The Blockchain And Why Enterprise Blockchain Tokens Will Trend in 2019

A study into 43 initiatives shows that despite a great number of promises and convincing arguments, none of the projects have been able to fully integrate the blockchain technology into their proposed solutions. Additionally, 2018 saw bitcoin and other cryptocurrencies steadily lose value – as much as 80 percent compared to their peaks in 2017.

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Based on this data, you may be forgiven to think that the blockchain revolution was just a fad that is now heading into oblivion. However, that’s not true. Blockchain is here to stay! There is a reason why major software companies such as IBM, Amazon Web Services, and most notably Microsoft are venturing into the blockchain landscape in full force.


Through this primer, we aim to look at the state of blockchain and its related technologies and also see why enterprise blockchain tokens will trend this year.



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Regulations

The blockchain technology and its related technologies especially tokens are noble inventions but they are relatively still in their infancy. That’s why regulatory bodies have been hard at work making sure that tokens follow some set rules and thus the public is protected when investing in them.

The most notable regulation came in February 2018 from the Swiss who have acknowledged the immense potential of the blockchain technology. Switzerland’s financial authority, FINMA, published ICO guidelines, where it clearly laid out the various types of tokens and what makes a token a payment token or a utility token or a security.

The Securities and Exchange Commission in the United States (SEC) is also working on providing transparency. The SEC recently disclosed plans to create a guide in “plain English” for developers to assist with planning token offerings. OSC Launchpad, a unique project out of Canada, is a program formed by a securities regulator to help enterprises navigate securities law requirements and accelerate time-to-market.

According to Pat Chaukos, Chief of OSC LaunchPad,

  • “This is an important program, Fintech innovation is changing the industry and the OSC is striving to keep regulation in step with these changes. Many investors today want services that are fast, convenient and mobile and the fintech industry is keen to provide these services to investors.”

On a similar note, the European Commission has devised a systematic approach to engaging the blockchain community through the EU Blockchain Observatory.

What will happen to ICOs?

Data from Statis Group shows that more than 80% of ICOs conducted in 2017 were scams while other studies show that more than a thousand crypto projects are already “dead” as of June 2018. ICO Rating’s market Research Q2 2018 reported that 50% of the ICO projects announced in Q2 of 2018 were not able to attract more than $100,000 and only 7% of all announced ICOs were able to be listed on exchanges. 55% of ICOs failed to complete their offerings.

The medium return from tokens in Q2 was – 55.38%, compared to +49.32% in Q1. ROI after 3 days on an exchange in Q2 18 was – 21.59% with 57% of tokens trading below the ICO price. Additionally, based on data from a study by EY, an investor purchasing a portfolio of The Class of 2017 ICOs on 1 January 2018 would most likely have lost 66% of their investment. Of the ICO start-ups from the Class of 2017 that were examined in the study, only 29% (25) have working products or prototypes.

  • But in 2019, start-ups and companies planning an ICO will have to ensure that they have a viable project that will appeal to investors and thus ensure a positive return on investment. Just think of Ethereum, the platform has been able to withstand the test of time. Because of its ecosystem, the Ethereum platform has established a thriving community of real users, not trolls & trading bots and has the potential to be used by many more people over the coming years as the blockchain technology matures.

Ecosystems are gaining momentum

There is no arguing that the need to develop powerful ecosystems for both B2B and B2C that harnesses the power of blockchain will gain momentum as time goes by. A study by McKinsey highlighted the importance of ecosystems in the future, indicating that new ecosystems would emerge in place of many traditional industries with over $50 trillion in revenue by 2025.

For years now, enterprises have been looking for better solutions that can help to exchange information between the different lines of commerce, such as external parties and users, without compromising the privacy and security of users and data. And that’s what enterprise blockchain promises. The emergence of game-changing ecosystems based on decentralized peer-to-peer transactions through shared APIs can enable the development of new business models.

  • As a result, enterprises will come together and create marketplaces that connect various players through the lifecycle of any product and the end-to-end delivery of services. This also brings that built-in security, thanks to underlying cryptography, and it also allows for privacy as it doesn’t disclose user information such as names or other identifying information.

So far we’ve seen how major software companies such as IBM, Amazon Web Services, SAP, Maersk, HSBC, Deloitte and most notably Microsoft get involved in enterprise solutions that leverage the power of the bockchain technology. Microsoft, for instance, through Project Bletchley, has been working directly with its partners and customers to understand how the cloud can help developers build a new generation of modern applications with blockchain as a core data layer. The integration of Ethereum on Microsoft Azure, for instance, will allow users to expand and construct an Ethereum blockchain network within minutes of account creation.

Kaleido, built by ex-IBM engineers at ConsenSys, recently launched a new platform in collaboration with Amazon Web services (AWS) which seeks to help enterprises implement blockchain technology. The platform will provide tools and protocols for all the components of new blockchain projects; its offerings are full-stack which means they include everything from internal tools for developers to user-facing app interfaces. The Kaleido project also has options to help manage not only a blockchain network but also the network’s associated infrastructure and protocols. In fact, the company claims that early adopters of the platform estimated that Kaleido eliminated 80% of the custom code that would otherwise have been required to build their blockchain solutions.

  • Thanks to these benefits, Kaleido marketplace has attracted big players such as commodities platform Komgo, whose network of financial institutions includes Citi, ING, Koch Supply & Trading, MUFG Bank, Societe Generale, Credit Agricole Group, BNP Paribas, and Shell.

IBM, on the same note, is investing millions in blockchain-related projects. It recently partnered with Maersk, the world’s largest shipping company, and through the partnership, the two companies are working to create the so-called “TradeLens” supply chain solution. Research by World Trade Organization showed that simplifying the global supply chain could reduce costs among users by as much as 17.5%, with developing nations expected to see as much as a 35% increase in exports as they leapfrog over legacy technology platforms.

This blockchain-based solution intends to keep track of essential shipping data on a worldwide scale. This has even seen 94 organizations take part in the testing and development of the TradeLens supply chain solution. In addition, this strong collaborative effort has seen the platform capture over 154 million shipping events over a multi-month period. Interesting to note is that, numbers from a Transparency Market research estimates that this supply chain solution will be a $32.9 billion global supply-chain business by 2026.

2019- The year of enterprise blockchain tokens

Tokens and tokenized assets are now common in the enterprise financial services sector. The tokenization of assets simply involves the process of issuing a blockchain token (specifically, a security token) that digitally represents a real tradable assets-in many ways similar to the traditional process of securitization, but with an improved format. These security tokens are created through a security token offering. An STO can be used to create a digital representation-a security token- of an asset, meaning that a security token could represent a share in a company, ownership of a piece of real estate, or participation in an investment fund. These security tokens can then be traded on a secondary market.

To give you a clue of why enterprise blockchain tokens will trend in 2019, consider the following:

  1. Royal Bank of Scotland (RBS) is leading a consortia of banks to develop an enterprise blockchain standard dubbed- “Cordite” which will allow the banking industry to launch crypto tokens on one network. By utilizing the coding of R3 Corda blockchain technology, the open source CorDApp seeks to achieve what the ERC-20 standard did for Ethereum, ensuring all tokens adhere to a set of functions, anywhere within the Cordite system. This solution is specifically designed to address the challenges of these highly regulated institutions, its distributed ledger technology (DLT) aims to create a platform for banks to easily develop a variety of functional digital assets (tokens), that will streamline various banking products and services.
  2. Euronext and other ecosystem partners went to pilot at Liquidshare, a consortium re-engineering the interaction between post-trade parties by utilizing blockchain technology and developing a new infrastructure for small and medium-size enterprises (SMEs) in Europe.
  3. On September 2018, the Monetary Authority of Singapore and SGX, the city-state’s stock exchange, announced that they have successfully developed delivery versus payment (DvP) capabilities for the settlement of tokenized assets across different blockchain platforms.
  4. And Numbers don’t lie- data from Global Wealth Report shows that total global wealth has now reached $280 trillion, it is 27 percent higher than a decade ago and much of this wealth is relatively illiquid. One of low liquidity asset’s, such as real estate value alone was estimated at $217 trillion where commercial property accounts to roughly $54 trillion (25%) a market that is slightly less than all globally traded equities and securitized debt instruments put together.
    The implication for this is that if we assume that commercial estate market has a 10% liquidity premium, then asset tokenization of commercial real estate alone can target a $5.4 trillion liquidity premium market, which is almost 10x bigger than the market cap of all cryptocurrencies put together. The potential asset backed token market size is so big and comprises of different assets (think oil, gold, fiat currencies, diamonds, art, intellectual property, real estate, shares of companies, etc.).

  • Enterprise blockchain tokens will surely trend this year thanks to their improved liquidity and since they are based on smart contracts, they promise faster transactions and reduced administrative costs.

Closing Thoughts

The blockchain technology has its fair share of challenges just like the Internet before it but with time it will become the new imperative. In 2019, as regulations become clearer, tokens will gain mainstream acceptance and will be adopted in industries far and wide. This will see the tokenization of assets such as securities markets, trade finance, gaming, intellectual property, patents and licences, real estate, among others, and by 2020, the public will get to see what the buzz around blockchain was all about.

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