Indian Government Releases National Blockchain Strategy, Mastercard Reveals Why The Company Left Libra, Fidelity Leads $13M Funding Round for Clear

This week (3-8 February) in Blockchain & Crypto was yet another interesting one - Tyler and Cameron Winklevoss, the founders of the Gemini cryptocurrency exchange, have obtained six stablecoin-related patents, tech giant IBM is developing a new blockchain product that will automate the reconciliation of casual labor contracts, ConsenSys, a major blockchain firm founded by Ethereum co-founder Joseph Lubin, has acquired an American broker-dealer, Heritage Financial Systems, and much more!

About this and more, in the newest issue of Weekly Blockchain & Crypto Digest. Enjoy!

Indian Government Releases National Blockchain Strategy

A policy think tank of the Indian government, NITI Aayog, has released its national blockchain policy draft paper dubbed “Blockchain — The India Strategy” which explains different use cases of blockchain in India along with some conclusions from ongoing pilot projects. 

NITI Aayog was established with the aim to achieve sustainable development goals by fostering the involvement of state governments of India in the economic policy-making process.

The strategy document targets stakeholders such as government, enterprise leaders and citizens with the aim of demystifying the concepts surrounding blockchain technology. It aims to create a concrete national plan of action towards blockchain technology. 

The policy paper is being released in two different parts. Part one deals with basic concepts, trust systems, the economic potential of smart contracts and blockchain, ease of doing business and different ongoing use cases. Part two will be released in the coming weeks which will mainly cover different recommendations for using blockchain technology in India.

The think tank explains that the generic features of distributed ledger technology could represent a paradigm shift in the political economy of India. It emphasizes a rethink of the current engagement of government bodies:

Government should pay special attention to the decentralized network where peer-to-peer transactions can create more socio-economic value. If state entity is there just to ledger maintenance and not adding some value then we can relook the role of government.

For instance, the strategy paper states that for land and property transactions, there could be a DLT based system that would make it unnecessary for a government entity to keep records. 

NITI Aayog has pursued proof of concepts in four areas in an attempt to better understand the possible hurdles to implementing blockchain technology. The pilot projects included a track and trace of drugs in the pharmaceutical supply chain, claims verification and approval in the disbursement of fertilizer subsidies, verification of university certificates, and a transfer of land records.

However, in order to deploy blockchain at scale, the private and public sectors need some legal and regulatory modifications, according to NITI Aayog.  

The second part of the strategy, to be released in coming weeks, will focus on recommendations to establish India as a vibrant blockchain ecosystem, including regulatory and policy considerations, creating a national infrastructure for policy solutions, and a procurement process for government agencies to adopt blockchain tech. 

Winklevoss Brothers Obtain Six Stablecoin Patents

Tyler and Cameron Winklevoss, the founders of the Gemini cryptocurrency exchange, have obtained six stablecoin-related patents, according to filings with the United States Patent and Trademark Office. 

Three of the patents — the first, second and the fifth on the list — all describe systems for changing the supply of a public blockchain-based stablecoin. The first patent describes how trusted third parties such as exchanges or banks can generate the asset, also on-demand.

Two of the patents — the third and sixth on the list — describe a system for creating a stablecoin on a public blockchain. The third patent also suggests that backed stablecoins could be used as collateral in financial transactions that are executed via smart contracts.

The fourth patent — filed on April 23, 2018 — “relates to the use of a stable value digital asset to pay dividends for securities and other financial instruments tied to a blockchain.” This paper suggests that dividends from securities like stocks could be paid in stablecoin.

IBM Offers Blockchain Solution for Casual Labor Contracts

Tech giant IBM is developing a new blockchain product that will automate the reconciliation of casual labor contracts.

Technology news site CIO reported on February 3 that IBM considers the blockchain particularly well-suited to tackling the pain point for businesses of resolving discrepancies across thousands of casual work contracts.

A casual work contract — sometimes known as a contingent work contract — is a non-permanent employment relationship, which typically offers contractees less job security, and often part-time or payment on a piece work basis. It is thus used for work done by consultants, freelancers, independent contractors and temporary contract workers, known as temps.

IBM has its sights on the blockchain for enterprise management of such contracts, as it notes that processing the high volume of contracts generated by casual workers is a cumbersome and insufficiently automated task for firms at present. Burton Buffaloe, leader of global logistics and blockchain at IBM, said:

One of the biggest pain points of all suppliers of contractors is invoice reconciliation. Blockchain lives in the spaces where there is friction and discrepancy.

Dubbed the Contingent Labor on IBM Blockchain, IBM’s system automates the tracking of time sheets and purchase orders, while mediating between approved parties involved in the invoicing process, Buffaloe explained. Should the system’s worldwide rollout prove successful, it will soon go to market, CIO reported.

MIT ‘Spider’ Routing Scheme Could Speed Up Cryptocurrency Transactions

Researchers at the Massachusetts Institute of Technology have created a new cryptocurrency-routing scheme to speed up blockchain-based transactions.

In an announcement on January 30, MIT claimed that the new solution called “payment channel networks” (PCN) is able to notably reduce blockchain-based transaction times and even boost profits. 

As explained, in PCN, transactions are performed with minimal involvement from the blockchain. “Pairs of PCN users form off-blockchain escrow accounts with a dedicated amount of money, forming a large, interconnected network of joint accounts. Users route payments through these accounts, only pinging the blockchain to establish and close the accounts, which speeds things up dramatically. Accounts can also collect a tiny fee when transactions get routed through them,” the release further read.

While traditional schemes use the shortest path possible to complete a transaction and do not consider a user’s balance, PCNs rely on bidirectional joint accounts, where payments can only be routed on channels with sufficient funds to perform the transactions.

This, according to the release, eliminates a scenario in which one of the users in the joint account handles too many transactions, which could result in a zero balance and make it impossible to route further transactions.

Apart from PCN, the researchers introduced Spider, a technique that splits each full transaction into smaller “packets,” which could be transmitted across different channels at different rates. Vibhaalakshmi Sivaraman, one of the researchers, said:

Shortest-path routing can cause imbalances between accounts that deplete key payment channels and paralyze the system [...] Routing money in a way that the funds of both users in each joint account are balanced allows us to reuse the same initial funds to support as many transactions as possible.

In a series of recent transactions-related developments in the industry, tech giant IBM was awarded a patent for the development of a “self-aware token” designed to track and record events of an offline transaction. The proposed system relates to financial data processing in an electronic currency platform, as well as to processing e-commerce tokens, which involve offline transactions.

Mastercard Reveals Why The Company Left Libra

Mastercard Chief Executive Officer Ajay Banga explained his concerns about Libra in a February 3 interview with the Financial Times. He bashed Libra for its lack of transparency while arguing that national payment systems are “really stupid.”

Mastercard was one of the founding members of the Libra association, along with Visa, PayPal and Stripe. All four left in October 2019 with no proper explanation, though rumors indicated fear of running afoul of regulators.

Compliance appears to have been the primary cause for the sudden decision. The Libra association’s key members reportedly refused to commit to “not do anything that is not fully compliant with local law.” Specifically, Banga pointed to anti-money laundering, know your client and data management regulation.

Another concern was Libra’s business model. The association does not make it clear how it would make money, with Banga noting that “when you don’t understand how money gets made, it gets made in ways you don’t like.”

Finally, Banga noticed some inconsistencies in how Libra presented itself. Though it positions itself as a financial inclusion tool, the use of the proprietary wallet Calibra “doesn’t sound right” to him. He elaborated:

For financial inclusion, the government has got to pay you in this [currency], you’ve got to receive it as an instrument you can understand, and you have to be able to use it to buy rice and cycles. If you get paid in Libra [coin] [...] which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works.

Nevertheless, Banga does like the idea of a global currency.

Mastercard’s CEO was, predictably, a harsh critic of any attempt at making national payment systems:

The economic cost of building siloed [payment] systems in a world where citizens travel globally is really stupid, and where crime travels globally is even more stupid, and where technology is completely global is even three times more stupid.

While the idea of nationalized payment networks already existed, it has been recently regaining traction under the guise of the Central Bank Digital Currency (CBDC), though he did not mention them directly. Banga then explained:

This idea of finding a way to have national control on certain kinds of payments is not new — it’s a fantasy that’s been going on for a long time.

He cited France, Australia, Brazil and Mexico as examples of countries whose governments have attempted to build such systems. 

According to him, local networks fragment the transaction data necessary to do analytic work. This makes tracking crime more difficult in an age where terrorists do not respect borders, argues Banga. 

CBDC proposals are varied, but with over 70 percent of central banks evaluating the idea of their own digital currency, the resulting network is likely to be extremely fragmented.

ConsenSys Acquires SEC-Registered Broker-Dealer to Tokenize Bonds

ConsenSys, a major blockchain firm founded by Ethereum co-founder Joseph Lubin, has acquired an American broker-dealer, Heritage Financial Systems.

Heritage, a broker-dealer registered with the United States Securities and Exchange Commission (SEC), has been acquired by ConsenSys’s own broker-dealer, ConsenSys Digital Securities. ConsenSys’ blockchain-powered commerce and finance arm ConsenSys Codefi announced the news on February 4.

By purchasing Heritage, ConsenSys intends to reinforce its advisory and broker-dealer capabilities that will help the firm to implement blockchain technology for issuing tokenized bonds offerings in the municipal market.

Emma Channing, a representative of ConsenSys Digital Securities who will coordinate the brokerage effort through Heritage:

The acquisition will bolster ConsenSys in-house broker dealer capabilities by adding municipal finance in addition to some other lines to our existing line of private placement business at Consensys Digital Securities.

Specifically, ConsenSys is planning to apply blockchain technology to deploy automatic bond payments via smart contracts as well as to allow issuers to track who owns the debt. Additionally, ConsenSys wants to develop tokenized mini-muni bonds via its Codefi platform in order to provide issuers with the opportunity to sell securities in smaller denominations.

Fidelity Leads $13M Funding Round for Clear

Israeli blockchain startup Clear has raised $13 million in a Series A round led by Fidelity-backed Eight Roads.

Clear — which develops blockchain networks for high-volume transaction systems between businesses — announced the round’s completion in a statement via TechCrunch on Feb. 5.

Eight Roads is a global venture firm that originates in Fidelity’s first investment business, Fidelity Ventures. 

Other participants in the Series A for Clear were the venture funds of several global telecoms leaders: Spain’s Telefónica Innovation Ventures, the Telekom Innovation Pool of Germany’s Deutsche Telekom, Hong Kong telco HKT and Singapore’s Singtel Innov8. 

Telecoms is Clear’s first sectoral focus in its development of a blockchain and smart contract-driven transaction network designed for cross-border business to business (B2B) payments. 

Co-founder Gal Hochberg said that smart contracts in particular are a powerful tool to deal with high-volume, international transactions, as they:

Create a trusted view of the true status of the relationship within the company’s business partners [...] they can find any issues in real time, either in commercial information or in service delivery, and they can even actually resolve those inside our platform.

Use of the blockchain ensures that all these B2B transactions are auditable and secured by cryptography, with data consistent and in-sync for all parties involved.

Hochberg has claimed that the network is ostensibly capable of processing “hundreds of millions of billable events,” based on internal testing.

Clear anticipates entering full carrier-grade production in H1 2020, with the aim of expanding beyond telcos with the help of yesterday’s Series A.

Blockchain Payments Platform Paystand Raises $20M in Series B Round

Paystand has successfully raised $20 million in its Series B funding round, VentureBeat and others reported on February 6. The company will use this money to accelerate the growth of its blockchain-based commercial payment platform.

The current round includes investment from DNX Ventures, Battery Ventures, Epic Ventures, Commerce Ventures and Wildcat Ventures. Existing investors Leap Global Partners, BlueRun Ventures and others also participated.

The company will use the funds to expand its teams in Scotts Valley, California and Guadalajara, Mexico, as well as funding the expansion of its product lines. Paystand offers a blockchain-based platform for its customers that digitizes the settlement of commercial payments in many industries.

Jeremy Almond, CEO of Paystand, said to VentureBeat:

It’s like Venmo for complicated transactions for commerce. We are rebooting the financial infrastructure because a lot of it was built pre-internet. It holds companies back. We’re coming in with a new business model, doing payments-as-a-service.

Paystand fully automates the payment procedures for certain industries. For example, it allows insurance companies to digitally receive premium payments and send settlements for claims. Industries such as manufacturing, transportation and pharmaceuticals also benefit from the digitized cash cycle.

Paystand also uses smart contracts to negotiate conditions between companies. As Almond explained:

We enable the infrastructure between companies to use what they call smart contracts. We pay you on these terms. How do you ensure that happens? Blockchain infrastructure is good for that kind of thing.

This is made possible by a hybrid blockchain system, made of a public component for security and traceability, connected to private infrastructure for scaling.

The company is on a fast track for growth, having more than doubled its year-over-year revenue in the past 24 months. In the same time frame, it added over 80 large enterprise customers. Some of its current clients include JCB, Bugaboo, Covetrus, Parachute Home and Silicon Valley Bank.

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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