Do you need a blockchain?


This post was originally published in TechCrunch.

Blockchain technology is set to have a profound impact on a wide range of industries ranging from capital markets to the music industry. While some use cases may seem obvious, the technology is still surrounded by its fair share of hype and uncertainty. As a manager, how should you approach the subject, and when should you put your money where your mouth is and actively aim to implement blockchain technology?

According to Juniper research, 6 of 10 large corporations are either actively considering or in the process of deploying blockchain technology. Amongst companies who have reached the Proof of Concept stage, two-thirds (66%) expected blockchain to be integrated into their systems by the end of 2018.  The research claimed that those companies which would benefit most from blockchain include those with the need for (1) transparency in transactions, (2) a current dependence legacy storage systems and (3) a high volume of transmitted information.

Looking at the reasons for implementing blockchain, there is an inherent risk that managers eager to explore new technologies jump to conclusions without exploring alternative options. According to the research, systemic change rather than technological may provide both better and cheaper solutions to the issue at hand.

For many corporations, the go-to approach to investigate potential use-cases for blockchain is to look for inefficiencies in current processes.This approach is guaranteed to provide some results, but often the solution is to truly re-design legacy processes to fit a digital world rather than exploring new and unknown technologies.

One reason why blockchain often emerges as an answer to many problems is that it is easy to imagine high-level use cases of blockchain technology. However, as we venture under the surface of such use-cases, applying blockchain technology to a known problem is all too often a theoretical solution.

If we look at it, blockchain in its simplest form is an alternative to the traditional database. Blockchain differs from a database in many ways, but the most significant exception is the decentralized nature of blockchain. While a database requires a central authority to maintain and manage data, blockchain offers a decentralized approach to storage and verification of data. However, this feature comes at a cost. Blockchains in their current state (at least public ones) have some scaling issues, making them slower than traditional databases. In addition, users must pay a fee for each “transaction” on the database, which is fluctuating and unpredictable.

To make thing a bit more confusing, the term blockchain has become a bit diluted as the hype has continued to bloom. Terms like permissioned vs.permissionless and private vs. public blockchains are circulating, the term has become so widespread that is may lose some of its meaning.  Permissioned Blockchains are operated by known entities such as stakeholders of a given industry, where private Blockchains are operated by one entity. These approaches have become particularly popular in the financial industry, as they focus on immutability and efficiency rather than anonymity and transparency. However, if we look closely at the inherent properties of a private or permissioned blockchain, they resemble a shared database, and critics argue that the term private blockchain is just a confusing name for a shared database.

Estonias digital identity solution is an example of the use of the blockchain as a marketing tactic as the company providing the underlying technology rebranded its offering from “hash-linked time-stamping” to “blockchain technology” just in time to ride the blockchain hype. With last years crypto-craze, there is no shortage of companies claiming to be a “blockchain-company” in order to boost valuations.

With this in mind, there are a couple of simple control questions to help guide one through the decision process whether one should explore blockchain technology or just stick with a good old database.

First of all, if it works, don’t fix it. If you’re satisfied with your database setup today, there should be no rush to replace this. A potential switch involves rethinking everything, recoding most things, and betting on a new technology that will need many years of work to become as mature as whatever database you’re currently using.

Are you depending on a third party to carry out transactions or to create trust between multiple stakeholders? If the use of a trusted third party to establish and maintain trust across stakeholders it may be the time to investigate the use of blockchain technology.

On the other hand, if performance and transaction speed is the most important factor, you should stick with a database… for now.

Do you need to handle highly dynamic data with a clear audit trail, blockchains offer a flexible capacity by enabling many parties to write new entries into a system of record that is also held by many custodians.

To make things somewhat easier, there are numerous flowcharts for then to use a blockchain circulating the internet, and many of these can be found here.

While there are many reasons to steer clear of blockchain technology, there are equally many potential valuable use-cases such as royalty distribution in the music industry, cross-border payments, management of shared ownership such as timeshare, health records and many more. For instance, a decentralized Facebook might have mitigated the current array of scandals related to deliberately spreading misinformation to influence public opinion and the misuse personal data.

For managers looking to explore blockchain, it is easy to both be dazzled by the promises of new technology as well as dismiss the unknown. In this case it is important to stay curious and have a practical approach while still being able to have a vision that spans beyond the daily operations.


Norwegian mining company Intex signs agreement to develop asset backed digital token

Binary world

Intex Resources ASA to be renamed Element ASA signs Terms of Agreement  with Harmonychain  to explore initiation of an Initial Coin Offering of asset-backed digital tokens based on blockchain technology.

The Company and Harmonychain intends to issue asset-backed tokens which are backed by the Company’s metal reserves; currently Iron Ore and Nickel Ore, and products derived thereof (‘Tokens’). The Tokens will be based on blockchain technology and will be exchangeable in to the physical product (i.e. Iron Ore, Nickel or products derived thereof). The Tokens may accordingly be used as an alternative tool for investors who are looking for Iron Ore- or Nickel exposure/hedging or investors who simply want exposure in digital Tokens which have the security of underlying value assets (as opposed to Bitcoin and other un-backed crypto currencies).

The new world of serious and secure digital currencies and tokens opens up a whole new way for listed companies to raise capital. We believe our ICO would be the first of many to come from other companies in Norway and internationally”, says Lars Beitnes, Chairman of the Company.

“For the Company the most obvious potential of issuing Tokens is the possibility of bridging the gap between current reserve-value and equity value, in addition to providing a possibility for non-dilutive financing for our shareholders”, says Beitnes.

On the condition of a successful ICO by 30 June 2018, the TOA stipulates that the Company will have exclusive rights to use Harmonychains Ethereum Smart Contract platform technology and some or all of their pending patent claims to develop Tokens for Iron Ore and Nickel. The company has already registered IRON and NICKEL on the EC20 blockchain and is aiming to distribute the tokens on reputable token exhanges.

For more, read the entire press release here.


Is the surge of ICOs an innovative funding source or a bubble waiting to burst?

Initial Coin Offerings has suddenly emerged to be a fast growing funding source for technology startups, and by July this year, almost $1,3 billion has been raised through this funding mechanism, where more than half of the amount was raised in June. With this speed of adoption, wither someone has figured out something ingenious to fill a gap in the market, or we are looking at a greed-driven bubble.

For those unfamiliar with the concept of ICOs (Initial Coin Offerings), An ICO has become an alternative mechanism to raise capital where a company instead of issuing shares to investors sells digital tokens or coins such as ether or bitcoin to fund their company. Investors are not given any stake in the company nor any future voting rights in contrast to a stock offering. A comprehensive report published by Autonomous NEXT provide this analogy to explain exactly how an ICO work.

“Imagine there are plans to open a new casino, and for funding, the casino sells its own plastic chips before opening, in anticipation of customers using these chips and creating economic value. “Further, the buyers start trading these chips based on the expected value of the casino, how well attended it will be, and whether other chip holders are trading.”

Just like chips at a casino, the tokens have an inherent functional value, e.g. XRP fuels transactions on the Ripple Protocol and Ether acts as the engine for the smart contracts system of Ethereum. This raises the question whether all the ICOs are offering tokens with an actual functional value, or whether tokens are issued primarily for speculation.

The first question everyone should ask himself or herself in that case is whether the company at hand benefits from using blockchain technology over a traditional database or ledger? Unless you are dependent on inherent functions of the consensus mechanism in the blockchain technology such as immutability, provenance between numerous stakeholders, or could benefit from a smart contract layer, a good old-fashioned database may be sufficient. There are many examples of digital currencies with no need for a blockchain. Take World of Warcraft Gold for instance, a virtual currency that has been traded for real world money for years. Since this currency exists solely in Blizzards closed environment, there is no need for any blockchain to validate or record transactions. There is reason to believe that many ICOs are offering tokens or coins without any real functional value. ICOs like ‘jokecoin’ and ‘uselesscoin’ are still seeing hundreds of thousands of dollars invested, proving that real money is being invested in useless coins

Another cause for concern is the sheer number of ICOs and the amount of capital raised in a very short time. Autonomous calculated that $26m was raised from ICOs in 2014, $14m in 2015 and $222m last year. It found that by the second week of July there had been 56 token sales this year, raising $1.27bn in total. More than half of this year’s proceeds have been raised since the start of June, as the price of leading cryptocurrencies such as bitcoin and ether surged to record highs. We are even starting to see companies reaching unicorn valuations of over 1 billion USD through ICOs.

For existing and potential investors, the number of altcoins being launched should raise some serious concerns regarding liquidity and second-hand market. A unicorn valuation is of little to no value it the underlying token/coin is illiquid.

ICOs are often referred to as a cross-breed between an IPO and a crowdfunding campaign, as supporters sign up for a project similar to a crowdfunding campaign, while at the same time looking for a future return on their investments as the expect token value to rise. To set ICOs as a funding source in context, this year’s total investments are still a tiny fraction of the $34bn raised via crowdfunding platforms back in 2015. Even though Crowdfunding had its number of hopeless investments in its early days, it has proven to be a serious funding option. Time will tell if this also will be the case for ICOs as a funding mechanism.

With the value of popular cryptocurrencies such as btc, ether and XRP rising to record highs this year, it is reasonable to believe that the sudden explosion in number of ICOs are driven by the desire to get on early on what could the next best thing. Opportunistic investors with little to no technical expertise to evaluate whether an ICO is backing tokens with a function value or not hoping to cash in on what they perceive as easy money should prepare for a rude awakening. Both South Korea and China announced this week that they have outlawed ICOs, saying ICOs have “seriously disrupted the economic and financial order”, and SEC has warned against the legality of some ICOs.

Even though the jury is still out on whether we are witnessing a bubble or not, one thing is for certain, there will be losses. After months of unprecedented appreciation, almost every digital currency is seeing double-digit losses over the last 48 hours. Regardless of whether the market is experiencing a correction as it matures and consolidates or whether we are witnessing a market collapse, winter is coming for many hopeful altcoin investors.


Blockchain – hype or reality?


Around this time last year, blockchain was the hottest subject in finance and tech. It was close to impossible to attend an industry event or read a subject-specific news source without hearing about blockchain.  As the attention to blockchain has cooled down some might ask whether it was all just a hype.

While some of the early use-cases for blockchain turned out to be too good to be true. The DAO, an organization built on smart contracts, had been robbed of more than $60 million through a code exploit in the underlying smart contracts, and around $70 millions were stolen from Bitfinex due to a flaw in the storage of private keys. In the financial sector banks are struggling to reap the benefits of the technology without modifying it to a point where it starts to resemble traditional systems. While ringleaders like Goldman Sachs, Santander and Morgan Stanley left the prestigious R3 consortium, the technology has proven to have potential far beyond the financial sector.

In a world where the majority of middle school students can’t tell the difference between real news and fake news, and the president of the Unites States claims fake news every time he receives criticism from the press, the validity of data is more important than ever.

But who watches the watchmen when those institutions that where once trusted to provide the public with transparent data takes a different turn? It did not take long before the Trump administration deleted every trace of information regarding climate change from the White House website, but this is merely a portion of the information that has been deleted by the current administration. Early February, the US government deleted several datasets that were part of the open government act, which the Obama administration created to promote government transparency.

The US government are far from the only ones tampering with data to promote their cause or benefit financially. Anyone remember the Volkswagen emission scandal? A public blockchain could be utilized to ensure the validity of information through public consensus in an age where data is a fundamental raw material of the digital economy.

Blockchain also shows great promise in the music industry as a method to provide a more fair royalty distribution. Cutting out the middleman is only one area where blockchain could benefit musicians. Royalties are often divided amongst several artists, where the performing artist(s) get one fraction, another to composer, another to the producer as well as fractions to the publisher, the record company, A&R depending on your contract. In addition to providing an immutable proof of ownership for each recorded song, a blockchain-based solution might even sort out the payments of those royalties in real-time opposed to today’s streaming world where it takes forever for an artist to receive any payment from music published on digital distribution platforms.

License and rights administration is another area where complexity in today’s system creates room for intermediaries like performing rights societies to track and collect royalties whenever music is played public. Lastly, blockchain could enable new business models when it comes to funding. A blockchain-based crowdfunding solution would enable fans to invest in the next release of artists they love, and smart contracts would entitle the same fan a small fraction of future royalties. This would also incentivize fans to promote artists the support, creating a stronger bond between artists and fans, as well as give independent artists supporters that have a mutual financial incentive to promote the music.

Blockchain has also shown potential for the public sector, and Sweden’s land registry authority is leading the way with trialing the technology for land title registration. Last year we also saw the first blockchain-managed energy transaction. the owner of a roof solar panel sold a few kilowatt-hours of excess energy to a neighbor utilizing a smart contract, proving the promise of blockchain for distributed energy production, distribution and consumption.

One of my personal favorite use cases is the promise of blockchain for digital identity. Blockchain could act as an enabler for a decentralized global identity database, where the people owned their own identity and no single government or corporation could assert sovereignty. Norwegian challenger-bank, Taqanu has created a bank for refugees based on blockchain for identity management and identification.

While the underlying technology has stolen the spotlight from digital currencies, bitcoin prices are continuing to soar and is viewed as an asset class and Japan has even recognized bitcoin as a legal method of payment.

The defining moment for bitcoin as a potential asset class came from the report Bitcoin: Ringing the bell for a new asset class released earlier this year by Coinbase and ARK Invest, arguing that bitcoin should be considered the first in a new kind of asset class.  The report examines how bitcoin’s unique characteristics are breaking ground for an entirely new asset class: cryptocurrencies.

No asset has scaled from a theoretical concept to a market cap of more than 12 billion USD as fast as bitcoin. Bitcoin also displays a unique politico-economic profile. Its basis of value, governance, and use cases are clearly differentiated from other asset classes. This gives bitcoin as an asset class a unique price behavior with near zero correlation to other asset classes over the past five years.

Even though the hype has cooled down, blockchain and cryptocurrencies are here to stay. The fact that C-level representatives like me stop talking about it and leave it to those who actually know what they are doing to get hands-on with the technology should be considered a good sign.


Identitet i en digital verden


This post was originally published at Dagens Næringsliv (in Norwegian)

Hver person, ting og entitet har sin egne unike identitet, og evnen til å bevise denne er nøkkelen til alt fra å logge inn på Facebook til å levere inn selvangivelsen. Vi omgir oss med ulike former for digitale identitetsløsninger som gir oss tilgang til innhold, foreta betalinger og kommunisere gjennom dagen. Samtidig henger mange av prosessene og reglene knyttet til opprettelse og verifisering av identitet igjen i den fysiske verden med signaturer, papirbasert ID og fysisk oppmøte.

Et av de største hindringene for finansiell inkludering er manglende evne til å verifisere egen identitet. Hele 1,5 milliard mennesker står på utsiden av det finansielle systemet grunnet manglende evne til å legge frem papirer for å bevise sin egen identitet for å oppfylle standard hvitvaskingsregleverk. Selv i Norge er det til tross for høy digitale modenhet fortsatt krevende å opprette en bankkonto for barn uten fysisk oppmøte fra begge foreldre, samt fremleggelse av papirbaserte ID-papirer i form av pass eller fødselsattest.

Men fordelen med en digital identitetsløsning strekker seg langt utover finansiell inkludering og digitale banktjenester. En lovlig identitet er også avgjørende for tilgang til helsetjenester og utdanning, samt grunnleggende rettigheter for flyktninger. Avhengigheten av en papirbasert identitet gjør befolkningsgrupper i konfliktområder spesielt utsatt, og ID-papirer er som regel det første som destrueres i forbindelse med barnearbeid og menneskehandel.

FN har satt det som et av sine globale bærekraftsmål å kunne tilrettelegge for en lovlig identitetsløsning for hele verdens befolkning innen 2030. Dette målet støttes også av Verdensbanken gjennom «Identification for development»-programmet som har som hensikt å bistå utviklingsland å nå dette målet.

I Norge har regjeringen besluttet å inkludere elektronisk ID i fremtidig nasjonalt ID-kort, men løsningen har blitt utsatt ved gjentatte anledninger. Samtidig tilbyr Estland som foregangsland en digital ID-løsning som er tilgjengelig for alle som vil bli digitale borgere av Estland. En av de store fordelene ved en slik løsning er muligheten for beskatning av digitale tjenester, og Estland utforsker allerede muligheten til å utvide ordningen basert på blockchain-teknologi.

Bruken av blockchain for å etablere tillit i en digital identitetsløsning var også et av hovedtemaene ved ID2020-konferansen som ble avholdt hos FN i mai i fjor der fokuset var å samle bedrifter og nasjonale myndigheter til å samarbeide om målet om å etablere en global digital identitetsløsning.

Som følge av dette er flere bedrifter i gang med utvikling av blockchain-baserte identitetsløsninger. Deloitte utvikler en digital identitetsløsning basert på blockchain, og Microsoft samarbeider med ConsenSys og Blockstack om en open source identitetsløsning basert på blockchain.

Ettersom våre liv i større grad integreres i digitale tjenester har EU-kommisjonen foreslått at nasjonale elektroniske ID-løsninger også skal brukes til innlogging i digitale tjenester som Facebook, Twitter og Uber. Facebook på sin side tar saken i egne hender, og har bygget sitt digitale økosystem rundt forvaltningen av vår sosiale digitale identitet, og ifølge grunnleggeren av Pirate Bay kan Facebook regnes som verdens største nasjon med sine egne regler for etikk og sensur.

Den største utfordringen knyttet til digitale identitetsløsninger er knyttet til registrering av en digital identitet i første omgang. Av verdens identitetsløse befolkning er det en uforholdsmessig stor andel kvinner og barn, hvor det er anslått at så mye som 750 millioner barn har ingen juridisk identitet, og en måling foretatt i 2012 anslo at 230 millioner barn under fem var ikke registrert med noen form for identitet.

Teknologi alene er ikke løsningen på å gi hele verden befolkning en lovlig identitet, men blockchain-teknologien gjør det mulig å opprette et desentralisert globalt identitetsregister hvor hvert individ eier sin egen identitet uten inngripen fra utenforstående. Det er paradoksalt at vi setter vår lit til fysisk verifikasjon av papirbaserte ID, når dette i mange tilfeller er det svakeste leddet til ID-tyveri, hvitvasking og tilgang til grunnleggende rettigheter.


Core banking – fintech’s final frontier


If it ain’t broke, don’t fix it. This idiom has acted as a rule of thumb for core banking solution for several years. While analysts has claimed repeatedly that  legacy IT is slowing incumbents down, the existing and sometime ancient core banking systems still work flawlessly. Although, even if something works an upgrade is due when the world around is moving at an increasingly rapid pace.

A majority of bankers consider the cost of maintaining core legacy systems on of their major challenges, and the majority of IT budgets are spent on incrementally improving and maintaining legacy core systems.

core-bankingWhile incumbent banks are built around traditional core banking systems, the center of gravity for challengers differ from incumbents. While incumbents built around core banking, challengers like Fidor shift the center of gravity from the traditional core banking view to focus on their API layer. This enables Fidor to maintain a strategic position where anyone can innovate on top of the Fidor platform.

Just like the PC replaced mainframes, changing customer behavior and new digital solutions is forcing banking solutions away from vertical integration to horizontal layers, where user experience and relevance is imperative the closer you get to the user. This becomes even more prevalent with the implementation of PSD2, which forces banks to open up their APIs to third parties. This development favors born-digital challenger banks who are able to build around their APIs and create a new wave of consumer-friendly services that utilize data and services from both their own and third party middle layers via APIs.

Fintech startups have so far been focused on innovating around the traditional core of banking. However, ThoughtMachine is looking to change that with a banking operating system called Vault OS. The solution is cloud-based, and is based on a private blockchain with cryptographic ledgers for security. Furthermore, in addition to providing flexible products based on machine learning and smart contracts the company claims to solve compliance hurdles through automatic and real time reporting of standards like Basel III. Deloitte is also taking a swing at core banking, and has announced that they are partnering with five blockchain startups to build a new core banking system, and Fidor is exploring both Ripple for transaction banking and Ethereum to replicate basic customer accounts.

A blockchain-based approach to core banking could act as a catalyst to fracture the monolithic and vertically integrated approach to core banking. A modular approach to lending, syndication, capital markets could utilize blockchain to tie it all together. All the other elements of transactions management, integrity of transactions, messaging, etc. are inherent features of blockchain. Blockchain is also well suited for digital identity management, enabling efficient KYC and AML procedures as well as an immutable customer perspective across platforms and channels.

While replacing the core banking solution could be considered undergoing an open-heart surgery during a marathon, fortunately some incumbents are audacious enough to embark on this journey. Both SpareBank 1 and Nordea are in the process of replacing and renewing their core banking solutions.

However, when renewing core banking solutions it is not sufficient to modernize architecture, update coding language and comply with industry standards. A core banking renewal should be considered a catalyst for process revision and renewal as well as radical product simplification.

Chris Skinner states several benefits for renewing core banking systems on his blog:

  • Real-time provision of service
  • Consistency of data
  • Ability to leverage deep data analytics
  • Single view of the customer
  • Enterprise information leverage
  • Consolidated risk management

Looking at the development, every layer of the traditional core banking architecture is at play.

  • The front-end is moving from proprietary digital channels (online and mobile banking interfaces) to a vast array of personalized interfaces, chatbots (made possible by data analytics and machine learning) and APIs
  • Real time becomes a prerequisite for transaction banking, data flow and personalization as well as risk and compliance
  • A modular design based on microservices provide the necessary agility to respond to a changing landscape for financial services
  • Blockchain could disrupt the core infrastructure and force us to rethink the whole concept of core in core banking solutions

In my opinion, the core-banking solution of the future should be based on a modular design, centered around the customer relationship and API-layer in order to maintain focus on a customer-centric banking-model.


You can’t have financial inclusion without digital inclusion


This post was originally published at TechCrunch.

One of the most exciting aspects of fintech is the promise of delivering financial services to the unbanked and underbanked population of the world. According to the World Bank, 2 billion people are still unbanked in the world today. Even though this is a high number, it still is a decrease of 20 percent since 2011. Of the 2.5 billion people who have no access to a traditional bank in 2011, 1 billion have cell phones and services like M-Pesa has provided mobile money accounts to 12 percent of adults in Sub-Saharan Africa. However, a study conducted by GSMA found that “women are on average 14% less likely to own a mobile phone than men”, creating a gender disparity in financial inclusion.

Of the unbanked population, 1,5 billion people are unbanked due to their inability to prove their identity through a valid birth certificate, passport, proof of residence through utility bill or some other means to fulfil traditional KYC-procedures. When there is no bank account, people only gain access to and underground economy and is on the outside of vital economic and public services like education or welfare.

This has sparked the debate that digital inclusion if a prerequisite for financial inclusion, as digital, and specifically mobile financial services accelerates financial inclusion.

The United Nations has stated as one of their sustainable development goals that providing a legal identity for all of the world’s population by 2030 is a shared objective for the international community. This is also backed by the World Bank through the Identification for Development (ID4D) program to assist developing countries achieve this goal.

However, it is no straightforward process to create a global digital identity and several alternatives have been suggested. Estonia offers an e-residency, a transnational digital identity available to anyone in the world interested in administering a location-independent business online. There are several benefits for countries offering such a digital residency, including tax on any earnings generated through digital banking services on the identity, and is already  investigating the prospect of applying blockchain technology to the identity.  This includes an e-voting scheme for companies listed on Estonias stock exchange, similar to the basic principle of DAO, as well as notarization services  through Bitnation.

Deloitte is developing a proof of concept for smart identity, including the ability to use a single digital key to access any identity-restricted location, automated identification and verification of customers, public records like driving licenses and passports, into a single digital record.

The use of blockchain in creating trust in digital identity concepts were also one of the key subjects at the ID2020 conference, hosted at the United Nations in May with the goal of getting governments and corporations on the same page as UN when it comes to solving the need for global digital identities.

One of the initiatives seeking to provide a solution is a collaboration effort between ConsenSys, Microsoft and Blockstack Labs that aims to create an open source, self-sovereign, blockchain-based identity system. Bitnation has also launched its Decentralised Borderless Voluntary Nation Constitution using Ethereum, promising users to create their own nation through smart contracts.

Facebook is also taking matters into its own hands, and is creating a global digital ecosystem revolving around ownership of their users digital identity. According to the founder of Piratebay, Facebook can be considered the world’s largest nation with their own views on ethics and censorship. As our lives are increasingly entangled in digital services, social logins are shaping the future of our digital identities. The European Commission is even proposing the idea of using national ID cards to log in to online services, including Facebook, Twitter and even Uber. Thus strengthening your Facebook profile as a borderless digital identity.

Despite notable efforts, technology alone will not solve the problem. The real hurdles are borders, sovereign governments, global trade and businesses.

The first challenge is issuing and registering a digital identity. The problem disproportionately affects children and women, where it is estimated that 750 million children have no legal identity and as of 2012, the world has failed to account for the births of 230 million children under the age of five. This effectively puts millions of children at risk of being victims of human trafficking and child labor. Therefore, birth registration must be a top priority for digital inclusion. A blockhain-based approach could provide a starting point for an immutable record of legal identity. By applying a decentralized approach, citizens are able to own and update their own personal identity, thus removing the dependency on governmental intervention.

Storage, authentication, authorization and audit are key factors when creating a digital identity and different biometric factors as a means of authorizing an authenticating contain appealing properties to create a frictionless digital identity. Identity theft is an increasing problem, and a blockchain-based digital identity could potentially provide provenance for digital identities.

The importance of providing legal digital identities to the world stretch far beyond financial inclusion, and has the potential to provide better gender equality in developing economies, help people gain access to basic public services like health and education and secure rights for refugees just no name some of the benefits stated by the United Nations. Technology alone is not the answer, but the promise of blockchain could act as an enabler for a decentralized global identity database, where the people owned their own identity and no single government or corporation could assert sovereignty.


How will blockchain impact the music industry?

While the financial industry is on the brink of disruption, the music industry has been on a steady decline as digital has replaced physical distribution the last ten years. Even though revenues in the music industry is growing for the first time since 1995, the gap between music consumption and artist revenues is growing. This is due to several factors, but one of the contributors for lesser known artists is how streaming platforms calculate royalties. The way it works, the artist’s monthly streams is divided on total monthly streams, effectively favoring whatever becomes that months huge hit, instead of dividing revenues per play. This has enraged both fans and artists, and some artists have chosen to pull their music from streaming services such as Spotify.

This is where many are advocating the use of blockchain for a more fair music and royalty distribution. I had the pleasure of meeting Imogen Heap last year, who then had released her last single on blockchain. By doing this, she hopes to create a “fair trade” music industry that aims to sidestep intermediaries like iTunes and Spotify and giving musicians ownership of their own work as well as giving the artists control of pricing and terms of use.

Cutting out the middleman is only one area where blockchain could benefit musicians. Royalties are often divided amongst several artists, where the performing artist(s) get one fraction, another to composer, another to the producer as well as fractions to the publisher, the record company, A&R depending on your contract. For sampled music, it gets even more complicated. In addition to providing an immutable proof of ownership for each recorded song, a blockchain-based solution might even sort out the payments of those royalties in real-time opposed to today’s streaming world where it takes forever for an artist to receive any payment from music published on digital distribution platforms.

Copyright administration is another area where complexity in today’s system creates room for intermediaries like performing rights societies to track and collect royalties whenever music is played public. For a small country like Norway there are no less than two different performing rights societies. A distributed database of ISRC codes could potentially automate and make this process more transparent and reduce the need for intermediaries.

Lastly, blockchain could enable new business models when it comes to funding. Crowdfunding has already become an option for many artists, and sites like Indiegogo and Kickstarter feature lots of artists hoping to raise funds for their next release. Based on how much is raised, backers receive various rewards in forms of both physical and digital copies of upcoming releases, merchandise and concert tickets. A blockchain-based crowdfunding solution would enable fans to invest in the next release of artists they love, and smart contracts would entitle the same fan a small fraction of future royalties. This would also incentivize fans to promote artists the support, creating a stronger bond between artists and fans, as well as give independent artists supporters that have a mutual financial incentive to promote the music.

A blockchain –based approach to digital distribution of music could benefit the entire value chain from funding, rights management, copyright administration as well as payments. However, as in most blockchain use-cases the real change need to occur in the business model. Technology is only an enabler that could provide transparency and provenance of digital rights.

Photo taken at Oslo Marathon 2015.


The stream from Oslo blockchain day is now available

Trying my best to explain blockchain from a banking perspective.


Blockchain from a banking perspective

Shared some perspectives on blockchain at Oslo blockchain day today.



What is this infamous blockchain and how does it actually work?


When talking about fintech, I usually mention blockchain at some point. One of the most common questions I get in the break following my speech is; what is this blockchain everyone is talking about? Instead of explaining the theory behind the technology, I will try to recite some practical applications for blockchain technology I have come across that interest me.

I argued this summer that blockchain technology provides multiple possibilities for real-time payments through the distributed ledger by utilizing ISO 20022 as the message container combined with the blockchain technology as a ledger of ownership to confirm the change of ownership. This approach is backed by banks like WestPac, ANZ and Commonwealth Bank of Australia have experimented with the Ripple protocol for real-time cross-border payments integrated with existing payment infrastructures.

Blockchain also can be used to create smart contracts, which is another word for computer programs that can automatically execute the terms of a contract. This could potentially enable real-time verification of pre-defined trade conditions through digitized smart contracts. In addition to solving the friction related to large-value payments for global value chains, blockchain technology would, in theory, make trade finance available to SMEs that would otherwise find it difficult to obtain credit approval.

I had the pleasure of discussing blockchain with Deanne Kemp, CEO and founder of Everledger earlier this year. Everledger use the blockchain technology to prevent and combat insurance fraud. More accurately to record and track diamonds. Every diamond has a unique serial number, as well as a variety of other metadata points that make up a diamonds “digital fingerprint”. CEO Deanne Kemp states to TechCrunch, the perfect use case for the blockchain is most definitely when there is an immutable ID on a device that can not be changed and it is sitting within an immutable ledger. The value proposition to insurers is to reduce claims fraud as well as increase the chance of reclaiming stolen diamonds, since diamonds recorded on the chain could be retraced to its rightful owner, and diamonds are just a starting point. The Everledger platform could be used in recording and tracking almost every high-value item as long as it has a unique and unchangeable serial number or other identification that could be represented digitally.

Another use-case for blockchain is identity management. ShoCard is a startup that registers and stores your identity on a blockchain so that you can prove your identity whenever you need to.

One of the most interesting areas to explore from my point of view is the use of blockchain in the internet of things. IBM and Samsung is already working on a proof of concept for an blockchain-based framework for the internet of things. Just imagine how a blockchain-based framework could be utilized by self driving cars in an on-demand economy. The driver would identify and access the car via some kind wearable device containing a digital identity. Payments would be deducted automatically based on usage, and the car itself would keep track of all costs related to pay-as-you drive insurance, tolls, parking and power consumption.

Blockchain is increasing in popularity for incumbents in the financial services industry, and is considered as a candidate for the next disruptive technology. Nasdaq acknowledge bitcoin and blockchains as two separate innovations, and 22 top banks have joined a consortium led by R3 that is working on a framework for using blockchain technology in financial services. One of the key interest areas for the consortium is the creation of a distributed and open platform that  all the banks have access to, reminiscent of how Norwegian banks have been collaborating on a shared infrastructure for years.


Bitcoin er mer enn en spekulativ valuta


This blog post is in Norwegian and was originally published at e24. For My english-speaking readers, I recommend Google Translate.

Siden lanseringen av bitcoin i 2009 har det vært et omdiskutert tema, og for mange synonymt med valutaspekulasjon, svarte penger, en mystisk opprinnelse og ideologiske visjoner. Fellestrekket ved kontroversen rundt bitcoin er sterkt knyttet til bitcoin som valuta. Det er i denne sammenheng viktig å skille mellom bitcoin som valuta og blockchain, som er den underliggende teknologien bak bitcoin.  Blockchain-teknologien kan sees på som en offentlig distribuert hovedbok eller database, og det er her det store potensialet ligger.

Valutaen har vært svært volatil og har opplevd kurssvingninger fra 1,245 USD på topp til bunnen på 178 USD i januar i år. I tillegg kommer avsløringen av det illegale nettstedet Silk Road som benyttet bitcoin som primær valuta og ønsketekninger om bitcoin som alternativ valuta for kriserammede land som Hellas.

Men bitcoin er fortsatt i en tidlig fase og kan sammenlignes med måten Napster og lignende fildelingstjenester utfordret musikkbransjen i år 2000. Men Napster var kun beviset på at distribusjon av musikk gjennom fildeling var mulig og ikke lenge etter lanserte Apple iTunes som kommersialiserte digital distribusjon av musikk. Dersom bitcoin er finansbransjens Napster, så er det stor sannsynlighet for at finansbransjen vil få sin iTunes basert på blockchain teknologien.

Det siste året har flere fått øynene opp for disse mulighetene, og både finansinstitusjoner, investorer og nasjonale myndigheter ønsker å være med på den videre utviklingen.

Citibank er en bank som annonserte nylig at de er i ferd med å utvikle sin egen løsning, Citicoin for å skaffe seg en bedre forståelse av hvordan digitale valutaer vil forme fremtidens finansbransje. Dette underbygges av Goldman Sachs, som er tydelige på at digitale valutaer vil forme fremtidens finansbransje og Santander som hevder å ha identifisert 25 bruksområder der blockchain teknologien kan appliseres. I tillegg er alle de største navnene innen venturekapital involvert i investeringer i bitcoin, med skandinaviske Northzone som intet unntak. Men det er ikke bare privat kapital som er satser på digitale valutaer, den amerikanske sentralbanken har i samarbeid med IBM igangsatt et prosjekt for å utvikle en egen blockchain med hensikt å etablere en digital representasjon av en sentralisert valuta som dollaren.

I tillegg til økende interesse for blockchain-teknologien, er det en rekke potensielle konkrete bruksområder, med ulik modenhetsgrad.

Pengeoverføringer på tvers av landegrenser er i dag en svært kostbar tjeneste som også ofte tar lang tid å gjennomføre. En distribuert reskontro som blockchain muliggjør potensielt både betalinger, clearing og oppgjør i sanntid. Australske banker som WestPac, ANZ og Commonwealth Bank of Australia utforsker muligheten for å kombinere nasjonal betalingsinfrastruktur med den distribuerte betalingsprotokollen Ripple for internasjonale sanntidsbetalinger. Dette viser hvordan nasjonale initiativ knyttet til sanntidsbetaling potensielt kan kombineres med blockchain for å skape en løsning som kombinerer det beste av begge verdener. En mulig løsning er å benytte standarden for betalingsformidling, ISO 20022 som meldingsformat og blockchain-teknologien for å bekrefte at transaksjonen har funnet sted.

Kostnader og kompleksitet knyttet til betalinger gjelder også netthandel, som opplever stort kundefrafall i betalingsøyeblikket, og må betale høye gebyrer til kredittkortnettverkene Visa og Mastercard. Både Microsoft, Dell og en rekke andre nettbutikker har begynt å akseptere bitcoin som betaling, og selskaper som Bitstamp og Bitpay tilbyr løsninger med sanntids oppgjør konvertering til dollar i kjøpsøyeblikket. Løsningen har en forenklet utsjekk og en flat gebyrstruktur som ligger lavere enn Visa/Mastercard.

Digitale valutaer vil også potensielt fjerne den nedre grensen for størrelsen på betalinger, noe som åpner for nye muligheter innen mikrotransaksjoner. For eksempelvis mediebransjen vil dette åpne for nye inntektsmodeller basert på pay-per-use/pay-per-view, der det er mulig å kapitalisere sidetrafikk gjennom automatiserte mikrotransaksjoner til en marginal pris for hver sidevisning. Til sammenligning har en standupklubb i Barcelona tatt i bruk ansiktsgjenkjenningsteknologi for å ta seg betalt per smil for å stoppe frafall av publikum.

Et av de mest spennende bruksområdene for blockchain-teknologien er etableringen av smarte kontrakter, hvor kontraktens formål gjennomføres automatisk når forhåndsdefinerte betingelser blir oppfylt. Dette kan forenkle en rekke finansielle prosesser produkter som aksjer, obligasjoner og derivater uten involvering av tredjeparter og manuelle operasjoner.

I Norge har dette også stort potensiale som et neste steg i innføringen av Elektronisk Handel i planleggingen, gjennomføringen og oppfølgingen av offentlige anskaffelser av varer og tjenester, der smarte kontrakter kan benyttes til å automatisere manuelle operasjoner knyttet til saksbehandling og kontraktsoppfølging basert på standardiserte formater gjennom EHF og BIS.

For en potensiell fremtid der hver tredje jobb kan bli erstattet med roboter de neste 20 årene kan smarte kontrakter potensielt spille en sentral rolle i de tilfeller kunstig intelligens kan stå juridisk ansvarlig for sine handlinger.

Dette er kun nonen eksempler på bruksområder for digitale valutaer, men det viser at det eksisterer et uforløst potensiale i å utforske temaet fremfor å avfeie bitcoin som en spekulativ valuta for svart økonomi.

Digitale valutaer vil nok ikke erstatte tradisjonelle fiat valutaer, men den underliggende teknologien vil gjøre transaksjoner raskere, sikrere og mer effektive. I tillegg er bruksområdene for en distribuert reskontro ikke begrenset til valuta og finansielle tjenester, men kan potensielt revolusjonere måten vi ser på digitalt eierskap i fremtiden.


The future of finance is in real time


This post was originally published at TechCrunch.

In a world of decreasing size, and rapidly increasing technological development, the financial sector needs to keep up at the same pace. While physical supply chains have improved to keep track of the digital world, the financial supply chain has not kept pace. The race towards real time financial services involves a wide array of stakeholders and possibilities, ranging from common standardization to reengineering underlying processes and protocols through blockchain technology.

So far, much of the hype in fintech is concentrated around the front-end through P2P-payments like Venmo, Facebook Pay and Snapcash as well as mobile payments like Apple Pay/Wallet and Android pay. These solutions changes the dynamics of the customer interface but are mainly built on existing infrastructure. Either the banks or the card networks. However, in a world where physical goods can delivered within the same day, expectations for real time payments are rising.

For companies like Amazon, which operate on a near zero-margin philosophy, efficient working capital management is crucial for a well-oiled value chain. This applies to both large volumes of small- to medium-sized transactions, as well as clearing and settlement of large value payments across global value chains. However, not only the process of debiting one bank account and crediting another will benefit from increased speed in the overall payment process. Real time accounting and reporting could potentially reduce fraud and money laundering as well as give companies better control of their liquidity.

Speed in payments is not only a competitive advantage for traditional value chains, but will also have a great impact on the internet economy, where time to market is essential. The delay in payouts from for instance Apples app store is as long as 60 days. This time delay could mean the difference between life and death for an app developer, and that money should probably be used to acquiring new users as soon as possible instead of being stored on an intermediary bank account.

For emerging markets, real time payments would enable a smooth transition from a cash-based economy to a digital payment world, by potentially leapfrogging the process of establishing centralized clearing and settlement functions.

With the rise of the sharing economy, or more precisely stated an on demand economy it is likely that a larger proportion of the future work force are freelancers. A transition to real time would allow workers to get paid as they go upon completion of a task directly to a bank account with all required tax reporting requirements in place. This could be done weekly, or even daily.

These are only a few examples of how real time financial services would have an impact.

Today, 18 countries has implemented real-time payments, with another 18-30 underway. This is mainly done by upgrading existing infrastructure. For this to work both national payment infrastructure and a central real time system, as wells core banking systems need to make the transition to real-time. This is a costly process with large up-front investments as well as increased operating costs for 24/7/365-operations. There is also the issue of cross border payments, which is acknowledged as one of the harshest points of friction for international commerce, where the European Commission has launched a pan-European payment clearing and settlement project.

In addition to the incumbent-driven journey towards instant payment processing, blockchain technology provide multiple possibilities for real time payments through both the distributed ledger as well as the possibility to create smart contracts. The latter would potentially enable real-time verification of pre-defined trade conditions through digitized smart contracts. In addition to solving the friction related to large value payments for global value chains, blockchain technology would, in theory make trade finance available to SMEs that would otherwise find it difficult to obtain credit approval.

These approaches are not necessarily mutually exclusive, but can easily co-exist by utilizing ISO 20022 as the message container combined with the block-chain technology as a ledger of ownership to confirm the change of ownership. With a vast number of unknown variables related to this approach, banks like WestPac, ANZ and Commonwealth Bank of Australia experiment with the Ripple protocol for real time cross border payments integrated with existing payments infrastructure. Australia is not alone on this, banking giant Barclays recently signed an agreement with Swedish blockchain-startup Safello for a proof of concept to explore how the blockchain could be used in traditional finance.

In a world where the banks are at risk of becoming a commodity, the ability to offer real time financial services could strengthen the position of incumbents in an increasingly smaller world where availability and speed are essential to stay ahead of the curve.


For those in search of summer reading material


After a busy couple of months with many interesting developments in fintech, I’ll be taking a couple of weeks hiatus from updating my blog for the summer. Feel free to check out my previous posts from the last couple of months in the meantime.

Since the launch of my blog in late february I have covered numerous subjects that interest me. A common denominator for the majority of my blog posts is the changing landscape for financial services, where I have looked at how tech giants are challenging incumbents though the launch of Facebook Pay as well as what plans Google may have for the insurance industry. Ia have also covered how industry convergence is reshaping finance, with the Scandinavian media industry is also joining in on the fun.

Not only are established companies from converging industries challenging the existing ecosystem, but the number of unicorns in fintech steadily increasing, with P2P Lending as one of the areas of high potential for disruption as well as bitcoin and blockchain as a potential game changer. I have also given a reminder that regulations are not always a constant, and Iceland’s proposed change in the monetary system is a brilliant example.

Over to regional perspective, I have devoted a lot of time giving an overview of fintech in Scandinavia, including fintech in Sweden, or more specific the greater Stockholm region, how Denmark is focusing on a more specialized approach and the growing Norwegian fintech scene. There are also several bank driven fintech initiaitves, and some claim the Nordics as the potential silicon valley of payments.

In addition to my focus on fintech, I have also looked into more general subjects like how to hire digital talent, interpretation of Net Present Value when interest rates are negative, and how sharing in the sharing economy is everything but caring.

While you wait, you could also check out the older material on my blog (in both English and Norwegian) and stay tuned for my next contribution at TechcCrunch scheduled July 12th. There I will look closer at real time banking and the correlation between ISO 20022 and Blockchain.

Thank you for all the feedback and encouragement. Have a great summer!


Bitcoin: Why Everyone Should Learn to Stop Worrying and Love the Blockchain


After the fall off Bitcoin prices from its peak at $1,242 in 2013 to hitting below the $200- dollar mark in january 2015, sceptics were lining up to be the first so say; I told you so. Here is why those sceptics are dead wrong:

First of all, when discussing Bitcoin it is important to distinguish between Bitcoin as a currency, bitcoin as a payment service provider (PSP) and lastly the underlying technological platform, the Blockchain. From my perspective, the potential is all about the Blockchain. here are just a few announced from this week proving the potential of the Blockchain:

At the same time, the number of bitcoin transactions processed through the Blockchain-protocol has experienced steady growth and sharing services like Lyft starts to accept Bitoins as payment as well as Paypal considering integrating Bitcoin as an option.

We also have massive amounts of funding being poured into Bitcoin. the total amount of venture capital raised for bitcoin-related companies is as of march 2015 $667 million, with over $200 million raised YTD in 2015.

These amounts are based on the belief that Blockchain has limitless potential in every industry that is facing digital disruption, and from my point of view that includes every industry out there. But is a complex subject and takes time to fully grasp its implications and potential.

Courtesy of Disney
For those interested in some further reading:

Bitcoin as a PSP like Ripple renders clearing obsolete and dramatically lowers the transaction cost for merchants. This makes Bitcoin an alluring option for profit-seeking merchants looking for cost effective solutions, a means to lowering the cost of transactions for remittance as well as serve as an enabler for online microtransactions below $1.

Bitcoin as a currency is of limited interest for me to discuss any further. But for those who are curious I’ll just stick to the facts. Bitcoin as opposed to fiat currencies has no central issuer, but is created through decentralized “mining” of new Bitcoins. Bitcoin as a currency has a number of similarities to gold, hence the term mining. Bitcoin has a finite amount of available Bitcoins at 21 million, and the amount of Bitcoin in circulation is expected to reach the maximum amount by 2140. In addition Bitcoin has a built-in deflation-mechanism, meaning that the amount of Bitcoins will decrease over time when e.g users lose their access to their bitcoins, since it is impossible to create more Bitcoins when the maximum amount is reached.

I am still learning about Bitcoin, and I reccomend checking out for more in-depth insight on Bitcoin and Blockchain.