Blockchain & Ethereum
Blockchain is included in Piercing View’s list of tracked disruptive technologies.
It is quite possibly one of the technologies that is most difficult to truly grasp and tackle to the ground.
It has also suffered of late of some disillusionment due to unrealistic expectations.
That said, we at Piercing View have no doubt that in due time it will absolutely transform money, assets, ownership, developing countries, trade, legal structures, contracts, governance, security, currencies, financial markets, …. and so much more that is unknown. But clearly, the pace and momentum of adoption is also unknown.
As we prepare the forthcoming Financial Services IoE Industry report, we thought it would be helpful to carve out a musing on Ethereum and Blockchain; two terms that emerge often in our reviews and you will see throughout many of financial services company IoE reports.
Just a quick review for now. If you would like a fuller write up, shoot us a note.
Ethereum is an open blockchain platform that lets anyone build and use decentralized applications that run on blockchain technology. Like Bitcoin, no one controls or owns Ethereum – it is an open-source project built by many people around the world. But unlike the Bitcoin protocol, Ethereum was designed to be adaptable and flexible. It is easy to create new applications on the Ethereum platform, and with the Homestead release, it is now safe for anyone to use those applications.
Ether and Bitcoin
Ethereum would never be possible without bitcoin—both the technology and the currency. Ether is to be treated as “crypto-fuel”, a token whose purpose is to pay for computation, and is not intended to be used as or considered a currency, asset, share or anything else. Like in Bitcoin, users must pay small transaction fees to the network. This protects the Ethereum blockchain from frivolous or malicious computational tasks, like DDoS attacks or infinite loops. The sender of a transaction must pay for each step of the “program” they activated, including computation and memory storage. These fees are paid in amounts of Ethereum’s native value-token, ether.
Use cases of note
- Gold Investing
The team at Digix has engineered a method for anyone to buy gold in tokenized form on the Ethereum blockchain. Ask yourself, how easily (and inexpensively) can you buy, say, $500 worth of gold right now? With Digix, you can convert your fiat (or Ether) immediately into gold tokens that are cryptographically linked to and backed by the Singaporean gold vault. At any time (even in the case of a Digix bankruptcy) a person can redeem their tokens for physical gold.
Kickstarter, Indiegogo, and others have dominated the crowdfunding space for some years now. A start-up pitches an idea and sets a target for funding. If successful, Kickstarter takes 5%, and passes the rest on to the start-up. On the Ethereum blockchain, a start-up pitches an idea and sets a target for funding. If successful, the smart contract automatically sends the money to the startup and takes 0% as a fee.
- Corporate Finance
TheDAO is essentially a decentralized venture capital fund that relies on a wisdom-of-the-crowd voting system to make investment decisions. This is one of those revolutionary experiments that throws absolutely everybody off guard, especially the regulatory bodies. Legal implications are still being worked out, but if successful, you will start to see companies governed by blockchain code instead of a CEO and Board of Directors.
- Internet of Things
Stephan Tual, Simon Jentzsch, and Christoph Jentzsch aim to capture a share of that market through slock.it, an ambitious start-up that is building a bridge between the blockchain and the real world. Through the use of a device called the Ethereum Computer, any asset (bike, apartment, car, etc) can be digitally locked or unlocked and turned into income by renting it out. Just as Ethereum crowdfunding does away with the Kickstarter fee, slock.it potentially does away with the AirBnB fee.
- Quorum (J.P Morgan)
J.P Morgan developed platform called Quorum, the platform was developed in partnership with Ethereum startup EthLab, and it is one of the first projects to come out of a working group within the bank known as the Blockchain Center of Excellence.
The idea is to satisfy regulators who need seamless access to financial goings-on, while protecting the privacy of parties that don’t wish to reveal their identities nor the details of their transactions to the general public.
Quorum will be able to handle a number of transactions in real time, with a smart contract service that vastly improves efficiency. The system is also meant to greatly increase security by making transactions available to only those who are involved in the transaction, or those with regulatory status.
- Market Forecasting (Augur.net)
Augur.net is an open-source, decentralized market prediction platform built on Etherum blockchain. It allows users to trade on the outcome of events, and for the market to then leverage that crowdsourced information. Augur plans to use decentralized public ledgers to create a way for anyone in any field, from finance, healthcare and governance, to tap into the collective forecasting power of a global user base.
- R3 (R3CEV LLC) Use cases (Ethereum Blockchain Technology)
R3 has done its first distributed ledger experiment, involving 11 of its member banks, using Ethereum and Microsoft Azure’s Blockchain as a Service.The 11 member banks and R3 are connected on a private peer-to-peer distributed ledger, underpinned by Ethereum technology, and hosted on a virtual private network in Microsoft Azure, the public cloud platform offering Blockchain-as-a-Service (BaaS).
These 11 banks include Barclays, BMO Financial Group, Credit Suisse, Commonwealth Bank of Australia, HSBC, Natixis, Royal Bank of Scotland, TD Bank, UBS, UniCredit and Wells Fargo.
11 banks tested a system that could make trading much faster and cheaper, using the technology that underpins crypto-currency bitcoin. The 11 banks in the simulation, operating across four continents, each used their own computer, or “node”, and transferred “Ether” to each other – Ethereum’s equivalent of bitcoin.
Click pdf to download: Blockchain Musing
Enjoy, Serge, Piercing View, @PiercingView