search (6/18/2018): • “Crypto”: 81 entries • “Blockchain”: 23 entries
  32. 32. ©Mark Mueller-Eberstein & Adgetec Corporation Investors and Investment companies • Pithia (RChain) • Reflective Ventures (RChain) • Bloccelerate.VC 32
  33. 33. WHAT GOVERNMENTS BRING TOTHE BLOCKCHAINTABLE • Markets need confidence in the regulatory framework for blockchain • Governments can signal to the market and to the public that there is confidence in the technology • Legislatures and regulators can remove impediments in current law regarding blockchain • Legislatures and regulators can make laws and rules that enable blockchain
  34. 34. Blockchain Community: “We have regulation in place, we just need clarity” 34
  35. 35. At Global Blockchain Expo (London): “You can have your team in the USA, but not your company” 35
  36. 36. VentureBeat: “Where not to establish a Blockchain company”: 36 “6 states you should probably block from your token sale”
  37. 37. Governments and Blockchain Technology APEC Estonia Washington State China
  38. 38. Sales Tax with Blockchain? • European Union estimates a loss of 160+ Billion Euro per year in sales taxes collected by “defunct companies” • Netherlands developing blockchain based “real time tax collection” 38
  39. 39. 39 Davos 2018 Blockchain core priority in digitalizing government and business
  40. 40. ©Mark Mueller-Eberstein & Adgetec Corporation Other governments (examples): “Technology-neutral regulation and promoting further technological innovations and growth” • USA: • Wyoming: 6 “Crypto friendly bills”; over 100 new “Crypto companies • Texas: Crypto Mining in gas fields • States like Arizona and Nevada have already regulation treating “Smart Contracts” as valid legal contracts. • Brian Forde (“Crypto Candidate for Congress” in CA) • Elections: Absentee ballots in first states • Europe: • Estonia • Malta (Virtual Financial Assets Act) • Gibraltar “9 principles” • Lichtenstein: “Blockchain Act” • Georgia: “Land-registry is on blockchain” • Asia: • China (People’s Bank) • Japan (legal tender) • Jordan: Digital Identity for 500,000 Syrian refugees • Africa: • Elections (Sierra Leone) • Supply Chain (Diamonds…) 40
  41. 41. Regulations and restrictions? From an economist perspective: Every restriction (and forced inefficiency) comes with a cost. Lets be clear who carries the cost and if that is in the best interest of an economy and society. Mark Mueller-Eberstein & Adgetec Corporation
  42. 42. Blockchain: Social scalability Everybody with a connection to the internet can transact with everybody else.
  43. 43. “The first internet era was predicated on the availability of information and content anywhere in the world and at any time. Now the second era, fueled by blockchain technology, is ushering in what is known as the Internet of Value, featuring a revolutionary distributed platform poised to reshape and advance the global business environment and world order.” Don Tapscotts, 2017
  44. 44. • Everybody can transact with Everybody and add billions of people to marketplace • Transaction fees could become “near zero” and “immutable” within seconds:  new business, marketing, advertisement and collaboration models are possible • Impacts every “transaction step”; from Compliance and Supply Chain Management to Advertisement, Marketing and Sales Impact of blockchain on consumers, business models, marketing and advertising:
  45. 45. Saving Capitalism? • Many agree with e.g. Robert Reich and Muhammad Yunus: “it's time to admit that the capitalist engine is broken--that in its current form it inevitably leads to rampant inequality, massive unemployment, and environmental destruction. We need a new economic system that unleashes altruism as a creative force just as powerful as self-interest.” • Muhamad Yunus “Technology designed for social purpose to begin with would be more powerful and would create its own exponential expanding positive force” • I believe that a blockchain powered re-envisioned economics will recognize that humans are naturally entrepreneurs, best served not by jobs as such but by opportunities to make their own ventures in the marketplace. 45 A World of Three Zeros, 2017
  46. 46. 46 • The next level of blockchain technology enabled innovations are a mix of economics, social organization and software development. • The emergence of “economic design patterns”: • We see key economic constructs that appear in decentralized applications, similar to software design patterns • Electricity = energy over the wire. • Telephone = communication over the wire. • Blockchain = consensus over the wire. Direction
  47. 47. Why does this matter? 1. Eliminates the need for third party moderator / intermediary 2. Creates on (very secure) Golden Record 3. Can eliminate back office and intermediary functions 4. Can be paired with other smart technologies (think IoT, AI, SCM, ERP,…) to enable coordinated record keeping that would otherwise be logistically difficult or impossible. 47
  48. 48. The Blockchain revolution is here.  Our Opportunity! ➢ Change will be fundamental on business, technology, processes, structures and people ➢ Technology & customer oriented leaders are positioned to drive and realize the vision and image of the future ➢ Bringing Billions into the economic system is an opportunity and our responsibility