Business with No Intermediaries Using Blockchain—Best Use Cases

01.05.2018
8 min.
title

As discussed in the previous post, blockchain can be used in different industries, from fintech to healthcare, manufacturing, tourism, real estate, and government. Cutting intermediaries out of many business equations is easy using blockchain. This helps to optimize costs, leading to lower prices and more tangible competitive advantages. Let’s have a look at some of the best blockchain-based no-man-in-the-middle use cases.  We are starting with the seafood case study.

Blockchain-based supply chains

In a traditional seafood supply chain scenario data is entered manually, food may or may not be stored properly. It is also hard to trace illegal practices and mislabeling of the product. Here is how it works:

Food safety and quality issues lead to the parties mistrusting each other adding to the industry’s economic insecurity.  Sustainability is also a growing problem since more customers demand to know where their food comes from. 

Combining modern tech, namely IoT and blockchain, changes everything.  If you tag seafood with sensors, time and location data from them is recorded on the blockchain, tracking possession charges with buyers free to access a record of the fish’s provenance. Thanks to automation, a blockchain-operated seafood supply chain is faster and cheaper, as well as transparent and trustworthy.
 

The same scenarios can be used with highly regulated items (meat, poultry and pharmaceuticals) or high-value items (gem stones and minerals). Let’s have a look at the latter.  Manufacturers are put under increasing pressure to produce evidence of “clean” records for minerals like tantalum, tin, tungsten, gold and cobalt used in electronics, not to mention tools that guarantee resource origin, which become more complex and add more and more to the resulting price. Blockchain to the rescue.

The diamond industry is already benefiting from blockchain technology companies efforts, where each stone is assigned with a digital fingerprint and tracked throughout the supply chain process, providing all parties with an immutable forgery-proof record of the stone’s origins. Below is an image of automating the diamond supply chain process using blockchain:

Cobalt, used in electric car and smartphone production, is next. Many automotive giants are pressured to prove their car making practices are sustainable and child labor free. Tech giants like Apple and Samsung support the Responsible Cobalt blockchain-based initiative aimed at tracking the main stages in the cobalt supply chain. The following visual demonstrates cobalt production industry facts:

So how does it work? Each bag of cobalt gets a digital tag with data like the date, time, weight, etc., all entered on the blockchain. Each subsequent participant of the trade records this data on the blockchain creating a journey record every party, including end users, can trust.

Similar schemes will be especially applicable to luxury product authenticity and automating anti-counterfeit measures, logistics, shipping perishables, prototyping and proof-of-concept, transport, public safety and even tracing legal processes.

Distributed autonomous marketplaces

One of the main advantages of blockchain is its decentralized structure. That’s why in the future blockchain may well enable autonomous distributed marketplaces that don’t feature a central platform and user-regulated. This is not the case right now, of course, with the majority of marketplaces in the world centralized to ensure quality of service. But let’s consider the possibilities blockchain potentially brings to marketplace management. In the table below we outline marketplace aspects that function in a different way with a blockchain model.

Marketplace Feature Blockchain-Based Decentralized Marketplace Traditional E-Marketplace
Trust through contract enforcement

Distributed validation, including proof-of-work mechanisms or proof-of-stake mechanisms.

The network enforces the contract between seller and buyer.

The network validates reputation ratings, including reviews and feedback mechanisms.

Third parties (such as a bank, certifying authority, promissory note, transfer systems, or other forms of contractual mechanisms).

Usually controlled by the firm.

Potential for significant alteration.

Transaction time

Can be instantaneous due to fast network validation.

Delays can be mitigated using proof-of-stake/proof-by-consensus algorithms.

Promissory note, letter of credit, or acceptance of credits that can take a long time.
Value
The network can reward participants with tokens or by accepting third-party tokens. Banking systems (such as national exchanges, currency, and underwriters).
Privacy and security

Identity is not disclosed on the network.

Tracking transactions can be facilitated, though with difficulty.

Transaction details can be hidden behind layers of encryption.

Cost of tampering with the network's validation mechanism is high.

Identity fully disclosed in the marketplace.

As secure as the network's components.

An example of a blockchain-based marketplace is CanYa. CanYa is a blockchain-based services marketplace startup from Australia trying to differentiate itself from competition by offering more transparency and trust.  Startup founders guarantee that paying clients will be satisfied with the quality of provided services, and, at the other end of the spectrum, service providers will be paid in full and on time. All this is achieved thanks to automating processes with the help of blockchain and smart contracts, pushing fintech software development forward. The startup also launched iOS and Android apps processing both fiat cash and cryptocurrency peer-to-peer payments. Their own cryptocurrency—CanYaCoin—is created to be at the center of the platform. It is designed into the innovative hedged escrow contracts that combat the notorious instability of cryptocurrencies.

Such smart marketplaces prove that blockchain is not just a technology disruptor but will also most definitely bring socio-economic change through decentralized autonomous organizations much like the internet did.

Bonds Settlement

Blockchain is already changing the way people invest in bonds. Existing and upcoming blockchain bond settlement platforms offer smart bond technology that promise attractive fees, faster than traditional settlement periods, lower operational risks and entry barriers. A typical smart bond tool will allow investors to transfer bonds and track them safely. Features include tools for bond creation and purchase, sale and settlement. Putting bonds directly on the blockchain also allows cutting out middlemen from the issuer-investor relationship.

Let’s take a quick look at a comparison between a blockchain-based and classic bond settlement process in the table below:

  Blockchain-based Bonds Settlement “Classic” Bonds Settlement
Model
Decentralized, supported by users. Owned and regulated by a third party.
Data
Sensitive data is secured through unique hardware configuration. Data can be changed retroactively resulting in fraud.
Transparency
Distributed records prevent monopolization and offer enhanced trust and transparency. Centralized data management solutions have a monopoly on the services they offer.
Record keeping
Consistent data and records keeping across different institutions. Different sets of rules for each institution, complicating reconciling ledgers, adding costs and extending time.
Ownership data
Guarantees accurate and comprehensive, ordered and immutable historical ownership data. Ownership data can be fractured and incomplete.

Here is what a blockchain-driven bond settlement solution looks like:

Now let’s take a look at a few blockchain initiatives already changing the fintech world. tZero is a blockchain platform intended to be used for the issuance of equity and bonds. A subsidiary of Overstock, it has already revealed the prototype for its upcoming token trading platform. It also recently unveiled the prototype and released a video demonstration that showcases the product’s main features. Right now the startup is gathering public feedback to improve its upcoming product before the platform is released fully in May 2018.

One of the leading settlement and clearing companies in Russia issued the first blockchain-based live bond, proving the initiative to be a hit among brokers and issuers. The National Securities Depository (NSD) used open-source Hyperledger Fabric blockchain and smart contracts to reproduce a $10 million bond for shares in a large Russian telecom company. The bond is expected to mature in three month since issued, while the NSD already got 30 requests to customize the initial smart contract to launch other bonds.

In a different part of the world, the Commonwealth Bank of Australia has plans to issue a bond using a blockchain platform. The bank has been studying the best blockchain services use cases for 4+ years, creating proof-of-concepts and testing the solution. The bond will be issued next year. Users will be able to transfer and pay for the bond over a blockchain-based system. The bank is collaborating with the yet unknown world issuer, and promises to make the settlement process more efficient. The bank also considers that there is huge potential in using blockchain benefits for equities, syndicated loans and applications with complications expected in the settlement process.

These platforms are just the tip of the iceberg as different tools and solutions can be tweaked for other fintech services initiatives. Clearly more bond settlement solutions are to come out of tools like the Hyperledger Sawtooth platform since it enables developers to customize solutions to fit different fintech use cases and unique objectives.

Customer Care, Entertainment and Beyond

If we fantasize a bit and extend on what the startup SimplyVital Health is doing with ConnectingCare tracking patient care post hospital leave, similar advancement can be made in the field of tracking customer care and the quality of after services care using IoT data on a blockchain. This way you don’t have to worry about an employee forgetting about a Tweet or a DM from a disgruntled client.

Similarly, music and photography publishing is moving to the blockchain, with products like Kodak and Ujomusic that allow you to gain all rights to your creations by simply publishing them, without the notorious intermediaries. It’s safe to say the same is possible for tracking all types of ownership, intellectual property rights and payments to creative professionals, as well as securing copyright and even patents.

Next time we will expand the topic of blockchain and IoT and talk about blockchain as the underlying architecture of secure IoT solutions.

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