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MINDSMITH column: blockchain in the peak of summer

August 6, 2020, 10:02 (UTC+3)|

The managing partner of MINDSMITH Ruslan Yusufov and the company’s analyst Gleb Borisov told ICT.Moscow how the main trends in the blockchain field were developing in 2020 during the coronavirus pandemic, which of the previously predicted trends are still present and why.

The three key processes were highlighted:

  • blockchain is becoming socially oriented;
  • blockchain gets deeper into financial institutions;
  • application in supply chains strengthens blockchain ecosystems.

To confirm the theses, current events in fintech related to blockchain, such as government initiatives, the emergence of new projects, investments, were considered. The comments from representatives of the FinTech Association, Alfa-Bank and Waves Enterprise were also provided.

The main topic of the first half of summer 2020 in blockchain area, as in almost any industry, was the COVID-19 pandemic. The virus has exposed the barriers of nearly every application area for distributed ledger technology.

The use of blockchain in healthcare has undoubtedly received the most attention from the international community. Both state and supranational organizations and private companies have actively invested and developed blockchain solutions in this area for the past month and a half.

In addition, socially-oriented blockchain projects have become widespread, and the recent major hacks of social networks and corruption scandals have shown that it is necessary to actively fight fraud both on the Internet and in real life.

Blockchain is going deeper into institutional financial organisations. The introduction of the digital yuan by the People’s Bank of China, which began in April, has ignited the “blockchain arms race” among the central banks of the world.

In the first half of the summer, financial institutions were very interested in cryptocurrencies. More and more banks offer custody services - the services for storing the client’s cryptocurrency, and companies that manage financial assets are increasingly cooperating with blockchain startups.

The use of blockchain for tracking supply chains remains one of the most promising areas of technology development. Unexpectedly, the beginning of the summer of 2020 was marked by a significant number of blockchain projects related to sea cargo transportation, despite severe restrictions on international trade caused by the pandemic.

The industrial sector remains a popular area for the use of blockchain in supply chains in the summer of 2020, and the use of distributed ledgers in the field of commodity supply.

Blockchain is becoming socially-oriented

Technology to guard health

If the COVID-19 pandemic has a positive side, it is, first of all, a test of the healthcare system’s strength.

The heavy workload that doctors and healthcare organizations have to bear has forced many countries to accelerate the adoption of innovative technologies, including blockchain.

International and government organizations have become one of the main drivers of support for the inclusion of blockchain in the fight against the virus. The UNICEF Crypto Fund - United Nations Children’s Fund - announced on June 20 funding of $100,000 will be provided for startups developing open source blockchain solutions to combat global challenges, primarily caused by the COVID-19 pandemic. On June 5, Cristina Del Río Fresen, leader of the Global Tourism Safety Lab of the Ministry of Tourism Canary Islands, announced the introduction of a digital health passport for air passengers. The Health iCard application developed on the basis of blockchain technology with the support of the UN World Tourism Organization is designed to simplify the procedure for passing quarantine regimes at airports for passengers.

Developing countries were most vulnerable to the pandemic. Therefore, blockchain was implemented where it was very rarely used before. Fantom, a blockchain startup, together with the Afghan Ministry of Health, launched a pilot project Smart Medicine on July 6. The project is aimed at tracking the supply of drugs from manufacturing to pharmacies and protecting the population from counterfeit products.

Private organizations also did not stand on the sideline. French biopharmaceutical company Transgene specializing in immunotherapy for cancer and infectious diseases and Hypertrust Patient Data Care, which develops healthcare solutions, successfully tested the world’s first cloud-based blockchain system for tracking the supply of specialized vaccines on July 9.

On June 25, the founder and CEO of the largest cryptocurrency exchange Binance, Changpeng Zhao (better known as CZ), spoke about the success of the charity project of Binance Charity. According to CZ, a custom-designed platform that allows to track how every dollar of donation was spent has sent 1.42 million masks, 53 thousand protective suits and 50 thousand gloves to people in 24 countries.

Blockchain combats deception

On the eve of the presidential elections in the United States, the world media has paid increased attention to the problem of fake news. The largest ever hacking of celebrity Twitter accounts on July 15 followed by massive cryptocurrency fraud only confirmed the need for combating fraud both online and in real life. Over the past few months, many organizations started to use blockchain technology to solve these problems.

On June 30, the technology department of the European Commission allocated €5 million to six blockchain initiatives under the Blockchains for Social Good program. One of the winners of the program was WordProof, a Dutch company that develops authentication and content verification solutions. And on July 6, The New York Times research group tested blockchain technology to combat disinformation in the media by identifying and capturing news photos metadata.

The fight against corruption is also a hot topic for both non-profit and private organizations. On June 17, the World Economic Forum published a study that considered the use of blockchain by government agencies to track bribes in the form of cryptocurrencies. The American company Chainalysis, which specializes in tracking and analyzing blockchain transactions, raised an additional $13 million on July 7 as part of an expanded series B round, raising a total of $49 million.

Blockchain continues entering financial institutions

Central bank projects are gaining momentum

The introduction of the digital yuan by the People's Bank of China, which began in April, has ignited “blockchain arms race” among the world’s central banks. On July 13, the Monetary Authority of Singapore announced that it is ready for commercial use of the project Ubin, the central bank’s “wholesale” digital currency, that has been developed jointly with Temasek and J.P. Morgan since 2017.

Furthermore, on July 6, at the Unitize blockchain conference supported by the Singapore government it was announced that the country’s blockchain ecosystem grew by more than 50% over the year, reaching 234 companies. It is noteworthy that, as of October 2019, the Russian corporate blockchain ecosystem had more than 150 players, including not only blockchain solution vendors and system integrators, but also a variety of professional organizations, lawyers and business consultants.

The use of blockchain by the world’s central banks is not limited to digital currencies. On July 7, the Central Bank of Sri Lanka announced the launch of a project for the development of an identification system based on blockchain technology, and on June 20 the National Bank of Cambodia announced that it was considering to use blockchain for developing national payment system.

The beginning of the institutional Crypto Spring

Over the past few months, financial institutions have been very interested in in cryptocurrencies. More and more banks are offering custody services for storing cryptocurrency, and financial asset management companies are increasingly working in partnership with blockchain startups.

On June 17, one of Japan’s largest brokerage companies, Nomura Holdings, announced the launch of a custody service for Komainu institutional clients, jointly created with cryptocurrency companies Ledger and CoinShares. On July 1, Curv startup, that also offers solutions for secure storage of cryptocurrency assets of institutional clients, raised $23 million in Series A funding round from major industry players such as Digital Currency Group, Coinbase Ventures and CommerzVentures.

Moreover, on July 8, the leading Indian IT company, Tata Consultancy Services, launched Quartz platform, it is a cryptocurrency trading boxed solution for banks and investment companies. On July 3, one of the largest consulting companies of France, Atos, together with the British financial organization, TISA, announced the development of a blockchain reporting automation system for asset managers and financial advisers. On June 8, Ripple Managing Director Navin Gupta reported that since November of last year, more than 50 financial institutions have joined the partnership network of the organization’s payment system, and now the re are more than 350 network members.

The use of blockchain in supply chains strengthens blockchain ecosystems

The use of blockchain for tracking supply chains remains one of the most promising directions of technology development. Besides, such blockchain use cases most clearly demonstrate the potential benefits of large-scale deployment of distributed ledger technologies.

In the early summer of 2020, a significant number of blockchain projects related to sea cargo transportation appeared, despite the severe restrictions on international trade caused by the pandemic. The joint project of the blockchain solutions developer for document automation, CargoX (logistics technology provider Portall Infosystems and the Indian Ports Association), aimed at digitalizing the circulation of logistics documents, was presented on June 11 and became one of the last missing elements in India’s electronic port system.

On June 19, Alibaba joined the International Port Community Systems Association to create a blockchain solution for standardization and automation of port logistics workflow. Then, on July 7, Alibaba entered into a partnership with one of China’s largest state-owned shipping logistics companies, Cosco Shipping Holdings, to implement blockchain developments for tracking goods in maritime supply chains. On June 4, Kvarøy Arctic, the largest producer of Norwegian salmon, finally announced its accession to the IBM Food Trust blockchain platform in order to improve the traceability of Arctic salmon shipments and enhance consumer confidence.

The industrial sector has become another popular area for the use of blockchain in supply chains, and distributed ledgers continue to expand their use in commodity supplies.

On June 3, the oil and gas blockchain consortium of the Offshore Operators Committee, the members of which are such industry giants as Chevron, ExxonMobil and Shell, announced the successful completion of a pilot project on the automation of logistics at all stages of work. On July 8, the Chinese steel company Nanjing Iron & Steel announced a successful $16.87 million deal at the blockchain for the supply of iron ore with mining company Rio Tinto. On the same day, Volvo Cars announced a strategic investment in Circulor blockchain startup. Circulor solution based on blockchain technology is now used throughout the Volvo Cars battery supply chain, which made it possible to achieve full traceability of the highly toxic cobalt used in lithium-ion batteries.

* * *

In early 2020, the MINDSMITH team analyzed more than 80 events of the past year in blockchain area and formulated five key blockchain trends in technology development at the turn of the decade. Halfway through the difficult year of 2020, we have the opportunity to assess how close to the truth our forecasts were.

As expected, in the first half of 2020 financial institutions actively promoted further blockchain implementation. It is noteworthy, that two trends that we predicted were combined within this area.

Increased use of blockchain in central banks has shown that distributed ledgers of government also very effective, as in the corporate environment.

Russia is keeping up with world trends on this issue. On May 28, the First Deputy Governor of the Bank of Russia Olga Skorobogatova reported that the regulator is actively working on launching a digital mortgage powered by a first domestically developed certified blockchain platform called Masterchain.

The Bank of Russia is one of the developers of blockchain platform Masterchein and is currently developing a project to connect to a decentralized depository system for automation of securities reporting. The trend for the use of blockchain technology by central banks has been present for quite some time, including in Russia. So I do not expect it to be strengthened, I think that many projects will be scaled up and companies will move from development and trial operation to reproduction.

Anatoly Konkin

Head of the “Development of Distributed Ledger Technology” of the FinTech Association

If at the beginning of 2020 “crypto winter” did not want to release the cryptocurrency market from the cold embrace, then with the arrival of summer the situation has clearly changed. By the middle of the year, notable examples of institutional use of cryptocurrencies started to appear. Considering that on July 22, more than two years after the start of work on the bill, the State Duma passed the law on digital financial assets and digital currency, it will be extremely interesting to see how Russian banks and financial institutions will respond.

The Russian market is far from introducing legal cryptocurrency projects. However, it does not apply to digital assets, stablecoins, various instruments related to the tokenization of assets, settlement mechanisms for their exchange and custody services. I consider that the market for distributed applications and platforms will grow vigorously, through which interactions for contracting, accounts and calculations exchanging will take place, within which the exchange of tokenized value can be used.

I believe that banks as payment infrastructures will play a significant role, but the main driver will be large corporations that form consortium models of interaction. The market is developing, there are a lot of technologies and protocols, and the use of tokenization in settlements in commodity markets and the search for liquidity for low-liquid goods can accelerate market development, reduce costs and create new business models. It’s too soon to talk about cryptocurrencies, but even without them, there’s a lot to work on in the domestic market.

Denis Dodon

Director of the Alfa Bank Center for Innovations

The most significant and unexpected event of 2020 was the COVID-19 pandemic. If the trend of increasing socially-oriented use of blockchain was predicted at the beginning of the year, then the rapid increase in the number of blockchain projects in the sphere of healthcare became a surprise. The implementation of “social distance” in many countries of the world and the transition to remote work has provided a strong impetus to the introduction of blockchain technology in many areas of society.

Domestic companies in this area did not stand on the sidelines either. On May 28 Waves Enterprise announced the launch of public testing of the blockchain service for remote voting. And considering that information security is one of the most critical aspects of remote work, on July 9, Waves Enterprise additionally conducted an external security testing of the voting service together with Deteact company.

We decided to develop a remote electronic voting service long before the start of the pandemic and in this way solve an extremely difficult problem: to combine in one service the invariability of records and ease of use, reliable authentication and transparency of voting. We believe in real practical application of blockchain in voting systems, while there are still very few high-quality implementations on the market.

The main negative stories associated with electronic voting on the blockchain are related to the fact that the distributed ledger was not actually used for its intended purpose. The COVID-19 pandemic has certainly given additional impetus to the development of remote trusted services. Moreover, in Russia, even at the state level, there are precedents for the implementation and use of such solutions. We suppose that this trend will continue to develop in the future. Of course, security issues are fundamental to such services, that is why we attract and will continue to attract outside experts for continuous testing of our voting service.

Matvey Voytov

Chief Marketing Officer at Waves Enterprise

Most of last year’s trends continue to develop in 2020. By the middle of the year, we saw a significant number of projects both in the financial industry, in supply chain tracking, and in the social application of technology. Despite the global pandemic, Russia is determined to keep pace with global trends.

By forcing us to increase “social distance”, the pandemic became a powerful incentive to look at old things in a new way, including promising technologies. Along with the increased distance, the gap of mistrust between people has also grown. Let’s hope that in the second half of 2020 blockchain technology will unite our society, which is disintegrated this year, with its “chain”.

Original (in Russian)


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