I just arrived home from this evening from the first week working with my new client, the Digital Trust team at T-Systems, and my mind is spinning with ideas.
Over the coming months, I am going to be working with this team to define a set of product offerings that make the most of the investment and capabilities that T-Systems has already developed in the DLT space. Naturally, a good portion of my time this first week was spent beginning to get an understanding of what the team had already accomplished. The quality of thought that this team has displayed in its solutioning impressed me in a number of ways, but what I find myself thinking about the most is the work they’ve put into a DLT use case I have not spent any time exploring until now: discrete manufacturing process control.
I have to admit that the idea of driving a manufacturing assembly line with real-time decisions made by blockchain smart contracts did not strike me as intuitively obvious. Assembly lines might manufacture goods for different clients, but typically on behalf of a single manufacturing enterprise; I failed to understand how having DLT drive assembly decisions would add value. Could you accomplish the same thing less expensively with a single, non-distributed application? Where was the potential for world-changing transformation that we see with other DLT use cases?
The way that the Digital Trust team chose to illustrate that potential was nothing short of brilliant. Being part of Deutsche Telekom affords access to a wide variety of capabilities, and in this instance the team really made the most of that: they constructed a working model assembly line which actually took instructions in real time from a blockchain smart contract.
This is the model assembly line they built. It is a mini manufacturing rig that assembles and packages model widgets with embedded RFID tags. There are several assembly options, and the configuration of those options is driven by an Ethereum smart contract.
This working model illustrated — in a way that PowerPoint slides never could, how truly revolutionary the potential is. When we think of disintermediation, we tend to think of brokerages, professional services like accountancy or law, and other facilitators of the information economy. Until I saw this machine, it never occurred to me that manufacturing itself could be disintermediated. Startups and medium enterprises would be able to share expensive and specialized equipment they could otherwise never afford. Smaller medical facilities could do likewise with the most modern diagnostic and imaging tools. Entire factories could tool themselves to meet the needs of separate, small-batch units of demand in real time.
I will need to think about this some more, do some research, and validate ideas with people who have a lot more experience in this area than I do. But the possibility for change here is vast, and my intuition says its full potential won’t be realized until someone can articulate a business and process model that could never have existed without this breakthrough.
That someone is may be the Digital Trust team at T-Systems. They certainly have a head start, and this is only one of several really interesting ideas they have cooking. This team is looking way beyond the standard payment, token, or supply chain solutions that everyone else is building. I am really excited about working with them on this.
We are pleased to announce that Finserv Experts has reached an agreement to work with T-Systems in developing DLT solutions. T-Systems is a global ICT provider and is part of the Deutsche Telekom global enterprise. The development team within T-Systems has made significant investments in blockchain, and have developed an impressive set of capabilities. Finserv Experts will be working with this team and with the T-Systems product marketing team to develop a set of targeted product offerings that deliver measurable business benefits to T-Systems customers.
We are honored and thrilled to have T-Systems as our newest client!
22 January 2018
Finserv Experts managing director Areiel Wolanow gave evidence this evening for the All-Party Parliamentary Group on Blockchain. Areiel spoke on the transformative potential for blockchain in the insurance industry, and cited work carried out by Finserv Experts consultants here in Indonesia, Kenya, and here in the London Market.
Here is a written transcript of his remarks…
Areiel Wolanow is the Managing Director of Finserv Experts, an independent consultancy that provides advisory and delivery services for technology-enabled business transformation. Areiel has been working with blockchain solutions since 2014. At IBM, Areiel was asked to create their blockchain services practice for the ASEAN region; in this role he was responsible for selling and delivering IBM’s very first blockchain consulting project: a trade finance prototype for HSBC and Bank of America. Areiel has advised central banks and financial regulators around the world on blockchain adoption, and most recently led the delivery of a working DLT prototype for Lloyd’s of London and the London insurance market. He is currently engaged in designing a mobile-based microinsurance solution for natural disasters in Indonesia
In many industries, blockchain is thought of first and foremost as a tool for disintermediation. While this is also true to some extent in the insurance industry, significant disintermediation has already taken place in our lifetimes, well before blockchain was invented. Thirty years ago, retail brokers were the primary distribution channel for motor, home, and life insurance. Today, retail brokers are almost non-existent, aggregators and direct consumer search have been proven to meet the needs of insurance buyers at a much lower cost than brokers were able to meet.
Nevertheless, blockchain has the potential to be a major disruptor for how insurance is delivered in several key ways. Blockchain provenance solutions, for instance, can provide assurance that insured goods are genuine, reducing the incidence of fraudulent claims and thereby the overall cost of insurance delivery. Blockchain market solutions, similar to the prototype we developed for Lloyd’s, can significantly lower the cost of placing large, complex insurance contracts, as well as the cost of administering claims. Currently, when an insurance contract is placed in the London market, many parties need to create their own record of the same contract in their individual IT systems. This leads to huge amounts of work in re-keying and reconciliation; it also is the root cause of many errors or gaps in quality. By enabling multiple parties to share a single version of the truth, blockchain solutions can at the same time reduce cost and increase the quality of delivery. This allows insurance professionals to spend far less time on administrative tasks and more time selling and directly supporting clients. The magnitude of these cost savings is dramatic – there are several solid empirical evidence sets of administrative cost reductions of 80%-90%
But perhaps the single greatest change to insurance that blockchain can make possible is in the realm of microinsurance. Insurance has never been available to most people in the world because the cost of administering a £200 policy is not that different from the cost of administering a £2,000,000 policy. For instance, Finserv Experts is right now working on a project that will make natural disaster insurance available to people living in Indonesia. In the event of a disaster, such as the recent tsunamis, the policy would provide a minimum of one year’s income. It would be paid parametrically – no claim investigation would be required. The policy could be taken out via mobile phone, and the claim paid via mobile phone as well. The ability of a community to recover from these disasters will be completely transformed.
Guidance for lawmakers
There are two pieces of guidance I would like to offer
First, blockchain is one of the few areas in which businesses would welcome more regulation rather than less. The benefits of DLT are increasingly well understood, but innovators are still wary of taking risks because of the level of uncertainty about whether or not a given business model will ultimately be allowable. In the fintech space, the UK already has a great reputation for forward-thinking policy. By providing a clear framework under which blockchain-based business can operate, lawmakers can both capitalize on and further differentiate the UK’s thought leadership.
Second, and far more important, I would like to invite our lawmakers to consider directly sponsoring microinsurance initiatives here in the UK. The benefits of making insurance of all kinds available and affordable to everyone in the UK. The benefits go way beyond mitigation of risk. Affordable insurance will make it possible for far more people to buy homes, start businesses, and otherwise engage in more productive, successful, and fulfilling lives.
To further secure their brand leadership in the DLT resourcing space, Plexus Resource Solutions has launched a regular interview series featuring UK thought leaders in the DLT space. I am honored to have been selected for their inaugural edition. Many thanks to Colin for a thoughtful and enjoyable conversation; I look forward to continuing our dialog.
You can read the interview here: https://www.plexusrs.com/interview-with-areiel-wolanow/
Every major breach involving cryptocurrency, blockchain, and ICO solutions to date can be traced to poorly implemented smart contracts, so it is welcome that Blockgeeks have had a go at establishing guidelines for smart contract auditing. You can find it here:
Their approach looks well thought out and quite thorough, but focuses mainly on the code base. While a technology audit is obviously a necessary component of smart contract assurance, a full audit will require two additional components. The first is a business audit, in which the executives of the business using the smart contract are provided assurance that the contract does what they think it does in business terms. The second is a legal audit; since DLT solutions by definition involve multiple parties, a smart contract is also a real contract, and DLT solution owners will need legal confirmation that their contracts are binding, lawful, and enforceable.
The last thing we need is for this three-part approach to be formally adopted by an internationally recognized standards body, so that enterprise architects around the world Kudos to Blockgeeks for taking this on.
–photo sourced from the original Blockgeeks article
In Singapore, a pair of global banks built a blockchain trade finance prototype for letter of credit origination in 2016. The actual build of the prototype was estimated to take 15 weeks, and successfully finished on time. But agreeing the intellectual property rights, as well as other aspects of the contract, took more than twice as long as the actual build. And despite the success of the prototype, obtaining architectural approval to move forward with a production solution took over a year and a half.
This account serves as an excellent illustration of the main challenges facing the adoption of blockchain, and distributed ledger technologies (DLT) in general, as a new standard for transaction accounting. More and more, people and enterprises around the world are coming to understand DLT’s transformative potential. Enterprises, governments, and system integrators alike are discovering through experimentation: not only are DLT solutions relatively straightforward to develop, it is becoming increasingly common that they cost less to build than their technological predecessors. And the market for technologists with genuine DLT delivery experience is growing rapidly. But despite it becoming increasingly straightforward to conceive of, and then build, DLT solutions, the actual adoption of those solutions is progressing far slower than anticipated.
Probably the single greatest obstacle causing this slowdown is a lack of standards against which potential DLT solutions can be compared. The importance of this gap becomes readily apparent when one considers how enterprise applications are typically released into production. One of the main jobs of any enterprise architect is to validate that a proposed solution is safe to use; this check is made against a large and growing set of dimensions: security, data privacy, regulatory compliance, availability, business continuity, and so on. In providing this validation, the architect must rely upon more then their opinion, no matter how expert they might be. She must demonstrate and record evidence that the solution meets a set of relevant industry or governmental standards in each of these domains.
To provide an illustrative example, let us consider one of these domains: data privacy. One of the things an architect must prove before agreeing to release a solution into production is that the solution provides adequate protection for the data of both the enterprise and its customers. And one of the most common prevalent global standards for data privacy is that an application must never make customer data available outside the enterprise’s firewall. Since a blockchain application will, by definition, have that data physically resident in every node of that blockchain’s network – and many of those nodes are likely to be owned by the enterprise’s direct competitors – how are architects able to certify this application is safe for production? The simple answer is: they can’t. Through cryptography and sound design, the blockchain application might actually do abetter job of protecting customer data than its traditional predecessor, but without an independent and evidence-driven basis for approving it to release, it won’t matter. This is what blocked the advancement of the trade finance prototype, and this is what is blocking the advancements of numerous, otherwise excellent, DLT solutions around the world.
Seeking a way out of the impasse
In tracking the growth and adoption of many innovations over history, one is often tempted to think of governments and regulators as impediments to progress. But here in the UK, the initiative to break this impasse may be coming from lawmakers themselves. Two members of parliament, Rt Hons Grant Shapps MP and Damien Moor MP have established an All Party Parliamentary Group on Blockchain to better inform parliamentarians about blockchain/distributed ledger technologies and their impact on industry and civil society. The APPG on Blockchain will particularly focus on engagement with the government to ensure the right regulations and policies are put in place. The group had its first formal meeting in January of this year, and its mission statement reads as follows:
The mission of the APPG Blockchain is to ensure that industry and society benefit from the full potential of blockchain and other DLTs, making the UK a leader in Blockchain/DLT innovation and implementation. We bring evidence, use cases, and future policy scenarios while considering industry and societal implications as well as environmental opportunities.
The APPG Blockchain agenda and work plan
The APPG Blockchain’s Advisory Board and Expert Advisors Group include experts from industry, academia, public policy, and of course the lawmakers themselves. Its work is facilitated by an innovation and policy hub called Big Innovation Centre, who is also the Secretariat for the All Party Parliamentary Group on AI, and whose team has a long track record of facilitating public policy work on transformative innovations.
The initial roadmap for the APPG Blockchain covers 2018 and 2019. The first goal is to build within the Advisory Board a shared understanding of blockchain’s capabilities, limitations, and transformative potential. This goal will be accomplished primarily through a series of evidence sessions held at Parliament itself, in which the experts provide lawmakers a briefing in their respective areas of expertise. The first three of these evidence sessions have already been conducted; more are planned through the balance of 2018.
Having achieved this shared understanding, the APPG will then construct a roadmap for building pragmatic solutions to achieve the group’s mission. These solutions are likely to encompass such diverse topics as policy, regulation, industry practice, and infrastructure development. Should the APPG Blockchain achieve its mission, it may end up providing exactly the kind of clarity and guidance that DLT needs to achieve its full potential, both in the UK and globally.
More information on the APPG Blockchain and its work can be found at http://www.appg-blockchain.org/
In the past three or four weeks I have had no less than six separate requests to offer advice on the viability of various blockchain startups or ICO’s. After thinking about it a bit, I wrote the following article on LinkedIn; view it here