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The Next Revolution in Gaming is Blockchain

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The Next Revolution in Gaming is Blockchain

According to a recent industry report, there are nearly 3 billion gamers in the world today, and – in 2020 alone – they will spend nearly $160 billion on games.

These numbers reinforce one inescapable fact: people love playing video games.

No corporation knows this better than video-streaming giant Netflix. In a letter to shareholders last year, Netflix told investors it wasn’t looking over its shoulder at the competition coming from other streaming services like Hulu or HBO Max. No, Netflix said it is far more concerned about competing with Fortnite, a shooting game that now commands the attention of 200 million players.

The raging success of Fortnite – and its parent company Epic Games – not only has Netflix a little nervous; it has also put other gaming giants on notice.

It might explain why Ubisoft – the company that introduced Assassin’s Creed, a gaming franchise valued at more than $300 million – recently announced it is now recruiting blockchain startups in its incubator program.

Why would a gaming company want to expand into blockchain? According to Ubisoft, “We … see a nascent ecosystem flourishing in many different directions exploring new possibilities to envision the relationships with the gamers, and between them, virtual assets ownership and exchanges, transaction security, and all what a cryptocurrency can allow.”

Exactly. Blockchain gives gamers something they have never had: the opportunity to take total ownership of the many rewards they earn or purchase while playing games. Ask any gamer, these items are costly – both in terms of money and hard work – but they have little value outside of the centralized game.

Blockchain is about to change all that.

Full transparency: I come at this from two different perspectives. One, I am a tech entrepreneur who incubates blockchain gaming startups.  But, two – and maybe more importantly – I am the father of five gamers.

Because I’ve raised a family of gamers, I have developed an understanding of gaming that goes beyond earnings reports. I’ve watched my kids get swept up in a wide variety of games over the years. I saw exactly why Sims (the most popular game of all time based on unit sales) captured their attention. I also understand why Call of Duty, a first-person shooter game introduced in 2003, mushroomed into a franchise now valued at $130 billion.  Mega-gaming hits like Minecraft and Halo were also big hits in my living room.

How does watching kids play games enhance my understanding of the gaming industry? Because I saw how each of these highly successful games won over gamers: they leveraged the latest technology to deliver a completely engrossing experience.

And that is what is happening right now with blockchain games; because they can be powered by non-fungible tokens (NFTs), they hold the potential upend the entire gaming industry.

Blockchain-based games can deliver an unprecedented, fully immersive experience. Those costly, hard-earned rewards I mentioned earlier can suddenly take on real value in a blockchain environment. That’s because a gaming collectible purchased or won in one game can now be transferred to another blockchain game. That means, for the first time, those rewards become the property of the gamer, not the game.

This transferability means gaming rewards can accumulate genuine value. They can be bought and sold in blockchain-supported marketplaces for fiat dollars, cryptocurrencies – or exchanged for other NFTs. And guess what. That also means – for the first time – gamers may even earn real money playing games.

And, as a parent of gamers, that last value proposition is music to my ears. Conservatively speaking, I estimate I’ve spent about $50,000 in gaming over the years. Blockchain games represent the first potential opportunity I have seen to recoup some of that investment.

This potential is already coming to fruition. CryptoKitties – a 2017 blockchain game where users are invited create, trade, and sell digital cats – already has more than 1 million users who have completed $40 million worth of transactions.

As an entrepreneur, the success of CryptoKitties validates my enthusiasm for blockchain games, but so does the experience of watching my 16-year old daughter play another blockchain-based game – Axie Infinity – the other night. She couldn’t put it down and I knew I was witnessing the future of gaming.

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Brad Robertson is the founder and CEO of Polyient Labs, an early-stage blockchain startup incubator. He has been an entrepreneur in the tech field for more than 20 years and he earned his JD from Pepperdine University. 

music

How Blockchain Could Save the Music Industry from the Threat of Technology

Did you know that there was a time, not so long ago, when the only way to listen to music was live and in-person? No, I’m not talking about a live stream from your favorite band on Facebook or YouTube, but listening to the music at a venue congregated alongside a small or large group of similarly-minded folks who liked the same kind of music you did. In pre-historic times like the year 1984, the concert was the only way we consumed our favorite tunes and supported the musical artists of our choice.

With the advent of recording technology, we have gone from the live concert experience to the phonograph and jukebox, the eight-track, cassette-tape, and CDs, to recent years with the onslaught of the mp3 and all digital streaming abilities. In the wake of these massive technological strides forward, the music industry has consistently been in catch-up mode; always having difficulty keeping pace. In the same way that technological changes have shaped the way we consume our favorite music, it has also played a huge part in other aspects of the industry, transforming the first and original way in which we consumed our music: LIVE.

Through technological advancement, the concert-going experience and the revenue created from these live performances have also seen a massive control shift out of the hands of the artists and the investors who deserve it.

Finding fair and legal means to regulate the consumption of music by the masses to taking back control of a rising secondary ticketing market and governing the concert experience are major issues that have united the music industry.  Together, record labels, venues, streaming services and artists fight to get ahead of the technological curve and retain earnings for people that make the music possible in the first place. Technology changes and it changes fast. It has been the central force that has thrown the music industry into decades of chaos, and it’s the very thing to set it back on its feet again.

ALL ABOARD THE DIGITAL TRAIN

In the annual Global Piracy Report, 2017 saw music theft grow 14.7%. It was the most prevalent in the United States. Technology and its maturity have played a major role in people’s ability to steal and download tunes that don’t belong to them, but this technology did not appear yesterday.

Think back to 1997. This was the year that two guys created a system by which you could swap songs with your friends at no cost. They called their technology, Napster. This was the beginning of illegal music downloading. Technology spread like wildfire through college campuses and within months had over 20 million users on the platform uploading and downloading songs from across the decades to the biggest radio hits that came out yesterday.  Major artists came together to speak out against the platform and the Digital Media Copyright Act  (DMCA) was signed into law by President Clinton in 1998 but did little good as Napster gave way to a swell of music piracy sites including Limewire and BitTorrent among many others.

While the music industry fought to control these illegal downloading sites, it was blindsided by a number of game-changing technological advancements over the next decade, including the introduction of streaming services (Spotify launched in 2001) and the introduction of digital music library through Apple’s iTunes. With Spotify and Apple Music leading the charge and giving the listener the ability to instantly devour an array of music genres and artists through a single subscription service, music streaming services (accounting for 50% of total recorded music revenues in 2017) has become the preference of most consumers looking to broaden their musical horizons or just get the song that their favorite artist released last week.

THE EVOLUTION OF MUSIC CONSUMPTION – THE TIMELINE

1877

Thomas Edison invents a device to record and play music on. The Phonograph.

1887

Emile Berliner invented the Gramophone, the invention to record on flat discs (The Record)

1948

The first LP is invented and was also known as the album.

1963

Cassette Tapes become the most popular form of music media and it’s the mobility factor made music portable.

1982

The first CD (Compact Disc) ever made was ABBA’s ‘The Visitors’ album.

1997

The first Mp3 player is released.

June 9th, 1999

NAPSTER is invented, developing the idea of free online music sharing and leading to a huge drop in music recording sales.

2001

NAPSTER is shutdown through a court order.

APPLE introduces the iPod

Streaming services like SPOTIFY begin to pop up giving way to the modern-day streaming music service

2003

iTunes and the advent of the digital music library managed from your computer come to market.

ACCESS BEFORE OWNERSHIP

With the introduction of streaming technology and services by Pandora, Rhapsody, Spotify and Apple Music, music consumers now had the ability to gain access to multiple artists all at once and for one low price per month.  Though some consumers still preferred the music quality of the CD, it was only a matter of time before streaming music became the popular choice.  Physical formats of music consumption like the CD were officially out and digital music was the dominant form.

Record companies could no longer work outside the system and fight the digital age as it cost the industry millions of dollars yearly, so over the next decade, they began to work alongside these digital streaming services building the systems and infrastructure that facilitate the authorizing of over 380 digital music services and more than 40 million tracks.  In 2016, the music industry saw its first increase in revenue by 5.9% after 15 straight years of loss or about 40% of the industry’s revenue.

So the industry as a whole is on the up and up, but It is important to note here that very little of the money that record companies receive for the digital downloads make it to the actual artists themselves. In the current business model, the label takes about 70 percent of the purchase price and this leaves the artist with only pennies from each download.

RECORDING ARTISTS COMPENSATION ISSUES EXTEND BEYOND THE RECORD

‘Access’ is also the prevailing issue when it comes to the live performance sector of the music industry’s business model but in a very different way. Still, from both the sales of their recorded music and the ticket sales to their live performances, artists are not receiving the compensation due to the creative force behind what are now big-name brands created by and profited off of by the record companies alone.

But if it is the streaming service technology and the easy access to the music keeping artists from their due on the recorded music side of the industry, what are the major industry issues and technologies that are keeping them from gaining money deserved from their concerts and tours and other live performances?

SPOTLIGHT ON THE LIVE MUSIC TICKETING INDUSTRY

The secondary market is the issue that is plaguing the current live ticketing industry. More specifically, the bot technology that is created to buy up what is usually 60% of the tickets to any given live performance. These tickets, which are usually priced on the low side by the primary markets for organizers and artists to maximize attendance of their target audience are quickly bought by secondary market resellers (with this bot technology) and then sold for sometimes triple or quadruple the original ticket price to the fans based on the demand of the artist.  So when tickets are bought and then resold at astronomical prices, only the companies and individuals (you call them scalpers) that comprise that secondary market sees the profit. Once again, the artist (and now the fans of the artists) are the ones that lose.

Both technology and legislation have been created to try to correct the fundamental issues at the heart of this industry, but both methods have fallen short of truly getting at the root of the problem.

BLOCKCHAIN TECHNOLOGY CAN SAVE THE TICKETING INDUSTRY

There is a bright spot on the horizon for artists (and fans) in regard to the issues plaguing the live concert ticketing industry and that bright spot is a new technology that has seen a recent rise in popularity across multiple business sectors called a blockchain.

By allowing digital information to be distributed but not copied, blockchain technology is the backbone of a new type of internet. Originally devised for the digital currency, Bitcoin, the creators quickly found potential uses for the technology across many sectors.

Yellowheart is a start-up company out of New York City that is building a brand new ticket-selling protocol, harnessed by blockchain technology and specifically geared to control end-to-end ticketing, solving an issue that artists and ticketing providers have battled for years while enabling fans to buy the best tickets at face value.

In a recent interview with Billboard magazine, Yellowheart CEO Josh Katz explained how this technology is the key to YellowHeart’s success.

“The plague of the scalping industry is something I’ve talked to artists and friends about for years, and with the unprecedented growth of this underground system, we knew it was time to find a real solution,” he explains. “While technology and secondary ticketing sites are to blame for the growth of scalpers, we believe that technology is also our solution. Blockchain offers us the unique ability to track the entire ticketing lifecycle, which means the tickets end up in the hands of the fans, and no one else.”

Billboard went on to report that YellowHeart is just the latest startup to target the secondary market. London-based live ticketing company Dice, which recently partnered with Primavera Sound, and San Francisco-based online ticket exchange Lyte are also working on technology to take on the secondary markets and get the creative artists behind these live events the revenue percentages that they deserve.

CONCLUSION

Whether it be the revenues allocated from the digital sales of their music or the cash streams created by the sales of their most recent tour, artists and creatives are getting the short end of the stick with the current systems and technology created by the live streaming industry and the record labels to correctly and fairly compensate each for the value that they add to their label or service.

The artist and the music deserve their due and, though it is with the use and through the creation of technology that the music industry’s inequalities for artists were created, it seems that it is technology-driven platforms like YellowHeart and its use of the blockchain open ledger that give artists and investors the most hope of seeing the systems change and their true value upheld.

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Josh Katz is the Founder and CEO of YellowHeart. Founded in 2018, YellowHeart is the first socially responsible live event ticketing platform. The YellowHeart platform is autonomous, fully decentralized and runs on public a Blockchain – which enables artists and teams to identify, market and sell directly to their fans. Josh is also the Founder of El Media Group (EMG). Established in 2005, EMG is the premier subscription music provider for business, servicing over 5000 of the premier luxury brands in hospitality, food and beverage, airports, casinos, and retail. From 1996 – 2004 Josh worked within the music industry spending time at Arista Records, Jive Records and BMG Entertainment. Josh was responsible and assisted in the launch, development and marketing for many of the biggest stars in music today. Artists include Britney Spears, Buddy Guy, Gwen Stefani/ No Doubt and many more.

4 Challenges Blockchain Must Overcome To Achieve Mass Appeal

When most people think about blockchain, they likely associate it with Bitcoin or other types of cryptocurrency.

But the blockchain technology introduced a decade ago to serve as a secure database for transactions in the cryptocurrency world has plenty of uses beyond that – and potential for even more. Around the world, blockchain can be or already has been used in such areas as energy, tourism and financial services.

Yet, plenty of people still have little knowledge of this technological breakthrough that could transform how they do business and live their lives. That raises a couple of questions: Is blockchain ready for the masses? And are the masses ready for blockchain?

“Despite renewed investor interest, blockchain technology still needs to evolve to overcome some challenges before adoption reaches people who are not early adopters or who are not very tech savvy,” says Kirill Bensonoff (www.kirillbensonoff.com), a serial entrepreneur and an expert in blockchain.

Those challenges include:

Interaction with other systems. Blockchain’s growth depends on the technology’s ability to scale and interact with other systems and networks, Bensonoff says. “Right now, blockchain as a service is limited in performance because of slowed transaction processing times and the inability to have various blockchain platforms interact with each other,” he says. Just one way this challenge is being addressed is by developers creating consensus mechanisms, Bensonoff says. Consensus mechanisms refer to how participants in a blockchain network agree that the transactions recorded in the digital ledger are valid. “This mechanism creates a trust and validity in the transaction between participants who aren’t familiar with each other,” he says.

Cost and usability.  The cost of creating and implementing blockchain networks remains a significant barrier, Bensonoff says. One possible solution could be the introduction of cloud-based blockchain technology from tech giants such as IBM, Microsoft and others. “These companies have made cost reduction and scaling the crux of their business offerings,” he says. For blockchain to evolve, the average user experience also needs improvement, Bensonoff says. “The good news is that developers and blockchain companies are catching on, and working to create a more welcoming look and feel for consumers,” he says.

Regulation. If there’s a grey area in the blockchain world, regulation is it, although some states, such as Wyoming, and countries such as Malta, Estonia and Switzerland, are attempting to change that. “In the meantime, this regulatory limbo is affecting adoption, with many waiting for some finality in legislation before they implement their own blockchain solution,” Bensonoff says. As some states pass blockchain bills, hopes are high that others will follow suit, he says.

Privacy. Blockchain’s transparency is one of its strengths – and a weakness. Bensonoff points out that blockchain acts as a public ledger, which is necessary for the technology to provide trust and to verify transactions. But that can make use of blockchain troublesome for some industries, such as healthcare, which needs to protect the privacy of much of its data. Some solutions on the horizon, Bensonoff says, include making use of new developments like stealth addresses, ring-confidential transactions and state channels.

“Blockchain is definitely going to become more useful and more popular,” Kirill says. “But it must overcome these hurdles to get where it needs to be.”

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Kirill Bensonoff (www.kirillbensonoff.com) has over 20 years experience in entrepreneurship, technology and innovation as an advisor and investor in over 20 companies. In the information technology and cloud services space, Kirill founded US Web Hosting while still in college, was co-founder of ComputerSupport.com in 2006, and launched Unigma in 2015. As an innovator in the distributed ledger technology (DLT) space, Kirill launched the crypto startup Caviar in 2017 and has worked to build the blockchain community in Boston by hosting the Boston Crypto Meetup. He also is the founder of the Boston Blockchain Angels, producer and host of The Exchange with KB podcast and leads the Blockchain + AI Rising Angel.co syndicate. Kirill earned a B.S. degree from Connecticut State University, is a graduate of the EO Entrepreneurial Masters at MIT, and holds a number of technical certifications. He has been published or quoted in such national business, blockchain and technology media as Inc., Hacker Noon, Huffington Post, Bitcoin Magazine and CoinTelegraph.

 

blockchain

How Blockchain Can Fight Counterfeiting and Fraud

A recent report by the Organization for Economic Cooperation and Development and the European Union’s Intellectual Property Office shows that imported counterfeit goods raked in $509 billion in 2016 — nearly 3.3% of all global imports for that year. To fight back against the rising tide of knockoffs threatening their brands, companies are turning to blockchain technology to create more transparent supply chains.

Blockchain is a distributed, decentralized ledger technology controlled by smart contracts and regulated by a consensus protocol. The ledger automatically records every transaction, and every record it creates is unalterable. Depending on exactly how one uses the ledger, it can be classified as permissioned, public, or fit for purpose.

Within a brand’s supply chain, a blockchain ledger can manage a variety of activity from automating contract compliance between entities via smart contracts to tracking products from manufacturing to distribution. The ledger eliminates supply chain ambiguities and creates transparency that ensures companies and customers get the quality for which they pay.

Blockchain’s Value in Existing Supply Chains

The value of modernizing supply chains with blockchain isn’t just theory. Major brands have already begun partnering with tech firms and other entities in response to rising demands for improved brand protection. LVMH (Louis Vuitton SE), for instance, working closely with Microsoft and ConsenSys, has created Aura Ledger to provide proof of authenticity of luxury items and trace their origins from raw materials to point of sale and beyond to the used-goods markets.

Throughout the retail industry, companies like eBay are starting to offer product authentication as a value-added service. Currently, the company authenticates only handbags due to rising concerns from customers about their authenticity. However, eBay plans to expand authentication to additional luxury items that might be subject to counterfeit.

In agriculture, the blockchain-based Grain Discovery streamlines transactions between farmers and buyers, making it easier for them to form new partnerships. In the pharmaceutical industry, distributors have formed the MediLedger consortium to track the provenance of pharmaceuticals and stem the counterfeit drug market worth more than $75 billion annually.

In virtually every industry, suppliers and distributors are turning to blockchain technology to lower their risk of fraud. A decentralized, immutable record of every product’s journey can help verify authenticity — or lack thereof.

Blockchain as a Force Against Fraud

Companies that worry about counterfeit versions of their products have options to address the issue. When implemented together, the following steps can help mitigate risk and inspire confidence among companies and consumers alike:

Establish a secure supply chain network.

For blockchain to successfully transform a company’s supply chain, every business entity along the chain must agree to participate. That makes establishing a network of trusted partners the most important step toward securing products.

For example, the jewelry consortium TrustChain, which operates on IBM’s blockchain platform, only works because the group includes the mines that produce jewels, manufacturers that refine them, and retailers that sell them.

Given the rise of counterfeit purchases, most companies with strong brands are looking to work with their suppliers to prevent fraud. The momentum of such efforts increases when every stakeholder in the supply chain sees the value and signs up to actively participate in the efforts.

Choose the tags most suited for the brand and product.

Only with the right tagging technology can blockchain technology track every product along its journey. Through various IoT devices, tags can detect diversions, liquid leaks, vibrations, package openings, tilt, excessive force, and more.

Companies have several options, such as smart tags and high-resolution signatures that digitally relate products to the blockchain. Purpose-fit tags that have been developed to track shipments at the container, pallet, and package levels further help. Companies can also employ decentralized identifiers (DIDs) that are universally resolvable and globally visible to stakeholders throughout the supply chain.

This topic holds great interest across many industries. The RFID Lab at Auburn University recently announced the Chain Integration Project (or CHIP) launch, a project focused on finding ways for retail and apparel companies to communicate with their suppliers about tracking product inventory at the item level using radio frequency identification tags and blockchain. The project has attracted global companies across many industries due to the applicability across supply chains outside of retail and apparel.

Some products don’t need to be tracked with such intricate detail, while others should be tagged to track every moment of their journeys. Determine what tagging technology makes the most sense, adds business value, and is easiest to manage along the entire supply chain.

Encourage customers to be part of the solution.

When customers clearly and directly benefit from a company’s use of a blockchain-enabled supply chain, getting more partners to join the consortium becomes easier. However, brands can’t expect all end users to automatically jump on board.

When eBay released its authentication program for handbags, it did so in response to a need its customers had expressed. To entice sellers to participate, it offers several incentives if they sign up to authenticate their products.

Before long, the streamlined processes and unprecedented transparency that blockchain provides will be more than enough to encourage participation. Until then, make it more attractive through bonuses and other rewards in order to incentivize users and increase customer stickiness.

Unleash IoT, AI, and ML to actively fight fraud.

Protecting against counterfeiting and fraud isn’t always a passive exercise. With blockchain, companies can unleash the potential of IoT, artificial intelligence, and machine learning to actively prevent fraudulent transactions.

For instance, customers can scan product tags to verify their authenticity or compare images of the product against its stored signatures. Proof of purchase and other transaction details can be cryptographically linked to the buyer and product and then subsequently uploaded to the blockchain.

Any product that bears a brand’s name but can’t be tracked to its manufacturer would be considered counterfeit. A company can ensure, in real time, that it receives compensation for every product sold with its name on it.

The reported value of fraudulent goods that hit the global market is expected to continue rising, but companies are no longer helpless in the face of counterfeiters. As more industries and their supply chains embrace blockchain technology, counterfeit goods will no longer have a place in any market.

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Mohan Venkataraman is the chief technology officer of Chainyard, a blockchain consulting company focused on delivering production solutions that address supply chain, financial services, transportation, government, and manufacturer pain points. With more than 20 years of proven experience, Mohan has extensive skills in software engineering, governance best practices, and industry models. With exposure to more than 70 clients, he has a clear focus on understanding client needs and aligning technology and business priorities to deliver value. His current interests include blockchain, cloud solutions, big data, service-oriented architecture, governance and integration competency center establishment, and enterprise architecture, with a focus in telecom media, technology, insurance, retail, healthcare, and life sciences industries.

Will Facebook’s Libra Help Bring Cryptocurrency To The Masses?

When Facebook announced plans for a stablecoin called Libra, the reaction from the cryptocurrency world ranged somewhere between skeptical and cautiously optimistic.

But, regardless of any specific merits of Facebook’s version of a digital coin, the social-media giant’s move could help speed the adoption of cryptocurrency to a larger audience, says Kirill Bensonoff (www.kirillbensonoff.com), a serial entrepreneur and an expert in blockchain.

The biggest issue now is that most people are not familiar with crypto; they think it’s difficult to use, and they may not trust it,” Bensonoff says. “Facebook will put a digital wallet on many phones and computers, and sending payments with crypto will become commonplace.”

Facebook’s Libra is proposed as a stablecoin, which is a form of cryptocurrency. Using Libra, people would be able to buy things or send money to others while paying, at most, minor fees. Unlike other cryptocurrencies such as Bitcoin, the value of stablecoins is tied to an asset such as gold, the U.S. dollar, the Euro or other currencies.

Facebook won’t have complete control of Libra. It’s just part of a bigger group of partners that’s creating the stablecoin.

What might all this mean for the future of cryptocurrencies – and for the average person who still knows little about them? Bensonoff says a few things worth knowing about Libra in particular and stablecoins in general include:

-Bringing stability to cryptocurrency. As the name implies, the idea of stablecoins is to bring more stability – and more peace of mind for wary investors – to the world of cryptocurrency. “I don’t think Facebook will bring stability immediately,” Bensonoff says. “I believe it’s going to take a lot more in terms of mass adoption, but Libra could be a step in the right direction.”

-The SEC’s view. Regulators at the Securities and Exchange Commission have been eyeing stablecoins with the possibility that some of them could be classified as securities. “That could put stablecoins in the same category as stocks, subject to the registration, disclosures, and accreditation of investors that demands,” Bensonoff says.

-Will Libra replace PayPal? Maybe not, considering that PayPay is one of the founding members of Libra, Bensonoff says. “I think they will have some influence on the direction,” he says. “However, crypto in general is a threat to all existing payment processors, including PayPal. I believe PayPal is smart and will adopt and accept crypto payments, and they will figure out a way to monetize it. The downside for them is they won’t be able to charge nearly as much as they do now.”

“I believe Libra is going to have a positive impact in terms of awareness, adoption and interest in cryptocurrency from both businesses and consumers,” Bensonoff says. “But at the same time, with that could come more regulatory scrutiny.”

About Kirill Bensonoff

Kirill Bensonoff (www.kirillbensonoff.com) has over 20 years experience in entrepreneurship, technology and innovation as a founder, advisor and investor in over 30 companies. He’s the CEO of OpenLTV, which gives investors across the world access to passive income, collateralized by real estate, powered by blockchain. In the information technology and cloud services space, Kirill founded U.S. Web Hosting while still in college, was co-founder of ComputerSupport.com in 2006, and launched Unigma in 2015. All three companies had a successful exit.

As an innovator in the blockchain and DLT space, Kirill launched the crypto startup Caviar in 2017 and has worked to build the blockchain community in Boston by hosting the Boston Blockchain, Fintech and Innovation Meetup. He is also the producer and host of The Exchange with KB podcast and leads the Blockchain + AI Rising Angel.co syndicate. Kirill earned a B.S. degree from Connecticut State University, is a graduate of the EO Entrepreneurial Masters at MIT, and holds a number of technical certifications. He has been published or quoted in Inc., Hacker Noon, The Street, Forbes, Huffington Post, Bitcoin Magazine and Cointelegraph and many others.

blockchain

SMALL AND MEDIUM-SIZED GLOBAL TRADERS ARE BANKING ON BLOCKCHAIN

This is the second in a three-part series by Christine McDaniel for TradeVistas on how blockchain technologies will play an increasing role in international trade.

Give Me Some Credit

Every business requires capital to operate. To sell products to customers overseas, many companies also need trade financing and insurance from third-party lenders. About 80 percent of all global trade is transacted through third-party lenders and cargo insurers, but the process is complex, can be costly and many banks find it too risky to support small and medium-sized enterprises (SMEs).

Blockchain has the potential to increase transparency, speed and accuracy in assessing risk across the trade finance process, which in turn could expand the supply of credit available for international trade transactions – good news especially for SMEs that face significant hurdles accessing credit. Here’s how.

Pay Me Now or Pay Me Later

Buyers who import goods from sellers in other countries generally want to pay upon receiving the merchandise so they can verify its physical integrity on arrival. Exporters, on the other hand, generally prefer to be paid as soon as they ship the goods. Trade finance can bridge this gap.

Exporters and importers engage third-party lenders and insurers who will guarantee payments on the basis of collateral and indemnify the exporter, importer and related parties in the event that the merchandise is damaged, stolen or lost while in transit. In this way, trade finance provides the credit, payment guarantee and insurance needed to facilitate an international trade transaction on terms that will satisfy all parties.

80% of trade relies on finance

Steps on the Trade Journey

Intermediaries such as freight forwarders typically manage the physical journey of merchandise, from the original producer to the border, across the border (maybe several borders), and to the final buyer.

Each step must be verified: when was the merchandise transported from the factory or farm to a warehouse, when was it moved from the warehouse to a container, when was the container loaded onto a ship, when did the ship get underway, when was the container unloaded from the ship at port, and when was the merchandise transported from the port to the end consumer.

Different trade finance instruments, such as lending, letters of credit, factoring and cargo insurance cover legs of the journey. A letter of credit is a guarantee from a bank that a buyer’s payment will be received and be on time or else the bank will take responsibility for the payment. Factoring is accounts receivable financing to accelerate cash flow. Cargo insurance insures the merchandise while en route.

Without Finance, Trade Would Sink

The World Trade Organization estimates that 80 percent of global trade relies on trade finance or credit insurance. The global trade finance sector (i.e., the global volume of letters of credit) is worth roughly $2.8 trillion. Demand for trade financing exceeds availability, resulting in the underutilization of existing capital. According to the Asian Development Bank, the global trade finance gap — the difference between the demand for and supply of trade finance — has reached $1.6 trillion.

SMEs Face a 50 Percent Rejection Rate

The shortfall in supply reflects the complex and risky nature of trade finance which often involves multiple parties. Before banks will issue letters of credit in trade finance, they require potential customers to present a solid credit history and a strong balance sheet, conditions that tend to favor larger institutions.

SMEs typically experience more difficulty navigating the trade finance process and dealing with the cost and complexity of banking regulations than larger companies. In 2014, SMEs had trade finance requests before financial institutions rejected at a rate of over 50 percent. In comparison, the rejection rate for multinational corporations was only seven percent.

Links in the Trade Finance Chain

According to the United Nations, there are typically eight major steps required to obtain a letter of credit, although in practice the Credit Research Foundation lists more than twenty. Each step of the process is dependent on the previous steps, and some steps involve sending the same document back and forth for verification purposes. The administrative burden is greater for SMEs than for large firms.

survey of 2,350 SMEs and 850 large firms conducted by the U.S. International Trade Commission in 2010 showed that lack of access to credit is the major constraint for SME manufacturing firms seeking to export or expand into new markets and it is one of the top three constraints for SME services firms.

rate of rejection for trade finance

How Blockchain Can Help Ease Trade Finance

Requirements to authenticate each transaction in the trade finance and insurance process can engender large amounts of paperwork and cause delays at each step. Every handoff must be approved and verified.

Instead, blockchain uses digital tokens that are issued by each participant in the supply chain to authenticate the movement of goods. Every time the item changes hands, the token moves in lockstep. The real-world chain of custody is mirrored by a chain of transactions recorded in the blockchain.

The token acts as a virtual “certificate of authenticity” that is much harder to steal, forge or hack than a piece of paper, barcode or digital file. The records can be trusted and greatly improve the information available to assure supply-chain quality.

Using blockchain as a digital ledger for these handoffs would allow involved parties to instantly track and receive secure information about the traded goods. Parties can monitor the entire shipping process and verify the completion of each step in real time. This increased transparency and ease of monitoring reduces the risk that a borrower presents to a potential lender or insurer.

Banking on Blockchain

A number of financial institutions are piloting the use of blockchain-enabled trade finance platforms.

Bank of America, HSBC, and the Infocomm Development Authority of Singapore collaborated in 2016 to develop a trade finance application designed “to streamline the manual processing of import/export documentation, improve security by reducing errors, increase convenience for all parties through mobile interaction, and make companies’ working capital more predictable.” Using the application, each action in the workflow is captured in a distributed ledger and all parties (the exporter, the importer, and their respective banks) can visualize data in real time, offering transparency to authorized participants while ensuring confidential data is protected through encryption.

Barclays used blockchain in 2017 to issue letter of credit that reportedly guaranteed the export of $100,000 worth of agricultural products from Irish cooperative Ornua to the Seychelles Trading Company, noting the parties were able to execute a deal in four hours that would usually take up to 10 days to complete.

A group of European banks launched a trade finance blockchain platform in July 2018, initially focused on facilitating small and medium-sized businesses trading within Europe. In September 2018, the Hong Kong Monetary Authority announced plans to launch a trade finance blockchain platform. Twenty-one banks are participating in the platform, including large institutions such as HSBC and Standard Chartered. The Hong Kong Monetary Authority is also reportedly working with its counterpart in Singapore to develop a blockchain-based trade finance network to settle cross-border transactions.

Lessons for Trade Policymakers

As the trade finance industry begins to utilize blockchain technology, there are some potential implications worthy of policymakers’ attention.

First, the large number of intermediaries and corresponding administrative costs in trade finance tend to fall particularly hard on SMEs and the relatively higher cost of each transaction makes SME financing less attractive to banks. If blockchain can reduce the costs of trade finance, more small and medium-sized businesses could trade globally.

Second, although blockchain technology does not alter the fundamental credit risk of borrowers, the increased transparency and access to information it delivers could improve the accuracy of banks’ risk assessments. If perceived risk is greater than actual risk, a nontrivial number of loan applications may be denied even though those loans have the potential to be successful. If blockchain brings greater confidence and issuance of good loans — that is, those that are paid back — the transactions they support would bring value to the economy.

In these important ways, blockchain can increase transparency across the trade finance process and decrease risk for all parties, in turn expanding the supply of credit available for international trade transactions.

ChristineMcDaniel

 

Christine McDaniel a former senior economist with the White House Council of Economic Advisers and deputy assistant Treasury secretary for economic policy, is a senior research fellow with the Mercatus Center at George Mason University.

This article originally appeared on TradeVistas.org. Republished with permission.

Blockchain

Where Have You Been? Blockchain for Tracking Goods in Trade.

Why is it so hard to track the origin of a diamond, or take longer than we’d like to trace the source of a food safety outbreak? It turns out that we’ve been tracking the supply chain in some really antiquated ways, but that’s about to change thanks to blockchain.

Origins and Travels

The “provenance” of a good refers to its origin as well as a chronological record of its ownership, location, and other important information as it moves along a supply and distribution network.

Many companies are exploring the use of blockchain technologies to help track this information much deeper into their supply chains than previously feasible. A retailer, for example, might require detailed information about materials, components, and ingredients as would manufacturers sourcing from a variety of suppliers.

Using blockchain technologies to track the origins of raw materials and follow domestic and international supply chains can also help meet the increasing demand for consumer information about globally produced goods, providing more transparency and accuracy about a product’s long journey to the store.

How Blockchain Can Help

Blockchain works to track the provenance of a good thanks to digital tokens that are issued by each participant in the supply chain to authenticate its movement. Every time the item changes hands, the token moves in lockstep. The real-world chain of custody is mirrored by a chain of transactions recorded in the blockchain.

The token acts as a virtual “certificate of authenticity” that is much harder to steal, forge or hack than a piece of paper, barcode or digital file. The records can be trusted and greatly improve the information available to assure supply-chain quality.

Blockchain technology can also make the audit process more efficient. The ledger distributes responsibility to the owners of pieces of information while ensuring verification along the way. The transactions are transparent to parties on a permission basis.

Consumers Want to Know

Surveys show that consumers in the United States and around the world are becoming more aware and interested in the origins of the merchandise they buy and the food they consume. Many also want to know how production processes of the goods they consume impact the environment and society.

The Pew Research Center found that 75 percent of Americans are “particularly concerned” for the environment, and 83 percent make an effort at least some of the time to live in ways that protect the environment. Nearly three out of four Millennials surveyed by Nielsen say they would pay extra for “sustainable” products and brands with a reputation for environmental stewardship. When it comes to food products, 71 percent of people surveyed by Label Insight said they want access to a comprehensive list of ingredients when deciding what food to buy.

Sustainable Coffee, Genuine Brand Purses and Conflict Diamonds

Retailers are concerned that brand loyalty is on the decline. But with some products, high consumer demand for product information is associated with higher expenditures, meaning people might pay more for a product they believe is ethically or sustainably sourced or manufactured. Blockchain can be used by companies to verify the claims their customers care about.

Take Starbucks, for example. Since 2004, the company has worked to support farmer livelihoods through its Coffee and Farmer Equity (C.A.F.E.) program. In 2015, they announced that 99 percent of their coffee was “ethically sourced,” complying with a set of principles and practices at each step of the supply chain from farm to cup. Last year, they took traceability to the next level by piloting the use of blockchain to create a transparent and direct connections with tens of thousands of coffee farmers. Customers can now see up close a supplier’s sustainability practices.

Worried your designer handbag isn’t the real deal? The luxury goods industry is seeking to use blockchain to verify the authenticity of its product. Brand name shoes, dresses or purses would have specific codes that retailers and consumers could use to track changes in ownership. Given the decentralized blockchain platform and multiple authentication processes to update the ledgers, fraudulent entries will be nearly impossible. The auditable and tamper-proof records produced through blockchain technology could help combat trade in counterfeit goods, which is a $1.77 trillion problem for manufacturers according to the International AntiCounterfeiting Coalition.

Blockchain is a promising development for the diamond industry, which struggles to prevent so-called “conflict diamonds” from entering their value chains. A United Nations panel reportedly found that 140,000 carats of diamonds were still being smuggled out of the Central African Republic between 2013 and 2015 and traded illicitly to finance armed conflict despite an export ban. De Beers, which controls 37 percent of the global diamond market, reported earlier this year that it was able to track 100 high-value diamonds from mine to retailer using blockchain technology.

Food Safety and Quick Recalls

The Centers for Disease Control and Prevention estimate that each year roughly one in six Americans, or 48 million people, becomes ill as the result of a foodborne pathogen (e.g., salmonella, listeria, or E. coli). Blockchain technology will not necessarily prevent outbreaks but could be used to track their source more quickly and prevent outbreaks from becoming epidemics. Retailers and regulators could use the distributed ledger technology for accurate and rapid information about potentially contaminated food.

Walmart is pioneering the use of blockchain to maintain easily accessible records of food provenance. In a simulated recall, The company was able to trace the origin of a bag of sliced mangoes in 2.2 seconds compared with the 6 days, 18 hours, and 26 minutes it would take using a standard approach of working with suppliers.

Australian exporter InterAgri is experimenting with using blockchain to track the production and global delivery of its Black Angus Aussie Beef. Teaming up with JD.com, a major e-commerce site in China, InterAgri aims to detect and eliminate food fraud such as counterfeit Aussie beef illegally marketed in China. By some cost estimates, food fraud affects approximately 10 percent of all commercially sold food products, creating food safety concerns for the consumer and liability issues for producers.

Coming to a Shelf Near You

In principle, blockchain could be applied to tracking provenance information for virtually any good, from agricultural commodities to luxury goods. Although blockchain technology is still not prevalent or the industry standard, more producers and retailers are exploring ways to track their own supply chains to increase quality assurance and their ability to communicate information about their products to consumers.

It will take trial and error and significant work with suppliers to ensure interoperability and efficiencies, but such experimentation will be essential if the U.S. and global economies are to realize the benefits of blockchain in international trade.

This is the first in a three-part series by Christine McDaniel for TradeVistas on how blockchain technologies will play an increasing role in international trade.

ChristineMcDaniel

Christine McDaniel a former senior economist with the White House Council of Economic Advisers and deputy assistant Treasury secretary for economic policy, is a senior research fellow with the Mercatus Center at George Mason University.

This article originally appeared on TradeVistas.org. Used with permission.

Brazil’s Banco Bradesco Confirms Blockchain Integration

Bradesco Bank – the second largest private bank in Brazil, released information confirming the integration of the Marco Polo Network. The global trade finance network combines R3’s Corda blockchain technology and the TradeIX distributed trade finance platform to create a unique, paced process for financial institutions to utilize.

Marco Polo’s Network gives banks and other financial institutions the advantage of learning and exploring opportunities in blockchain technology prior to implementing strategic trade finance initiatives with the platform.

“Facilitating financial inclusion and supporting economic growth is one of our key priorities. Following the successful digitalization of our retail services, we’re now focused on leveraging the best technology to develop new trade finance solutions for our corporate banking customers,” said Roberto Medeiros, Bradesco’s Head of International and Trade Finance in the announcement.

“Our Research & Innovation Department carefully assessed the options available to implement blockchain solutions and APIs. The expertise of the Marco Polo Network, the forward-looking vision and the end user-focused approach convinced us that we had found the optimum place to succeed,” he added.

With a focus on improving trade finance by increasing transparency, connectivity, and optionality, the joint finance initiative provides solutions and efficiencies to minimize financial roadblocks while maximizing client and partner relationships.

“As Marco Polo’s global network continues to grow momentum, it is clear that it is bringing tremendous value to the trade finance and working capital sector. Institutions which get ahead of the curve by engaging actively with blockchain technology now through use-cases and pilots will be ahead of the curve and gain a significant competitive advantage. Banco Bradesco is joining a network leading the way in exploring how blockchain can improve the entire trade finance lifecycle,” said David E. Rutter, CEO of R3.

Source: Marco Polo

Blockchain Changes the Pace for Agricultural Supply Chain

Farmers and buyers are now provided streamlined visibility for their deals through the new blockchain platform, Grain Discovery. As a result of the start-up technology, the first global corn trade transaction was successfully processed for Prince Edward County farmers Larry Reynolds and Lloyd Crowe following the discovery of vomitoxin beyond the threshold for corn and leading to rejection of two loads. The two were in need of a quick and reliable solution to locate a new buyer and process the transaction. Grain Discovery did just that.

“By using Grain Discovery, we were not only able to avoid hours of searching for a new buyer, but found one just down the road, at a better price than the original deal, and were paid instantly,” said Mr. Reynolds. “If blockchain technology means a few extra dollars in my pocket and a few hours less trucking, then that’s a win.”

The goal for Grain Discovery is to create a revolutionary approach to agricultural supply chain through the use of blockchain technology while providing increased visibility, control, and simplicity for farmers and buyers.

“Farming technology in the agricultural industry is incredibly advanced,” explained Rory O’Sullivan, CEO of Grain Discovery. “However, the way grain is bought and sold hasn’t changed much since our grandparents were farming! In the age of Amazon and eBay, we reckoned the industry deserves better.”

“We are participating in a number of other pilot projects this year, including tracing soybeans from seeds in Canada to the export market in Japan and coffee from Columbia to your local café,” said Mr. O’Sullivan. “This transaction was the vital first step towards realizing our goals.”

Source: EIN Presswire