By Jen Wolfe, Founder, Wolfe Board Advisory Group
Big Tech & Finance Companies are Blockchain Trend Setters
Blockchain could transform key business areas such as currency, supply chain and operations. Large companies set to be disrupted by blockchain invest in research and development and set trends. Because there is limited legal principles on blockchain, you must study what others are doing in order to have any idea what components of a program may be relevant to your company. Additionally, those companies out on the forefront will be the trailblazers in developing the law and understanding their initiatives provides important guidance. Tracking their blockchain projects provides important perspective to legal counsel in an area without settled legal principles.
We can learn from their participation in open source projects, and patents they are filing. Project leaders also publicly post videos of presentations, slide decks and detailed research briefings. While their information often promotes their products and platforms, they put out some of the best and most comprehensive explanations of use cases and the problems that blockchain solves.
What In-house Counsel Can Learn from Trendsetters
Wherever your company may be in the research and development lifecycle of blockchain, understanding what other companies are doing will provide guidance to you as you create long-lasting partnerships. While there is no concrete guidance currently available, understanding how the innovators are developing blockchain create the building blocks to future law. No company will develop and deploy blockchain alone – it inherently requires collaboration and partnership so be prepared to understand what’s happening in your industry and with leading edge companies.
Profiled below are the companies out on the forefront developing partnerships and platforms to be used by others. If your company embarks on a blockchain project, you will likely partner with one of these companies. You will need to carefully decide which company you work with because it’s not easy to undo once you get beyond a pilot program.
Which company will compete with you in the future? Which company will be a strong partner? Which company will help you leverage your own data most effectively? Which company actually values and protects privacy? These are all important takeaway questions for you to consider as you counsel your companies on blockchain partnerships.
IBM was early in to develop a global community of blockchain developers through its Linux Hypderledger project. It is quickly developing a governing board and principles to guide it, creating greater legitimacy and credibility to the burgeoning technology, and to shield it from the criticism of cryptocurrencies.
The project is an open source collaborative effort to advance cross-industry blockchain technologies. The Linux Foundation is the host of the Hyperledger project. One of the key distinctions of the IBM Hyperledger project is that it is not for cryptocurrency. Its purpose is to leverage the broader business possibilities of creating confidential transactions in a distributed network that is programmable with the embedded logic of smart contracts. Companies like Wal-Mart have, in a public relations frenzy, partnered up with IBM.
Many other companies will continue to partner up with IBM in understanding, investigating and using blockchain technology. An important component of this partnership is that you are “marrying yourself” to the blockchain platform and technology that IBM is building, so, if you are exploring a blockchain research and development process, give yourself some checkpoints to evaluate if other technology solutions are developing that you also want to experiment with in your development plan. For example, you may wish to set six-month evaluation criteria to determine whether development and deployment goals are being achieved. Additionally, you may want to evaluate if any new regulations have been introduced or recommended in order to apply to your blockchain project. To access IBM’s hyperledger requires a specific application programming interface (API) for interacting with their peer nodes (i.e., computers). This is because the hyperledger blockchain is truly its own internet environment and you need those tools to access it.
IBM has the legacy of rolling out new technologies that transform society from IBM’s rise through the 1960s and 1970s as the predominant database and computing company. Will they do the same here? They have positioned themselves to be a leader in developing the governing principles and standards, and most likely have many people working on the technology, the solutions and how to monetize it.
Bank of America
Bank of America is leading the way with blockchain patent filings in financial services. At the time of this writing, no other bank comes close to where they are in terms of developing and protecting blockchain technology for themselves. They are clearly looking to protect all corners of what blockchain can do (reduce time and processing, improve identity verification, eliminate hackability). Worth noting is that some companies are jumping in and building their own portfolios, while others are just partnering up with IBM, Ethereum or others. Here is just a sampling of the concepts Bank of America is protecting:
- Security and access in a distributed network
- Large-scale processing using block chain
- Enhancing blockchain-based security with biometrics
- Routing data
- Separate security features
- Validation of instruments
- Self-managing rewards program using blockchain
- Alias for person-to-person payments
- Controlling access to data
- Cryptocurrency suspicious user alert system
- Cryptocurrency risk detection system
Notwithstanding this investment, Bank of America has been fairly stealth in their operations and even publicly stated that despite its growing patent portfolio it remains skeptical of the role of the technology in the future. Is this just a public relations ploy to deter others from investing in what could be a transformative technology or a true statement of their skepticism? They are correct that blockchain has been overhyped as it relates to new forms of currency, but the potential for it to underpin new operational efficiencies is real. Their patent portfolio may someday be licensed to others, so be aware of what they have developed as you evaluate your own company’s initiatives.
Microsoft is also investing in blockchain research, particularly related to the cloud platform and how blockchain may transform offerings in the cloud. In that regard, blockchain as a service will grow as an offering by Microsoft alongside the others mentioned here. Already benefiting from the millions of businesses working with Microsoft products, servers and cloud-based offerings, Microsoft adding a blockchain component would leverage that marketplace potentially faster than newcomers. Microsoft is a founding member of the Enterprise Ethereum Alliance.
Microsoft has partnered up with Ernst & Young to revolutionize and build out a test case in the gaming industry as seen here: https://vimeo.com/279679573ht. It explains in detail how they are using blockchain to create greater efficiencies in paying game developers. This is one of the best explanations out there of the real operational value of blockchain. Microsoft’s initial use cases support that the real benefit is in operational effectiveness, and not necessarily in cryptocurrency. Expect to see them continue to prove out business cases in smaller environments and test cases.
SAP began to get publicly involved in blockchain in 2016 with a bottom-up approach in its innovation labs. By mid-year, it had collaborated with blockchain start-up Ripple on a cross-border payment proof of concept to transmit funds between Canada and Germany. SAP is also investigating cloud-delivered integrated offerings. As one of the data analytics platforms already embedded into many organizations, it’s not surprising that they will also revolution services in the cloud with ready-to-use blockchain environments to deploy for SAP’s customers. SAP is the type of company that could be fully disrupted by blockchain technology, so it makes sense they have dived in to build out services and tools versus waiting to be disrupted. SAP could revolutionize supply chain through its blockchain services. Currently, they are working on pharmaceutical supply chain. The key issue for SAP (and all the other companies) is scaling this outside of a test environment. If your company approaches you with a blockchain imitative, check out your current vendor agreement with SAP to see if it applies.
Wal-Mart has become one of the biggest patent filers in the U.S. as it no longer identifies solely as a retailer, but as a technology company (outpacing its competitors in grocery and traditional retail). In the blockchain space, they have partnered with IBM’s hyperledger project and have built a Food Safety Alliance. They have also partnered with ten food suppliers to improve how produce is tracked from farm to store to better manage inventory and food safety for its customers using blockchain technology.
Their food supplier partners include Dole, Driscoll’s Golden State Foods, Kroger, McCormick and Company, McLane Company, Nestle, Tyson Foods, and Unilever. By applying blockchain to trace food in the distribution process, they were able to cut the time it took to trace a package of mangoes from the farm to the store to just two seconds — from days or weeks. They are working to create a standards-based method of collecting data about the origin, safety and authenticity of food using blockchain for traceability throughout the supply chain.
These organizations are now working to build standards for collecting data about the origin, safety and authenticity of food using this technology. The vision of the pilot program is to encourage accountability and provide suppliers, regulators and consumers with greater insight and transparency into how food is handled from the farm to the fork. If you want to watch a great video on this pilot program and what they hope to accomplish, please review this video https://youtu.be/SV0KXBxSoio
JPMorgan has a web page dedicated to blockchain technology (see www.jpmorgan.com/global/blockchain) touting its Blockchain Center of Excellence in exploring use cases and pilot solutions across business lines. They have formed strategic relationships with key vendors such as Digital Asset Holdings, Axoni, Enterprise Ethereum, Alliance and Hyperledger.
Despite early derogatory comments by Chief Executive Officer (CEO), Jamie Dimon, about Bitcoin, in February 2018, patents filed by JP Morgan began appearing. Their early filings were for reconciliation of a distributed ledger related to payments (not surprisingly) and enhanced organizational transparency using a credit chain. Widely known for investing in the Ethereum Alliance and Hyperledger project, as well as many financial technology start-ups in blockchain, JPMorgan will probably build rapidly its own proprietary technology in tandem with the open source projects. Like Bank of America, they publicly remain somewhat skeptical about blockchain, but are internally building an arsenal to prepare for whatever disruption comes.
Mark Zuckerberg announced in his 2018 new year’s speech that he planned to study encryption and blockchain “to see how to best use them in our services.” He subsequently announced an internal team evaluating Facebook’s options. With their enormous global power of influence over billions of people, they have interesting opportunities and the potential to disrupt industries in a similar vein to Amazon. In 2019, Facebook announced its own cryptocurrency, Libra. They could also use blockchain to prove a user’s identity and improve privacy and security on the embattled network as they begin to face tighter government scrutiny. Facebook has been very secretive about its initiatives, not surprisingly given its increased government scrutiny. The Libra project was initially met with skepticism, but Facebook’s ability to innovate and reach so many people quickly and scale quickly means they need to be watched carefully when it comes to blockchain. As one of the biggest tech companies in the world, Facebook will be one to watch in finding innovative blockchain solutions to problems every digital company faces.
Google has been one of the more active corporate investors in blockchain activity, according to Bloomberg Technology, ranking second in size of investments with six investments in data storage provider Storj, cryptocurrency derivatives trading platform Ledger X and merchant services with Veem. It’s reported that Google’s DeepMind artificial intelligence lab is embracing blockchain, potentially specifically looking at healthcare implications. While it, too, does not yet appear to be part of one of the big projects, it is undoubtedly working stealthily behind the scenes and will go public when it’s ready. Its patent portfolio is small relative to the cutting-edge work Google is doing in smart home technology and driverless cars, but that probably will change in the future. Additionally, Google has launched search tools for developers to build and scale blockchain based platforms and cryptocurrencies creating cloud-based services, similar to SAP, IBM and Microsoft. The race is on for who can provide the services that will power the blockchains of the future. Given the potential for blockchain to connect computers in supply chains of the future, this is no small endeavor. With Google’s search power, if blockchain replaces aspects of the current internet infrastructure, their ability to navigate future online environments should not be overlooked.
Amazon Web Services (AWS) is investing in blockchain through a partner approach as well. They have sought proposals from companies innovating in healthcare and life sciences, financial services, supply chain management, security, and compliance. Amazon has partnered with Sawtooth (Intel), Corda R3, PokitDok and Samsung Nexledger. It’s also working with Wuorum, an Ethereum-based distributed ledger protocol for the financial services industry, as well as companies like BlockApps, Virtusa Polaris, PWC and Deloitte. AWS is also on the cutting edge of potential new currencies, working with Luno and Coinbase. Like most of the other companies profiled here, they want your company to use their blockchain platform and cloud services.
Intel is a member of the Enterprise Ethereum Alliance and Hyperledger (by IBM; described above). It is also a partner of the Initiative for Cryptocurrencies & Contracts, an academic group researching how blockchain solutions may affect the financial industry. Intel named its distributed ledger platform SawtoothLake, and then contributed it to the Hyperledger project as open source to advance the growth of blockchain. Intel is also working with the R3 Consortium and academic bodies such as the Initiative for CryptoCurrencies & Contracts.
A company like Intel has to understand how the technology can produce microprocessors to leverage the blockchain advantages and overcome the challenges presented. It has already positioned itself as a leader not just in developing the core technology that will be needed, but in leading the way for standardization.
Intel also has a large portfolio. As the maker of the processors to so many computing devices, it’s not surprising they are also looking at infrastructure and how to leverage blockchain power for others. A few of the interesting patents already in the public record:
- Public key infrastructure
- Energy-efficient bitcoin mining hardware
- Accelerators for device commissioning
- Data broker-assisted transfer of device ownership
- Sequencing proof of work
- Method of scalable IOT device with onboarding capabilities
Wherever your company may be in the research and development lifecycle of blockchain, understanding what other companies are doing will provide guidance to you as you create long-lasting partnerships. Keep in mind these key trends and questions to consider:
No company will develop and deploy blockchain alone – it inherently requires collaboration and partnership so be prepared to understand what’s happening in your industry and with leading edge companies.
If your company embarks on a blockchain project, you will likely partner with one of these companies. But you will need to carefully decide which company you work with because it’s not easy to undo once you get beyond a pilot program.
- Which company will compete with you in the future?
- Which company will be a strong partner?
- Which company will help you leverage your own data most effectively?
- Which company actually values and protects privacy?
- How will you handle shared data sets from a liability and ownership perspective?
- Will you be using open source code and how will it be patched when vulnerabilities are learned?
- Will you carve out intellectual property assets and how will future revenue opportunities be shared?
- How do you incorporate blockchain initiatives into important supply chain contracts?
These are all important takeaway questions for you to consider as you counsel your companies on blockchain partnerships.
About the Author
Jen Wolfe is an author, speaker, lawyer and entrepreneur. She has written four books, her most recent is Blockchain in the Boardroom. She is the National Association of Corporate Directors Faculty expert on emerging technologies like blockchain and artificial intelligence, as well as cybersecurity and the future of work. She has served on GNSO Council of ICANN and is the CEO of Dot Brand 360, a digital advisory firm for c-suite executives. She can be reached at [email protected] or www.jenwolfe.digital.