Blockchain buzz - getting to the bottom of distributed ledger technology

© Lacuna Innovation Ltd. 2019
BLOCKCHAIN BUZZ: GETTING TO THE BOTTOM OF DISTRIBUTED LEDGER TECHNOLOGY
PAGE 1
BLOCKCHAIN
BUZZ:
Getting to the
Bottom of
Distributed
Ledger
Technology

PAGE 2
CONTENTS
Getting to the bottom of Distributed Ledger Technology (DLT)
Blockchain Buzz – What’s all the Hype About?
What is Distributed Ledger Technology?
Industry Applications Of DLT
Impact and Opportunites
03
04
05
06
12

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GETTING
TO THE
BOTTOM OF
DISTRIBUTED
LEDGER
TECHNOLOGY
The term ‘blockchain’ is everywhere these days, with what
seems to be hundreds of startups claiming that their
blockchain product is the solution to all the world’s problems,
affecting diverse sectors including banking, healthcare, supply
chain management and information security. However, while
the word ‘blockchain’ is thrown around a lot, many people aren’t
aware of its applications — or even what exactly it is, primarily
associating it with Bitcoin, the cryptocurrency which is largely
responsible for the technology’s notoriety. Let’s take a closer
look at blockchain — or distributed ledger technology — to see
what all the fuss is about, beyond the buzz.
A distributed ledger, also known as a shared ledger or
distributed ledger technology (DLT), is a consensus of
replicated, shared, and synchronised digital data that is
geographically spread across multiple sites, countries, or
institutions and has no central administrator or centralised
data storage. Distributed ledgers have been gaining popularity
around the world due to their decentralised control of
information and transactions among users, which has the
potential to drastically reduce transaction time, and allows for
24/7 services.
Distributed ledger technology (DLT) is an umbrella term to
designate numerous multi-party systems that operate with
no central operator or authority (‘decentralised’) despite
operating in an environment where unreliable or malicious
parties may be present (an ‘adversarial environment’). The
buzzword ‘blockchain’ simply refers to a subset of DLT that uses
a particular data structure consisting of a chain of hash-linked
blocks of data. The conceptual emergence of DLT dates back
to 1982, while blockchain’s earliest occurrence can be traced
to 1991. A distributed ledger may or may not have a ‘block’ data
structure and simply represents a type of database dispersed
across multiple areas and participants.
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PAGE 4
BLOCKCHAIN
BUZZ – WHAT’S
ALL THE HYPE
ABOUT?
Blockchain’s decentralised and immutable ledgers are
more secure and convenient for financial transactions,
making it a popular choice for digital currencies (also
known as cryptocurrencies). Its use extends to utilities
including the recording international money transfers
and keeping tamper-proof logs of shareholder records.
The recent hype surrounding Bitcoin triggered a surge in the
research of blockchain technology, spurring governments,
businesses, economists and enthusiasts to consider ways
of its application in different fields. Built on a blockchain
infrastructure, Bitcoin is a cryptocurrency that bypasses
traditional financial institutions, and allows for near-
instantaneous, secure and inexpensive transactions. It
gained notoriety as an anonymous form of currency used to
conduct illegal business online and for its highly speculative
status: its wild fluctuations in price both attract and repel
investors. Released in 2009 by Satoshi Nakamoto, the first
known commercial transaction with Bitcoin was made by
programmer Laszlo Hanyecz, who bought two Papa John’s
pizzas for 10,000 Bitcoins (about USD $30 at the time). At the
height of what has become known as the Bitcoin bubble, a
single Bitcoin was worth $19,783. The success of Bitcoin led
to the launch of several alternative cryptocurrencies, also
known as ‘altcoins’. It remains to be seen whether Bitcoin and/
or other cryptocurrencies will eventually supersede the current
financial system.
Beyond cryptocurrencies, a growing number of companies
are exploring the applications of blockchain in diverse fields
including music streaming, social networking, commodities
trading and property registries. The April 2019 Forbes list of 50
big companies actively exploring blockchain includes Amazon,
Anheuser-Busch InBev, Ant Financial, Citigroup, CVS Health,
Facebook, Google, IBM, Intel, JPMorgan Chase, Mastercard,
Microsoft, MetLife, Nestlé, Samsung and Walmart. While
blockchain and Bitcoins attract most of the attention, the
underlying technology — distributed ledger technology — has
the potential to completely transform a number of industries.
2
Some 61% of high-profile
digital companies worldwide
are investing in blockchain
as of April 2019.
Blockchain and
cryptocurrency startups
raised almost USD $3.9
billion from venture
capitalists from Q1 to Q3
in 2018, which represents a
280% increase in comparison
to data from 2017.

PAGE 5
WHAT IS
DISTRIBUTED
LEDGER
TECHNOLOGY?
Largely popularised by blockchain, distributed ledger
technology essentially refers to a decentralised
method of record-keeping and processing data, such
as transactions. Due to its decentralised nature
and the difficulty of altering information, DLT is
considered more secure than traditional databases.
DLT applications include banking, supply chain
optimisation, and asset and information management,
among a plethora of other industries.
A distributed ledger comprises a database that is spread
across several computing devices, also known as nodes. The
data is replicated and saved as identical copies of the ledger
on each node, which updates itself independently. The ledger
is independently constructed and recorded by each node
instead of a central authority. The nodes then ‘vote’ on these
updates to reach a majority agreement or consensus on one
version of the ledger, which is conducted automatically by a
consensus algorithm. Once this is completed, the distributed
ledger is automatically updated and the latest, agreed-upon
version is saved on each node separately.
Blockchains are a form of DLT where the data is grouped
together and organised in blocks which are then linked to
one another and secured using cryptography. Its append-
only structure allows for the addition of data to the database;
however, altering or deleting previously entered data on earlier
blocks is not possible. This makes blockchain highly suitable
for applications such as recording events, managing records,
processing transactions, tracing assets or chain of custody, as
well as voting.
Distributed ledger technologies help to reduce the cost
of trust while mitigating our dependence on banks,
governments, lawyers, notaries and regulatory compliance
officers. US fintech company R3’s Corda is an example of a
distributed ledger used in the financial system. It empowers
businesses to transact directly and in strict privacy using
smart contracts, reducing transaction and record-keeping
costs and streamlining business operations.
3

PAGE 6
INDUSTRY
APPLICATIONS
OF DLT
Besides its obvious usefulness to the banking and
financial sector, DLT has applications in a wide range
of fields. Use cases include leveraging the technology
to increase transparency in nonprofits and charities,
verify academic degrees to minimise fraudulence, verify
product quality in the retail industry, solve problems
relating to royalties in the music industry, and to
generate digital identification for migrants and other
undocumented people — among others. For example,
blockchain-powered marketplace TEND uses the
technology to tokenise the ownership of collectables,
allowing investors to partially own luxury items instead
of the entire item. The pages that follow look at some of
the key industry use cases for DLT.
BANKING
In the banking and financial sector, distributed ledger
technology can be used to build digital wallets and ledgers that
serve as a means to store and transfer valuable assets, record
details of business processes and sensitive information. It
effectively creates secure records of transactions and serves
as a time-stamp that cannot be tampered with, fostering
transparency. This helps to shorten the verification process
with regards to data concerning financial assets while reducing
the cost of processing, increasing convenience, and building
trust in the marketplace.
DLT is being adopted by the banking sector in the form of
a central bank digital currency (CBDC), which is a digitised
version of fiat currency, i.e. the central bank issues new money
equivalent to — and redeemable for — its domestic currency.
More than 40 central banks around the world are currently,
or soon will be, researching and experimenting with CBDC,
according to a January 2019 report by the Bank for International
Settlements (BIS) in Basel, Switzerland. CBDC has attracted the
attention of the central banking community due to its potential
to address challenges such as financial inclusion, payments
efficiency, payment system operations and cyber resilience.
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PAGE 7
A number of financial services companies are venturing into
DLT territory. J.P. Morgan Chase has been researching the
use cases of blockchain technology since 2015 through its
‘Quorum’ division, which is dedicated to researching and
implementing blockchain technology applications. In February
2019, the firm introduced the first prototype of its blockchain
settlement product: JPM Coin, which is a stablecoin backed
1:1 by its fiat reserves. A stablecoin is a type of cryptocurrency
that is designed to maintain a stable value, rather than
experiencing significant price changes, as is the case with
Bitcoin. Meanwhile, Bank of America has filed patents related
to blockchain technology while Goldman Sachs has introduced
crypto options and additionally opened a trading desk
exclusively for digital trading.
Dutch bank ABN AMRO announced in May 2019 that it will
launch a digital blockchain platform to get real-time insight
into trade inventories, which often serve as collateral for loans.
Named Forcefield, the platform uses Internet of Things (IoT)
and near-field communication (NFC) chips to communicate
with physical trade inventories, allowing for more effective
monitoring. In addition to ABN AMRO, companies that have
signed a memorandum of understanding to launch Forcefield
include Accenture, Anglo American, CMST International,
Hartree Partners, ING Bank, Macquarie, Mercuria and OCBC
Bank.
In May 2019, Thailand’s largest and oldest bank, Siam
Commercial, announced that it is experimenting with a
blockchain app powered by Ripple. Recently, its plan surfaced
online after its users shared images of the Ripple-based app for
cross-border transactions on Twitter. It’s unclear whether the
system will make use of Ripple’s XRP cryptocurrency.
In May 2019, global funds network Calastone announced
the launch of Distributed Market Infrastructure (DMI), which
uses blockchain to help its clients (some 1,800 companies)
to manage transactions for the mutual fund sector. The
blockchain-based market infrastructure will allow all
participants across the fund’s world to work together and view
trading activity in real-time. The UK-based company estimates
that blockchain can save the industry some £3.4 billion ($4.3
billion) per year.

PAGE 8
SUPPLY CHAIN MANAGEMENT
In increasingly complex, often international supply chains —
involving numerous stages and stakeholders — there is often
a lack of transparency and accountability, which can lead to
financial losses. Due to DLT’s decentralised nature and its
efficient and scalable design, involving it in managing the
supply chain and logistics industry is expected to significantly
improve operational efficiency, transparency and convenience,
helping to streamline processes from warehousing to delivery
and payments. Use cases in supply chain management vary
from industry to industry. In the food industry, for instance,
Walmart uses blockchain to trace the pork that it sources from
China from source to shelf. Other companies using blockchain
for similar purposes include Unilever, Nestlé, Tyson and Dole.
In the mining sector, BHP Billiton uses blockchain to track the
mining process and share the data with its vendors in order
to increase efficiency and build effective communication with
partners. Similarly, in the diamond industry, De Beers uses
blockchain to track stones from mining to retail, verifying
authenticity and avoiding conflict or ‘blood diamonds’.
Another DLT application in supply chain management is in
cold chains. Cold chains are supply chains that distribute
heat-sensitive products such as medicine and dairy in carefully
monitored and temperature-controlled environments. As the
process requires a delicate balance of different elements, the
resulting distribution system is complex. It analyses, controls,
measures, documents and validates products to avoid possible
spoilage that has the potential to seriously harm consumers
— not to mention result in wastage, profit losses and even
lawsuits. Blockchain can be used to assign a cryptographically
unique identifier to every single product at the start of the cold
chain. Used in tandem with internet of things (IoT) technologies
such as wireless temperature and humidity sensors, these
can be closely and carefully monitored while documenting
the storage temperature and other factors throughout the
product’s journey. IoT technologies used to this end could
include devices that measure environmental factors such
as temperature and humidity or even advanced packaging
technology that automatically creates logs on the blockchain
archive which can be checked by stakeholders and even alert
them in the case of abnormalities.
The trucking industry is another potential area of application of
DLT. Experts estimate that some $140 billion tied up payment
disputes in the transportation industry every day. In January
2018, IBM and Danish shipping giant Maersk announced that
they are teaming up to form a new company — Trandelens
— to help shippers, ports, customs offices, banks and other
stakeholders in global supply chains to replace related
paperwork with tamper-resistant digital records to better track
contracts and transactions. The duo performed an experiment
by tracking a shipping container of flowers from Mombasa,
Kenya, to Rotterdam, the major port in the Netherlands. They
found that the refrigerated container went through over
30 different organisations and required over 200 separate
communications. Any lost form or delayed approval could result
in the container being held in port indefinitely or getting lost
and the cargo spoiling.

PAGE 9
The trucking industry is another potential area of application of
DLT. Experts estimate that some $140 billion tied up payment
disputes in the transportation industry every day. In January
2018, IBM and Danish shipping giant Maersk announced that
they are teaming up to form a new company — Trandelens
— to help shippers, ports, customs offices, banks and other
stakeholders in global supply chains to replace related
paperwork with tamper-resistant digital records to better track
contracts and transactions. The duo performed an experiment
by tracking a shipping container of flowers from Mombasa,
Kenya, to Rotterdam, the major port in the Netherlands. They
found that the refrigerated container went through over
30 different organisations and required over 200 separate
communications. Any lost form or delayed approval could result
in the container being held in port indefinitely or getting lost
and the cargo spoiling.
100 major Japanese manufacturers including Mitsubishi
Electric and Yaskawa Electrik are set to share production data
with each other to improve efficiency, using blockchain. Set
to begin in the spring of 2020, the aim is to improve efficiency,
minimise data breach risk, and reduce operating costs. The
project will be overseen by the Industrial Chain Initiative, a
manufacturers’ group launched in 2015 to promote the Internet
of Things in Japan.
Swiss luxury watchmaker Vacheron Constantin announced in
June 2019 that it will use blockchain technology and QR codes
to authenticate its watches. The company is piloting forgery-
proof digital certificates to provide authenticity to its watches
so that they can be easily transferred to new owners.
Starbucks is working with Microsoft to use its Azure
Blockchain Service to track coffee shipments and bring digital,
real-time traceability to its supply chains. Starbucks wants to
give its customers access to more knowledge about its coffee
products, including details like where the coffee was sourced
and roasted.

PAGE 10
HEALTHCARE
Blockchain technology can be used in the healthcare industry
for tasks ranging from managing patient files to tracking the
supply chain of drugs and managing prescription renewals,
helping to combat problems like opioid addiction. Data as
sensitive and private as individuals’ health records is currently
being stored in fragmented and inefficient systems, often in
paper files and old computers. This makes the information it
contains difficult to access when needed and puts it at risk
of being lost or corrupted — or stolen. Using DLT’s secure,
immutable and easily accessible platform could help to
solve this problem, helping to reduce the time to track down
information across systems and improve the field of healthcare.
This could help to bring about transformative changes in
research while empowering patients with the ownership of
their data and improve the continuity of care, particularly in
medically underserved areas and for undocumented people.
DLT could give patients increased control over their data and
privacy and additionally help them to use it in conjunction with
health tracking devices and apps to gain greater insight into
their wellbeing and improve preventative care. Additionally,
sending, receiving and accessing medical data becomes
cheaper when these are maintained through DLT.
The use of DLT could help resolve trust issues through
cryptography as different parties involved do not need to trust
one another or third parties and can rely on the immutable
data stored in the platform. Implementing a robust system that
uses DLT could additionally help to minimise the risk of data
losses and cyberattacks that frequently plague the healthcare
industry. London-based startup MedicalChain has developed a
platform that allows patients to control access to their medical
records. Another startup, PokitDok, uses ‘DokChain’ to facilitate
data exchange in the medical field, while ‘Mediledger’ is using
DLT to track the medical supply chain in a similar manner
to how other companies are tracking food or aeroplane part
supply chains.
Robomed combines AI and blockchain to offer patients a
single point of care. The company deploys chatbots, wearable
diagnostic tools and telemedicine sessions to gather patient
data and share it with the patient’s medical team. Robomed’s
Panacea platform engages patients in smart contracts that
incentivise them and guide them on the path to better health.
Patientory’s platform enables patients, healthcare providers
and clinicians to access, store and transfer important health-
related information via blockchain technology, whose end-to-
end encryption ensures that patient data is shared safely and
efficiently. Patientory helps the healthcare industry to remove
pain points from current healthcare environments.
Blockpharma offers a solution to drug traceability and
counterfeiting. By scanning and verifying products at each
node in the supply chain, the company facilitates complete
transparency and prevents counterfeit medications. Its app
also allows patients to verify their medicines, allowing them to
avoid falling victim to the 15% of all medicine worldwide that is
counterfeit.

PAGE 11
INFORMATION MANAGEMENT AND SECURITY
As ever more digitally-stored data is being generated, it is
increasingly important for governments, companies and
individuals to protect this information from access by
unauthorised entities that may destroy or misappropriate the
data. Data security — and with it, cybersecurity — is a growing
concern for a number of industries and a growing industry
in itself. Moreover, in an era of ‘deep fakes’, data veracity or
authenticity is a key concern. Distributed ledger technology has
the potential to vastly improve data security while reducing the
number of checkpoints required for validation. As DLT records
are immutable and not controlled by a central system, the
authenticity of data points is ensured.
In business, data collected from customers contains their
sensitive information, which must be protected from attacks
by cybercriminals when stored in centralised storage. Using
DLT to decentralise it significantly reduces the risk of a breach
as hackers no longer have a single point of entry. Another area
where DLT could provide added security against hackers is in
the field of data exchanges between connected IoT devices
such as doorbells, security cameras and the like.
Speaking at the Korea Future Forum 2019 & Blockchain Tech
Show, Seoul mayor Park Won-soon, announced that the city
will launch a number of blockchain and AI initiatives. One such
initiative will be blockchain-based Seoul citizen cards that will
provide citizens with easy access to various administrative
services. Seoul already uses blockchain in its e-voting system
and its used car selling system is also blockchain-based.
The Russian state of Nizhny Novgorod is reportedly testing
a blockchain-based application, ‘City N’, for managing public
administration tasks. Using the application, residents will
be able to file their taxes on the blockchain-based platform,
Vostok. It also allows Nizhny Novgorod residents to verify their
identity and tax payments and get involved in ‘participatory
budgeting’. The project will be overseen by state-owned Russian
holding company Rostec, which has proposed a five-year
national blockchain strategy that will purportedly generate
some $25.4 billion.
Alibaba is set to utilise blockchain technology to upgrade its
intellectual property system across its global enterprises and
brands. The system will purportedly allow electronic deposits
from international brands to directly link to the Internet
Court through the blockchain-based Ali Intellectual Property
Protection Platform, providing a basis for litigation rights
protection.
In a partnership with the Decentralized Identity Foundation,
Microsoft is reportedly using the Bitcoin blockchain in a new
project named ‘Identity Overlay Network’ or ION, to enhance
online security. The project will use blockchain to create
decentralised identifiers (or DIDs) to represent individuals
online, giving them greater control over their data and privacy
— instead of being at the mercy of tech giants like companies
like Microsoft and Google.

PAGE 12
IMPACT AND
OPPORTUNITIES
Regardless of what industry you’re in, blockchain and
distributed ledger technology are bound to feature
significantly.
In the financial sector alone, DLT is set to cause significant
disruption by facilitating more seamless, secure and affordable
transactions — particularly on an international level. Whether
or not you buy into the Bitcoin hype, cryptocurrency is a
game-changer for the banking and finance industry and we
can expect to see many more iterations in the future, with the
possibility of ultimately arriving at a global digital currency.
Due to its capacity to be used to create smart contracts, DLT
will likely see much adoption for the purposes of automation
of systems and processes that involve multiple stakeholders.
DLT is also poised to completely transform the way we track
information and secure important records. Moreover, its use as
a tool for promoting transparency and supply chain integrity is
still in its infancy and is certain to have a profound impact on a
number of industries.
4

ABOUT LACUNA
These are just a few of the trends and opportunities emerging in the nascent distributed
ledger industry. To find out more about how this industry is transforming and how your
company can take advantage of these shifts, contact Lacuna Innovation. Our innovation
experts can help you to identify unmet consumer needs and opportunities and help you
map a path to implementation.
Lacuna Innovation is a boutique consultancy that helps global organisations to sustainably innovate new
products, services and business models by combining trend, insight and commercial expertise in one
place. We identify new growth opportunities, immerse ourselves in markets and build in-house innovation
capabilities to achieve lasting impact.
Harnessing an environment of tangible tech and creative collaborations, we can help you bring identified
opportunities and concepts to life through experimentation and prototyping. With offices in Cape Town,
Johannesburg, London, and Mauritius we have global recognition, credibility and reach, which allows us
to be at the forefront of Front-End Innovation (FEI).
We are innovation architects in the business of building tangible and sustainable futures. We work with
companies to facilitate their innovation efforts, using our proprietary innovation methodology.
We are not a branding or advertising agency. We seek opportunities for our clients to ensure that they
remain competitively innovative. We identify and monitor trends that impact our clients’ businesses, and
assist them in identifying innovation opportunities to be pursued through focused research, a series of
workshops, and a unique understanding of the unmet needs of consumers. Our proactive approach to FEI
allows us to move beyond concept development to developing Proof-of-Concept design, prototyping and
ultimately, commercialisation.
To find out how we can help you, reach us at hello@the-lacuna.com

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