Opening panel: David Bosshart, Alessandro Curioni, Guido Fürer
What will be the impact of blockchain? The opening panel participants had very different responses to this question. David Bosshart, CEO of the Gottlieb Duttweiler Institute, encouraged people to jump on the bandwagon now: “Those who get on board now are likely to be the winners.” But technical innovation must also be accompanied by the appropriate social innovation. Alessandro Curioni, Vice President Europe and Director IBM Research Zurich, believes that blockchain is one of the most pivotal new technologies, but its value still has yet to be proven in many cases. And Guido Fürer, Group Chief Investment Officer and member of the Board of Directors at Swiss Re, is of the opinion that blockchain “is not a revolution, but rather a revolutionary technology”. Insurance companies will benefit because the industry is inefficient and currently requires numerous phases, from the policy to the broker through to reinsurance. Blockchain offers enormous potential to inefficient industries. Now is the big experimental phase, and it would be a major step if central banks began to digitalise their currencies. Curioni said: “Blockchain should bring trust into business.” It is probably the largest expansion of the internet. Bosshart added: “Blockchain promises enormous leaps in efficiency, which is the reason for its success.”
Alex Tapscott: “It’s the combination of two technologies that will have a big impact: AI and blockchain.”
Tapscott is convinced that blockchain represents the second internet era, and that the internet is evolving from the internet of information to an internet of values. Today, middlemen “frack” our data in order to exploit it for profit. Blockchain would bypass this. “It’s the combination of two technologies that will have a big impact: AI and blockchain”, says the author. The financial sector currently works like a Rube-Goldberg machine; i.e. a machine that performs a simple task in numerous unnecessary and complicated individual steps. Blockchain would simplify the system and also make founding and investing in start-ups much easier, as companies such as Cosmo Hub and Bancor demonstrated when they managed to collect millions in donations in just a few hours. Energy markets and elections could also be made more straightforward, secure and less expensive. If a government is not using blockchain by 2020, it will be considered a “late adopter”. Hence, his call to the audience: “Start now!”
Brian Hoffman: “OpenBazaar will usher in a new era of e-commerce that brings the entire globe together.”
Brian Hoffman’s OpenBazaar is the first truly decentralised marketplace that uses bitcoin. Hoffman explained his objective: “OpenBazaar will usher in a new era of e-commerce that brings the entire globe together.” The open source marketplace has managed to bring in several million dollars so far and is being further developed by programmers all over the world. However, how the platform can be used to make money is still not clear to everyone. OpenBazaar’s customer service, hosting and infrastructure provisioning may present opportunities to make the platform profitable.
Richard Olsen: “You can only learn this new world if you do it yourself.”
Richard Olsen was convinced that it will only be possible to become familiar with this new world by experimenting with it oneself. “This is the reality now – not in the future.” He explained that the antiquated financial systems generate high transaction costs and result in market illiquidity. Blockchain could solve this problem and create a 0% commission global marketplace available 24/7 that is able to process transactions in real time. Addressing the question of whether blockchain might also make it easier to conduct illegal business, Olsen said: “Let’s embrace regulation.” Regulators would be responsible for the development of blockchain.
Jesse Grushack: “Blockchain will really have to come from everyone.”
With blockchain, everyone is invited to participate, says Jesse Grushack, co-founder of the blockchain-based music service Ujo Music, which has the mission of creating a digital environment in which independent artists can thrive. “Music should be freely available to all and not regulated by corporations.” Musician Imogen Heap earned approximately USD 123 with her song on Ujo Music. Thanks to the increase in value of the digital currency ether, however, this is now worth about USD 55,000.
Guido Baroncini Turricchia: “The more transparent you are, the more donations you will receive.”
Guido Baroncini Turricchia’s Helperbit is a platform that uses blockchain to distribute donations transparently and quickly. “The more transparent you are, the more donations you will receive.” For example, Helperbit increased the total collected by a crowdfunding campaign for earthquake victims in Italy by 25 %. Using blockchain, donors could see exactly how their money was being used.
Primavera De Filippi: “Plantoid was created to illustrate some of the challenges blockchain creates.”
Harvard researcher Primavera De Filippi presented Plantoid, a blockchain-based life form that demonstrated the positive and negative challenges of blockchain that still have to be addressed. The artificial creature is fed bitcoins, is autonomous and can reproduce. The “soul” of the life form exists in the form of a smart contract on the Etherum blockchain. The body is a metal sculpture. The entire model is based on an evolutionary algorithm. Real applications in the future might include self-driving cars that have no owner, chauffeur around passengers and are paid in bitcoin. However, moderator Florian Inhauser wanted to know who would be responsible in the event of an accident. “I have no idea,” responded De Filippi honestly. The legal questions surrounding blockchain remain unanswered.
Breakout session: Blockchain for Society and Consumer (GDI)
GDI Research Director Karin Frick says that our world is increasingly run by algorithms. But how will trust change in an “algocracy” of this sort? Do we trust the technology? Frick was convinced: “The more abstract the world becomes, the more trust it requires of us.” What we already know will not be much use in helping us find our way in such a world. Trust in institutions and politicians has continued to dwindle in recent years. “Today, we trust people like ourselves, people who belong to our tribe.” If it’s convenient, we’re said to be more willing to let algorithms make decisions; for example, ebanking and online dating. And perhaps artificial intelligence might also make better decisions than a president. However, the question remains: “How can algorithms be controlled?” Potential mechanisms for building trust are transparency, social control, traceability, wikisation, competition and certification.
Andre Wolke, co-founder of Validity Labs, gave a presentation on blockchain companies in Switzerland that have already succeeded; for example, Melonport and Modum. Projects in the fields of banking, legal services, Internet of Things, marketplaces, organisation management and supply chain management were said to be the most promising. Many US start-ups would set up shop in Switzerland, because the regulatory conditions are ideal here. To gain access to the market, SMEs should consider blockchain consortia, such as the Swiss Industry Consortium or the Internet of Things Consortium. And in the area of education, Switzerland is a pioneer with the first blockchain Certificate of Advanced Studies (CAS) in the world. But it was said that currently too few smart contract developers exist.
Moderator Inhauser put it in a nutshell: “Blockchain is an ultra-modern and much sharper scalpel in the hands of a Neanderthal.”
Breakout session: Blockchain in Insurance (Swiss Re)
Blockchain has the potential to transform the insurance industry through a shared, transparent record of information, allowing for data transfers in seconds and streamlining communications and transactions. With the advent of cryptography, smart contracts and distributed ledgers, commercial entities can track all of their data-driven interaction securely on a smart-contract enabled blockchain without having to build different systems. Blockchain can enable the transaction flow across multiple layers of counterparties from the Original Insured to Brokers to Primary Carriers to Reinsurance Brokers to Reinsurers to Retrocession players all the way to capital markets.
Blockchain could redefine the standard for digital transaction processing. However, this will only work through strong collaboration, be it with industry peers, regulators or other financial institutions. To address this issue, Swiss Re together with a group of the world’s biggest insurers launched the Blockchain Insurance Industry Initiative (B3i) to explore the potential of distributed ledger technologies to better serve clients through faster, more convenient and secure services.
Blockchain without Smart Contracts is like the internet without trading/payment platforms. Smart Contracts are a key dimension when assessing the potential of Blockchain in finance. They can easily automate simple tasks and transactions (e.g. calculations and transfers) of simple units of value (e.g. Currency Units), which will significantly improve efficiency. It is still a moot point to what extent they can be used to fully automate (re)insurance contracts, which are extremely complex and circumscribed arrangements based on notions of proving loss, and indemnity principles.
Blockchain networks pose a very different cost-economic model to business processes. The cost overhead of blockchain networks per transaction unit is higher by a factor proportional to the number of counterparties bound by its consensus. The overhead costs include aspects of necessary redundancy, cyber-security, risk liabilities associated with new technologies and acquisition of organizational talents. Business processes need to be redesigned to create sufficient efficiency gains and strategic benefits to absorb the elevated cost overheads of blockchain networks. The deepest operational benefit of blockchain based business processes is the elimination of trust deficits in the value chain.
Breakout session: Blockchain for Enterprises (IBM Research Zurich)
“Trust for business transactions”. This slogan describes the untapped business opportunities of Blockchain far beyond the well-known crypto currencies. The simple example of a container vessel shipping flowers from Mombasa to Rotterdam includes dozens of parties, which currently rely on as many as 200 documents with different terms & conditions throughout the entire journey. Transactions are huge, not just in size but also in their complexity. Transparency and speed are clearly not the associations in one’s mind for this current process. But this is exactly the idea of an Enterprise Blockchain, or so-called “permissioned Blockchain” technology like Hyperledger Fabric – an open source endeavor at the Linux Foundation.
As a unique, shared ledger between all business partners it can
Hence, Blockchain for enterprises is more than an opportunity; it is a crucial requirement across most industries.
Only the improved performance, scalability and required infrastructure of this Enterprise Blockchain makes the technology feasible for large-scale industry applications. The spectrum of possible applications of Enterprise Blockchains is then only limited by the innovation spirit of the participating organizations, as the following use-cases show:
Concert Tickets: Re-selling event tickets is challenging: Personalized tickets are more secure, but inconvenient. With permissioned Blockchain technologies it is easy to securely and uniquely transfer the ownership of a ticket to another person even across event organizers and enforced policies on pricing.
Insurance Coverage: Largely differing terms and conditions make it hard for customers to compare policies or to verify a preferred coverage of individual risk. Insurance companies face costs and risks due to the reluctance of customers to provide personal data because of security issues. An Enterprise Blockchain is an ideal trusted platform, where individuals grant temporal, targeted data access to single insurances in return of an individual offer. The data could even include fitness data.
Aircraft Maintenance: The highly regulated aviation industry involves many stakeholders. Everyone has different interests. Blockchain represents an ideal trusted platform to share and record vital information between all parties involved, such as airlines or maintenance providers.
For example, a hard landing is recorded and immediately visible to all affected parties. Consequently, air-worthiness is re-established most efficiently and in an auditable environment. It also facilitates new options like a real-time visibility about the state and value of an aircraft and its components, or solid forecasts about when an aircraft needs to undergo the next maintenance.
How real are Enterprise Blockchains? Blockchain surveys led by IBM in Switzerland and globally show: