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What’s Next for Blockchain?

As a blockchain technology continues to mature, its applications are growing into a wide range of industries. Learn how blockchain’s next generation use cases may have the potential to change everything from air and automotive travel to foreign currency exchange and green energy investment.

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Tech Trends Episode 7 Transcript

Anish: Well, Christine, thanks for joining me today.

Christine: Great. Thanks for having me.

Anish: So, for some of our viewers who might not be as familiar with it, right. Can you tell us a little about how the blockchain is and how it works?

Christine: Blockchain is a digital ledger that multiple participants can share and interact with, both reading and writing together and having real time updates. All the interactions are cryptographically secured and there’s a built-in audit trail. You can think of it as a Google spreadsheet where multiple participants can have real-time updates on their interactions and have a golden source together, but without the central intermediary.

Anish: Okay, great. And we wear about public and private blockchains. Can you talk about the difference?

Christine: Sure. Public blockchains are blockchains that you can just use a computer, download some open-source code and join the network and interact in it. So, there’s an element of student anonymity in that. As in, you don’t have to register or identify yourself, and then you can already start engaging in transactions or interactions with other entities on the network. For permission blockchains, it’s a different construct where everybody has to properly identify themselves, there’s enterprise-grade cyber-security controls about how we think about interacting in this system together. And so, permission block chaining is where J.P. Morgan and other enterprises have been focusing most of their attention on.

Anish: So, public blockchains suited for things like anonymity, a lot of people think about that with cryptocurrency and other things like that.

Christine: That’s right.

Anish: Private blockchains, much more enterprise permissions, you have to establish identity and other things like that. There’s a sense of trust, right?

Christine: Right. And the goals are different. Public blockchain is mostly focused on peer-to-peer interactions in an alternative financial system. Whereas the uses of blockchain technology in enterprise for permission blockchain is about sharing processing infrastructure for cost-savings, for streamlining operations, for enabling better coordination and synchronizations across multiple businesses and enterprises. In fact, Ernst and Young recently published something, where they asserted that enterprise blockchain will do for networks of enterprises and businesses when earpiece systems did for the single company, which I think is really interesting. Just think of it as next-generation enterprise technology.

Anish: Ok. So blockchain’s still pretty new, though, right? So talk about what’s been going on in the last year. It seems to be exploding, right? A lot of different projects, etcetera. What’s going on in the space?

Christine: Yeah, of course. So I mean, in the past few years, there’s been a lot of hype around and it was almost like every other day that someone was announcing a project, a research thing they were doing or a proof of concept they were working on with multiple of their counterparts. Basically, a Cambrian explosion of experimentation of like, “What can we do with a blockchain?” But, you know, I think that in the past year or so, all of that had slowed down a little bit. And for my part, what I’m seeing, is that while the announcements have been slowing down, the underlying momentum around making this technology real has been increasing. There has been increasing investment in the space, both financial and technological by large corporates, with the likes of Starbucks and USAA and BP across multiple industries and for across multiple use cases. And you’re seeing a lot of application actually become real. Actually, from my part, I’ve been excited because lately, I’ve been hearing about people using blockchain, but there’s no news announcements related to it. And so, that just indicates to me that people aren’t doing blockchain anymore to get news to say that they’re—

Anish: For the sake of doing blockchain

Christine: Yes, say they’re doing innovation. But actually, to say that they’re actually using it for solving a problem.

Anish: So a couple of years ago, we announced Quorum, contributed to the open-source, right? Basically a fork-off of the original Etherium, but this is a permission blockchain. What's going on with Quorum?.

Christine: Yeah, Quorum is doing great. The team just wrote an actual implementation of zero knowledge proofs called Z-Thereta. Add a new element of privacy for anyone using Quorum. But most exciting is that in the past couple of months, Microsoft has actually announced that they will be championing Quorum as the blockchain protocol that they will be supporting and building special tools for their blockchain manage services offering. And this has been really exciting because Microsoft specializes in global scale and security, and they've actually been in blockchain for quite some time. For many years investigating and researching both public blockchains and permission blockchains. So it's great validation that this company has actually said, like okay, the work that J.P. Morgan did, this blockchain protocol that we open sourced is actually worthy of them supporting and actually championing for their services.

Anish: We also talked in the past about a lot of our use cases being not necessarily in payments, but around payments, right? So the Interbank Information Network around things like correspondent banking, inquires rather than the payments themselves, right? But I look at this here. We announced JPM Coin, a first foray into payments with blockchain. Tell us a little bit about what JPM Coin is and how it works.

Christine: Sure. First of all, JPM coin is not a cryptocurrency. I know there's a lot of news in the space and a lot of myth associated with it. The easy way to think about J.P. Morgan coin is that Is payments on a blockchain infrastructure. And actually the origin story of J.P. Morgan Coin is that we just had to build it to enable payments for some of the other applications that we're building. So as an example, last year, we were testing tokenized debt issuance, and how we could create end-to-end financial instrument on blockchain that had automated settlement, automated interest payments, etcetera. And what we found was that at that point, if you're talking about trying to trigger an interest payment with existing financial payments rails, it will look something like: send a message to go-- send an instruction, send to a wire to receive the wire, send a message back into the blockchain. So it was very hockey and it was almost like why bother using a blockchain? There's no efficiency there.

Anish: Right, because what’s the point?

Christine: Exactly, so from there what we wanted to do was actually think about how we could create a digital representation of money that was sitting in a J.P. Morgan bank account on blockchain so that you could get the benefits of blockchain based activities. So basically programmable value transfer, frictionless 24/7 365 interactions with your network participants, but bridge it to the existing payments rails so that we're not using cryptocurrencies. We're using US dollars or Euros or whatever currency that anyone's actually using. So that's been really exciting. We're thinking about it as enabling not only launching applications that we will build, but also the applications that our customers will build. So to the extent that they have something in the supply chain finance or any other interaction that requires a payments rail. Not everyone's a bank, so not everyone's in the best position to do this. We want to basically create this foundational payments rail that plugs into other applications and allows people to solve the problems that they want to solve without having to build all that infrastructure.

Anish: Got it, got it. So very focused on corporates, right? Focused on either corporate to corporate payments or even intra-company transfers and things like that.

Christine: That's right, that's right. We’re exploring use cases around intra-companies efficiencies and also cross border corporate to corporate payments, and then obviously to enable all the other Blockchain applications around settlements and interest payments for financial instruments as an example. And this model of putting fiat in your in J.P. Morgan-- having fiat in your J.P. Morgan bank account mobilizing creating a digital representation of that. Not only is that applicable for cash and payments. It’s also applicable for other financial instruments. So actually J.P. Morgan filed a patent a couple of years ago called the Virtual Depository Receipts patent, And that contemplates tokenizing financial instruments or securities that might sit in your custody account, as an example. So really, on-ramping things that live outside of blockchain onto blockchain so that we can take advantage of the benefits of this technology.

Anish: So a lot of use cases, a lot of energy in the financial industry. When you look outside the financial industry, companies like USAA and Starbucks and BP and other folks like that as well, what's going on more generally in the industry?

Christine: Sure. More generally in the industry, I think we're moving beyond just the basic components of financial instruments on blockchain and payments on blockchains as I mentioned, and kind of moving into the next generation of use cases that hopefully are uniquely enabled by blockchain. As an example, J.P. Morgan has been spending an enormous amount of time thinking about how we can use blockchain to build digital identities that are self-sovereign and self-managed. What that means is that people and entities will have more control over their data, will have more transparency over who has access to what attributes of their data, and maybe in a future world actually have an active participation in commercialization their data. This is in contrast to existing models, where there's a creation of a honey pot of data where, mostly, you’re the product and another company has access and also that it’s subject or vulnerable to hacks. And so, we're thinking about blockchain to establish that new construct, but it requires behavior change, it requires a lot of change, but it's something that's quite interesting. Accenture, as an example, has been really leading in this space with this ID2020 solution that they've been developing that's built off of blockchain. And most recently they announced that they're working with the Canadian government and the Netherlands government to actually use this for cross-border travel, like they're known travelers, digital identity use case. So it's been quite exciting. Others like Microsoft and PayPal have also been in this space, in addition to MasterCard.

Anish: So that's interesting because obviously a lot of new privacy regulations, whether it be GDPR in Europe or recently CCPA in California, things like that. And this sounds like that would be a huge help in sort of helping people meet those requirements, right?

Christine: Yeah and I think the most important thing to note is that when anyone says we're doing digital identity with blockchain, that no private identity data at all is going to be on blockchain. That is a really important thing to note. Basically what we can use the blockchain is base a registry for indicating whether or not an actual data attribute is updated, or has been revoked. But certainly, we're not actually publishing real private data onto the blockchain.

Anish: Also a lot of discussion around blockchain and the internet of things, right? Another one everybody wants to talk about these days, right? So what's going on there?

Christine: Yeah. So we've also been spending some time thinking about this and researching. I think the idea here is that either more or more objects that are creating more and more digital data in line with the identity work that we're doing, partitioning that data, actually thinking about how to utilize it in a proper way. It has been important to us. And so for our part, we've been thinking about what are the use cases that can be uniquely enabled when you connect objects that actually create this data with blockchain? As an example, what are some use cases that you can enable if you could connect a metered solar panel to blockchain, right? There are many applications around actually registering renewable energy generation, and then if you take that further downstream, if you're an investor that’s interested in sustainable investments, how you might even be able to quantify your return on investment in terms of actual green energy generation. That's one example. Also spending some time thinking about what it might look like to connect moving objects like vehicles on blockchain. Like what would it look like if we have digital passports for vehicles or even parts of vehicles in the supply chain? And so there are many companies like Daimler and BMW and others that are doing research in this space.

Anish: Okay so lots of interest in a lot of industries, right? How should companies think about getting started with blockchain?

Christine: Sure. The first thing companies to do is just make sure that they have gotten smart on the technology. Have a baseline understanding of what it is, what it can do, and definitely what it can't do. I wouldn't expect that anyone should be able to understand the very deepest technical detail or understand everything that's been happening. As we mentioned before, the space has been moving quite quickly. But just getting a base level understanding would be important. The second thing to do is to research what else is happening in your sector, in your industry. What are your industry peers or leaders doing? And as we've mentioned, people haven't been shy about their blockchain projects. Certainly there's a lot out there that we can read that also points in the direction of, what are the applicable use cases to you and your company in your particular industry? And then from there, what's really important it is for you to narrow on what are the actual pain points you're experiencing that you want to focus on and prioritize. And take a step back from there and understand whether or not blockchain can be part of the tech stack that helps solve that. So problem and pain point first, then figure out if blockchain is applicable. This has been really important for us as we shape our use cases. As an example, Interbank Information Network. We scope that use case to be very narrowly focused on solving the actual problem of sanctioned screening exceptions across the corresponding bank value chain. And what we found is that by solving an actual problem that people have, that actually sweeps adoption of the network which is obviously critical because no one should be blockchaining by themselves. Otherwise just use a centralized database. And so, we're actually seeing the fruits of that labor come through. We have over 250 corresponding banks signed up to join the network already after one year from launch. And so, it's really important to understand the pain point, understand that doing a blockchain project takes financial investment and time investment, just as building any other technology. So you really have to have a clear eye on what is the return on investment when you're undertaking a project like this.

Anish: So just to recap, A. Make sure you understand the technology, maybe not super deep, but broad enough to know where it's applicable. Number two, make sure that you're solving the right problem. And number three, that that problem is not just unique to you but there's a broad level of interest in a community so you can build that net worth effect, right?

Christine: That’s right.

Anish: Great. Christine, thanks for joining us today.

Christine: Thanks for having me.


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