“The blockchain is one of the most misunderstood technologies in recent times” (Monetary Association of Singapore (MAS), 2019). 1
In this first of this two-part article, I cover an introduction to the world of the blockchain and cryptocurrencies technologies (BCT) followed by the positive aspects of BCT. This article attempts to demystify the blockchain and cryptocurrency technologies while highlighting the objective strengths of these technologies, as well as bringing to light some of the negative shades of the crypto space.
The definition of blockchain according to the World Economic Forum 2 is: “By using math and cryptography, blockchain provides an open decentralised database of every transaction involving value.” In simple terms, blockchain is a novel form of database.
A cryptocurrency is a form of digital currency and similar to blockchain, also uses math and cryptography. One approach to visualising the relationship between the blockchain technologies, cryptocurrencies, and various applications is as shown in Figure 1.
- L1: At the base layer, hardware comprises of equipment and devices that is related to the blockchain and cryptocurrencies. This include the mining rigs, hardware wallets, among others.
- L2: Above that is the platform layer where blockchain technologies can be independent from the cryptocurrencies. Many cryptocurrencies involved a specific type of blockchain, for example, BTC cryptocurrency is based on the Bitcoin blockchain, ETH cryptocurrency is based on the Ethereum blockchain. However, it is possible that a blockchain technology is independent from a cryptocurrency and one such example is Hyperledger (Hyp). Among the cryptocurrencies, one can further sub-divide it into a few types: bitcoin (BTC), altcoins (ETH and LTC), and appcoins (MITx and TKX). Most appcoins are ERC-20 compliant where they operate on the Ethereum platform—to date, there are over 180,000 ERC-20 compliant tokens 3 including MITx and TKX which are appcoins for Morpheus Labs 4 and Tokenize Exchange 5 respectively.
• L3: There are numerous blockchain related applications including crypto-exchanges such as Tokenize Exchange 5 and Binance. To date, there are several hundred crypto-exchanges allowing users to trade cryptocurrencies. The MAS partnered with R3 and a group of financial institutions 6 to develop a blockchain project to facilitate interbank payments using the blockchain technology and is currently still an on-going development focussing on novel methods to conduct cross border payments using the central bank own digital currency. 1 Morpheus Labs (2018) is a blockchain company that developed a blockchain as a service product that enables developers to more rapidly create blockchain solutions and the corresponding appcoin is MITX. Unibright 7 is another very promising project that is also seeking to ease the creation of enterprise blockchain solutions. In the area of Intellectual Capital, IP Blockchain 8 is a blockchain solution that allows creators to register their invention disclosure, trademarks, trade secrets, and copyrighted materials enabling proof of existence of their works in the future. There are a few other thousands of blockchain applications which are available in ICOBench. 9
2.1. Positive Shade: Blockchain Innovation
Patent information is an important source of technological intelligence that institutions may use to gain strategic advantage. Patent information visualisation involved the methodology for the development and application of a technology knowledge base, for purposes of technology and competitive intelligence. The European Patent Office has observed that “Patents reveal solutions to technical problems, and they represent an inexhaustible source of information: more than 80 per cent of man’s technical knowledge is described in patent literature” while The World Intellectual Property Organisation revealed that 90 to 95 per cent of all the world’s inventions are found in patented documents.
A large part of the patents relates to the use of blockchain technology to manage transactions in different manner. While Bitcoin is an open source project where its original code base was contributed by Nakamoto 11 but have since been improved upon by over 600 other developers around the world.
Citation analysis is an analytical technique that reveals the citations of a patent. The two common types of patent citation analysis used in the industry are:
- Backward citation analysis which involves the examination of cited patents, and
- Forward citation analysis which involves the examination of citing patents (or cited-by).
Backward citation analysis is often of relevance if a patent validity study is required. For competitive technology intelligence, forward citation analysis is more relevant.
Illustration of the Value of High Impact Patents Using Forward Citation Analysis
Scenario: INV is an inventor. Ten years ago, INV was awarded a patent (BPAT) for blockchain related invention. INV has an idea to improve on that invention and to take the technology a step further. Before INV can get additional funding to continue the work, INV needs to prove that this is a viable and fruitful area for development. To prove this, INV need to see what work has been done in this area since the grant of BPAT. INV also needs to know who is doing BPAT-related work as they may be INV competitors. Patents filed after the publication of BPAT may be cited, especially by patent examiners who are more impartial than competitive inventors. Similar to scientific journal publications, research has shown that patent citations are also positively related to the probability of that patent being licensed. 12 While not a perfect tool, patent citation frequency is still useful in assessing and identifying more fundamental patents in a group: the greater the frequency of citation, the more basic the technology is likely to be.
One of the highly cited patents is “Document tracking on distributed ledger” filed by a Canadian bank 13 and is based on an earlier provisional patent application. 14 This invention recognised that the transfer of cryptocurrencies between owners is essential to the success of the cryptocurrencies eco-system which “relies on a robust distributed ledger structure that, due to its public nature, redundant verification, and resistance to fraudulent activity, offers advantages over existing centralized server systems.” This invention improves on the state of the art in the existing blockchain by providing features to use to track assets in a secure, non-trusted, and/or sensitive context, where privacy is of utmost importance.
2.2 Positive Shade: Sources of Funding for Early Stage Companies
Diemers 15 provides a summary (Figure 2) on the different characteristics involved in a traditional angel 16 and venture capital funding and fund raising through Initial Coin Offering (ICO). It also envisaged the possibility of a hybrid funding where companies raised funds through both means. An ICO is a form of crowdfunding method that crowdsource for funds (in one or more types of cryptocurrency) for the purpose of developing a blockchain related application.
Globally, for the past 3 years, Singapore is consistently among the top three position 9 in terms of the number of ICOs as the choice country to conduct an ICO as well as in terms of total amount raised.
The average amount of fundraised over the past 10 months is about US$9 million 9. The figures for the next quarter will be closely watched as that would indicate if the ICO fund raising market has stabilised, improved or is still uncertain.
The second part of this article will cover the bad and ugly sides of the BCT—the money grabbers, ICO exit scams, as well as some very shady ICO projects. Stay tuned...
1 MAS, 2019, Is the block chain a solution looking for a problem?, keynote speech, Monetary Authority of Singapore. Accessed via https://www.mas.gov.sg/news/speeches/2019/is-the-block-chain-a-solution-looking-for-a-problem
2 World Economic Forum, 2016, What is blockchain?, Accessed via https://youtu.be/6WG7D47tGb0
3 Etherscan, 22 April 2019, Ethereum token market capitalization: token tracker. Accessed via https://etherscan.io/tokens
4 Morpheus Labs, 2018, Morpheus Labs Website. Accessed via from https://morpheuslabs.io
5 Tokenize Exchange, 2018, Tokenize Exchange Website. Accessed via https://tokenize.exchange
6 MAS, 2016, Project Ubin: central bank digital money using digital money using distributed ledger technology, Accessed via http://www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/Project-Ubin.aspx
7 Unibright, 2018, Unibright website. Accessed via https://unibright.io
8 Ideacity, 2016, IP blockchain within ideacity platform, Retrieved April 22, 2019 from http://www.ideacity.io
9 ICOBench, 2019b, ICOBench Market Analysis: March 2019, ICOBench Publication.
10 Yeap, R. (2018b), Blockchain system layers, IP Blockchain, 42F34C6E4ED9F9B6064F9CEA7D81C167B64464973614673719213D-9F86437B34, 2018-05-17.
11 Nakamoto S, 2011, Bitcoin core integration/staging tree, Accessed via https://github.com/bitcoin/bitcoin
12 Henk F Moed, Wolfgang Glänzel and Ulrich Schmoch, 2005, Handbook of quantitative science and technology, ICOBench. Accessed via https://icobench.com
13 Chow A C, Chan P M W, Haldenby P A J, Lee J J S, 2016, Document tracking on distributed ledger, United States Patent and Trademark Office, Granted Patent Number US10,163,080.
14 Chow A C, Chan P M W, Haldenby P A.J, Lee J J S, 2015, Document tracking on distributed ledger, United States Patent and Trademark Office, Provisional Patent Application 62/204,768.
15 Diemers D, Arslanian H, McNamara G, Dobrauz G, Wohlgemuth L, 2018, Initial coin offerings: a strategic perspective, PWC Strategy.
16 Lee Y S, 2010, Keynote Speech, Asian Business Angel Forum 2010, National Archives Singapore.
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