Blockchain Foundations: For the Internet of Value

Blockchain Foundations for the Internet of Value

Mary C. Lacity

An imprint of The University of Arkansas Press

Arkansas, USA

An Epic Books publication

(Imprint of The University of Arkansas Press)

Cover design:

Nick Sample

www.nicksample.co.uk

Editor & layout designer:

Steve Brookes

SB Publishing

Stratford-upon-Avon, UK

www.sbpublishing.org

Cover artwork image:

Synchonicity of Colour: Blue by Margo Sawyer, 2008

www.margosawyer.com

Installation at Discovery Green, Houston, Texas, USA

www.discoverygreen.com

Author:

Mary C. Lacity

Published in 2020 by:

Epic Books (an imprint of University of Arkansas Press)

Text copyright © 2020 Mary C. Lacity

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. The right of Mary C. Lacity to be identified as the author of this work has been asserted by her in accordance with the Copyright, Designs, and Patents Act 1988. All enquiries regarding any extracts or re-use of any material in this book should be addressed to the publisher.

ISBN: 978-1-682261-57-6

Printed and bound in the USA by University of Arkansas Press

ISBN-13: 978-1-61075-745-4 (electronic)

Contents

Figures and Tables

Foreword by Don Tapscott

Author’s Acknowledgements

Publication credits

About the research

Why executives, professionals, and students should learn about blockchains

PART I: Blockchain Foundations

Chapter 1: Moving to the 'Internet of Value'

1.1. Something big is afoot

1.2. Bitcoin: A new solution to some very old problems

1.3. Blockchain communities

1.4. Beyond Bitcoin

Chapter 2: The Global Blockchain Landscape

2.1. Overview of the landscape

2.2. The cryptocurrency market

2.3. Blockchain investment

2.4. Blockchain players

2.5. Blockchain indices

2.6. Blockchain’s technology hype cycle

2.7. Conclusion: The landscape shifts rapidly

Chapter 3: The Blockchain Application Framework

3.1. Introduction

3.2. Trade before and after a blockchain

3.3. The blockchain application framework

3.4. Blockchain’s distributed ledger vs. traditional distributed databases

3.5. Mapping Bitcoin to the blockchain application framework

3.6. Conclusion

PART II: Business Application Examples

Chapter 4: Business Applications for Financial Services

4.1. Overview of the cases

4.2. Global payments before blockchains

4.3. Ripple

4.4. Stellar

4.5. WeTrade

4.6. Santander

4.7. Conclusion

Chapter 5. Business Applications for Supply Chains

5.1. Overview of the cases

5.2. Challenges and solutions for food safety

5.3. Everledger

5.4. VeriTX

5.5. Conclusion

Chapter 6. Business Applications for Energy

6.1. Overview of the cases

6.2. LO3 Energy

6.3. Share&Charge

6.4. Conclusion

Chapter 7: Business Applications for Credentials

7.1. Overview of identity and credentials

7.2. Talent acquisition challenges

7.3. SmartResume

7.4. Conclusion

PART III: Road to Maturity

Chapter 8: Technical Challenges and Emerging Solutions

8.1. Introduction

8.2 Resource consumption

8.3. Security

8.4. Performance and scalability

8.5. Anonymity

8.6. Confidentiality

8.7 Interoperability

8.8. Conclusion

Chapter 9: Mindshifts, Strategies and Action Principles

9.1. Making enterprise blockchains a reality

9.2. The blockchain mindset: coopetition and shared governance

9.3. Selling the C-suite

9.4. Blockchain strategy: an ecosystem perspective

9.5. From idea to development

9.6. Design principles

9.7. From deployment to critical mass

9.8. Conclusion

Chapter 10: The Future of Blockchains

10.1 Introduction

10.2. Butterfly defects

10.3 Ethical blockchains by design

10.4. Blockchain visionaries: In their own words

10.5. Conclusion

Glossary

Index

Figures and Tables

Figures

Figure 0.1   Blockchain ledgers use triple-book accounting

Figure 0.2   Challenges to realizing an ‘Internet of Value’, particularly for enterprises

Figure 1.1   Trusted-Third Parties & Governments vs. Bitcoin: Different solutions to old and new problems

Figure 2.1   The global blockchain landscape as of Q1 2020

Figure 2.2   Market size comparisons

Figure 2.3.   Traditional vs. new funding models in blockchain startups

Figure 2.4   Ten largest VC blockchain deals

Figure 2.5   Global companies adopting blockchain technologies

Figure 2.6   Blockchain consortia by industry

Figure 2.7   Hyperledger’s projects as of 2020

Figure 2.8   Example of how GS1 standards work in concert to track items through a supply chain

Figure 2.9   US GAO map of US regulatory environment

Figure 2.10 Blockchain patents awarded in China and the US

Figure 2.11 Number of 10-K reports that included the terms ‘blockchain’ or ‘distributed ledger

Figure 2.12 Gartner’s mapping of blockchains through its Technology Hype Cycle

Figure 3.1   Trade before and after a shared blockchain application

Figure 3.2   Components of a blockchain application

Figure 3.3   Examples of three distributed ledger structures

Figure 3.4   Ledger structure for a continuous ledger process

Figure 3.5   Iota’s tangle structure

Figure 3.6   A private–permissioned blockchain with a gatekeeper to enforce the rights of access

Figure 3.7   Quorum has public and private states stored on a single blockchain

Figure 3.8   EY’s WineChain solution

Figure 3.9   Three examples of the SHA-256 hash function

Figure 3.10 Proof of digital asset ownership using private-public key pairs

Figure 3.11 Proof-of-Work vs. Proof-of-Stake

Figure 3.12 Practical Byzantine Fault Tolerance (PBFT) consensus process

Figure 3.13 Advantages and disadvantages of Proof-of-Work, Proof-of-Stake and PBFT

Figure 3.14 Blockchain use cases

Figure 3.15 The ‘trust boundary’ as the distinguishing difference

Figure 3.16 Bitcoin mapped to the blockchain application framework

Figure 3.17 Example of a web-based and mobile digital wallet interface to Bitcoin

Figure 3.18 A screenshot of a website to view Bitcoin’s blockchain

Figure 3.19 An example of a transaction stored on Bitcoin’s public ledger

Figure 4.1   A simplified example of cross-border payments before blockchains

Figure 4.2   A high-level depiction of two banks using Ripple

Figure 4.3   Ripple mapped to the blockchain application framework

Figure 4.4   Live Ripple ledger on March 22, 2020

Figure 4.5   Live Ripple network topologyn March 23, 2020

Figure 4.5   A blockchain application for cross-border payments

Figure 4.6   Stellar mapped to the blockchain application framework

Figure 4.7   Example of a Stellar ledger showing the header and the first two transactions

Figure 4.8   WeTrade product overview

Figure 4.9   Active trade finance consortia in 2019

Figure 4.10 Digital blockchain bond issuance and settlement workflow

Figure 4.11 Ethereum’s records of Santander’s ERC-20 token (SUSD) as of March 25, 2020

Figure 4.12 Santander bond mapped to the blockchain application framework

Figure 5.1.   Global supply chains before a blockchain application

Figure 5.2   Overview of the IBM Food Trust solution

Figure 5.3   Example of tracing a Patagonian tooth fish

Figure 5.4   Grass Roots blockchain solution

Figure 5.5   Everledger’s digital identifier for a fair trade diamond

Figure 5.6   VeriTX’s blockchain end-to-end solution

Figure 5.7   Creating unique IDs from 54,000 unique surface areas for metal parts

Figure 5.8   VeriTX’s strategic partners as of 2020

Figure 6.1   Exergy’s transactive energy stack

Figure 6.2   Example of LO3 hardware

Figure 6.3   Site of proof-of-concept test on President Street in Brooklyn, New York

Figure 6.4   Gowanus and Park Slope neighborhoods of Brooklyn, New York

Figure 6.5   Example of mobile app interface for Brooklyn microgrid project

Figure 6.6   Pando: Bringing utility providers into the solution

Figure 6.7.   Share&Charge mobile app

Figure 6.8   First generation Innogy charging station with embedded Ethereum node

Figure 7.1   From centralized to decentralized control before and after the ‘Internet of Value’

Figure 7.2   Example of SmartResume®’s certified badges

Figure 7.3   An example of a SmartResume as viewed by a hiring organization

Figure 7.4   Screenshot for SmartResume holders as of March 2020

Figure 7.5   Business and technical domains of a blockchain application

Figure 8.1   Bitcoin mining site in Bowden Sweden

Figure 8.2   EZ Blockchain Mining

Figure 8.3   Bitcoin’s largest winning mining pools on February 18, 2020

Figure 8.4   Ethereum’s largest winning mining pools on February 18, 2020

Figure 8.5   A Bitcoin transaction that occurred in Block 400000 on Feb 25, 2016

Figure 8.6   Meta patterns that can arise from a blockchain’s transparency

Figure 8.7   Jellybean example for a challenge-response zero-knowledge proof

Figure 8.8   A Sudoku puzzle and its solution

Figure 8.9   An example of a Monero transaction

Figure 8.10 Channels in Hyperledger Fabric

Figure 8.11 Blockchain interoperability projects

Figure 8.12 Proof-of-Burn is one way to 'destroy' assets on one blockchain and 'recreate' them on another

Figure 8.13 Blockchain time delays in cross-chain transactions

Figure 8.14 Single notary

Figure 8.15 Accenture’s interoperability node

Figure 8.16 Multiple notaries

Figure 8.17 Cross-chain transactions using Simple Payment Verification (SPV) proofs

Figure 8.18 Conceptual rendering of a Hash-Time Locked Contract (HTLC)

Figure 8.19 The Interledger Protocol

Figure 9.1   Action principles for making enterprise blockchain-enabled solutions a reality

Figure 9.2   Three levels of coopetition

Figure 9.3   Example of a participant pledge

Figure 9.4   Blockchain governance models

Figure 9.5   Dilbert’s boss is confused by blockchains

Figure 9.6   Five attributes of innovations

Figure 9.7   KoreConX’s onboarding process

Figure 9.8   Three influences that pressure institutions to conform

Figure G.1  Example of a block header for Bitcoin

Figure G.2  Distributed ledger structured as a chain of blocks

Figure G.3  Delegated Proof-of-Stake (DPoS) voting process

Figure G.4  Distributed ledger structured as a trangle of transactions

Figure G.5  Bitcoin's Elliptic Curve Cryptography

Figure G.6  Hard forks vs. soft forks

Figure G.7  Merkle tree

Figure G.8  Three network structures

Figure G.9  Practical Byzantine Fault Tolerance (PBFT) consensus process

Figure G.10 Example of a private–public key pair

Figure G.11 Proof-of-Authority: Authorised nodes take turns in creating blocks

Figure G.12 The Proof-of-Work mining competition algorithm

Figure G.13 Machine readable QR code for the University of Arkansas

Figure G.14 Silk Road website screenshot

Tables

Table 2.1.   Comparison of ICOs, STOs, and IEOs

Table 2.2   Examples of professional and IT services firms with blockchain practices

Table 2.3   Blockchain standards initiatives

Table 2.4   Examples of GS1 data standards

Table 2.5   Examples of GS1 electronic standards

Table 3.1   Trade before and after a blockchain application

Table 3.2   Types of blockchain networks

Table 3.3   Public-permissionless blockchains

Table 3.4   Public-permissioned blockchains

Table 3.5   Decimal to hexadecimal conversion

Table 3.6   Code base release dates

Table 4.1   Blockchain application examples for financial services

Table 5.1   Blockchain application examples for supply chains

Table 6.1   Blockchain application examples for energy

Table 7.1   Blockchain application example for credentials

Table 8.1   Examples of performance and scalability solutions

Table 9.1   Strategic intents of blockchain applications

Table 10.1 Ethical design principles

Foreword by Don Tapscott

Blockchain: An idea that has become a necessity

This is one of those rare turning points in history and Mary Lacity’s enormously helpful and instructive book Blockchain Foundations for the Internet of Value is a timely one. The COVID-19 pandemic will profoundly change our behavior and society. Many institutions will come under scrutiny and, we hope, change for the better.

At the Blockchain Research Institute, we’re doing our part to facilitate positive change. Technologies like artificial intelligence, the Internet of Things, augmented/virtual reality, and above all, blockchain, are more relevant than ever—not just to business and the economy but to the future of public health and the safety of global populations. Traditional systems have failed us and it’s time for a new paradigm. To build on Victor Hugo, Nothing is more powerful than an idea that has become a necessity. To avoid and manage pandemics the world needs the Internet of Value. It’s time for a new paradigm.

In Blockchain Revolution, Alex Tapscott and l argued this Internet of Value represents a second era of the Internet. The first era was defined by information—the Internet of Information, a peer-to-peer mechanism for communicating information and collaborating online. While it has enabled companies to interact directly with consumers, take orders online, and deliver digital goods, services, and experiences, it has not fundamentally changed how we do business. Companies and markets are still vertically or horizontally integrated hierarchies, relatively opaque and insular, and relatively slow to change. We can say the same of public institutions.

With the Internet of Information, we have to rely on powerful intermediaries to exchange things of value. Governments, banks, digital platforms such as Amazon, eBay, and AirBnB, and universities do the work of establishing our identity, vouching for our trustworthiness, and helping us to acquire and transfer assets and settle the transactions.

Overall, they do a pretty good job—but there are limitations. They use centralized servers, which can be hacked. They take a piece of the value for performing this service—say 10 percent to send some money internationally. They capture our data, not just preventing us from using it for our own benefit but often undermining our privacy. These intermediaries are sometimes unreliable and often slow. They exclude two billion people who don’t have enough money to justify a bank account, let alone an education. Most problematic, they are capturing the benefits of the digital age asymmetrically.

We posed the question: What if there was an Internet of value—a global, distributed, highly secure platform, ledger, or database where we could store and exchange things of value and trust each other without powerful intermediaries? That is the blockchain. Collective self-interest, hard-coded into this new native digital medium for value, would ensure the safety, security, and reliability of our exchanges online. Trust is programmed into the technology, which is why we call blockchain the Trust Protocol.

Combine AI and Machine Learning with blockchain and this represents the second era of the digital age. Every institution will change profoundly. How about the corporation, a pillar of modern capitalism? With the rise of a global peer-to-peer platform for identity, trust, reputation and transactions, we will be able to re-engineer deep structures of the firm, for innovation and shared value creation. We’re talking about building 21st century companies that look more like networks rather than the vertically integrated hierarchies of the industrial age. The whole financial service industry is already being reinvented by blockchain and others will soon follow. How well does today’s university prepare students for such a future?

How about the Internet of Things? In the not-too-distant future, billions of smart things in the physical world will be sensing; responding; communicating; sharing important data; generating, buying and selling their own electricity; and doing everything from protecting our environment to managing our health. It turns out, this Internet of Everything needs a Ledger of Everything.

One of the biggest opportunities is to free us from the grip of a troubling prosperity paradox. The economy is growing but fewer people are benefiting. Rather than trying to solve the problem of growing social inequality through redistribution alone, we can change how wealth—and opportunity—is predistributed in the first place, as people everywhere, from farmers to musicians, can use this technology to share more fully in the wealth they create.

Blockchain and Pandemics

Given the urgent need for global solutions to the Covid-19 pandemic, the Blockchain Research Institute convened a virtual roundtable of 30 experts from five continents. We discussed the challenges of COVID-19 and the possibilities of using blockchain in areas of need. In our special report, Blockchain Solutions in Pandemics, we developed a framework for facing pandemics together in these five areas.

1. Self-sovereign identity, health records, and shared data

Data is the most important asset in fighting pandemics. If any useful data exists now, it sits in institutional silos. We need better access to the data of entire populations and a speedy consent-based data sharing system. To accelerate discovery, the blockchain start-up, Shivom, is working on a global project to collect and share virus host data in response to a call for action from the European Union’s Innovative Medicines Initiative. In Honduras, Civitas—an app developed by the start-up Emerge—is linking Hondurans' government-issued ID numbers with blockchain records used to track medical appointments. Doctors simply scan the app to review a patient's symptoms verified and recorded by telemedicine services. And Dr. Raphael Yahalom of MIT and Oxford-Hainan Research Institute is working on Trustup, a trust-reasoning framework that can systematically highlight the ways in which health data recorded on a blockchain ledger is more trustworthy than data stored in conventional databases. The trade-off between privacy and public safety need not be so stark. Through self-sovereign identities where individuals own their health records and can freely volunteer it to researchers, we can achieve both.

2. Just-in-time supply chain solutions

Supply chains are critical infrastructure for our globally connected economy, and COVID-19 has put them under tremendous strain, exposing potential weaknesses in their design. We must rebuild supply chains to be transparent, where users can access information quickly and trust that it’s accurate. The start-up, RemediChain, is doing just that for the pharmaceutical supply industry. One of its co-founders, Dr. Philip Baker, was interested in tracking down and recycling unused but still efficacious medications, such as those used for cancer. He saw blockchain as means of recovering their chain of custody:

By posting the medication and its expiration date, people all over the country can create a decentralized national inventory of surplus medication. When there is a sudden run on a previously ubiquitous medication like hydroxychloroquine, healthcare professionals can call on this surplus as a life-saving resource. The same principle applies for ventilators and PPE.

Blockchain serves as a ‘state machine’ that gives us visibility into the state of our suppliers as well as the assets themselves. When COVID-19 hit, the start-up VeriTX—a virtual marketplace for digital assets like patented design files—pivoted to medical supplies, so that medical facilities could print the parts needed at one of the 180 3D printing facilities in VeriTX’s network.(i) VeriTX can reverse-engineer a part and then build it much faster and at a lower cost than getting it from the original manufacturer or replacing the equipment.

3. Sustaining the economy: How blockchain can help

If supply chains are the machinery of global commerce, then money is its lubricant. Yet, money as a carrier of the disease has been a stressor during this pandemic. We highlight the what, why, and how of digital cash as an alternative. Costs are also an issue. The Ethereum-based Solve.Care platform is dramatically lowering healthcare administrative costs so that more of a patient’s medical budget goes directly to care. The health crisis has also become a financial crisis, closing off access to supply chain credit. We look at blockchain-based financing solutions such as Chained Finance and fundraising efforts like that of the Binance Charity Foundation. Finally, decentralized models of governance such as those created by blockchain start-ups Abridged and Aragon can transform how NGOs, governments, and communities respond to the crisis.

4. A rapid response registry for medical professionals

Front-line medical professionals are the heroes and our last line of defense. Yet hospitals can’t onboard people fast enough. This is not for lack of talent; it’s the inability to find those with proper credentials. Blockchain platforms such as Dock.io, ProCredEx, and Zinc.work help to streamline coordination among different geographies, departments, and certification bodies so that supply and demand for healthcare workers—as well as the process for verifying their skills—becomes more efficient and transparent.

5. Incentive models to reward responsible behavior

People respond to incentives. Blockchain serves as a mechanism to up the incentives of stakeholder groups around issues and activities, changing patterns of behavior in the process. For example, the Heart and Stroke Foundation of Canada collaborated with Interac to micro-motivate healthy lifestyles, and Toronto’s University Health Network teamed up with IBM to put the control over health records into patients’ hands.

An action plan for the new paradigm

Many of these changes are beyond the timeframe of this round of COVID-19. But many can be implemented quickly. Governments must wake up to the blockchain opportunity. Every national government should create an emergency task force on medical data to start planning and implementing blockchain initiatives. They can stimulate the development of technology firms working on the solutions described here. They should partner with medical professional associations and other players to implement blockchain credential systems.

The private sector affected by COVID-19 must still lead the way. They must start today by incorporating blockchain into their infrastructures. Companies need to continue their work on pilots framed around medical records, credentialing systems, incentive structures, and other sovereign identity solutions. When designing pilots, companies could consider embedding incentive systems for socially responsible behavior.

Emergencies turbocharge the pace of historical progress. Businesses like Zoom, once used mostly by technology companies, have become ubiquitous tools of daily life. Meanwhile, 20th century titans are asking for bailouts. By necessity, human behavior—from where we work and when to how we socialize—changes overnight. Add to this mix the exponential properties of blockchain, and we’re setting ourselves up for a cataclysm of some kind.

We anticipate a real crisis of leadership as the new digital-first and digital-only models conflict with the old industrial tried-and-true. Maybe this awful crisis will call forth a new generation of leaders who can help us finally get the digital age on track for promise fulfilled? Who among us will step up?

This book

It is in this context that we’re delighted to see Mary Lacity’s lucid book. If there was ever a topic that needed de-obfuscation, blockchain is one. The book clearly explains key blockchain concepts and the global blockchain landscape. It’s not a book about crypto or digital currencies, but rather one that will be of considerable help to strategists, and implementors within enterprises and government, laying out a solid framework for applications and outlining a plethora of great use cases in the financial services industry, supply chains, and credentials for talent. It’s also a practical book with real down-to-earth approaches and even tactics on how to make it happen in your organization.

Read on, enjoy, prosper, lead the change.

Don Taspscott

Don Tapscott is the author of 16 books about the Digital Age. His most recent, Blockchain Revolution, he wrote with his son, Alex, with whom he co-founded the Blockchain Research Institute. He is an Adjunct Professor at INSEAD, the Chancellor Emeritus of Trent University and a member of the Order of Canada.

(i) See Chapter 5 for an in-depth case study on VeriTX

Author’s Acknowledgements

Many people informed and shaped this research program. I am especially thankful to all of the executives interviewed for this research. I hope this guide fittingly trumpets your visions and achievements.

In June of 2018, I became the Director of the Blockchain Center of Excellence (BCoE) at the Sam M. Walton College of Business at the University of Arkansas. It was an opportunity of a lifetime to work with fellow blockchain enthusiasts including Professor Matt Waller, the Dean of the Walton College; Professor Rajiv Sabherwal, Chair of the Information Systems (ISYS) Department; Professor Paul Cronan, Director of Management Information Systems (MIS) graduate programs; and Dr. Zach Steelman, Assistant Professor of IS (and resident blockchain guru). They laid the groundwork for the BCoE.

I relied on insights and inspiration from our exceedingly capable BCoE team: Kathryn Carlisle, BCoE Senior Managing Director; Professor Dan Conway, BCoE Associate Director; Professor Remko Van Hoek, BCoE Advisor; and Andrea Morgan, ISYS Department Assistant. A special thanks to Jacob Yates, our rock-star graduate MIS student, for updating statistics and uses cases. Jacob, you have all the makings of a University Professor, and I look forward to future collaborations as you pursue a Ph.D. with us.

Before coming to the University of Arkansas, I had the full support of the University of Missouri-St. Louis for over a quarter century. Dr. Dinesh Mirchandani, Chair of the Information Systems Department, and Charles Hoffman, Dean of the College of Business, supported every request to enable our blockchain research. Other colleagues engaged in thoughtful conversations about the research, most notably, Dr. Nasser Arshadi, Professor of Finance; Dr. Tom Eyssell, the Associate Dean and Director of Graduate Studies at the time; Dr. Shaji Khan, Associate Professor of Information Systems; and Dr. Steve Moehrle, Chair of the Accounting Department. Dr. Joseph Rottman, Associate Dean, has been my longtime collaborator, confidant, and friend.

Many thanks to Epic Books, SB Publishing, and the University of Arkansas press. My gratitude to Matt Waller for launching the Epic book series and for his vision, kindness, and leadership. SB Publishing, whose editing and production services bring our best work to market faster than any traditional publishing route, has been a great partner for years. Thank you to Mike Bieker, Director of the University of Arkansas Press, for understanding and accommodating the unique needs of business publications.

I express my heartfelt gratitude to my circle of family and friends. This work consumed much of my time, resulting in neglect on my part to people who enrich my life in every way. Thank you to my long-time colleague, coauthor and friend, Professor Leslie Willcocks at the London School of Economics. Christine Emma Cotney Benson, thank you for entertaining me during my many research trips to New York City. My thanks to my parents, Dr. Paul and Joan Lacity, my sisters Karen, Diane (always close) and Julie, and my dear friends, Michael McDeviitt, Beth Nazemi, and Val Graeser for your unwavering support and humor. To my son, Michael Christopher, whom I hold in my heart every hour of every day. Finally, to the man who makes all this worthwhile, Jerry Pancio, my past, present, and future.

The Book's Cover Art

Margo Sawyer is Professor of Sculpture and Assistant Chair of Studio in the Department of Art & Art History at the University of Texas at Austin. A graduate of Chelsea School of Art in London and Yale University, Sawyer is an internationally artist. Honored by: John Simon Guggenheim Fellowship, Louis Comfort Tiffany Foundation, NEA, Japan Foundation, American Academy in Rome, Fulbright Grant to India and Japan.

Sawyer’s artistic work Synchronicity of Color: Blue, 2008 at Discovery Green in Houston, Texas, has become the beloved icon for the city of Houston, and an image of the artwork is used on the cover of this book.

Synchronicity of Color: Blue, by Margo Sawyer

Installation at Discovery Green, Houston, Texas

Source: www.margosawyer.com

Publication Credits

Earlier versions of our work have been revised and updated for this guide, including:

Lacity, M. (2020), ‘Crypto and Blockchain Fundamentals’, Arkansas Law Review, 73.

Lacity, M. (2020), Re-inventing Talent Acquisition: The SmartResume® Solution, Blockchain Center of Excellence Case Study Series, BCoE-2020-01, University of Arkansas.

Van Hoek, R., and Lacity, M. (April 27, 2020), 'How the Pandemic Is Pushing Blockchain Forward,' Harvard Business Review, https://hbr.org/2020/04/how-the-pandemic-is-pushing-blockchain-forward

Lacity, M. (2019), An Overview of the Internet of Value, Powered by Blockchains, Blockchain Center of Excellence white paper, BCoE-2019-03, University of Arkansas.

Lacity, M., Zach, S., Paul, C. (2019), Blockchain Governance Models: Insights for Enterprises. Blockchain Center of Excellence white paper, BCoE-2019-02, University of Arkansas.

Lacity, M., Zach, S., Paul, C. (2019), Towards Blockchain 3.0 Interoperability: Business and Technical Considerations, Blockchain Center of Excellence white paper, BCoE-2019-01, University of Arkansas.

Lacity, M., Steelman, Z. R., Yates, J., Wei, J. (2019), ‘US and China Battle for Blockchain Dominance’, CoinTelegraph.

Lacity, M., Allee, K., Zhu, Y. (2019), ‘Blockchain in Business: What do Companies' 10-K Reports Say About DTL?’, CoinTelegraph.

Lacity, M. (2018), ‘Addressing Key Challenges to Making Enterprise Blockchain Applications a Reality’, MIS Quarterly Executive: (3), Article 3.

Lacity, M. (2018), A Manager’s Guide to Blockchains for Business, SB Publishing, Stratford-Upon-Avon, UK

About the Research

About the Research

Think back to the early 1990s. Are you old enough to remember the first time you saw the Internet through the friendly interface of a web browser? I do. It was 1994. I was sitting in my office at Templeton College when my colleague showed me Mosaic, one of the first web browsers. I viewed it with curiosity for a few moments, but then went back to my ‘day job’. I venture to say I was not alone in initially ignoring—and certainly underestimating—the Internet’s long-term economic, social and political effects.

Jump ahead to 2009 when Bitcoin, the first blockchain application, was released. Many visionaries saw its value long before I did. Finally, Lee Coulter, CEO of Ascension Shared Services at the time, explained blockchains to me on the back of a napkin during a dinner in San Francisco in May 2016. I went home and read Don and Alex Tapscott’s forward-thinking book, The Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World. The authors described how Bitcoin and other blockchain innovations were moving us from an ‘Internet of Information’ to an ‘Internet of Value’ where people transact value—i.e. money and other assets—in new ways. I could see the promise, and blockchains for business became my primary research focus.

I spent the first six months learning about the protocols that specify the rules for blockchains like Bitcoin; Ethereum; Ripple; Stellar; Corda; Fabric; and Quorum. The learning curve was brutal—it’s easy to fall down the technical rabbit hole. Terms like elliptic curve cryptography; proof-of-work; mining; digital wallets; native digital assets; smart contracts; hashing; Merkle roots; Byzantine Fault Tolerance; and zero-knowledge proofs, make it difficult to climb out and really understand what the technology enables for businesses. I developed and taught blockchain modules to Masters’ students at the University of Missouri-Saint Louis (UMSL) in the fall of 2016. One of the aims of the course was to shortcut the technical learning curve for students and business professionals.

In 2017, I joined MIT’s Center for Information Systems Research (CISR), housed in the Sloan School of Management, as a Visiting Scholar to study how enterprises were exploring blockchains. The research team included Dr. Jeanne Ross, Principal Research Scientist, and Kate Moloney, Research Specialist. During interviews, we asked managers about their blockchain adoption journeys, their participation in blockchain ecosystems, and the practices and lessons they have learned so far. We asked the following types of questions:

What strategies are being considered? How is the organization building blockchain capabilities? Which applications are deemed to be the most promising, are already under development, or have been deployed?

Does the organization participate in industry consortia? Open-source projects? Invest in startups or FinTechs? What needs to happen to create the minimum viable ecosystem for applications relevant to the organization?

What challenges do organizations need to overcome to deploy blockchain applications? What are the key project and change management practices? How well have expectations been met so far? What are the preliminary outcomes and lessons learned?

We interviewed executives from global enterprises currently exploring blockchains; from the professional services firms that sell services to them; and from the startups that want to disrupt them. The enterprises we studied primarily represent global financial services, but also included manufacturing and healthcare firms. The professional services firms included representatives from large organizations like Deloitte, KPMG, Capgemini, IBM, and Wipro, as well as boutique consulting firms. The startups included companies seeking to advance general blockchain technical capabilities and specific business-focused blockchain applications. In 2017, these enterprises were participating actively in industry blockchain consortia and developing many proof-of-concepts; none had deployed live production systems. In 2017 and 2018, I also participated in (or more accurately observed) the Center for Supply Chain’s three studies to define blockchain standards for tracking and tracing pharmaceuticals.iii Bob Celeste leads the group of about 100 participants who represent pharmaceutical manufacturers, wholesalers, distributors, and retail and hospital pharmacies. This experience helped me to understand the perceived benefits and concerns that supply chain partners have about shared blockchain applications.

From 2018 forward, our research has been supported by the Blockchain Center of Excellence (BCoE) at the University of Arkansas. We work with the Executive Advisory Board members on blockchain research, which include ArcBest; Ernst & Young (EY); FIS; Golden State Foods; IBM; JB Hunt; McKesson; Microsoft; Tyson Foods; and Walmart. We meet in closed workshops to hear from experts, which then informs our white paper and research briefing series. So far, we have investigated blockchain interoperability; shared governance models; messaging the C-suite; IoT and other enabling technologies; and digital identities. Overall, members are interested in deploying technologies to deliver real business value; blockchains are just one component that enable new solutions.

Other BCoE blockchain research projects include:

Blockchain Indices

We are working with a number of University of Arkansas faculty and students to assess blockchain’s impact, including the reporting of blockchain activities in accounting reports and patent applications and awards in China and the US. Research team members include Dr. Dan Conway; Dr. Zach Steelman; Dr. Kris Allee; Jacob Yates; Jia Wei; and Yaping Zhu. Results are presented in Chapter 2.

Poultry Excellence in China

This project aims to improve food safety for poultry in China. It is funded by the Walmart Foundation. The project entails collecting data on the salmonella and antibiotic residues using biosensor IoT devices; developing risk assessment and cost-benefit analyses; and tracing vital information from poultry breeding to retail outlets using blockchain technologies. The project is led by Yanbin Li, Distinguished Professor, Tyson Endowed Chair in Biosensing Engineering at the University of Arkansas. The University of Arkansas’ blockchain portion of the project is led by Kathryn Carlisle, Senior Managing Director of the BCoE and Professor John Kent, Supply Chain Management. The project is quite large, with leaders from Walmart Food Safety Collaboration Center; South China Agricultural University; Zhejiang University; Zhejiang Academy of Agricultural Sciences; Agricultural Technology; and China Agricultural University.

Consumer Economics

This project investigates US consumers’ willingness to pay for blockchain traceability for beef. It is being led by Dr. Aaron Shew, Assistant Professor of Agricultural Economics, Arkansas State