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Database Giant Oracle Wants Better Governance for Blockchains

Multinational software provider Oracle is working on a way to introduce "fair" governance to permissioned blockchains, according to a newly published patent application. The U.S. Patent and Trademark Office (USPTO) released the application for "Accountability and Trust in Distributed Ledger Systems" on August 17, after it was initially submitted in late May 2016. Specifically, it focuses on so-called permissioned blockchains – those in which participants are limited to approved parties. For the basis of the patent, the firm draws issue with some approaches to maintaining permissioned blockchains, particularly when it comes to the subject of policing the activities of nodes. As the application details: "Even in permissioned ledgers, however, a participating node may violate a fairness policy, for example because it has been hacked, its software is defective, or its operator is dishonest. In principle, permissioned ledgers make it easier to hold nodes accountable for fairness policy violations: once exposed, a violator may lose a deposit, may be expelled from the ledger, or may be sued. In practice, however, reducing the opportunities for internal fairness violations, and detecting them when they occur, is a non-trivial problem." Such problematic behaviors also include transaction censorship, as well as "dropping or reordering transactions" within nodes. Oracle's application proposes a method to resolve these concerns, constituting a system that utilizes a modified version of the open-source code developed by blockchain startup Tendermint. "Accountability and Trust" is the second patent application submitted by Oracle to date. Last year, CoinDesk reported that the software company had filed an application focused on the use of blockchains to verify data in the workflow process.

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Blockchain Could Change the Way You Pay Taxes

Blockchain. It's a buzz word that you haven't heard the last of, and that's scary to some people. It took years for most of us to begin to truly understand bitcoin. Now, try to process that bitcoin is simply the first large-scale application of the blockchain platform. Sounds pretty daunting, right? But it's not quite as petrifying as it sounds. For the uninitiated, blockchain is essentially a digital transaction ledger that, theoretically, is impossible to manipulate. Think of it as one central repository (like a Slack channel) where every stage of a transaction is tracked, and the logging is beyond editing or reproach. Thus far, it's been touted as a potential game changer for financial transactions and real estate deals. But when we think of it from a tax perspective, there is certainly a case to be made for blockchain as the ultimate digital disruptor in the global taxation landscape. Corporate taxpayers, government tax administrations, and tax advisory organizations could all be swept up in the revolution. But at this current stage, what does it mean for American businesses? That's still up for debate. In order to get some insight into how blockchain can truly transform the taxation process both at home and abroad, I spoke with two subject matter experts from EY: Michael Meisler, Partner & Global Blockchain Tax Leader, and Channing Flynn, International Tax Partner & Global Technology Tax Leader. "I think the blockchain is about openness: an open ledger and advancing trust. So whatever the application, the end game is about efficiency," Flynn said. "Tax payers see positives in it, because they see less cost, less payroll, and more efficiency. Tax authorities see it as having to pay fewer auditors and gaining more liquidity, because they're getting money into the coffers faster so they can do the jobs they have to do. And providers like us see opportunities to serve and help and validate that blockchain is working like it should." Sounds fairly straightforward. So what kind of applications does blockchain have for the United States, and how can it shift the way we collect taxes? The two told me that EY's current focus on blockchain is global, and much of the use is in countries outside the U.S., where value-added taxes (VATs) are in play. As we've discussed in a previous column, value-added tax is a consumption-based tax that is applied at each point in the production and sale of goods whenever value is added. So if you were manufacturing a car, each step of the supply chain is taxed whenever value is added, such as when a steel company sells material for the frame, rubber is sold to produce tires, etc. Expenses at each leg of the chain are used to offset the tax. That can be an arduous task, and it's why blockchain can be such a game changer for countries with a VAT because the technology would automate much of the manual processing associated with that process. Of course, the U.S. isn't one of those countries, but Meisler still thinks blockchain could have a tremendous impact here. "In the U.S., we don't have the VAT system, but the same basic VAT application could eventually be applied to collection of payroll taxes, employment taxes, any transaction-based tax where, rather than a self-reporting system, we could have live access to transactions and get paid immediately," Meisler said. That paints quite the picture of a digital world where the lion's share of the work would be automated, ensuring almost 100 percent compliance at every level of taxation. It also starts to open up the possibility that, while the bulk of mainstream attention on blockchain has been focused on its potential impacts to financial services sector thus far, its implications for taxation could be just as significant. "What we're seeing from our clients is that there are a lot of discussions about the potential uses of blockchain, and although taxation is not always at the front end of those discussions, its potential is becoming clear," Meisler said. "Blockchain has the capability to create a fundamental change in how we tax, because it creates a world where every single leg of a transaction is tracked in an immutable record, which makes audit detection risk loom even larger." This point has not been lost on government tax authorities, many of whom are actively experimenting with blockchain-based solutions for auditing and filing taxes. The country of Luxembourg has been one of the most progressive on this front, investing heavily in a technology company called LuxTrust, which has just created a blockchain identity platform that will be used throughout the country in everything from tax filing to regulatory enforcement. China is also reportedly planning to incorporate blockchain into its tax collection process within the next five years. As more government agencies follow suit, anyone doing business in those regions will need to keep pace, ensuring they have both the technological capabilities and the practical experience necessary to support this type of reporting. While there are certain to be barriers to adoption along the way - whether they come in the form of new privacy concerns or plain old resistance to change - the momentum that already exists behind blockchain applications for tax is becoming harder to ignore. For businesses at any level looking ahead to the future of tax compliance, it's a good idea to start cozying up to the idea of blockchain. It's here to stay.

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IBM Reveals Blockchain Supply Chain Trial with Singapore Port Operator

A major port operator in Singapore has inked a deal to work with IBM and a regional shipping firm to test a new blockchain-based supply chain network. Announcing the news, PSA International, which operates ports in Asia, South America and Europe, said today that it has signed a memorandum of understanding with IBM and Pacific International Lines (PIL), one of the largest liner services in the world. The three firms will "work together to explore [proofs-of-concept] using technologies like blockchain," according to an announcement published today. The goal of the trial is to automate the flow of documents between trading partners, providing transparency along the way. Tan Chong Meng, group CEO of PSA, said of the deal: "Blockchain has the potential to reduce inefficiencies and gaps within the supply chain, promote more cost-efficient transactions and facilitate the continued growth in world trade. PSA looks forward to working alongside its partners in supporting this initiative and we will contribute our expertise and knowledge in managing ports and advancing supply chains." The tie-up represents the latest effort within the shipping sector to test the potential of blockchain to solve industry problems, a broad push that has seen some of the world's biggest ship operators and port authorities move to launch trials of the technology. IBM, too, has built several projects focused on the supply chain use case to date. As reported by CoinDesk, the tech firm partnered with Danish shipping giant Maersk earlier this year, completing a live blockchain trial designed to automate documentation processing using smart contracts.

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IT Giant NTT Data Enlists 13 Companies for Blockchain Consortium

Japan's largest IT services firm, NTT Data, has announced a new consortium aimed to investigate use cases for blockchain technology. According to the company, the initiative so far includes 13 different companies drawn from the financial, logistical and trade industries. Notable participants include Mizuho Financial Group, Mitsu Sumitomo Insurance, Nippon Express and Sojitz Corporation. The Bank of Tokyo-Mitsubishi, Toyota Tsusho and Kawasaki Kisen Corporation, and others, are also involved. The effort, which will officially launch on August 30, is expected to run through next spring. Perhaps informing the new group effort, NTT Data is no stranger to blockchain. The IT giant has already completed work on pilot programs for banks looking to test the issuance of letters of credit through blockchain, as well as partnering with insurance companies to explore the technology. The announcement comes during a period of building momentum for blockchain development in Japan, which has even seen government agencies test the use of smart contracts. More recently, a group of Japanese financial institutions successfully tested a prototype that uses distributed ledger technology to streamline international transaction agreements.

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Russia Begins Work on Developing Blockchain Standards

Russia’s national standards authority is working toward the standardization of blockchain and distributed ledger technologies. Russia’s Federal Agency for Technical Regulation and Metrology, also known as Rosstandart, has announced the formation of a new technical committee tasked toward the standardization of “the software and hardware of distributed register and blockchain technologies”. In its announcement, the Rosstandart adds that blockchain technology is “actively spreading” in its adoption across the Russian Federation. “Blockchain is a digital platform that records and verifies transactions in a public and secure manner based on decentralized solutions,” reads a loosely translated excerpt from the statement. “Initially appearing as technologies that facilitate the mechanisms of cryptocurrencies, blockchain technologies are finding more and more fields of application around the world. In recent years, these technologies are quite actively spreading in the Russian Federation.” On a global scale, the International Organization for Standardization (ISO) – commonly seen as the primary global standards authority – appointed Australia to lead an international technical committee with 35 ISO member nations to develop a uniform approach to introduce global standards for the technology. Earlier this year in March, Standards Australia unveiled its roadmap to develop these international standards, overseen by technical committee 307 or ISO/TC 307. Russia’s standards authority references these developments at the ISO whilst adding that it “abstained” from joining ISO/TC 307 at the time of its formation. However, the Russian Federation is now among 20 participating members of the committee. The newly established Russian technical committee will also presuppose international cooperation with the ISO committee. Explaining its reasons for working toward its own standards, Russia’s standards states: [The standards] are designed to raise the development of these technologies to a new level by developing international cooperation, closer interaction, speeding up their acceptance by the public, expanding the methods of their application, and ultimately increasing confidence in such operations. The move by the national standards authority to explore the standardization of blockchain technologies comes at a time when the Russian government is actively considering the introduction of regulations for the decentralized technology in 2019. Herman Gref, chief executive of Sberbank – Russia’s largest bank by assets – has predicted blockchain technology to see commercial applications on a nationwide scale in two years.

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CULedger Credit Union Consortium Launches Blockchain Services Business

A blockchain initiative backed by a group of US credit unions has formed a new service organization dedicated to the tech.As previously reported by CoinDesk, CULedger members are seeking to use blockchain in a bid to reimagine how they exchange data and provide services to their clients.The project has grown steadily since its unveiling in 2016. Now, the credit unions that back it are forming what is known as a credit union service organization, or CUSO, centered around blockchain. A CUSO is a business entity, typically owned by a group of federally chartered credit unions, that provide certain services such as business loan originations or payment card processing.In the case of CULedger, the CUSO will function as a bridging point between all of the credit unions that opt to link up with the project's permissioned ledger.Rudy Pereira, chairman of the CULedger steering committee, said in a statement:"CULedger is an opportunity for credit unions to be leaders of innovation in financial services. Getting involved now in CULedger and CULedger, LCC will offer credit unions the ability to participate in shared-ledger technology that is on path to reshape the credit union industry as a whole in the years to come."While a big step for the group, the new CUSO isn't operational yet. Over the next several months, CULedger will host events for credit unions in a bid to find investors.As part of that search, CULedger will begin looking for a CEO to take the helm of the venture as well.

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Blockchain Will Change the World: Fidelity SVP

It’s no secret that Fidelity is beginning to jump on the cryptocurrency bandwagon. Recent statements by the CEO, as well as the addition of a cryptocurrency holdings partnership with Coinbase, have made the investment house the frontrunner among pro-cryptocurrency institutions. The $2.3 tln investment giant has added cryptocurrencies as a service to investors, but questions still remained regarding the company’s views. Hadley Stern excited about the Blockchain A recent interview with the SVP Hadley Stern revealed more of Fidelity’s notion of where the investment market is moving in light of cryptocurrencies and the Blockchain. Stern is responsible for running the Blockchain incubator at Fidelity and believes that trying to imagine the future of Blockchain technology is like trying to conceive of Facebook or Google on the first day the Internet browser was invented. He said: "I do think [cryptocurrencies] will make things, whether it's Bitcoin or something else, faster and cheaper and create new products and services that we can't even imagine.” The frontrunner among investment houses, Fidelity joins a long list of hedge funds and market analysts who have seen cryptocurrencies as a good bet for investment. As Bitcoin price continues to skyrocket, those investors who refuse to consider Bitcoin are being left in the dust. It may be that the ‘bubble’ is actually the start of mainstream acceptance by a broader swath of the public. Too big to ban Stern also made it clear that governments must embrace Blockchain as something that is here to stay, comparing banning cryptocurrencies to banning the web. The technology is here to stay and attempting to ban or control it is futile, according to the VP.   Stern concluded the interview by expressing his opinion that the power of Blockchain technology will “change the world.”   His comments reflect the buoyant mood among Blockchain enthusiasts and crypto fans alike, especially as the concerns regarding SegWit and Bitcoin have subsided.

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Cryptocurrency is Here - And It's Frightening

Most people who buy a house or a car, or buy things on Amazon, never think about “paying” with cryptocurrency. Most people have no idea how many cryptocurrencies there are (over 1,000), though a lot of people have heard something about Bitcoin. Very few people realize that cryptocurrency is simultaneously a currency, an investment and a technology: you can buy a house with cryptocurrency, speculate with some of your retirement money in cryptocurrency (and eventually invest in cryptocurrency ETFs), and invest in cryptocurrency’s underlying technology (blockchain). Not surprisingly, banks are smarter than politicians about cryptocurrency, and many individuals and start-ups are smarter than banks. The rise of cryptocurrency is roughly analogous to the rise of medical and recreational marijuana. How long will it take “official institutions” – banks, corporations and the government – to discover cryptocurrency opportunities – and threats? Their discovery journey is already well underway.   What do you need to know about cryptocurrency? Identify theft is essentially impossible with cryptocurrency. It’s potentially nefarious: money laundering, among other transactions, is easy. Governments cannot control it – though they can – and will – regulate and tax it (principally through investment instruments). It’s available and immediate. More and more businesses will accept it – because they will have no choice. It’s volatile: the value of Bitcoin and Ethereum, for example, have swung wildly over the past couple of years. It’s enabled by a technology called blockchain, which according to Portia Crowe offers an alternative to traditional transaction processing: “Blockchains are ledgers (like Excel spreadsheets), but they accept inputs from lots of different parties. The ledger can only be changed when there is a consensus among the group. That makes them more secure, and it means there's no need for a central authority to approve transactions.” What should you do? Play with cryptocurrency: create your own digital wallet. Convert some conventional money into Bitcoin, Ethereum, Litecoin or Ripple, and experiment with how it works. Consider sites like Coinbase to get started. There are others. Track the investment instruments beyond individually buying/selling cryptocurrencies online. Exchange Traded Funds (ETFs) will arrive soon, after some hiccups with the US SEC. There are other investment options including publicly traded funds, hedge funds and private buy-and-hold funds, according to Kevin Gao. They all come with opportunity and risk.  (You should speak to investment professionals before risking meaningful money.) Assess your industry’s appetite for change, experimentation and alternative payment systems; track industry progress as well as the technological infrastructure required to expand the use of cryptocurrency. Why is cryptocurrency “here” and “frightening”? It’s here because it provides a safer, faster and cheaper way to transact.  It’s also here because organic growth will stimulate massive institutional interest and offerings.  Even the payment incumbents will come around and proactively champion their cryptocurrency offerings. It’s inevitable because it’s anonymous and secretive. Which gets us to “frightening.” Any time an established process – in this case, payment systems can be replaced by another better/faster/cheaper one there are repercussions. Amazon’s continued assault on brick-and-mortar retail, Uber/Lyft alternatives to taxis, and Airbnb as replacements for hotels are just a few examples of how disruptive alternatives can be – especially if they’re measurably better/faster/cheaper.

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Square CEO: Blockchain Can Help Solve 'So Many Problems'

Jack Dorsey, the CEO of both Twitter and Square, recently said he believes blockchain can be used to solve problems in a range of different areas. Speaking in an interview with tech media publication The Verge, Dorsey described the technology as the "next big unlock", arguing that it has a plethora of applications beyond payments and the like. "There are so many problems we can help solve [with blockchain] that are not just related to finance, but finance is an obvious one," he told the site. That said, Dorsey cautioned against trying to reach too far in applying the tech, decrying the push to try and solve "every single problem with it. He went on to say: "I think we need to be more thoughtful. What are people struggling with? How does the technology help them progress or does it distract them?" Speaking about bitcoin specifically, Dorsey said that he's hearing from a number of people close to him about investing in those markets, expressing surprise at the degree of interest. "It's not about the currency at all to these people who asked me. It's about the investment," he concluded.

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Microsoft’s Coco Framework Aims to Speed Up Blockchain Adoption

Microsoft has revealed today that it is working on a new technology that will boost the adoption of the blockchain by enterprises. The multinational technology company said that it had created a system called the Coco Framework, which stands for Confidential Consortium. When implemented into blockchain networks it will solve privacy, speed and governance issues for commercial adoption, reports Reuters. The CoCo platform is aiming to solve these issues through the introduction of a trusted execution environment (TEE) and advanced algorithms. The idea is that you place your blockchain code in a trusted area, which is established through tools such as Intel’s Software Guard Extensions (SGX) or Windows Virtual Secure Mode (VSM), which then supports other compatible TEEs. This then creates a trusted network that agrees on the CoCo code and ledger, removing the need to perform a proof-of-work, thereby increasing the transaction speed. In its prototype setup, Microsoft said that Coco and ethereum – one of the distributed ledgers to integrate with the framework – were able to handle up to 1,600 transactions per second. In comparison, Visa is able to process 24,000 transactions in the same time. R3 Corda, Intel’s Hyperledger Sawtooth and JPMorgan Quorum are some of the open source blockchain and distributed ledgers that will integrate with the new CoCo platform. Mark Russinovich, chief technology officer of Azure, Microsoft’s cloud computing division, said: We expect this to be the foundation for blockchain for enterprise. We think blockchain is going to potentially transform every industry. CoCo will be ready and made open source by 2018.