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Blockchain Landscape Report 2019

There is increasing interest in the potential impact of Blockchain globally, across the business world. Blockchain is transforming data storage, security, digital property management, transactions in a variety of forms, and much, much, more. And the impact will be felt across a number of industries, including manufacturing, insurance, healthcare, retail, logistics, and more.

We believe Blockchain presents a unique opportunity for enterprises to leverage a revolutionary new technology and redefine how they function. The Blockchain Landscape Report 2019 by [X]cubeLABS discusses everything Blockchain ranging from its history, mechanism, and industry-wide adoption to its future potential.

Blockchain Landscape Report 2019

  1. 1. Blockchain Landscape Report 2019
  2. 2. [x]cube Blockchain Landscape Report 2019
  3. 3. Summary ▪ First generation Internet disrupted the global economy in numerable ways, enabling free and instant access to information, connecting people globally in large social networks, facilitating communication and sharing in wholly new ways, and more. Similarly, the second generation also promises to transform various industries fundamentally, and change how businesses operate. ▪ Blockchain, also often referred to as distributed ledger, is the technology which is enabling cryptocurrencies such as bitcoin and Ethereum. Blockchain technology is moving the world into a new dawn of trust, decentralization, and global inclusion. ▪ 2017-18 has been a period of experimentation for Blockchain technologies. Enterprises realized both the benefits and challenges of this technology. Enthusiasm towards blockchain technology continues to be universally similar as organizations and businesses alike continue to explore it’s potential business applications. 2019 is expected be a huge boost for Blockchain technology and Blockchain based service providers as full-scale deployments take shape across the business spectrum. ▪ Apart from Cryptocurrencies, blockchain technology adoption in various industries such as financial services, insurance, healthcare, retail, etc. is growing. Supply Chain and cross-border payments are two leading use cases where this is finding traction. Other prominent and fast growing use cases include regulatory compliance, identity management, and assets/goods management. ▪ The global spending on blockchain based solutions is forecast to reach $9.7BN by 2021, growing at a CAGR of 81.2% during 2016 – 2021. Despite this fast-paced growth, industry standards and regulatory issues continue to hinder widespread adoption as governments worldwide work with enterprises to formulate policies for the use of blockchain technologies and cryptocurrencies. !3
  4. 4. Key Executives Bharath Lingam Chief Executive Officer Nilesh Jahagirdar VP, Digital Strategy & Marketing Rama Krishna Chief Engineer With a decade & half experience of creating world class teams and driving innovation through cutting edge products and solutions, Bharath enables the [x]cube LABS team to deliver best-in-class digital solutions to its clients. Prior to [x]cube LABS, he completed a distinguished stint at Mahindra Satyam where, besides being on the Shadow Board advising senior management on strategic and operational initiatives, he also led strategy, marketing & sales initiatives for the 
 Travel, Logistics & other markets. Rama Krishna has formidable expertise in a wide range of technologies, including Blockchain, VoIP, iOS development, mobile advertising and analytics, and more. He has been part of organizations such as PanTerra Networks and Competent Solutions as a Software Architect before joining PurpleTalk. At PurpleTalk, he is responsible for project management as well as engineering standards and training implementation. Nilesh is a Blockchain and AR/VR & Immersive Tech enthusiast who enjoys solving problems in the enterprise leveraging digital technologies for. Apart from consulting with clients, he also provides leadership and oversight to [x]cube LABS 
 marketing efforts. One of the co-founders at [x]cube LABS, he has over 15 years of experience and brings together expertise in design, communication, gaming, and strategy. !4
  5. 5. Table of Contents 1. Introduction to Blockchain 2. Industry Adoption 3. Regulations 4. Fundraising Landscape Financial Servicesi. Insuranceii. Healthcareiii. Media & Entertainmentiv. Retailv. Energyvi. Logisticsvii. Manufacturingviii. Public Sectorix. 5. Market Prospects Chinai. United Statesii. European Unioniii. Maltaiv. Japanv. Australiavi. Indiavii. 6. ABOUT [x]cube LABS
  7. 7. 1990s 2009 2011 - 2012 2012 - 2013 2013 - 2014 2014 - 2015 2015 - 2016 2016 - 2017 The concept of distributed computing has been around since 1990 Cryptocurrency in applications related to 
 cash begin to deploy Use of blockchain technology in financial markets and applications beyond cash transactions begin to blossom Permissioned blockchain network solutions Bitcoin was created by Satoshi Nakamoto. Subsequently, the concept of a blockchain to create a decentralized ledger maintained by anonymous consensus was introduced Currency transfers and 
 digital payment systems The evolution of 
 smart contracts 
 using blockchain technology Market Evolution, 
 sub-development and exploration 
 across industries ORIGIN TRANSACTIONS CONTRACTS APPLICATION History and Evolution of Blockchain Technology !7
  8. 8. ▪ A blockchain is a digital, distributed transaction ledger with identical copies maintained on multiple computer systems controlled by different entities ▪ Anyone participating in a blockchain can review the entries in it. But the blockchain can only be updated by consensus of a majority of participants. Once entered into a blockchain, information can never be erased; ideally, a blockchain contains an accurate and verifiable record of every transaction. In essence, blockchain is a ledger, but one with built-in trust. . . . . . . . .. . Blockchain Definition !8
  9. 9. ▪ Organizations have traditionally recorded transactions in physical ledgers, and kept them under lock and key mechanism. Such ledgers are typically isolated to protect their accuracy and sanctity, and while conducting business, each organization maintains its own separate record, to independently verify information. In essence, blockchain is a ledger, but one with built-in trust ▪ A blockchain is a digital, distributed transaction ledger. Identical copies of these distributed transaction ledgers are maintained on multiple computer systems controlled by different entities/users. Anyone participating in a blockchain can review the entries in it, but can only update the blockchain by consensus of a majority of participants. Once entered into a blockchain, information can never be erased; ideally, a blockchain contains an accurate and verifiable record of every transaction Distributed nodes maintain a shared source of information. Automated audit trail ensures data is secured, tamper proof and irreversible. Real- Time transparency across the network ensures trust. Blockchain System Blockchain: A Secure and Trusted Digital Ledger !9
  10. 10. ▪ Cross border payment is currently an expensive and slow process. Blockchain technology has the potential to expedite the international money transfer process by removing the intermediaries involved and to significantly cut remittance costs, from 5-20% to 2-3%. In addition, the cross border transaction process is optimised and completed within 2-3 seconds rather than the 2-3 days required using conventional means Conventional Way of Cross Border Payments Cross Border Payments With Blockchain Technology Buyer US Based Bank US Federal Reserve Japan 
 Correspondence Bank FX Transaction Fee US Correspondence Bank Bank of Japan Japan Based Bank Seller Many Intermediaries High Transaction Costs Slow Money Transfer Less Number of Intermediaries Low Transaction Costs Quick Money Transfer Buyer US Based Bank Blockchain Based Platform Japan Based BankSeller Source: Evon Tech Traditional Vs. Blockchain Based Process – An Example !10
  11. 11. Each block also has a hash. This hash is essentially a value that is generated from a string of text using mathematical functions. A hash may be compared to a fingerprint, as each hash is unique. Its role is to identify a block and the block’s contents. A unit of data stored inside a block may represent any value depending on the blockchain type. A block may store an amount of money, a share in a company, a vote during an election, a digital certificate of ownership, or any other value. A block also stores encrypted details about the parties whose interaction resulted in the data being stored in the block. A block for an e-commerce transaction will contain identifiers of retailer & consumer, for example. Blocks are files where data pertaining to transactions is permanently recorded. Each block references the previous block and contains data, its own hash, and hash of the previous block. Once a block is created, a hash is calculated automatically. Changing something inside the block causes the hash to change. Hence, a hash also indicates changes to a block. Data Hash Hash of Previous Block Hash
 7ae26e64578abd1e66cfe1e9b23a9e56 Hash
 7ae26e64679abd1e66cfe1e9b93a9e85 What is a Block & How Does it Work !11
  12. 12. If anyone manipulates the data in a single block, the hash of that particular block changes, but it also makes the whole chain invalid. A hash works as a great tool for identifying attempts to change data in blocks. However, the hash algorithm alone does not ensure that the security of a blockchain network is fool proof. To mitigate attempts to manipulate the blockchain network and to ensure security, blockchain technology also uses a process known as proof-of-work. Technically speaking, a blockchain is a chain of blocks ordered in a network of non-trusted peers. Each block contains a hash of the previous block in the network. For example, if there are three blocks in a blockchain network, block 3 will contain the hash of block 2, and block 2 will contain the hash of block 1. Hash
 Previous Hash: 2K7L 2M0Z ... ... Hash
 Previous Hash: 0000 2K7L Hash
 Previous Hash: 2M0Z 2T4M Hash
 Previous Hash: 2B3H 2T4MHash
 Previous Hash: 2K7L J10F ... ... Hash
 Previous Hash: 0000 2K7L How Exactly Do Blocks Work A genesis block is the first block of a block chain. It is also known as Block Zero or Block 0. It is the only block in the Blockchain network that doesn’t refer to previous block because there isn’t any. !12
  13. 13. Transaction Block Chain Ledger The easy way to think of Blockchain is as a database (or Ledger) which is copied & synchronized across a network of computers (nodes). Nodes are free to join the blockchain network by simply running a set of software, allowing the network to be distributed across a wide range of computers. This is the reason why Blockchain is often referred to as a “Distributed Ledger” technology. Nodes provide computing capacity to the network and maintain a record of changes to the ledger. These changes are synchronized and agreed upon by a group of nodes across the network. This process of agreement between nodes is called as Consensus and is core to the security of the blockchain system. Transactions between accounts on the network are transfers of “value.” Each different block has a different use case for what this “value” is. Each transaction is submitted to multiple nodes on the network to be processed & approved (a process called consensus). Each set of approved transactions in a given timeframe form a Block. This new block 
 is added to the ledger as part of a chain of previous blocks. This is where the 
 name Blockchain is derived from. Over time, more and more blocks are added to the chain, creating an immutable (unchangeable) record of transactions. A Node The Ledger Consensu s How Blocks Are Added to the Chain !13
  14. 14. Think of a normal centralized organization. All the decisions are taken by the leader or a board of decision makers. This isn’t possible in a blockchain network because a blockchain has no “leader” and is a decentralized network. For the blocks to make decisions, they need to come to a consensus using “consensus mechanisms.” In simpler terms, consensus is a dynamic way of reaching agreement in a group. The purpose of a consensus mechanism is to verify that information being added to the ledger is valid, i.e., the network is in consensus. This ensures that the next block being added represents the most current transactions on the network, preventing double spending and other invalid data from being appended to the blockchain network. Consensus may be performed in different ways. A few models of consensus include: ● Proof of Work (PoW) — Where nodes compete to agree which block is real by solving mathematical problems, making it computationally expensive to cheat ● Proof of Stake (PoS) — Where nodes risk their own capital to agree consensus. If the block is not agreed the stake is lost, making it financially expensive to cheat ● Delegated Proof of Stake (DPOS) — A delegated proof-of-stake (DPoS) system works along the same lines as the PoS system, except that individuals choose an overarching entity to represent their portion of stake in the system. Delegated proof of stake uses real-time voting combined with a social system of reputation to achieve consensus ● Practical Byzantine Fault Tolerance (PBFT) — Under this consensus mechanism, every node distributes a public key. Messages getting through the node is designated by the node to confirm its organization. When enough indistinguishable reactions are achieved, at that point a consensus is met that the message is a legitimate transaction ● Federated Byzantine Agreement (FBA) — FBA permits reaching consensus among large numbers of nodes who don’t know each other personally, and in situations when the total number of participants may not even be known. Each participant extends to trust to only a limited (by number) group of other participants, and therefore achieves consensus only amongst a narrow circle Consensus in the Blockchain Network !14
  15. 15. What are Smart Contracts ?
 Smart contracts help users exchange money, property, shares, or anything of value in a transparent way while avoiding the services 
 of a middleman. Smart contracts not only define the rules and penalties around an agreement in the same way that a traditional contract does, but also automatically enforce those obligations. Smart contracts can be created for all sort of situations that range from financial derivatives to insurance premiums, breach contracts, property law, credit enforcement, financial services, legal processes and crowdfunding agreements, among others. A smart contract is a computer code running on top of a blockchain containing a set of rules under which the parties to that smart contract agree to interact with each other. If and when the pre-defined rules are met, the agreement is automatically enforced. The smart contract code facilitates, verifies, and enforces the negotiation or performance of an agreement or transaction.
 Smart contracts were first proposed by Nick Szabo, who coined the term, in 1994. Under this format, contracts could be converted to computer code, stored and replicated on the system and supervised by the network of computers that run the blockchain. 1 2 An option contract between parties is written as code into the blockchain. The individuals involved are anonymous, but the contract is the 
 public ledger. A triggering event like an expiration date and strike price is hit and the contract executes itself according to the coded terms. What are Smart Contracts !15
  16. 16. How Smart Contracts Work Match Buyer With Seller EXCHANGE Contract receives assets Contract distributes assets Clearing and settlement is automated Ownership is undisputed Sell House Buy House Digitize the Land Deed Digitize Currency How Smart Contracts Work !16
  17. 17. Types of Blockchain • A public blockchain has no access restrictions. Anyone with an Internet connection can send transactions to it as well as become a validator (i.e., participate in the execution of a consensus protocol) • Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm • Some of the largest, best known public blockchain networks are Bitcoin and Etherium • A private blockchain is permissioned. One cannot join it unless invited by the network administrators, since Participant and validator access is restricted. • This is a middle ground for companies that are interested in blockchain technology • Typically, they seek to incorporate the technology into their accounting and record-keeping • Procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public Internet • A consortium blockchain network is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network • The administrators of a consortium chain restrict users’ reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol PUBLIC PRIVATE HYBRID/CONSORTIUM !17
  18. 18. Dealing With Scalability Challenges in Blockchain Technology Off-Chain Transactions • One possibility of scaling the blockchain network is by pushing most of the transactional activity off the mainchain. This system would need sidechains that handle smaller activities and only record the result on the main blockchain. Participants using the blockchain network would be able to transact offline and the mainchain would be automatically updated to reflect the transaction details Smaller Networks with Fewer Nodes • Capacity to scale would be determined by the number of participant nodes on any network. This is one of the main factors that have made it difficult for blockchain networks such as Ethereum to scale as it has about 25,000 nodes on its network. Having a smaller network consisting of fewer nodes would mean getting a consensus on transactions much faster Increasing Block Size • Increasing the block size would mean that more transactions can take place on each block. Also, this will keep transaction costs reasonable as there will be no major backlog causing fees to spike One of the key issues that continues to hinder blockchain technology is its scalability. Blockchain networks are to some extent limited in terms of their capacity to scale. What makes it particularly hard for the innovation to scale is the nature of its consensus protocols. At the moment, all participant nodes on any given network have to process every transaction that takes place within the network. The rise of Blockchain technology has made it critical to implement a scaling solution which will increase functionality and lead to more widespread adoption. The future primarily lies in the ability to identify and implement an effective scaling solution as soon as possible. !18
  19. 19. Blockchain Vs. Bitcoin — What’s the Connection? How the blockchain transfers value ▪ Bitcoin’s first ever appearance was in a 2008 white paper authored by Satoshi Nakamoto. The white paper gave details on an innovative peer-to-peer electronic cash system known by the name Bitcoin which enabled direct transfer of online payments without an intermediary ▪ While the proposed bitcoin payment system was innovative and exciting, it was the behind-the-scene mechanics of how the system worked that made it truly revolutionary. Shortly after the bitcoin white paper released, it became clear that the key technical innovation was not the digital currency itself but the technology behind it, known today by the name blockchain ▪ Although commonly associated with Bitcoin, blockchain technology has many other applications in various industries. Bitcoin is just the first and most well-known use case. In fact, Bitcoin is only one of about seven hundred applications that use the blockchain operating system today Blockchain is to Bitcoin, what the Internet is to email. A big electronic system, on top of which applications can be built. 
 Currency is just one. !19
  20. 20. How the Bitcoin Blockchain Works ▪ The first widely popular and discussed blockchain was the Bitcoin blockchain, and it 
 serves as the de-facto example of how blockchain systems may work. The Bitcoin 
 blockchain is simply a database file which is stored on thousands of computers 
 globally, where the individual copies are kept aligned through the rules of the Bitcoin protocol ▪ The Bitcoin blockchain file (actually a series of files, as large files are difficult to manage) contains a list of every single bitcoin transaction that has ever happened since its inception: it is the ledger of record for Bitcoin and has been continuously growing since January 2009 ▪ The Bitcoin blockchain is referred to as an open or ‘permissionless’ database. Which implies, should a user ever wish to write entries to the database, he may do so without logging in, signing up, or even asking permission from anyone in charge. This can be managed by downloading some open source software and running it ▪ By doing so, a user’s computer will connect over the Internet to other computers running similar software. This software allows users to start sending and receiving bitcoin transaction data with other users, and allows them to add data to the bitcoin blockchain, by playing a computationally intensive lottery known as ‘mining’ ▪ By studying the Bitcoin blockchain file it is easy to see which bitcoin account has how many bitcoins and which accounts are sending bitcoins to whom. This transparency is needed so that the validators of the transactions determine whether a transaction is legitimate or not !20
  21. 21. Bitcoin Price Trends Bitcoin Historical Price Trends ($) Source: Coin Market Cap !21
  22. 22. Ethereum Blockchain How is Ethereum Different from Cryptocurrencies like Bitcoin ? ▪ Similar to Bitcoin, Ethereum is also a distributed public blockchain network. Although there are some huge technical differences between the two, the most important difference is that Bitcoin & Ethereum differ substantially in purpose and capability. Bitcoin offers one particular application of blockchain technology, a peer to peer electronic cash system that enables online Bitcoin payments. While the Bitcoin blockchain is used to track ownership of digital currency (bitcoins), the Ethereum blockchain platform primarily focuses on running the programming code of any decentralized application Ether, the Fuel for Ethereum ▪ Ether is the digital token used by Ethereum and is generated by the Ethereum blockchain platform. Ether is also used by application developers to pay for transaction fees and services on the Ethereum network. Ether is also used as a cryptocurrency and is traded on various exchanges similar to bitcoin ▪ Ethereum is a blockchain based distributed computing platform through which developers build and 
 deploy decentralized applications that feature smart contract functionality !22
  23. 23. Hyperledger Through Hyperledger, the Linux Foundation aims to create an environment in which communities of developers and companies meet and coordinate to build blockchain frameworks. What is a Hyperledger ? ▪ Hyperledger is a collaborative effort created to advance blockchain technology by identifying and addressing important features for a cross- industry open standard for distributed ledgers that can transform the way business transactions are conducted worldwide Hyperledger: Building Open Source Blockchain For Business ▪ Blockchain can do for business what the Internet did for communication. Hyperledger powers this transformation, and is hosted by the Linux Foundation, featuring innovators in finance, banking, IoT, supply chains, manufacturing and technology ▪ Hyperledger aids in creating an enterprise grade, open source distributed ledger framework and code base, upon which users can build and run robust, industry-specific applications, platforms and hardware systems to support business transactions !23
  24. 24. Hyperledger Projects Hyperledger Sawtooth is a modular platform for building, deploying, and running distributed ledgers. Hyperledger Sawtooth includes a novel consensus algorithm, Proof of Elapsed Time (PoET), which targets large distributed validator populations with minimal 
 resource consumption. Business Blockchain Frameworks Hosted with Hyperledger ▪ Hyperledger fosters and promotes a range of business blockchain technologies, including distributed ledger frameworks, smart contract engines, graphical interfaces, client libraries, utility libraries and sample applications ▪ The Hyperledger umbrella strategy encourages the re-use of common building blocks and enables rapid innovation of distributed ledger technology components Hyperledger Iroha is a business blockchain framework designed to be simple and easy to incorporate into infrastructural projects requiring distributed ledger technology. Hyperledger Burrow is a permissionable smart contract machine. The first of its kind when released in December, 2014, Burrow provides a modular blockchain client with a permissioned smart contract interpreter built in part to the specification of the Ethereum Virtual Machine (EVM). Intended as a foundation for developing applications or solutions with a modular architecture, Hyperledger Fabric allows components, such as consensus and membership services, to be plug-and-play. Hyperledger Indy is a distributed ledger, purpose- built for decentralized identity. It provides tools, libraries, and reusable components for creating and using independent digital identities rooted on blockchains or other distributed ledgers for interoperability. !24
  25. 25. Neo Blockchain Digital Assets Digital Assets are programmable assets which exist in the form of electronic data. Using blockchain technology, the digitization of assets can be decentralized, traceable, trustful, highly transparent, and free of intermediaries. On the NEO blockchain, users can register, trade, and circulate multiple types of assets. Neo’s main aim is to be the distributed network for “smart economy” Digital Assets + Digital Identity + Smart Contracts = Smart Economy Digital Identity Digital identity refers to the identity information of individuals, organizations, and other entities existing in electronic form. The more mature digital identity system is based on the PKI (Public Key Infrastructure) X.509 standard. NEO will implement a set of X.509 compatible digital identity standards. This set of digital identity standards, in addition to a compatible X.509 level certificate issuance model, will also support the Web Of Trust point-to-point certificate 
 issuance model. Smart Contract The NeoContract smart contract system will allow developers globally to quickly carry out the development of smart contracts. Developers do not need to learn a new programming language, but can use C#, Java and other mainstream programming languages in their familiar IDE environments (Visual Studio, Eclipse, etc.) for smart contract development, debugging and compilation. What is Neo ? ▪ NEO is a non-profit community-based blockchain project utilizing blockchain technology and digital identity to digitize assets, automate the management of digital assets using smart contracts, and to realize a "smart economy" with a distributed network ▪ Neo was formerly known as Antshares, and is often known as the “Ethereum of China” !25
  26. 26. The Stellar Network Key Features of the Stellar Network ▪ Real-time settlement (2-5 seconds) ▪ Cryptographically secure transactions ▪ Regulatory compliance ▪ Payments that move like email ▪ International reach with a single integration ▪ Great for micropayments: A $0.01 fee handles ~600,000 transactions ▪ Automatic currency exchange ▪ Stellar is an open-source protocol for exchanging money using blockchain technology. The Stellar platform connects banks, payments systems, and people. Using stellar, money can be moved quickly, reliably, and at almost no cost ▪ The Stellar protocol is supported by a nonprofit, the Stellar Development Foundation. The Stellar network has been used by companies such as IBM, KlickEx, Parkway Projects, Tempo, Wanxiang Labs and Stripe, among others ▪ The native digital asset of Stellar is called Lumens. In other words, Stellar is the payment network and Lumens is the cryptocurrency What problem is Stellar Solving? ▪ When someone sends money past international borders 
 (e.g. sending USD from the United States to someone in Japan accepting YEN) the transaction is charged high fees (from exchange rates, and from the banks) ▪ Not only that, but the transaction will sometimes take days to reach its destination. Stellar fixes this problem by making it easier to transfer money across borders !26
  27. 27. Quorum ▪ Quorum is an Enterprise-ready distributed ledger and smart contract platform based on Ethereum. It is permissioned blockchain infrastructure specifically designed for financial use cases ▪ Quorum is ideal for any application requiring high speed and high throughput processing of private transactions within a permissioned group of known participants. Quorum was designed to placate many of these key concerns that financial institutions have regarding blockchains Privacy & Transparency Quorum supports both transaction-level privacy and network-wide transparency, customizable to business requirements. Performance & Throughput Quorum supports institutional transaction volumes. Quorum networks process dozens to hundreds of transactions per second, depending on how the network and smart contracts are configured. Permission & Governance Quorum supports blockchain transactions among a permissioned group of known participants. !27
  28. 28. ▪ Within the financial sector, blockchain lends itself to a number of key use cases including regulatory compliance, cross-border payments & settlements, custody and asset tracking, and trade finance & post-trade/transaction settlements Spend by Blockchain Use Case in 2017 – Top 6
 ($ in millions) ➢ Financial & Supply Chain Use Cases Dominate ▪ Cross-border payments & settlements will be the use case that sees the largest spending in 2018 ($242MM), followed by lot/ lineage provenance ($202MM) and trade finance & post-trade/ transaction settlements ($199MM). These three use cases will remain the largest in terms of overall spending in 2021 as well ▪ In the distribution and services sector and the manufacturing and resources sectors, the leading use cases include asset/goods management and lot lineage/provenance Source: IDC Blockchain Use Cases !28
  29. 29. Cross-Border Payments & Settlements Use Case Description – Tracking, tracing, and managing cross-border/international payments and settlements; creates alternate payment and settlement "rails" built for immediate payment and settlement Worldwide Use Case Market Opportunity
 ($ in millions) Worldwide Use Case Market Opportunity
 ($ in millions) Worldwide Use Case Market Opportunity
 ($ in millions) Identity Management Use Case Description – Identity management and confirmation (includes digital signature management); authenticate identities, manage personal and financial
 data, and assist in identity as a service Lot Lineage/Provenance Use Case Description – Verify origin and authenticity of a product as it moves throughout the value chain; captures information about all inputs of a product, enabling accurate visibility and traceability into the history of a product Source: IDC Key Blockchain Use Cases !29
  31. 31. VERTICALS Healthcare Logistics Manufacturing Public Sector Media & Entertainment EnergyInsurance Financial Services Retail !31
  32. 32. ▪ The transfer of value has always been a slow and expensive process. This is particularly true in the case of cross-border payments. For example, if someone wants to transfer money from Europe to his family in India, who have an account with an Indian bank, it involves a number of banks (and currencies) before the money can be collected in India. Services like Western Union for similar transactions make the money transfer quick but are very expensive Financial Services Global Development of Cross Border Payments Value, 2016 – 2022
 ($ in trillions) Globalized Trade Drives Steady Growth In Cross-border Payment Volumes The overall value of cross-border payments is expected to rise by 5.6% per year, driven both by retail (C2C, C2B, B2C) and corporate payments. The C2B segment is expected to experience the highest growth rates (at around 25% a year) as a result of strongly growing cross-border e-commerce trade. ➢ The Issues – Slow and Complex Cross Border Payments !32
  33. 33. Faster & More Affordable ▪ Blockchain technology can simplify and speed up the current cross border transaction process by cutting out many of the traditional middlemen. At the same time, money remittance becomes more affordable through this process ▪ The costs of remittance which were 5%-20% until now will reduce to 2%-3% of the total amount via blockchain transactions and also provides guaranteed, real time transactions across borders Use Case ▪ Recently, Thailand's Bank of Ayudhya PCL was successful in conducting a cross-border transaction with a Singapore based bank by using a blockchain ▪ The bank, also known as Krungsri, announced that it conducted a real-time international remittance in concert with MUFG Bank, Mitsubishi Corporation and Standard Chartered Bank (Singapore) using the Krungsri Blockchain Interledger. Specifically, the bank used its blockchain to facilitate a transfer from Mitsubishi's Krungsri account to its Standard Chartered account ▪ Using the blockchain cross border technology in the future will allow companies such as Mitsubishi further improve their liquidity management efficiency and reduce their cost management Financial Services ➢ How Blockchain Helps – Simplifying and Speeding Up Cross-Border Payments !33
  34. 34. Global Stocks Traded by Value
 (Current $ in trillions) ▪ According to the World Federation of Exchanges database, the total value of stocks traded globally is around $77.5TN, and the market is getting bigger and more complex by the day ▪ Transaction time, compliance and operational costs are top concerns for the growing global stock markets ➢ The Issues – Slow Trade Settlement and Compliance Issues Source: World Bank Financial Services !34
  35. 35. ▪ Blockchain technology can potentially improve many processes in the financial sector, including share trading. Buying and selling of stocks and shares always involves many middlemen, such as the stock exchange itself and brokers ▪ The introduction of computers has already changed trading significantly. In the near future, share trading is expected to change even more dramatically. Blockchain technology may cut out brokers, and make the stock exchange decentralized, without a central system needed to bring demand and supply together ▪ Creating a secure and decentralized ledger – a blockchain gives all parties a say in the transaction validation process, speeds up the transaction settlement process, and allows for greater trade accuracy, while changing the role of others such as those that determine share price Use Cases ▪ NASDAQ has already started using blockchain technology to issue and manage private securities, while the London Stock Exchange (LSE) is exploring blockchain opportunities with a cross-industry group of institutions to change the way securities are traded across Europe ▪ In addition, other exchanges worldwide such as the National Stock Exchange of India, South Korea Stock Exchange and Tokyo Stock Exchange are looking into the potential benefits of blockchain Financial Services ➢ How Blockchain Helps – Shorter Settlement Process and a Greater Trade Accuracy !35
  36. 36. ▪ The global asset management industry has been growing rapidly over 
 the past few decades and is expected to reach $145.4TN by 2025 ▪ The industry uses intermediaries to meet investors' demands for a 
 global set of asset management products, making the process time 
 consuming and complex ▪ The blockchain concept can enable direct trading and settlements 
 across boundaries, which in turn reduces costs, increases data
 accuracy and reduces transaction delays
 Use Cases ▪ Using smart contracts and distributed ledger technology, FundsDLT - a blockchain based funds distribution platform is expected to provide asset managers a new distribution channel with significantly lower transaction costs and delays. FundsDLT was setup as a collaboration between Luxembourg Stock Exchange subsidiary Fundsquare, KPMG Luxembourg and Post Group subsidiary InTech ▪ Fundsquare is also working with iHub to launch a blockchain powered Know Your Customer platform for the funds industry which is ultimately expected to be integrated with FundsDLT Global Assets Under Management
 ($ in trillions) ➢ Increased Accuracy in Asset Management Financial Services !36
  37. 37. ▪ One of the biggest issues for the insurance industry is fraud. 
 In the U.S. alone, fraud is conservatively estimated to be around 
 $80BN a year across insurance lines ▪ Though insurance companies are dealing with false claims by 
 using smart analytics and other methodologies, fraudsters are 
 coming up with more sophisticated ways to dupe insurers ➢ How Blockchain Helps – Through Fraud Prevention and Blocking False Claims ▪ A distributed ledger in synchronization with existing anti-fraud mechanisms can ensure that all participants in the insurance value chain effectively combat fraud and process rightful claims quickly ▪ Blockchain's inbuilt feature of capturing time-stamped transactions with complete audit trail makes it extremely difficult for fraudsters. To track data around items of high value such as jewelry, a blockchain-powered risk ledger may be used. Authenticity certificates usually issued for jewelry may be replaced by this risk ledger in order to avoid duplicate claims, fake replacements, double financing and false claims ▪ Less fraud in insurance industry directly translates to higher margins for insurance companies, leading to cheaper premiums 
 for consumers Insurance ➢ The Issue – Insurance Fraud !37
  38. 38. Insurance ▪ Everledger uses blockchain technology to create a ledger of diamond ownership for buyers, sellers, and insurers. The company 
 has digitized around 1.6 million diamonds using blockchain technology ▪ The secure ledger records unique characteristics of each diamond and creates an equivalent digital identity for every precious stone. This ensures that insurers and traders have quick and ready access to the stones' provenance. Diamonds are usually laser-etched with a digital fingerprint which includes uniquely information for each stone like serial number, cut and clarity. This fingerprint is stored on an immutable ledger ▪ For instance, if a diamond jeweller falsely claims that diamonds have were stolen from his store, and files an insurance claim. He creates counterfeits certificates for the diamonds, and tries to sell them as new ones ▪ Since the unique identifiers of each of the diamonds already have been stored on the Everledger blockchain, when they resurface, the insurance company is notified and can repossess the diamonds ➢ Use Cases !38
  39. 39. ▪ Interoperability Gaps: Lack of interoperability costs 150,000 lives and $18.6BN per year in 
 the U.S. ▪ Need for Longitudinal Health Records: 46% of U.S. clinicians do not have a complete view of their patients’ health history/ records. ▪ Further, individuals cannot view a unified medical record or pass it on to clinicians ▪ High Error Rates with Centralized Health IT Systems: Error rates for successfully identification or integration of a file are 25% for hospitals and health systems; and as high as 
 50% – 60% outside hospitals Healthcare ➢ The Issues – Interoperability and Patient Matching Challenges !39
  40. 40. ➢ The Issues – Interoperability and Patient Matching Challenges Information Exchange Showstoppers
 Survey of HIE professionals identifies what they see as top interoperability challenges The Patient Matching Challenge
 Among provider data managers Healthcare Source: University of Michigan, AHIMA !40
  41. 41. Healthcare Smart contracts process the 
 incoming transactions Transactions are then completed and are uniquely identified2 Health organizations and institutions can directly query the blockchain network3 This data can then be analyzed to 
 populate new insights Non-identifiable patient information such as age, illness can be viewed Health organizations and institutions 
 submit their queries via APIs Patients can share their identity with health organizations4 With the private key, organizations can 
 then discover patient’s data The private key of patients can be 
 shared with new health organizations The patient’s private key links their 
 identity to blockchain data Patient data can non be identified 
 to those without the key ➢ How Blockchain Helps – Blockchain Technology Enables Nationwide Interoperability of Healthcare Data !41 Health organizations enter information to the blockchain network1 Standard data fields & a patient’s 
 public ID are redirected to the blockchain network via APIs Clinical data of patients is tracked in 
 existing health IT systems Health organizations provide
 services to patients
  42. 42. ▪ It is difficult to pay fairly for creative work in a digital world where it is easy to share and distribute copies, so royalty payment mechanisms are ripe for disruption. For example, music streaming sites and rights holders struggle to agree on compensation for trillions of song streams, leading to legal fights such as the recent $1.6BN lawsuit against Spotify ▪ Whenever a song is played on TV, radio, at events or is streamed online, the rights holders should receive a royalty payment in a contractually defined split. In order to ensure that this is happening, the national copyright collection bodies act as a collection platform for copyright holders and compensate the eligible parties. However, contractual complexities can complicate the settlement activities, leading to 
 opaque proceeds ➢ The Issue – Complicated Royalty Payment Mechanism Global Recorded Music Industry Revenues 1999 – 2017
 ($ in billions) Media & Entertainment Source: IFPI, Forbes !42
  43. 43. ▪ The distribution of music royalties may become more transparent and efficient due to blockchain technology. This could include a music directory containing the original digital music file – along with all relevant identities of people involved in the content creation. Additionally, in the blockchain network it is also possible to store specific instructions in the form of smart contracts which specify how artists will be compensated & how sales proceeds will be divided among all eligible parties. An embedded blockchain-based mechanism can track usage on radio stations, television, streaming services, etc. and may automatically accumulate credits or disburse actual payments to content owners. ▪ The Open Music Initiative (OMI), composed of 200 members including major labels such as Sony Music, Time Warner as well as YouTube, Netflix, Spotify, and Viacom, seeks to modernize royalty payment mechanisms. OMI revealed that it's considering blockchain technology as the fundamental resource behind this mechanism. ➢ How Blockchain Technology Helps – Facilitates Transparent Royalty Distribution Key Benefits Cost Efficiencies – Does not require costly monitoring & tracking systems for music usage, as blockchain technology can track every consumption pattern. Using smart contracts, blockchain technology enables almost real-time & exact allocation and distribution of royalty payments according to usage pattern. New role of collection associations – Blockchain platform provider and verification of smart contract details through collection associations as trusted third parties. 1 2 3 Media & Entertainment !43
  44. 44. ▪ Piracy is one of the biggest problems faced by entertainment businesses. Digital film theft alone costs U.S. entertainment companies around $20.5BN annually. Experts are hoping that blockchain, or technologies that flourish from it, may help media companies solve Digital Rights management (DRM) issues, a growing challenge as video consumption moves online. Producing and selling content has always been a long scuffle concerning who owns the rights to this content ▪ Blockchain based smart contracts can actually track content consumption across the network. Tracking boosts the efficacy of rights management and has the potential to simplify the process of licensing content. With smart contracts, media products can be seamlessly licensed using a standardized or customized contract across geographies and markets in a matter of minutes as compared to the weeks or months it currently takes ▪ Media companies can use blockchain-based cryptography to secure digital content with a paired ‘public-private’ key encryption. This level of protection is simple to execute and can control authorship and monitor the content across the production cycle. The blockchain then becomes the authority that protects digital content from piracy, without restricting fair use sharing between consumers ▪ Sony is considering implementing blockchain technology as the foundation behind their digital rights management efforts. The Company has filed an application for a patent to store users’ digital rights data on the blockchain, and it stands to disrupt another industry. The patent application is dubbed Blockchain-Based Digital Rights Management (DRM) and it was filed by both Tokyo-based Sony Corp and Culver City, Calif-based Sony Pictures Entertainment Media & Entertainment ➢ How Blockchain Helps – Simplifying Rights Management and Ensuring Compliance Source: Techahead, Covesting !44
  45. 45. ▪ As supply chains become complex, there is a need to drive operational efficiency through better transparency and collaboration between various stakeholders such as manufacturers, distributors, insurers, shipping carriers, importers, wholesalers and retailers ▪ Knowing in real-time the exact location, source and state of all inventory in the supply chain could be a game-changer for most businesses, particularly those dealing in luxury or perishable goods ▪ Current systems require each constituent of the supply chain to maintain its own distinct and disconnected database — meaning limited and often delayed insight into the status of goods elsewhere in the system ➢ The Issue – Complex Supply Chain Management Suppliers Customs Distributors Traders Consumers Carriers Producers 3PLs Retailers Retail !45
  46. 46. ▪ Consumers commonly have nagging worries about the source and quality of retail products that they buy. Blockchain helps retailers solve this dilemma and builds trust among customers. This is possible by giving every product a ‘digital ID’ which secures all information about it along the product lifecycle – from origin to the retail store ▪ As a mechanism which enables mass-collaboration and execution of collective self-interest, blockchain is a digitally autonomous way of bringing reliability and efficiency to the ever-expanding retail supply chain ▪ Blockchain facilitates real-time and trusted data sharing among supply chain constituents and can offer consensus about the true state of the system to all parties Retail F C R P F C R P F C R P F C R P Supply chain journey made visible through a scan to customer Farm & 
 Produce Details Packaging 
 Details Carrier 
 Details Retailers
 Details F Farm P Packager C Carrier R Retailer Validated at node Data added at node Next stage Farm details added to blockchain Packaging details added to blockchain Logistics details added to blockchain Retail details added to blockchain ➢ How Blockchain Helps – Brings Efficiency and Reliability to the Ever-Expanding Retail Supply Chain
  47. 47. The rise of renewable energy has accelerated the adoption of blockchain technology and thanks to the rapid growth of Distributed Energy Grids (DERs) and the popularization of solar and other independent sources of renewable energy, many consumers are now producing their own power in excess, and selling it back into the grid. With the introduction of the blockchain decentralized network, producers and consumers would finally be able to buck the traditional system of buying and selling energy from utilities and trade energy directly within a designated area. It’s an untapped market with big potential, and some small companies are already looking to corner it. ▪ As ‘Big Energy’ begins to catch up, many market leaders and investors are looking towards blockchain for a more transparent and efficient energy future. Just one of these capabilities would be to enable the energy industry to adopt a peer-to-peer trading model, completely revolutionizing the way energy is bought and sold ➢ Rise of Renewable Energy Accelerates Adoption of Blockchain Technology in the Sector Energy U.S. Electricity Generation by Fuel, all Sectors !47
  48. 48. ▪ In Brooklyn, a partnership between LO3 Energy and Siemens has established the Brooklyn Microgrid, which allows customers to buy and sell energy to their neighbors via the blockchain ▪ This means they don’t need to go through the utility, which is the central grid that provides electricity to most American communities. Instead, those with energy-producing sources, like solar panels, can sell their unused energy to their community via Brooklyn Microgrid’s borough-specific energy-trading app ▪ P2P energy sales have a few advantages. They can be cheaper than buying electricity from the grid ▪ In NY, utility charges include several fees — property and sales taxes, the maintenance of wires and substations, covering costs that providers may have paid for the electricity in wholesale markets. Consumers who are producing energy — like those who have solar panels on their roofs — are required to sell any energy that they haven’t used back to the grid ▪ P2P energy sales also open up the possibility of distinguishing where energy is coming from — renewables, coal, oil, and gas — which allows consumers to choose renewable energy, for example. Traditionally, grids generally measure electricity as net amounts and don’t allow consumers to pick and choose ➢ How Blockchain is Helping in Peer to Peer Energy Purchases Energy !48
  49. 49. ▪ An estimated 90% of global trade is carried out by the international shipping industry every year, and hence logistics is considered the lifeline of the modern world. But the logistics processes behind this world trade are highly complex in nature involving many different parties often with conflicting interests and priorities as well as the use of different systems to track shipments ▪ Achieving new and innovative efficiencies in global trade logistics is likely to have a significant impact on the global economy. According to an estimate from the World Economic Forum, reducing supply chain barriers to trade could increase global gross domestic product (GDP) by nearly 5% and global trade by 15% ➢ The Issue: Slow and Complex Logistics Processes Exporter 
 (e.g., shipper) Exporter’s 
 bank / insurer Export customs Forwarder Export 
 port Carrier Import
 port Import
 customs Importer’s 
 bank / insurer Importer 
 (e.g., consignee) The Global Logistics Eco System Logistics !49
  50. 50. ▪ Blockchain technology can help solve many of the complex issues in global trade logistics including transportation management, procurement, customs collaboration, track and trace, and trade finance ▪ With thousands of merchant ships involved in the global shipping industry and multiple customs authorities globally regulating the passage of freight, a major area of focus for efficiency gains would be ocean freight. Blockchain technology has good potential to optimize the time as well as cost associated with trade documentation and administrative processing for ocean freight shipments ▪ An example which highlights the complexities behind ocean freight today is the estimate that a simple shipment of refrigerated goods from East Africa to Europe can go through nearly 30 people and organizations, with more than 200 different interactions and communications among these parties ➢ How Blockchain Helps: Faster and Leaner Logistics in Global Trade Logistics Use Case ▪ To unlock efficiency in ocean freight, Maersk and IBM have partnered to establish a global blockchain- based system for digitizing end-to-end shipment tracking and trade workflows. The blockchain system allows each stakeholder in the supply chain to view the progress of goods through the supply chain, understanding where a container is in transit. Stakeholders can also see the status of customs documents, and can view bills of landing and other data ▪ Blockchain technology ensures tamper-proof repository and secure data exchange for this documentation. The two companies expect this solution to track tens of millions of shipping containers annually. This has the potential to significantly reduce fraud and delays, which could lead to billions of dollars in savings in the logistics industry !50
  51. 51. Primary Potential Benefits ▪ Increase traceability of material supply chain to ensure quality and corporate standards are met ▪ Lower losses from counterfeit/gray market trading ▪ Improve compliance and visibility over outsourced 
 contract manufacturing ▪ Reduce administrative costs and paperwork ▪ When it comes to tracing manufactured products, process capabilities are perhaps the most critical area of differentiation and investment
 for companies. Many manufacturers are excited about blockchain’s potential ability to verify goods moving through the manufacturing supply chain. The highly transactional and often multi-step nature of business process services means that the potential applications of blockchain in manufacturing are practically endless ▪ A blockchain-powered supply chain can help participants record price, location, date, quality, certification, and other relevant product information accurately and in real-time to more effectively manage the supply chain ▪ Blockchain improves manufacturing traceability and transparency to a whole new level while also reducing costs and improving process efficiencies. It can also help audit and manage transactions so that information can’t be changed by anyone in the transaction chain. It is tamper-proof and acts as a single source of truth in the chain of custody Secondary Potential Benefits ▪ Strengthen corporate/brand reputation by providing transparency of materials used in products ▪ Improve credibility and public trust of data shared ▪ Reduce potential public relations risk from supply chain malpractice ▪ Engage stakeholders ➢ Blockchain in Manufacturing: Better Traceability on the Horizon Source: Aberdeen Manufacturing !51
  52. 52. Source: Aberdeen % of respondents N = 173 Manufacturing ➢ Blockchain Will Ease Compliance, Traceability, and Safety Pressures in Manufacturing !52
  53. 53. Blockchain Experiments in Public Sector Growing ▪ Voting, another critical and legitimacy granting public function, has been the source of much activity among those working with blockchain. Citizens can cast votes the same way they initiate other secure transactions and validate that their votes were cast—or even verify the election results ▪ Potential solutions are currently working to blend secure digital identity management, anonymous vote-casting, individualized ballot processes (for example, a vote “token”), and ballot casting confirmation verifiable by (and only by) the voter ▪ The Estonian government is rolling out a technology by the name Keyless Signature Infrastructure (KSI) to safeguard all data. Estonian citizens Electronic health records are managed using KSI technology. KSI creates hash values that represent larger amount of data as much smaller unique values ▪ KSI will allow government officials to monitor any changes within the databases, including who changes a record, what changes are implemented, and when are they made. Unauthorized tampering of the records can be easily detected and prevented These developments suggest that governments across the globe do not need additional reasons to use blockchain technology. However, what they do need is the skill and understanding of the nuances to utilize the technology to its full potential. Blockchain experiments in the public sector are accelerating globally.
 Government agencies in more than 20 countries, including Canada, the United Kingdom, Brazil, China, and India, are running pilots, tests, and trials examining both the architecture’s broad utility as a basis for government service provision and procurement, and the development of individual blockchain based applications for internal use. !53
  54. 54. Increasing Use of Blockchain Technology in Asset Registers such as Land, Property, Vehicles ▪ Given the increasing number of frauds in property transactions, land / property registration using blockchain has come into prominence. Blockchain offers a trusted mechanism of transferring and storing data, and also provides transparency across the system. Several countries such as Ghana, Sweden, and USA are adopting blockchain-based technology solutions for digitizing land registrations and property transactions ▪ Sweden has successfully completed a pilot where land registry copies are shared with all relevant parties to facilitate property purchases with each step of the sale being verified and recorded on the blockchain ▪ Land Commission of Ghana and Dubai Land Department are also adopting blockchain to record all real estate contracts, including 
 lease registrations ▪ State governments like Georgia, US, are using blockchain to register land titles and validate property-related government transactions ▪ In India, the state of Andhra Pradesh has deployed Blockchain to safeguard & digitize over 100,000 land records in its capital Amaravati Blockchain Experiments in Public Sector Growing The blockchain-based system boosts land title transparency, reduces the prevalence of fraud, and brings significant time and 
 cost savings in the registration process. !54
  55. 55. Financial Services & Insurance Healthcare Energy Media & Entertainment Supply Chain & Logistics Real Estate The Blockchain Startup Space !55
  56. 56. 3. REGULATIONS
  57. 57. 2China Malta United States Japan European Union Australia India !57
  58. 58. Source: Coindesk State of Blockchain Q1 2018 report Regulatory Barriers Impact Blockchain Investments Blockchain Regulation Around the World !58
  59. 59. ➢ China May Oppose Cryptocurrencies But Loves Blockchain Technology ▪ China has been increasingly taking steps to curb down on cryptocurrency. The country started off by banning ICOs, ordered a freeze on bank accounts associated with crypto exchanges, kicked out bitcoin miners, and also instituted a nationwide ban on mobile access and Internet to all things related to cryptocurrency trading ▪ The People’s Republic of China appears to be the most stringent cryptocurrency regulator of the major economies regarding cryptocurrencies. This is an odd about-face given that, in 2017, Chinese bitcoin miners made up over 50% of the worldwide mining population and that cryptocurrency adoption in China increased at a rate higher than any other country China Plans to Establish National Blockchain Standards by 2019 ▪ China’s government has reportedly begun working on national standards for blockchain technology in the country ▪ An official from the Electronic Industry Standards Research Institute under China’s Ministry of Industry and Information Technology has confirmed that the authority is working towards establishing national standards for blockchain tech. The standards will reportedly be developed for implementations of blockchain technology in multiple sectors encompassing various decentralized designs. The Blockchain Research Office under the IT Ministry also revealed that a broader national plan for blockchain standards is also underway with a number of relevant government departments working toward establishing a nationwide ‘Blockchain and Distributed Accounting Technology Standardization Committee’ ▪ The sweeping rollout of these standards, expected to occur before the end of 2019, will include basic standards, business and application standards, process and method standards, credible and interoperable standards and information security standards Source: Bitcoin Magazine, CNN China !59
  60. 60. ➢ The United States Encourages the Development of Blockchain Technology ▪ The United States passes legislation to support and encourage the development of blockchain technology, but holds a conservative attitude towards the strict regulation of digital cryptocurrency ▪ According to statistics by Outlier Ventures, nearly a quarter of the world’s blockchain tech companies are from the United States, and the United States can be regarded as the development center of blockchain technology ▪ However, unlike the rapid development of U.S. blockchain technology, the U.S. holds a conservative view of the skyrocketing share price of bitcoin ▪ The United States has no coherent direction so far on its cryptocurrency regulation other than that there will be some soon. The Securities and Exchange Commission (SEC) has warned investors of cryptocurrency investing risks, halted several ICOs and hinted at the need for greater cryptocurrency regulation ▪ The Commodity Futures Trading Commission (CFTC) became the first U.S. regulator to allow for cryptocurrency derivatives to trade publicly
 To sum up, the United States encourages and protects blockchain technology innovation companies and strictly supervises ICO projects. Source: Bitcoin Magazine United States !60
  61. 61. ➢ Majority of US States Have Taken a Stance on Bitcoin and Blockchain Technology ▪ Blockchain technology is no longer just a tool to mine cryptocurrencies or manage databases. Now U.S. state governments have recognized the technology’s potential for the delivery of public services, and are at various stages of implementation Two Waves of Regulations in Four Years ▪ US states have taken at least some form of regulatory stance concerning cryptocurrencies and blockchain technology. However, many state legislatures have only introduced or passed regulations to clarify cryptocurrency exchange vis-à-vis existing money transmission laws. There was a clear wave of over 20 states enacting cryptocurrency related regulations starting in 2014. Around the same time, government officials from over ten states (e.g. California, New Mexico) issued public warnings about investing 
 in cryptocurrencies ▪ In the past two years, another wave of states started to shift attention to blockchain 
 technology and explore the potential roles of the technology in public and private services. 
 Some of these states took a more cautionary approach. Colorado, for example, saw a 
 bipartisan bill introduced recently to promote the use of blockchain technology specifically 
 for government record keeping. A few other states have sought initiatives with broader 
 impact on the state economy ▪ Several bills favorable to the blockchain technology are 
 also processing through the Wyoming state legislature. One particular bill, SB 111, has 
 passed both legislatures in Q1 2018. It would exempt cryptocurrencies from state 
 property taxes, potentially making Wyoming the friendliest state to investors of crypto assets State Level Engagement in Blockchain Source: Brookings United States !61
  62. 62. ➢ EU Takes Leadership on Blockchain Technology ▪ In a standout announcement, 22 European countries have recently signed a Declaration on establishment of a European Blockchain Partnership. The partnership “will be a vehicle for cooperation amongst Member States to exchange experience and expertise in technical and regulatory fields and prepare for the launch of EU-wide blockchain applications across the Digital Single Market for the benefit of the public and private sectors.” The partnership will also ensure that Europe “continues to play a leading role in the development and roll-out of blockchain technologies.” The main goals of this collaboration/partnership are to: ▪ Avoid "fragmented approaches" to blockchain technology by sharing information and facilitate cooperation on technical and regulatory aspects of the blockchain technology between the different countries who join the group ▪ Ensure and facilitate the interoperability and wider deployment of blockchain-based services ▪ establish an environment through which legal blockchain technologies can flourish throughout Europe and create ways to promote blockchain applications across the EU-wide Digital Single Market. ▪ Cement Europe as a world-leader in the development and launch of blockchain technologies The European Commission seeks to explore the potential of blockchain tech to improve cross-border European services such as: 
 VAT reporting; Taxation; Customs; Title and business registries; Environmental, financial and company reporting, Health records management, clinical trials reporting, medicines registration, identity management. European partnership to facilitate cooperation on technical and regulatory aspects of the blockchain technology. Source: Intellect Soft, FineXtra European Union !62
  63. 63. Source: Economic Times, Forbes, Inc 42, Business Today Malta ➢ The small European island of Malta is becoming a blockchain hub ▪ Striving to turn the Mediterranean nation into "Blockchain Island," the government is opening its doors to blockchain and other so-called distributed ledger technologies ▪ On July 4th 2018, the Maltese parliament passed three bills to set a regulatory framework and drive innovation in blockchain- like technologies. The government hopes these laws will attract foreign financial tech companies to establish themselves in the country. This makes Malta the first country globally to provide an official set of regulations for operators in the blockchain, cryptocurrency and DLT space ▪ The Malta Digital Innovation Authority Act (MDIA Act), establishes the Malta Digital Innovation Authority and certifies DLT platforms. This law will focus on internal governance arrangements and will outline the duties and responsibilities of the Authority to certify DLT platforms to ensure credibility and provide legal certainty to users wishing to make use of a DLT platform ▪ The second law, known as the Innovative Technology Arrangement and Services Act (ITAS Act), deals with DLT arrangements and certifications of DLT platforms. This bill is primarily concerned with the setting up of exchanges and other companies operating in the cryptocurrency market ▪ And the third law, known as the Virtual Financial Assets Act (VFA Act), establishes the regulatory regime governing ICOs, cryptocurrency exchanges, wallet providers, etc !63
  64. 64. ➢ Japan Emerges as a Crypto Haven ▪ Some countries in Asia are feeling the pain of inadequate cryptocurrency regulation, while others, like India, China and South Korea, have taken an uncertain or hostile stance to cryptocurrency. In contrast, Japan is building a clear framework for how virtual currency exchanges. In doing so, Japan is becoming a hotspot for virtual currency exchanges that can afford to comply with its strict rules, while also creating a regulatory template for the rest of Asia to follow ▪ Prompted by a desire to protect consumers, Japan has revised its Payment Services Act. The new law, which went into effect in April 2017, does two things. First, it legally defines virtual currency as a form of payment. (Japan still does not define bitcoin as legal tender, but acknowledges that you can use it to purchase things with.) Second, the law requires any virtual currency exchange that wants to do business in Japan or solicit its citizens to register with the country’s Financial Services Agency (FSA) ▪ In addition, Japan’s lawmakers are moving to regulate new exchanges, rather than ban them outright. In April 2018, they took the first step toward legalizing initial coin offerings, or ICOs, a controversial fundraising technique outlawed in places like China and South Korea. Emboldened by the government’s stance, tech and financial firms are stepping up investment ▪ Japanese government begins adoption of blockchain technology - Japan is embarking on a sweeping project to unify all property and land registries across urban, farmland and forested areas on a single blockchain-powered ledger. In incorporating some 230 million plots and 50 million buildings registered across the country, the ledger will also include collateral details and sale prices of properties. The register will be tested in select cities in summer 2018. If successful, the Japanese government will place its entire property register on a blockchain network over the next five years Source: Bloomberg, Bitcoin Magazine, CNN Japan !64
  65. 65. ➢ Australia: A Deepening Embrace of Blockchain Technology ▪ Australia pays more attention to the application of blockchain technology and the formulation of standards ▪ In April 2016, the Australian Bureau of Standards called for the development of a global ISO blockchain standard. In March 2017, the Australian National Bureau of Standards issued a road map for the development of the concept of international standards based on the task assigned by the International Standard Organization ISO ▪ In February 2018, the Australian Taxation Office announced that it will use data matching and “100-point identification” to track cryptocurrency investors and ensure compliance with bilateral tax treaties and anti-money laundering commitments to make sure that they can accurately submit cryptocurrency taxes in 2018 ▪ Australia is now implementing regulatory measures which may be a sign that things are moving into a more serious phase with adoption of these technologies being seriously considered on a wider scale ▪ As the government becomes familiar with blockchain thanks to cryptocurrencies, it can start using the technology. Already independent companies and state companies are using it for solar energy rights, travel needs, supply chain management and banking. It is also already being used in various supply chains for commodities such as wheat and minerals ▪ While the legal status and future of cryptocurrencies and blockchain regulations in Australia is uncertain, it is clear that the country is going to rely on the underlying blockchain technology to revolutionize private and public life Source: Infinity Blockchain Labs Australia !65
  66. 66. ➢ India: Government Clamps Down on Cryptocurrency, but Open to Explore Blockchain Technology ▪ India, once viewed as a burgeoning, friendly environment for cryptocurrencies, has been clamping down on cryptocurrencies in 2018 ▪ The country’s Reserve bank in April 2018 announced that with immediate effect, Indian banks and financial institutions are no longer allowed to deal with or provide services to any individual or business entities dealing with or selling cryptocurrencies. This means that Indian banks are no longer allowed to provide services of any kind to crypto companies, with India’s flourishing crypto exchanges being the hardest hit Government Panel May Allow Cryptos With Riders ▪ However, according to recent reports, a panel formed by the government to look into crypto-currency does not seem to be in favor of banning it. Instead, the panel will recommend allowing cryptocurrency trading with ‘riders’ or guidelines in the form of regulation Government to Explore Use of Blockchain Technology ▪ Indian Finance Minister Arun Jaitley while presenting the Union Budget 2018, revealed that the central government will explore the use of blockchain technology to add muscle to the digital economy. Indian states like Andhra Pradesh, Maharashtra, Uttar Pradesh, Karnataka are evaluating blockchain technology for e-governance. Andhra Pradesh has become the first state in India to adopt blockchain tech for managing land records. Blockchain technology helps to protect the state’s digital assets and transactions, preventing tampering by outsiders or even government insiders. Maharashtra is also piloting blockchain tech use in areas of financial inclusion, land records, supply-chain financing, goods and farm insurance and motor vehicle registration. Uttar Pradesh is expected to introduce blockchain technology in its Revenue Department to store and protect land-related data within the next few months Source: Economic Times, Forbes, Inc 42, Business Today India !66
  68. 68. ICOs Have Raised Billions — But Now VCs Are Swooping In ▪ The line between ICOs and equity financing is blurring, as traditional equity investors use non-traditional methods to invest in 
 blockchain companies ▪ Bypassing the skepticism and more onerous process of traditional VC financing, blockchain tech teams raised more than $18BN in the recent past through initial coin offerings (ICOs), often with little more than a white paper ▪ Some high-profile ICOs have raised hundreds of millions — even billions — of dollars before proof of a viable product. Filecoin, a blockchain data storage startup, raised $257MM, while EOS, which is building a “world computer,” raised over $4BN in its year-long ICO Traditional Investors Get in Before ICOs With Private Token Sales ▪ Traditional investors are acquiring tokens outright via pre-sales, SAFT contracts, and regulatory compliant offerings. In other cases, traditional investors are taking equity stakes in blockchain companies before an impending ICO ▪ Initial coin offerings may be defined as sales of tokens or coins offered by blockchain tech companies looking to raise funds, typically denominated in major “gateway coins” Bitcoin and Ethereum. Tokens are subsequently traded on cryptocurrency exchanges, and rise or fall in value nominally based on the company’s projected product, consumer traction, etc. ▪ A SAFT acts as a forward contract for tokens, with the contract converting upon deployment of a functioning network. Thus, startups aren’t selling equity stakes, but the rights to some of the tokens it will use as part of its network. A conversion might happen years after the initial sale Source: CB Insights Blockchain Fundraising Landscape !68
  69. 69. SAFT Contracts Gaining in Popularity ▪ Many regulators have stated that a substantial amount of ICOs should be classified as securities and thus fall under securities law. New projects now have to gather expensive legal advice to ensure that their token sales will not get them into trouble with financial regulators ▪ A company raising funds via an ICO, where its tokens relate to a product under development, would likely be in violation of U.S. securities laws. However, that same company, if its tokens are properly crafted, may be free to raise funds via an ICO once the product has been deployed and is active ▪ So how can an ICO issuer avoid selling tokens before product launch yet still raise the funds they need to develop the product? Via a 
 Simple Agreement for Future Tokens (SAFT), a written promise a startup can give to accredited investors, such as VCs, to grant them tokens in a post-product-launch ICO in exchange for immediate funding ▪ In other words, a SAFT lets an ICO issuer raise sufficient funds to develop its project while conducting an ICO free of securities regulations after product launch SAFTs Used in ICOs ▪ One of the ICOs to use SAFT agreements was the Filecoin ICO, which raised over $257MM for the development 
 of its decentralized cloud storage platform ▪ More recently, Telegram, an instant messaging app, which has reportedly raised $850MM during its token pre-sale, 
 has also opted for the use of SAFT agreements to attract U.S. investors from the venture capital sector Source: Bitcoin Market Journal, Venture Beat, Crypto News Blockchain Fundraising Landscape !69
  70. 70. Lots of Recent Equity Dollars go to “Pre Sales” and for Runway Before Large, Public ICOs Equity Financing (excluding ICOs), Jan 2017 – Mar 2018 Blockchain Fundraising Landscape Source: CB Insights !70
  71. 71. Lines are blurring between equity and ICO financing, 
 as venture investors increasingly deploy capital to companies in pre-sales and private rounds. In short - the token model is emerging as a de facto fundraising mechanism for blockchain teams. Pre Sales Financings are on the Rise ▪ Data indicates a shift toward pre-sales, with venture rounds trending up and pure-play ICOs trending down ▪ In February, ICOs raised almost 60% of their capital in private rounds and pre-sales, according to TokenData ▪ Some of that data is captured in this figure, with “other” VC equity deals up considerably as a share of blockchain deals. These include some private rounds and pre-sales Big Share of Blockchain Funding Moves to “Other: Rounds Equity Financing by Stage, 2013 – 2017 Source: CB Insights Blockchain Fundraising Landscape !71
  72. 72. With More Pre-sale Capital, Blockchain Based Companies Rely Less on ICOs ▪ Since Feb 2018, pure-play ICO deals have trended down. In April 2018, 129 ICOs closed for about $600MM, down from 215 and $1.2BN in December 2017. In terms of dollars raised, a similar downward trend may be seen (excluding Telegram‘s private sale and the year-long EOS ICO). As a caveat, these numbers are somewhat lagging indicators, since only completed ICOs are counted, not those that are still ongoing ▪ In one notable example of the trend toward pre-sales, Telegram held such a large pre-sale that it no longer has plans for a public sale. The encrypted messaging service raised $1.7B from 175 private investors in two separate private rounds, selling “purchase agreements for cryptocurrency,” instead of equity ICOs in Fast Decline From Dec 2017 Disclosed Funding of Completed ICOs (and Telegram’s private sale). Jun 2017 – June 2018 (YTD) (a) (a) (b) Source: CB Insights a) Feb 2018 & Mar 2018 data includes Telegram’s private sale of $850M in each month respectively. b) Corresponds to EOS year long ICO. As regulators continue to crack down on public ICOs, shift toward pre-sales and private sales is expected to continue. Blockchain Fundraising Landscape !72
  73. 73. Total Corporate Investors Jumped 70% y-o-y 
 between 2016 and 2017. Banks and other financial institutions participated in big rounds to 
 R3 in 2015 and 2017 ($107MM Series A), pushing the total 
 number of corporate investors up. Corporate Investments and Partnerships Skyrocket ▪ 119 corporations and corporate venture groups invested in blockchain technology in 2017 — the highest annual total yet. Even further, Q1’18 saw a little less than half that, implying that 2018 is going to be a huge year of corporate deal making in the sector ▪ This recent spike might imply that corporates are new entrants to the conversation, but many have been around for quite some time ▪ Long enough in fact that some early — and highly-touted — partnerships have stalled, or fallen apart altogether, suggesting that new partnerships might face similar tests More VCs and Corporates are Investing Through Q1 2018 Equity Financing, 2013 – Q1 2018 Source: CB Insights Blockchain Fundraising Landscape !73
  74. 74. Investments Consortia Source: CB Insights Banks Have Been looking at Blockchain for Years
 Equity Investments and Current Consortia Involvement (Q1 2012 – Q1 2018) Blockchain Fundraising Landscape !74
  76. 76. Blockchain Market Prospects US$ 0.00 US$ 2.50 US$ 5.00 US$ 7.50 US$ 10.00 2017 2018 2021 US$ 9.70 US$ 2.10 US$ 0.95 Worldwide Spending on Blockchain Tech Solutions ($ in billions) Worldwide spending on blockchain technology solutions is forecast to reach $2.1BN in 2018, more than double the $945MM spent in 2017, according to International Data Corporation (IDC). IDC expects blockchain technology spending to grow at a robust pace over the 2016 - 2021 forecast period with a five-year compound annual growth rate (CAGR) of 81.2% and total spending of $9.7BN in 2021. Source: IDC !76
  77. 77. Blockchain Market Prospects Blockchain technology spending will be led by the financial sector ($754MM in 2018), driven largely by rapid adoption in the banking industry. The distribution and services sector ($510MM in 2018) will see strong investments from the retail and professional services industries while the manufacturing and resources sector ($448MM in 2018) will be driven by the discrete and process 
 manufacturing industries. "Interest and investment in blockchain and distributed ledger technology (DLT) is accelerating as enterprises aggregate data into secure, sequential, and immutable blockchain ledgers, transforming their businesses and operations," 
 Many technology vendors and service providers are collaborating and working with consortiums such as the Enterprise Ethereum Alliance and the Hyperledger Projects to develop innovative solutions that improve processes such as post-trade processing, tracking and tracing shipments in the supply chain, and transaction records for auditing and compliance. Also, multiple regulators and central banks have made positive comments about blockchain and DLT, this will help to accelerate demand in regulated industries such as financial services and healthcare." Bill Fearnley , Jr., Research Director, Worldwide Blockchain Strategies at IDC !77
  78. 78. $945MM spent in 2017 - Blockchain Technology Investments Will Reach $9.7BN by 2021. 52% 21% 3% 7% 16% 1% North America 52% Latin America 3% Western Europe 21% CEMA 7% APAC (excl. Japan) 16% Japan 1% 2017 Blockchain ShareSource: IDC Note: All numbers in the document may not be exact due to rounding. Blockchain Technology Market Prospects !78
  79. 79. Blockchain Spending Forecast by Region, 2016 - 2021
 (in constant annual $ in billions)U.S. to Lead Spending on Blockchain Solutions Globally ▪ The United States will see the largest blockchain technology investments and deliver more than 40% of worldwide spending throughout the forecast period (2016 - 2021) ▪ Western Europe will be the next largest region for blockchain technology spending, followed by China and Asia/Pacific (excluding Japan and China)(APeJC) ▪ All nine global regions will see phenomenal spending growth over the 2016-2021 forecast period with Latin America and Japan leading the way with CAGRs of 152.5% and 127.3%, respectively Blockchain Technology Market Prospects "Enthusiasm for blockchain continues to be universally shared across regions as businesses and organisations alike continue to explore the technology’s potential business application”. "Regulatory concerns and industry standards continue to hinder widespread adoption as governments around the globe work with enterprises to formulate policies and governance. As such, cross-business collaboration and blockchain interoperability are emerging as key aspects in the growth of the distributed ledger technology (DLT).” Stacey Soohoo, Research Manager, Customer Insights & Analysis at IDC Source: IDC !79
  80. 80. Total Spending in 2018
 $281.69MM Trade Finance & Post- Trade / Transaction Settlements 2016 - 2021 CAGR
 90.7% Blockchain Spending Forecast in APEJ Cross Border Payments & Settlements Top 3 Sectors by Blockchain Spending in 2018 Top 3 Use Cases on Blockchain in 2018 Finance Manufacturing 
 and Resources Regulatory Compliance Distribution 
 and Services Source: IDC Note: APEJ stands for Asia pacific excluding Japan. Total Spending in 2017
 $148.76MM Blockchain Technology Market Prospects !80
  81. 81. Total Spending in 2018
 $307MM 2016 - 2021 CAGR
 77.4% Blockchain Spending Forecast in Middle East & Africa (MEA) Total Spending in 2017
 $38.9MM Top 3 Sectors by Blockchain Spending in 2021 Top 3 Use Cases on Blockchain in 2021 Assets/Goods management Cross Border Payments & Settlements Public Sector Finance Identity Management Distribution 
 and Services Source: IDC Blockchain Technology Market Prospects !81
  82. 82. Total Spending in 2018
 $1.8BN 2016 - 2021 CAGR
 66.6% Blockchain Spending Forecast in Western Europe Total Spending in 2017
 $200MM Source: IDC Top 3 Sectors by Blockchain Spending in 2021 Top 3 Use Cases on Blockchain in 2021 Regulatory Compliance Cross Border Payments & Settlements Finance Distribution 
 and Services Assets/Goods management Manufacturing 
 and Resources Blockchain Technology Market Prospects !82
  83. 83. Asia Pacific Blockchain Opportunity Cross-Border Payments & Settlements leads, driven by Singapore and China in hopes of easing international trade flows Trade Finance & Post Trade/Transaction Settlements follows, fueled by the need to eliminate paper-based documents and processes Driven by blockchain-powered smart utility projects, Energy Settlements will lead the growth in APAC in the coming years America’s Block Opportunity The diverse Lot Lineage/Provenance takes the top spot for use case spending in 2017, maintaining its position through 2021. Growth in Cross-Border Payments & Settlements driven by the need to modernize payments and improve the flow of money at the rate that business is done. Banking, Discrete Manufacturing and Process Manufacturing represent the largest areas of spend in 
 the Americas. EMEA Block Opportunity Cross-Border Payments & Settlements represents the leading use case for spending in EMEA Legislation driving Regulatory Compliance investments by enterprises sitting in financial services. Identity Management follows, fueled by KYC/AML and a need for greater control over personal data. Energy Settlements in Utilities will see the strongest CAGR, driven by peer-to- peer trading to facilitate direct sales of power. Source: IDC Blockchain Opportunities Across Global Regions Blockchain Technology Market Prospects !83
  84. 84. Global Blockchain Opportunity by Sector 2016 – 2021 2016 – 2021 Blockchain Sector Spending ($M) Size of Bubble Represents Size of 
 Opportunity in $M in 2017 Source: IDC Blockchain Technology Market Prospects !84
  85. 85. 6. ABOUT [x]cube LABS !85
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