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Building Blockchain for Business

Blockchain is the underlying technology for Bitcoin, Ethereum, and other cryptocurrencies. However, cryptocurrency is far from the only application of blockchain for businesses. One of the most popular business applications of blockchain is fundraising, especially for startups. Apart from conventional ways of funding, blockchain enables alternative methods of fundraising such as ICO or STO.

In the past few years, many companies have raised an incredible amount of money via ICO. Some of the biggest and most successful ICO projects include NEO, Ethereum, Spectrecoin, and Lisk. More info about ICO can be found on the Investopedia website.

That said, I am not going to discuss ICO in this article. Instead, we shall explore blockchain applications in businesses. Though we can use blockchain for all kinds of business applications, whether or not blockchain is suitable for a particular business depends on the nature of the business, the business model, the requirements, and many other factors.

Before implementing blockchain, the C-level management team of a business organization should conduct a feasibility study to determine whether it is necessary and plausible to adopt blockchain technology. You should ask the following questions:

Can blockchain add value to the current business?
Can blockchain increase the organization’s competitiveness?
Do you need to deal with many trustless parties?
Do you need a decentralized and distributed database system?
Can blockchain improve workflow efficiency?
Can blockchain increase revenue and profit?
Do you have enough financial resources to implement blockchain?
Can blockchain technology integrate with existing systems?
Do you have enough talents to manage the blockchain system?

Once you’ve decided that implementing blockchain would benefit your company, you need to carry out the following steps:

Identify a suitable use case.
Assemble your team.
Design the blockchain architecture.

Identify a suitable use case

To embark on a blockchain project, you need to identify the most suitable use case for your business. The best way is to examine use cases in an industry that is similar to your business. Generally, there are three areas in which blockchains can perform very well.

Data Authentication & Verification

This includes immutable storage, digital signatures, and encryption. Data in almost any format can be stored in the blockchain. Blockchains can create public-private key pairs and also be used for generating and verifying digital signatures. Therefore, it can be used for data authentication & verification.

One of the best usages is counterfeiting prevention. For example, Luxtag, a Malaysia-based blockchain company, has patented an anti-counterfeit technology. This technology enables businesses and their customers to protect the authenticity and ownership of their valuable assets by providing digitized certificates using blockchain technology. They have rolled out their first product, known as e-Scroll, for a consortium of Malaysian public universities to verify and validate certificates using a blockchain-powered web application.

Another area related to authentication and verification is data provenance. One of the most successful companies in this area is Everledger. This company has built the Diamond Time-Lapse Protocol, a traceability initiative built on a blockchain-based platform for the diamond and jewelry industry. The system is to ensure that there is transparency along the entire diamond’s lifetime journey, instilling consumer confidence and driving industry growth.

Another application is supply chain management. The most notable is the initiative by Walmart using blockchain technology to ensure food safety. Walmart has been working with IBM on a food safety blockchain solution requiring all suppliers of leafy green vegetables for Sam’s and Walmart to upload their data to the blockchain by September 2019. By placing a supply chain on the blockchain, it makes the process more traceable, transparent and fully digital.

Watch the following video about food safety:

Other business applications could be medical records management, insurance, KYC management for banks, and more.

Digital Asset Management

Any asset that can be digitized is considered a digital asset. Digital assets include ebooks, digital art, images, video, music, journals, newspapers, audio books, online training courses, recipes, and more. With the invention of blockchain technology, digital assets also include crypto assets. Crypto assets can be cryptocurrencies like Bitcoin, Ethereum, and other altcoins, or the tokenized version of a real-world asset such as gold, silver, oil, land titles, property, paintings, etc.

Currently, most digital assets are traded over the Internet via the centralized e-commerce marketplace. However, digital assets can be traded more efficiently over the decentralized peer-to-peer blockchain platforms.

Some real world use cases for digital assets management in blockchain include:

AlphaPoint. Provides enterprise-grade software that enables institutions to convert assets to securities tokens and trade those assets on an exchange.
Polymath. Enables trillions of dollars of securities to migrate to the blockchain.
Harbor. Offers a digital securities platform for compliant fundraising, investor management, and liquidity.
Powerledger. Provides a platform for peer-to-peer energy trading.

Smart Contracts

A smart contract is a programmable contract that enables auto execution of a contract the moment it fulfills certain terms and conditions. It is akin to a vending machine – you get your product by inserting some coins or banknotes.

According to Investopedia, smart contracts are:

“self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.”

Almost any blockchain business application involves the use of a smart contract. A famous use case is Cryptokitties. A smart contract is executed when a user acquires a unique virtual kitty from the Cryptokitties collectible marketplace via a bidding process. The highest bidder gets to own the digital asset. Other dapp transactions also make use of smart contracts.

Blockchain-powered supply chain management makes use of smart contracts to handle transactions between manufacturer, suppliers, wholesalers, and retailers.

In the insurance industry, the client who wishes to buy insurance can provide personal information including sensitive data like medical records via a smart contract to the insurance company. In the health care industry, a patient can get faster and more accurate diagnoses and treatment via a smart contract that allows them to share medical records.

Assemble your Team

After conceptualizing a business use case that is suitable for your business, you need to assemble your team to kick-start the blockchain project. Getting the right people in your team is crucial to success. Your team should comprise people with business skills and also people with technical skills. People with business skills should be able to see the overall picture of your business model and know how to execute it. They must also have good interpersonal skills, strategic thinking, good networks, and financial knowledge. The people with business skills should be assigned the posts of CEO, CFO, marketing manager, business development manager, and so on.

People with good IT skill in general and blockchain in particular are equally important. The CTO must have many years of experience in the IT and software industry and have a good grasp of blockchain. He or she must be assisted by a technical lead who has good practical experience in setting up the blockchain platform, know how to program the smart contract, sound knowledge of programming languages including Solidity, JavaScript, Goland, C++, Java, Python, and so on.

In addition, if you plan to raise funds via ICO, you need to employ a compliance officer, preferably a lawyer who understands the guidelines provided by the security commission and the central bank.

Designing the Blockchain Architecture

You need to decide whether to build the blockchain network from scratch, or use a third party blockchain solution like Azure blockchain, Oracle, or AWS blockchain. The former is time-consuming, whereas the latter could be up in as little as 30 minutes.

Each of the the aforementioned enterprise blockchains offer their own functionalities and features as well as cost advantages. Both AWS and Azure offers solutions for Ethereum, Hyperledger Fabric, Corda, and Quorum, while Oracle only caters for Hyperledger Fabric. We can compare their features in the following table:

The cost of setting up Azure Blockchain Workbench is roughly $400-$500 depending on your region and usage. The main costs are three VMs and one app service. Two VMs are for the default blockchain network, and one VM is for the microservices on Workbench. For AWS Blockchain pricing, refer to: https://aws.amazon.com/managed-blockchain/pricing/

References

HR Blockchain Use Cases

Blockchain is not just about cryptocurrencies but it can be applied in businesses. In this article, we shall explore its application in human resource management. HR Blockchain use cases have started to emerge and have the potential to disrupt traditional HR systems. Among them are ChronoBank.io, PEACOUNTS,and bitWAGE

Let’s examine each one of them.

ChronoBank.io

This is an HR blockchain platform designed to improve the recruitment process as well as payroll. It claimed that it will disrupt the HR industry similar to how Uber has disrupted the taxi industry.

ChronoBank ecosystem comprises a hiring platform(LaborX), a decentralized exchange(TimeX), a multi-signature wallet(Chronowallet) and a cryptocurrency that is pegged to labor hours(Labor Hour token).

LaborX is their flagship global hiring platform that connects candidates to the companies. It features an industry first immutable reputation system and a crypto payment system based on smart contract. The reputation system allows faster screening of candidates therefore save time and cost in hiring the right candidates. In addition, the crypto payment system enables candidates to get paid on time.

Furthermore, it plans to use a stable coin as the crypto payment to eliminate volatility common in most cryptocurrencies. This coin is known as Labour-Hour tokens. These tokens are linked to average hourly wages in the host country and are backed by a real labor force from big recruitment and labor-hire companies. Labor is considered a tradeable resource so ChronoBank will tokenise this resource into the LH-Tokens.

PeaCounts

PeaCounts is a blockchain-based payroll system. PeaCounts claimed that their payroll system will revolutionize the way employees are paid by using blockchain to remove the trust-based elements of the payroll process. It ensures the employees will get paid as soon as the work is completed. On the other hand, the employer will pay just for the work completed.

It features a smart contract that can track an employee location and time spent on certain tasks. It also holds the PEA Tokens and release them to the employee upon completion of the tasks. This system ensures that the employee gets paid efficiently and fairly.

The PeaCount payroll system is a private blockchain created as a fork off the Bitcoin. It also implements the zk-Snarks protocol and a multi-access wallet to ensure security in payroll transactions.

bitWage

bitWage is a payroll and HR services platform designed for the digital age. Basically it is a global outsourcing platform that serves the freelancers who wish to seek jobs worldwide and employers who wish to hire remote workers .

The bitWage payroll system allows employers to pay their remote employees rapidly with low transactions. The employees have the option to receive their wages and salaries in any of twenty four fiat currencies, four cryptocurrencies , and four precious metals.

References

HR Digital Transformation-powered by Blockchain

Human resource management has undergone tremendous changes in recent years particularly with regards to digitalization of human resource. The emergence of blockchain technology could further transform the world of HR.

According to Griffiths(cited in Gale, 2018), blockchain has the potential to streamline a lot of inefficient work related to employee data verification. Blockchain can store a candidate education, certifications and work history in a single ledger, therefore it would take just minutes rather than days to verify the data. Besides that, the data cannot be modified or hacked once they are stored in the blockchain, thus guarantee data security and trustworthiness.

In addition, blockchain has the potential impact on HR by allowing personal data to be owned by the individual rather than the organization(Mike, cited in Gale 2018). Consequently, every employee could maintain control over their entire employment data, including educational background, training, and work history. It also means that an individual work identity is more portable, it moves with the individual rather than stuck inside the former organization when an employee changes job.

Besides that, blockchain could disrupt conventional HR processes with respect to financial transactions. Blockchain could streamline payroll function significantly by allowing automated and direct payment based on smart contarcts, without the need of a third party such as a bank or other intermediaries.

Recently, PWC (2018)has identified a few areas where we can apply the blockchain technology in HR. The areas include talent sourcing and management, targeting productivity gains, cross-border payment and mobility and Fraud prevention, and cybersecurity and data protection.

Talent sourcing and management

Blockchain could have a major impact on talent sourcing and management. It allows employees to maintain and control access to a comprehensive, trustworthy blockchain-based record of their education, skills, training and workplace performance. By providing potential employers with access to their blockchain-based employment data, companies would be able to match individuals to roles much more accurately and effectively.

Targeting productivity gains

Blockchain has the ability to better match people’s skills and performance to jobs. Finding and recruiting the right talent is always problematic for business organizations, therefore by helping them do this more effectively and efficiently will surely boost their productivity. Besides that, blockchain can help to reduce the burden of data-intensive processes like payroll and VAT , allowing companies to focus more on their core businesses.

Cross-border payments and mobility

Multinational companies could create their own blockchain-based corporate cryptocurrencies that they can use for cross-border payment across their global supply chains, without the need of third-parties for settlement and reconciliation. In the future, central banks may legalize this type of cryptocurrency and support convertibility into fiat currencies. In addition, blockchain could facilitate employees mobility across the border with respect to payroll adjustment, international expenses, and taxes.

Fraud prevention, cybersecurity and data protection

HR department usually needs to handle high-volume financial transactions and sensitive personal data, therefore it is utmost important to prevent frauds as well as to safeguard the data. This is the area where blockchain could be extremely useful. Blockchain’s use of consensus to authenticate data can help to eliminate frauds.

Another issue that blockchain can help to overcome is cyber threats. Many SMEs are ill-prepared for cyber attacks and the results could be detrimental to their businesses. Blockchain could help ensure cybersecurity as the data are immutable and tamper-proof because it uses SHA-256 hashing cryptography.

References

A Wrap-up of Blockchain And Cryptocurrency Conference 2018

I am trying to summarize a bit of the Blockchain and Cryptocurrency conference 2018 (from 13th to 15th Nov 2018) but it is far from comprehensive as I missed out the first day programmes. Besides that, I couldn’t capture all the mind-boggling stuff delivered by the elite speakers, all of them are crypto experts! I am sure all the participants benefited immensely in one way or another unless they slept through the sessions.

The conference was co-organized by Twinintel, QF4 Tech Asia and Blueshare. The venue was at the impressive five-star Sheraton Imperial Hotel located at Jalan Sultan Ismail, Kuala Lumpur. The event was very well organized and the speakers’ line-up is simply overwhelming, kudos to the organizers!

The topics were very comprehensive and catered for everyone needs, be them crypto investors, tech-savvy nerds, govt officials, regulators(maybe hiding among us), academicians, and students etc. I would say there were not much marketing hypes about ICO, mostly educational. The topics covered ICO, ISTO, Crypto analytics, Blockchain training, Blockchain standards, Blockchain smart cities , fundamentals and more.

I was particularly impressed by the cool topic “Predicting Cryptocurrency Exchange Rate with AI and social media” delivered by Dr.Tim Frey. I like forecasting the future as it is my personal interest , that was why I watched all the back to future and time machine movies. I learned how Dr.Tim used Twitter’ tweets (or rather gossips) as the data for his forecasting model, which gives an impressive level of 70%-90% accuracy. Maybe One day we can develop a forecasting model that can deliver 99% accuracy. I believe by using AI machine learning we can achieve that goal. I managed to catch up with Dr.Tim at tea time to get more insights from him. According to him, it seemed 90% of the audience couldn’t grasp the concepts, I am not too sure. I myself don’t understand much too. For example, I don’t know what the heck is Kappa Architecture, I am sure our computer science experts can understand better.

Dr.Sindhu illustration of Crypto banking was an eye-opener. I like the diagram that showed clearly how various components from KYC, front-end app, ledger, and the blockchain’s bank wallet are connected to the bank’s backend. It showcases a banking model for the future crypto transaction. we also learned about the Microsoft, Ethereum and R3 11 banks experiment on simulation an exchange of value on the blockchain. The banks involved were HSBC, Credit Suisse, Barclays, Wells Fargo and more. Very useful for a case study. In addition, he also highlighted the advantages of using Blockchain in the banking industry:

Transparency
Less Labour intensive
Disintermediation
Tamper-proof
Nearly instantaneous

However, there are also some key challenges , as follows:

Privacy
Integration
Threat of Rivalry
Energy Consumption

I couldn’t remember who spoke on steps in launching an ICO but the points given were super good. According to him, the steps in doing an ICO are as follows:

Decide if an ICO is suitable for your business
Adviser reach out and on-boarding
Get legal opinion
Create a light paper/whitepaper/deck for your ICO
Private sale or an angel investment to develop the MVP
Create the product
Create a token
Create a community and buzz
Getting your token out on an exchange

He further showed us the shocking statistics that 81% of the ICO projects were found to be a scam scheme. Out of the genuine ICO projects, 6% failed, another 5% gone dead and only a meagre 8% proceed to trade. Therefore the ICO projects are not as rosy as what people claim.

Another speaker spoke on potential blockchain applications. He subdivided the potential applications into four areas, smart contracts, digital currency, securities and record keeping.

The speaker from Cryptology gave advice for those who intend to start an ICO project. First of all, he reminded that blockchain is not a get rich quick scheme. It is about the distribution of trust. Secondly, do not just explore blockchain technology just because it is hot or trendy. Think in terms of how the product or services can benefit from it. Finally, bear in mind that the most successful companies are those who can accept and adapt to constant changes.

Miss Daphne Chong, the CTO from Logistics Worldwide Express and a director of Woman Who Code KL explained how blockchain could disrupts the supply chain and logistics industry. She emphasized on the advantages of implementing blockchain in supply chain and logistics in terms of

Efficiency-less paperwork, elimination of the intermediaries
Transparency-price, ownership, location
Inventory tracking, quality control
Disputes settlement, reduction in cost of regulations and compliance

Last but not least, Mr. Fattah, the chairman of Malaysia’s National Standards Committee on Blockchain and Distributed Ledger Technologies told the audience about the development of Blockchain and DLT standards in Malaysia. He spearheaded the formation of the national committee and played a key role in putting Malaysia on the international scene. You can follow his blog https://fattahyatim.wordpress.com/ to learn more about the subject.

This is all about the conference that I can recollect, I welcome your valuable inputs if I have missed out anything important.

Hyperledger Fabric Architecture Part 2

In my article ” Hyperledger Fabric Architecture Part 1“, you have learned about the client applications, endorsing peers and committing peers as well as well as the ordering service. We have also discussed the transaction workflow and how consensus is reached. In this article, I shall explain the channels and membership service provider.

Channels

In permissionless blockchains like Bitcoin and Ethereum, all peers share and have access to the same ledger. However, this kind of blockchain may not be suitable for business applications. For example, a supplier may want to set different prices for different wholesalers, and he would not want everyone in the supply chain to view this information. In this scenario, he or she will prefer to deal with the different wholesalers separately. To solve this issue, Hyperledger Fabric came out with the novel concept of channels that allow private transactions within the same network.

Channels partition the Fabric network in such as way that only the stakeholders can view the transactions. In this way, organizations are able to utilize the same network while maintaining separation between multiple blockchains. The mechanism works by delegating transactions to different ledgers. Members of the particular channel can communicate and transact privately. Other members of the network cannot see the transactions on that channel. The concept is illustrated in the following diagram:

The diagram above shows two channels, channel 1 and channel 2. Each channel has its own application, peers, ledger and smart contract (chaincode). In this example, channel 1 has two peers, P1 and P2 and channel 2 also has two peers, P3 and P4. Ordering service is the same across any network and channel.

Application 1 will send transaction proposals to channel 1. P1 and P2 will then simulate and commit transactions to ledger L1 based on chaincode S1. On the other hand, Application 2 will send transaction proposals to channel 2. P3 and P4 will simulate and commit transactions to ledger L2 based on chaincode S2.

Though our example shows peers belong to two distinct channels, in actual case peers can belong to multiple networks or channels. Peers that participate in multiple channels simulate and commit transactions to different ledgers. In addition, the same chaincode can be applied to multiple channels.

Membership Service Provider (MSP)

Hyperledger Fabric is a permissioned blockchain, therefore, every user needs permission to join the Fabric network. In order to obtain permission to join the Fabric blockchain network, the identity of every user must be validated and authenticated. The identity is important because it determines the exact permissions over resources and access to information that user has in the Fabric network.

To verify an identity, we must employ a trusted authority. In Hyperledger Fabric, the trusted authority is the membership service provider (MSP). The membership service provider is a component that defines the rules in which identities are validated, authenticated, and allowed access to a network. The MSP manages user IDs and authenticates clients who want to join the network. This includes providing credentials for these clients to propose transactions, defining specific roles a member might play and defining access privileges in the context of a network and channel.

The MSP uses a Certificate Authority to authenticate or revokes user certificates upon confirmed identity. In Fabric, the default Certificate Authority interface used for the MSP is the Fabric-CA API. However, organizations can choose to implement an External Certificate Authority of their choice. Hyperledger Fabric supports many types of External Certificate Authority interfaces. As a result, a single Hyperledger Fabric network can be controlled by multiple MSPs.

The Authentication Process

In the authentication process, the Fabric-CA identifies the application, peer, endorser, and orderer identities, and verifies them. Next, a signature is generated through the use of a Signing Algorithm and a Signature Verification Algorithm. The Signing Algorithm utilizes the credentials of the entities associated with their respective identities and outputs an endorsement. The generated signature is a byte array that is bound to a specific identity.

In the following step, the Signature Verification Algorithm will accept the request(to join the network) if the signature byte array matches a valid signature for the inputted endorsement, or reject the request if not. If the user is accepted, he or she can see the transactions in the network and perform transactions with other actors in the network. On the other hand, if the user is rejected, he or she will not able to submit transactions to the network or view any previous transactions.

We shall explore chaincode in the next article.