by Michael Reuter | 2 October 2019 | Blockchain
In its purest form, a blockchain is a public, permissionless network. Equipped with a consensus mechanism and an underlying incentive scheme that motivates participants to act in a fair and healthy way, making the network robust.
However, most so-called enterprise blockchains, i.e. DLT networks built in and for companies, are neither public, nor permissionless. Nearly all enterprise blockchains are designed as private, permissioned networks, i.e. only a specific set of participants is invited and each of them has to be permitted by the network’s operator. In case of blockchains with more than one operator or initiator, we speak of consortium blockchains.
When two or more organisations partner with the objective of operating a common blockchain, this consortium sets up rules that define the structure and processes of the network. In particular, the consensus mechanism and the underlying governance model must be defined, in order to allow for a decentralised decision making. Depending on the consortium’s specific purpose, a blockchain technology will be selected. Sometimes, you read about specific blockchain technologies as synonyms for consortium blockchains. Our understanding is that a consortium can use such diverse systems as Ethereum, Hyperledger, Corda, or Qtum, amongst others, to create consortium blockchains.
by Michael Reuter | 7 August 2019 | Blockchain, MIA
Banking the Unbanked always refers to human beings and their enablement to participate in the global financial system by providing them with bank accounts. In this post, I argue for banking unbanked devices, i.e. machines, that are connected through the internet — the Internet of Things IoT.
Globalization has made our world a smaller place: through the internet we know everything what happens somewhere within minutes, through air travel we can personally experience the other side of the world within hours. We, in this case, means the rich world. The majority of people, however, may have access to the internet but is far from being able to travel around the world. However, there are other means of enabling them to participate in and get a fair share of globalization — by banking them; i.e. by providing people without access to the financial system with either proper bank accounts, or with alternative means of payment, such as the Libra project that Facebook has announced this summer.
This idea originates from my colleague with Bosch, Nik Scharmann, who leads the Economy of Things project, and from a Datarella project in the field of banking. As so often, evolutionary development is the result of combining ideas from different industries, – or – a “cross-sectoral” approach.
Machine-to-Machine Transactions
Having been active in the field of machine-to-machine communication (M2M) for quite a time, and working in several projects including machine-to-machine transactions, such as pricing negotiations and settlements between machines automated by smart contracts, I‘d like to point out the huge impact banking the unbanked IoT will have on the global economy. As Julian Simon claimed in his )controversial) thesis ot the „Ultimate Resource“ (The “ultimate resource” is not any particular physical object but the capacity for humans to invent and adapt), that there is no resource crisis since when a particular resource becomes more scarce, its price rises. This price rise creates an incentive for people to discover more of the resource, ration and recycle it, and eventually, develop substitutes.
Economy of Things
And as Ronald Coase defined and described transaction costs in his „The Nature of the Firm“: the lower the costs of organising and the slower these costs rise with an increase in the number of transactions, the less likely the human being is prone to erroneous behavior and the smaller the increase in human errors with an increase in the number of transactions.
The ultimate modern way of bringing down transaction costs is to have machines managing all transactions, without any interference of human error. That said, the Economy of Things EoT will most probably be the best description of our future global economy, with interconnected devices managing all economicl haggling, negotioans and settlements — even disputes will be handled by machines, supported by automated dispute resolution procedures, such as smart contract based arbitration.
The Development Of World Populations vs Connected Devices
Letting devices, machines, or things participate in economic transactions can be described as Banking the Unbanked IoT. From the perspective of the actual accessible install base and future growth, the economic impact of banking unbanked people is negligible compared with the impact of banking unbanked devices, as can be seen in the two charts above and below:
Looking at Facebook‘s Libra project and comparing its economic impact with Banking the Unbanked IoT described here, we can conclude that it makes much economic sense to work on the future Economy of Things. In our next post we will elaborate more on our plans with Datarella of being an active part of this fascinating journey together with our great partners in the field of mobility infrastructures. And I will explain, why and how the Enterprise Evolution Protocol model is a good framework for building a sustainable, ethical Economy of Things.
This article was originally publishes at michaelreuter.org
by Michael Reuter | 5 August 2019 | Blockchain
Since the advent of the internet aka Web 1.0, internet users have been enabled to shop online and to receive information from all over the world with a few mouse clicks. Since Web 2.0, users could actively participate by producing and sharing content, information and opinions over the web, and through this build their own personal online brands. With Web 3.0, we have now approached the next evolutionary phase: users can capitalize on their online brands by executing peer-to-peer (P2P) transactions, while keeping full sovereignty of their data.
There are two key technologies that allow for a more evenly distributed value creation: Distributed Ledger Technologies – aka Blockchain – and Artificial Intelligence AI. Whereas in Web 20, there were systemic errors, such as data silos, breaches and hacks, as well as data being hoarded or not utilized at all, the promise of Web 3.0 is becoming a distributed, silo-free, open source, non-discriminating framework to allow for a full sovereignty of individuals as well as enterprises. Blockchain is the best suited foundational technology layer for this purpose. A distributed network of ledgers can be used by machines to communicate with each other, and participate as autonomous entities in the global economy.
As we have learned from the history of the Internet, a technology itself is a necessary but not a sufficient condition for becoming a non-discriminating, open source technology layer. Beside technology, there must be a governance model including smart incentive schemes that allow for a sustainable, non-discriminating behavior of participants in the system. Ideally, many participants across a variety of industries agree upon. finding and setting these rules, regulations and incentives. With Datarella, we are honored to become a founding member of the Convergence Alliance, together with Deutsche Telekom Innovation Laboratories T-Labs, Jaguar Land Rover’s InMotion Ventures, SAP, Imperial College London, Frankfurt School Blockchain Center, MOBI, Smart Dubai, the Fab City Global Initiative and Outlier Ventures. The Convergence Alliance is a unique community of open source protocols, enterprise, start-ups, government bodies and academia leading the next phase of the Web.
Our role Datarella in the Convergence Alliance is to focus on onboarding and supporting small and medium-sized businesses SMB that aim for entering the fields of blockchain amd AI. Whereas other technology pushes come with huge financial investments, to work with Blockchain and AI means pushing your company to the next level with small investments and contained risks. And, with the Convergence Alliance, teaming up with the ideal partner to invent new business models by capitalizing on thie innovative technologies blockchain and AI, it should be a no-brainer for SMBs to start working on it! Looking forward to seeing many SMBs joining the Convergence Alliance!
by Michael Reuter | 22 March 2019 | Blockchain
Admittedly, I borrowed this title from a recently published article on Forbes. The auther‘s point why investment in blockchain technology has never been so high is because an absolute majority of enterprises are actively working on use cases and solutions in the fields of utilities, healthcare, payments, supply-chain management, government and agriculture.
What is missing here: enteprises can afford to invest in Distributed Ledgers. Because these technologies have reached a certain degree of maturity – at least, kind of. Corporations can‘t play around with technology, they have to make sure that innovative tools and functionalities are secure, stable and reliable. These are tough requirements when it comes to a technology that was made usable for a broader range of use cases in 2015.
At Datarella, we are asked from time to time to explain our company‘s claim „Building the Enterprise Blockchain“. Essentially, our claim means to provide blockchain solutions that match the above mentioned requirements – our clients and partners must be able to rely on secure, scalable and resilient solutions.
Enterprise-ready Blockchain Solutions
This enterprise-readiness requires expertise and know-how in the fields of technology, business, regulatory and legal systems, as well as governance – especially in decentralized systems. In other words, it isn‘t sufficient to know how to technically build – e.g. – a smart contract, but it makes much sense to know about the preconditions of a compliant use of smart contracts by enterprises. Then, not everything in blockchain solutions is core blockchain: if it comes to security, we develop zero-knowledge proof (ZKP) solutions – like, ‘compute on data using Homomorphic Encryption’ – that can be based on blockchain, but doesn‘t have to. Often blockchain is the basis and the precondition for applications is heavily equipped with security aspects (e.g. ZKP), or artificial intelligence AI – aka machine learning.
Learning By Doing
At Datarella, we respond to these manifold requirements by learning by doing: most of the solutions we offer we have either implemented during our work with clients or we invest resources and create exemplary solutions for in-house use cases. With our applications CodeLegit (Compliant Smart Contracts), XSC Crypto Wallet, and Raw Coin (Supply Blockchain Solution as a JV with Wirecard), we demonstrate how things work, how reliable and usable they are and provide food for thought for digital innovation at our clients’ brains.
RAAY – The OS for Digital Ecosystems
Based on our work with the United Nations World Food Programme, we created our own blockchain-based payment and ledger platform, we call RAAY – The Operating System for Digital Ecosystems. We offer plug and play with RAAY especially to those clients who aren’t interested investing in technology development, but rather want to start doing blockchain-based business right away.
Fostering the Blockchain Community
Additionally, we organize one of the biggest Blockchain Meetups in Germany that takes place every eight weeks. For these meetups, we invite domain experts from all relevant blockchain solutions related areas to discuss the respective fields of expertise at a professional level. To ensure that these conversations will be continued, we co-founded the European Blockchain Association EBA, as well as the Blockchain Arbitration Forum BAF. At EBA, we support the synchronisation of blockchain-related activities throughout Europe. At BAF, we support building a database of arbitrators who can help with dispute resolution on the basis of smart contracts and other digitzed contracts.
Blockchain – A Foundational Technology That Kills Inefficiencies
From a superficial perspective, Blockchain technology has seen its hype and now enters a cooling-off phase – at least if you believe in the Gartner hype cycle. On a more practical and realistic level, we experience the opposite: key industry players have realized that Blockchain isn’t a hype at all, but rather is a foundational technology that can substitute many inefficient legacy processes and thus, save billions of Dollars. There is no need to look for specific „killer (d)apps“: if done right, blockchain kills inefficiencies all over the place.
Over the next few years, we most probably will face global economic downturns requiring cost cutting tactics. And this is the reason for large enterprises to invest in decentralized ledger technologies: blockchain kills inefficiencies, saves money, and makes business more robust against looming economic downturns.
by Michael Reuter | 18 March 2019 | Blockchain
We are very happy to announce the brand new Certified Blockchain & DLT Manager program we co-developed with the TUM Executive Education Center and the European Blockchain Association.
This program is aimed at professionals in corporations who want to achieve a clearer understanding of blockchains and other distributed ledger technologies in order to provide guidance in decentralized aspects of digitization within their companies.
The Certified Blockchain & DLT Manager consists of a 5-day program, provided in 2 modules. In the first module, participants will discuss technical, economic, legal and regulatory aspects of blockchain technology. In the second module, corporate representatives present case studies that participants work on and provide new solutions for. The lecturers line-up of TUM experts with Prof. Dr. othersProf. Dr. Florian Matthes, Prof. Dr. Joachim Henkel, Prof. Dr. Jürgen Ernstberger, and Prof. Dr. Isabell Welpe on the one hand, and practitioners, such as Florian Huber of chain.de / Paradigm Ventures, Datarella CEO Michael Reuter, and other corporate representatives, looks promising.
This combination of theoretical and practical contents facilitates perfect first steps into the decentralized aspects of corporate digitization processes. The program’s first module starts on 18 September, 2019. The second module will follow right after the Oktoberfest – aka Wiesn – on 7-8 Octoberk 2019. All lectures will be held at TUM Executive Education Center in Munich.
We are looking forward to this program and encourage IT-people as well as managers in corporations to participate!
by Michael Reuter | 28 February 2019 | Blockchain
Today, we have launched our new Datarella website. Over the course of several months, we discussed how to re-fresh or re-build our existing standard WordPress template which was more text-heavy than eye-catching. In some conversations, we realised that not only our grandmas had their issues with understanding what Datarella actually offers, but also some potential clients – something we ought to change if our goal is to convert website visitors into satisfied clients.
When building enterprise blockchain solutions, one very important aspect of the work is to show the actual outcome of the projects More specifically, it is key to clearly demonstrate why and which blockchain technology has been used and how it benefits the participants in the use case. The best way to bring a smile on the executive’s face is to either make her an active participant in a live demo, shoot a respective video or use photos of a real life showcase. You can’t beat the power of images and a live experience!
With these experiences in mind, we decided to strip our blockchain technology heavy content down to a minimum and use it more as an explainer of images that describe actual live use cases. In other words: we planned an image-heavy website that should induce a feeling of physical reality – visitors should easily understand the implications and benefits of Datarella’s work. In addition, we ignored side projects and focused on our three key areas of enterprise blockchain applications: Finance, Mobility and Supply Chain.
With this topical focus, a new, fresh look, with many images and symbols, we hope to make it clearer and easy to understand what our Enterprise Blockchain Solutions work is about and what our fantastic target-oriented teams in Munich and Gdansk create. Of course, we highly appreciate your feedback – either as comments, emails or in person at one of our Blockchain Meetups!
by Michael Reuter | 5 January 2019 | Blockchain
Zero-based budgeting ZBB isn’t the first thing you learn at the university, not even when specialising in controlling. However, developed by a practitioner in the 1970s, ZBB has evolved into a budgetary process that lives up to the promise of modern controlling: it supports not only cost-cutting, but also prepares the ground within an organisation for a profitable growth strategy.
Originally, ZBB was a process only large enterprises could implement, die to high initial investment and administrative costs. But digital transformation has allowed ZBB to be used for more organisations in a more efficient way. Blockchain technology, finally, may help ZBB to conquer at least the world of controlling. Below you find an article that was published first on our RAAY website. It explains how distributed ledger technologies could ba adapted for many more enterprises, and even SMBs.
Zero-based budgeting ZBB is a method of budgeting in which all expenses must be justified and approved for each new period. It was created in the 1970s by former TI controller and advisor to then Georgia’s governor Jimmy Carter, Peter Pyrrh, to embed top-level strategic objectives into the budgeting process by tying them to specific functional areas within the enterprise.
ZBB starts from a “zero base” at the beginning of every budget period, analysing needs and costs of every function within an organisation and allocating funds accordingly, regardless of how much money has previously been budgeted to any given line item. Costs are grouped and measured against previous results and current expectations, enabling management to allocate funds by current need instead of by historical expenditures.
Cost-cutting and profitable growth
ZBB is a very useful budgetary process, especially in economically challenging times, when enterprises need to make reductions, and when there are significant and rapid technological changes. Its extremely detailed approach to budgeting as an opportunity to capture operational efficiencies, stimulate growth, and boost performance. In other words, ZBB is fundamentally different from typical budgeting because it switches the burden of proof for spending from those managers tasked with driving cost reductions to the business leaders, who must contribute to both identifying unproductive costs and eliminating them in practice: targets aren’t debated until they disappear,, but business leaders ask: “What does it take to hit the target?”
Advantage Digitalisation
However, ZBB come with some serious challenges: When Peter Pyrrh developed ZBB in the 70s, it was regarded as a budgetary process for large enterprises exclusively, that could afford significant investments to optimise the management of myriads of separated organisational databases. Digitalisation has made ZBB less burdensome: instead of having numerous controllers coordinating thousands of spreadsheets, today data is available at the click of a mouse. Still, with mostly central databases in place, there are serious synchronisation and consistency challenges.
Enters Blockchain Technology
In a project using tools and functionality of our RAAY Operating System, we explore the impact of blockchain technology applied to a ZBB process. Leveraging blockchain-inherent features, such as immutability and consistency of data, the hypothesis of this project is to allow for a streamlined, efficient zero-based budgeting that could be used not only by large enterprises but also by SMB in order to drive profitable growth.
The essence of using blockchain technology for ZBB is not to sell old wine in new wineskins, but to leverage features that automatically come with decentralised distributed ledgers. Instead of looking for highly innovative new business or so-called ‘killer dApps’, we apply what we have in-depth experience in to what is an accepted budgetary process – and potentially save millions of Euros.
by Michael Reuter | 27 December 2018 | Blockchain
At Datarella, we had an extremely interesting year 2018: Our Building Blocks project that we have set-up on 1 May 2017 (and that we develop further), has received lots of credit, internationally. Since Building Blocks is one of the few global live blockchain solutions with apparent economic and social impact, has not only helped us to shape our profile as the Enterprise Blockchain solution company, but has motivated us to invest internal resources to develop RAAY, the new Operating System For Banking.
In 2019, we will leverage RAAY’s first applications, the RAAY Wallet and a real-estate backed security token to demonstrate the power and the variability of the RAAY OS. Together with partners, such as Wirecard and zeb, we will provide RAAY OS functionality to players in the finance industry helping them to streamline their processes, bring down informational and transactional costs and develop new business.
Supply Chain, Security, Mobility
On the level of our Datarella core business, we’ve made great progress in the fields of Supply Chain, Security, and Mobility. With our partner Wirecard, we co-developed the blockchain-based supply chain solution Raw Coin that is supposed to play a major role in some upcoming projects in early 2019. We invested a significant amount if time and resources in research around blockchain security, namely in the field of multi-party computation. Here, our learnings will help us to provide our clients with solutions that fully comply with GDPR and regulations, and make blockchain technology future-proof.
With our Blockchained Mobility Hackathon in July 2018 with BMW, VW, Bosch, Deutsche Telekom, Deutsche Bahn, Amadeus, IOTA and others, we demonstrated that the event‘s motto – Compete & Collaborate – isn‘t just a buzzy catchword, but a lived experience, if participants are strongly committed. The hackathon‘s results have not only demonstrated the power of hybrid teams – formed by different mobility players – but have triggered some concrete blockchain mobility projects and far-reaching cooperations.
Crowdstartcoin XSC
Our decision not to launch an ICO based out of Germany in late 2017, proved to be a wise one – regarding the emerging challenges of then apparently successful ICOs, with even the Ethereum ICO of 2016 becoming subject to scrutiny by regulators
After having decided not to ICO, we agreed upon distributing CrowdstartCoins XSC to developers in the blockchain community who add value to the ecosystem. In early 2018, we developed an automated process that enabled us to distribute free XSC to legitimate recipients with little effort. However, we had to abandon our original plan to develop Crowdvote, a community driven decision making model to compensate blockchain developers, due to its high complexity and scarce resources in our development team. Alternatively, we decided to donate a large chunk of CrowdstartCoins XSC to the newly founded European Blockchain Association EBA thta itself distributes XSC to its members, albeit in a broader sense: every new member gets a welcome bonus of 2,000 XSC, and XSC have generally been defined as the internal means of payment and rewards for transactions within the EBA member network.
Governance As A Service GaaS
The Datarella team has supported the European Blockchain Association EBA in creating its Governance Model that sits at the core of its decentralised semi-autonomous organisation DSAO. Many of the above mentioned actual and upcoming failures of ICOs and other decentralised models can be ascribed to flawed governance models. In some cases, there was a complete lack of any proper governance. There is a general difference between governance of decentralised and centralised systems: in decentralised systems there is no central authority that oversees, controls or manages the system. All this has to be done by the imdividual participants, or nodes, by themselves. Thus, there has to be a proper incentive system in place that incentivises participants to act in ways according to the governance model.
We at Datarella will leverage on the experiences of co-creating the EBA governance by offering a Governance-As-A-Service GaaS model to our clients that aren’t interested in developing a governance model on their own. They can plug’n’play with the Datarella GaaS!
From our perspective, 2019 will be the first really big year for blockchain: we will see more live solutions with significant impact and we will see more blockchain-based Compete & Collaborate – that in turn results in great economic and social impact!
Happy New Year!
by Michael Reuter | 16 December 2018 | Blockchain
Blockchain is said to eliminate middlemen – just search for the purpose of distributed ledger technologies DLT, and you will end up with numerous predictions what kinds of middlemen will leave the playing field when blockchain arrives – disintermediation at its best. Although we have been developing blockchain solutions since 2015, we‘re somewhat sceptic about that disruption variant.
First – what is a middleman, and why does he actually exist, at all? Of course, there are many different kinds of middlemen in various industries, and their efforts are not necessarily compatible with each other. However, the common denominator of middlemen purposes is to facilitate relationships between two or more contracting partners. Be it a travel agent who connects a future traveler with hotels, airlines and other travel product suppliers, be it an auditor who audits financial processes of a company in order to prove the client’s correct and compliant behavior towards its shareholders – apparently there has been sufficient economic room for parties in between contracting partners.
Comes in blockchain and kills these middlemen? In theory: yes: blockchain technology provides a decentralized secure database and ledger that allows for individual access of all contracting partners without the formerly known risks and challenges of data sharing. In practice, we are sceptic. Sure, as a so-called trustless system, blockchain provides a decentralized notary function and therefore no external trust agent is needed any more. However, killing the trust agent results in a responsibility of each individual for everything the agent was responsible before.
Middlemen facilitators
Let‘s assume you are in the crypto trading business and you buy and sell your coins via a centralized crypto currency exchange. In this case, the exchange might help you recover your lost passwords that give you access to your account. If, alternatively, you trade via a decentralized crypto currency exchange, you are completely responsible for your passwords yourself – nobody will support you in case you lost access to your account. Same with any financial transaction on a blockchain: if you sent your Ether to your friend‘s wallet address, but unfortunately, you entered some transposed numbers into your transaction – your digital money is gone – unless the surprised unknown recipient sends it back to an account he doesn’t know himself. There is no bank (middleman) that could help to correct or withdraw your transaction.
These two examples alone show that predictions of fully occupied graveyards of middleman are exaggerated, if not simply wrong.
Let‘s look at a more differentiated case: in supply chains, there is a business run by middlemen that certify a product’s authenticity and provenance. With a blockchain system including a token that transports the product memory beside acting as a means of payment, theoretically there is no need for this kind of selective checks of materials or production processes. Since all network particpants have realtime access to the blockchain – and therefore to the complete product memory – everybody can be sure about correctness and consistency of the data in the supply chain.
However, who sets-up, runs, and maintains the blockchain? Who creates the governance model and acts as a contact entity for the network‘s participants? Who cares for the integration of the supply blockchain into legal and regulatory frameworks? If one of the participants would take that role – would everybody else trust the network? Would not the certification agent – the former middleman – be the best suited entity for this role? Isn‘t it the certification agent who already knows many, if not all, of the participants and therefore would be the one who could facilitate the blockchain in the best possible way?
Re-Intermediation
We at Datarella never have endorsed revolutionary disruption models that are based on 100% changes within industries. We think that gradual, evolutionary developments serve the needs of stakeholders in an industry better. Insofar, we expect blockchain technology to eliminate unnecessary and overpriced middlemen services, but at the same time blockchain can prove to be the ideal technology for all sorts of middlemen to re-invent themselves and bring their service offerings to the next level. This development would be then called re-intermediation, instead of dis-intermediation. No worries, middlemen: Blockchain might prove to be a proper business opportunity for you!
