The Real Benefits of Blockchain Are Here. They’re Being Ignored (#GotBitcoin?)
Introducing as many people as possible to the benefits of decentralization is a cause almost everyone in this industry shares. The issue is that, in making the technology more accessible, many developers are sacrificing the benefits of decentralization for the sake of convenience. The Real Benefits of Blockchain Are Here. They’re Being Ignored (#GotBitcoin?)
A Decentralized Product Should Keep Three Key Promises To Its Customers:
Censorship-Resistant: Your Stuff Is Safe And Can’t Be Tampered With
Self-Sovereign: You Own And Control Your Assets, Identity, And Data
Open Ecosystems: Everyone Gets Value From New Contributions
Dapper Labs has a few horses in this race: we started with CryptoKitties, still the most popular blockchain game by transaction volume, and recently announced NBA Top Shot, a new blockchain-based ecosystem being developed in partnership with the NBA and NBPA. We also shipped Dapper, one of the first ‘smart wallets’ for ethereum.
The value of censorship resistance and customers owning their own data is relatively well understood. Less attention is being paid to the other big benefit of crypto that centralized approaches compromise: open ecosystems.
Open Ecosystems Are The Cornerstone
Open ecosystems enable anyone to contribute to a platform or someone else’s work on the platform and receive rewards for their work. On ethereum, we’re seeing open ecosystems appear in the realm of decentralized finance (DeFi).
MakerDAO’s DAI, an algorithmic stablecoin, is used by dapps like Dharma, Compound Finance, and many others. These decentralized lending applications provide competitive rates using Dai to attract borrowers while enabling lenders to earn from assets they already own.
Compound Finance and Uniswap make MakerDAO stronger when combined together as opposed to existing individually. These open ecosystems are even multi-layered, using smart contracts from multiple primitives to create infinite possibilities. For example, Opyn is a non-custodial trading platform built on top of Ethereum, Compound, Uniswap, and MakerDAO’s DAI.
Without Compound Or Uniswap, Opyn Wouldn’t Be Able To Exist
“The combination of Primitives will enable the creation of protocols and systems that weren’t possible prior to their existence. These emergent systems will be greater than any of the individual primitives on their own.” — The Emergence of Cryptoeconomic Primitives by Jacob Horne
Turning Creators, Users And Developers Into Stakeholders
In an open ecosystem, users, developers, and the original creators can all capture value.
Users get more choice (because anyone can add features on anything), and users ultimately decide what’s important. The speed of software innovation increases because developers can use each others code like lego blocks.
Developers who build on existing code are, in many ways, marketing the original creator’s product for them, further increasing the reach of the brand. In return, developers tap into an existing and qualified user base.
As a result, trust is built through a cyclical relationship between all participating parties.
“I feel like we’re in a unique position where the users of the platform have an incentive to work hard to see the platform succeed, and if given the opportunity, we would move mountains.”
– Kabciane, A Kittyverse Developer Creating Numerous Utility Contracts
In the context of MakerDAO’s DAI, every developer using DAI in their dapp is preaching what MakerDAO has done for the decentralized finance ecosystem.
Why Aren’t There More Blockchain Games?
Open ecosystems have significant long-term benefits, but as CoinDesk’s Brady Dale recently pointed out, they’re difficult to create in games. By using sidechains or centralizing the data that matters most to third-party creators, dapp developers are inhibiting potential open ecosystems tied to their experiences.
Developers are building full-stack games, with most of the data existing off-chain, resulting in less composability, less shared data, and effectively closed ecosystems.
One of the major design decisions for CryptoKitties was to compute and store the genes on the ethereum blockchain. It would have been far easier not to do so, and the resulting experience would have been more accessible — but many of the things that make CryptoKitties interesting or valuable to this day would have been possible.
Developers need access to these genes to make third-party games like KotoWars and Mythereum, both of which create more utility and value for specific genes (i.e. certain cats are more valuable because these experiences exist).
If CryptoKitties had decided to reduce the decentralized value of the game for the sake of accessibility, The KittyVerse wouldn’t exist, the game wouldn’t be as trustworthy, and the tokens wouldn’t have nearly as much value or utility to players as a result.
Open Ecosystems Are Important Outside Of DEFI
Cheeze Wizards, Dapper Labs’ newest game, attempts to leverage as many lessons as possible from CryptoKitties.
It’s specifically designed as an open ecosystem: third-party developers can utilize the Cheeze Wizards API and art assets before the game launches its first official tournament later this summer. Cheeze Wizards is further encouraging developers to play in the open ecosystem via a month-long hackathon, with $15,000 in cash prizes and a whole host of other rewards as incentives.
Cheeze Wizards itself is composed of “tournaments” hosted by either Dapper Labs or third-party developers. The contract and logic for these tournaments are entirely on-chain, which means any developer can create their own tournament and take a percentage from the amount raised.
The tournament contract is a built-in business model for developers to build on top of existing IP, something that has never been possible before with second-layer experiences.
Acknowledging the reality that ethereum doesn’t scale today, CheezeWizards is really by and for the crypto community.
Blockchains and dapps can be designed so developers can earn their fair share in contributing to an ecosystem. Rewarding developers for maintaining or improving a network is the hidden treasure that’s yearning to be discovered by open ecosystems.
“In the same way that the vibrant ecosystem of exchanges and consumer experiences around bitcoin, ether, and ERC20 drove liquidity for the assets, the ecosystem created by [third party] experiences will be what drives consumer excitement and confidence in digitally scarce assets.”
– Blockchain Gaming, Separating The Signal From The Noise By Devin Finzer
Choices We Make Now Will Shape The Future
Many developers are turning to so-called “Layer 2” scaling solutions (e.g. sidechains, Lightning network) to reduce the load on the base blockchain and provide a better user experience. Major corporations are also beginning to build on blockchain technology, compromising decentralization in favor of performance.
The pendulum for blockchain games in particular seems to be swinging towards more centralized solutions in a bid to attract mainstream users.
Unfortunately, while this means that while developers will have users interact cheaply and easily with their application, the major benefit of building software in an open ecosystem — like the network effects of other developers — will be impossible to realize.
Apps on sidechains and sharded blockchains will have a difficult time communicating with each other because of the friction and lack of standards to transport digital assets across networks.
On the other hand, applications on networks that support open ecosystems can build on each other freely and transparently, creating more choice for consumers and compounding network effects for the system as a whole.
“Decentralized systems start out half-baked but, under the right conditions, grow exponentially as they attract new contributors.”
– “Why Decentralization Matters” by Chris Dixon
MediConnect Completes PoC To Track Medication Through The Supply Chain
Blockchain startup MediConnect has completed the workflow for the Proof-of-Concept (PoC) designed to track medications through the supply chain and begun integration of online pharmacy UK Meds’ processes to its platform.
Tracking Medication Through The Supply Chain
Per a press release shared with Cointelegraph on Sept. 26, MediConnect established a foundation and methodology for proof of concept finalization, which will enable tracking and managing of prescription medication through the supply chain — from manufacturer to end users.
In 2020, MediConnect is also planning to complete a pilot scheme, which includes up to 10 participants. As part of the pilot, MediConnect will integrate online pharmacy UK Meds’ processes into its blockchain-based platform, allowing thus to trace products through its supply chain and prevent the misuse of prescription medications.
Blockchain In Healthcare
Earlier this year, the Ugandan government partnered with MediConnect to trace counterfeit drugs in the country. Similar to UK Meds’ case, the blockchain-based platform enables the recording of prescription medication, thus identifying counterfeit drugs and preventing their distribution in the pharmaceutical supply chain.
The potential of blockchain tech in the healthcare and supply chain sectors is recognized by other world’s governments and institutions. Most recently, the United Arab Emirates’ Ministry of Health and Prevention launched a blockchain system for recording and sharing healthcare data.
Tech startup Nebula Genomics rolled out anonymous genetic testing earlier in September, enabling clients to purchase whole genome sequencing and provide saliva samples without the need to share personal data such as their name, address or credit card number.
We want to push the pendulum back in the other direction, toward open ecosystems and permission-less composability. Open ecosystems empower customers as well as developers, ultimately creating more value for everyone involved.
Blockchain To Save $450B In Supply Chain Costs In Western Europe
The implementation of blockchain technology in supply chains could save businesses in Western Europe $450 billion in logistics-related costs.
According to a new study from Cointelegraph Consulting and Swiss enterprise blockchain firm Insolar, blockchain technology can reduce supply chain-related costs for businesses between 0.4% and 0.8%.
While that may sound like a small figure, the sheer volume of the sector means that this percentage translates into a potential hundreds of billions in savings. Furthermore, the report claims that the technology will pay for itself:
“94% of supply chain leaders say digital transformation will fundamentally alter supply chain management. In the transition to industry 4.0, industrial business can expect a 25% gross increase in [Return on Capital Employed] by 2035.”
In the joint study, Cointelegraph Consulting and Insolar survey the problems that enterprise firms experience in managing their supply chains, stating that 60% of companies overpay their supply chain vendors. And 70% of firms have “visibility gaps” between the initial supplier and internal clients’ systems, making tracking of supply chain sources difficult or impossible.
Current Tech Cannot Solve Supply Chain Issues
Current technological solutions like enterprise resource planning and traditional databases are ill-equipped to address contemporary supply chain issues, according to the study. One reason: Nearly 80% of enterprise data is siloed and prone to reduced integrity. The study states:
“The database approach fails to provide an inherent share of data related to the supply chain, which is crucial for counterparties that do not trust each other to obtain information about a certain product, its price, delivery conditions, etc. The information is not always up to date from some parties, and some data may be hidden.”
Insolar’s founder, Peter Fedchenkov, notes that blockchain adoption will not necessarily uproot current IT systems, stating that it can be applied in tandem with existing infrastructure. He told Cointelegraph:
“When people think about blockchain there is a misconception that it’s a new paradigm requiring a change in business entirely. We believe this is wrong though, and offer an approach to complement organizations existing IT infrastructures using our blockchain platform.”
Cointelegraph Consulting launched on Dec. 3 and aims to aid blockchain adoption among small and medium-sized businesses by matching them with enterprise blockchain solutions that are applicable to their operations.
Blockchain A Boon For Supply Chains
Blockchain technology has seen widespread adoption across supply chains of various goods including diamonds, rare metals, fashion items and food. According to major American retail firm Walmart, distributed ledger technologies like blockchain make it easier for the firm to recall problematic medicine or food items should the need arise.
Last week, Big Four audit firm KPMG launched a blockchain-based track and trace platform in Australia, China and Japan.
Recently, retail giant Carrefour and Swiss food and drink conglomerate Nestlé joined IBM’s Food Trust platform to track the supply chain of milk-based formula for infants with blockchain tech.
In August, Cointelegraph reported that the second-largest Indian state of Maharashtra was preparing a regulatory sandbox to test blockchain in various applications including supply chains, agricultural marketing, vehicle registration and document management.
2019 Saw The End Of Blockchain Tourism
In 2019, blockchain’s initial hype has evolved into enterprise platforms driving real digital transformation. Today, real-world use cases for permissioned networks, administered by trusted parties, are yielding benefits in industries including finance, food, global trade and healthcare.
While entrepreneurs and businesses continue to propose novel blockchain concepts worth pursuing, blockchain is now ten years old, surely long enough to identify clear patterns about where it drives the most tangible business benefits.
Indeed, we might even say that 2019 marked the end of blockchain tourism, a period when for many, blockchain pilots were less about critically examining and applying a new technology than they were about simply saying you had made the trip. We saw a shift from dabbling in blockchain for the sake of learning more about the technology for technology’s sake, to applying it to solve long-standing problems.
So far, IBM has helped clients launch more than 100 networks that are now in production. The best use cases, in our view, take advantage of the technology’s novel properties, including the ability to track provenance, an increasingly important issue to consumers. 75 percent of consumers said they would consider changing to a brand that offered more product information in 2018, according to a Food Marketing Institute survey, up from just 39 percent in 2016. After making provenance information available in store using IBM Food Trust, the French retailer Carrefour found that customers spent as long as 90 seconds reading it.
While hype surrounding crypto certainly helped drive consumer interest, funding, and innovation in the past, it has also perhaps overshadowed some of the hard business uses to which blockchain is uniquely suited. These advantages include immutability. Blockchain can readily digitize the paper processes once relied upon to share information up and down supply chains.
In the longer term, the technology can even make it possible to exchange value between participants where an efficient market maker does not yet exist, for example with carbon credits or cross-border remittances, areas of commerce that have been devoid of clear rules and level playing fields for participants. In short, blockchain is best at tackling problems where there is a lack of traceability or a lack of digital economy.
“We have seen many successful blockchain pilots, but unless network participants feel comfortable using it to collaborate and share data at scale, the advantages of distributed ledgers won’t materialize. ”
When these advantages have been exploited, blockchain-based businesses are already beginning to drive sales. Carrefour says it blockchain tracing system, which is accessible via consumer-facing QR codes, has boosted sales of some products. Through shared data, companies like Carrefour can engender greater trust and collaboration between customers, employees and partners.
Distributed ledgers present a dual challenge for companies, one that is arguably 20 percent technological and 80 percent governance. We have seen many successful blockchain pilots, but unless network participants feel comfortable using it to collaborate and share data at scale, the advantages of distributed ledgers won’t materialize.
2019 also offered a clear roadmap for how these governance models should be structured to ensure adoption and growth. These principles must allow for global identity standards that aren’t limited to a single network or country. They must require permissioned, trusted access in a way that centers privacy. There should also be blockchain registries like Hacera Unbounded – almost like network ‘Yellow Pages’ – to identify the public entry points to enterprise networks, and participants must ensure open access to key data platforms via API.
When applied, these principles have made it possible to scale blockchain networks rapidly. TradeLens, a solution co-developed by IBM and Maersk to digitize the global shipping industry, became commercially available only in December 2018. But thanks to its open standards and governance structure, the platform has rapidly recruited dozens of ports, freight forwarders, customs offices and more. By July 2020 commitments from key global container operators will cover more than half of world’s container cargo.
While the age of blockchain tourism may be mercifully over, the digital transformation it enables is still only just getting underway. Now that we have a base of successful implementations, we can begin to shift our focus to standards surrounding integration and interoperability.
As we look ahead to 2020, key community efforts will help expand the business impact of blockchain. These include establishing trusted identity standards that apply across networks (and will also speed on-boarding and adoption, like those established by the Decentralized Identity Foundation and World Wide Web Consortium.
Meanwhile, efforts like the Token Taxonomy Initiative are creating technical standards for the digitization of assets on blockchain data platforms. These complement the public and regulatory interest in new digital business models around asset-backed stablecoins and digital fiat currencies.
Once we have a shared version of the truth based on shared data and common standards, entirely new business models become possible for companies and individuals. And while this vision may take much longer to come to pass than one supply chain or finance platform, its end goal — a truly circular, frictionless economy – will be greater than the sum of its parts.
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