The latest in the SourcingTech series, The Executive Guide to Blockchain Webinar introduced blockchain for use in the sourcing industry in a jargon free format, demystifying this new technology and providing insight from our industry experts.
Kerry Hallard, CEO of the GSA
Haydn Jones, Senior Blockchain Market Specialist at PwC, CEO of Blockchain Hub and co-author of the book “The Executive Guide to Blockchain”
Alex Cravero, who is Digital Law Lead at Herbert Smith Freehills (HSF)
Hosted by GSA CEO Kerry Hallard, the webinar kicked off with our first speaker, Haydn Jones, Senior Blockchain Market Specialist at PwC, CEO of Blockchain Hub and co-author of the book “The Executive Guide to Blockchain” which has raving reviews on Amazon and can be found here. The book provides clear explanation of blockchain to professionals and how the technology can be applied in a business context. Haydn goes on to delve into the following points:
The webinar presented some great questions from our audience to Haydn following this information.
Interested to know who is really using this tech in earnest in a production sense, and what benefits they are seeing in saved cost and time. Are there any examples?
Haydn explains the most interesting user is IBM with Walmart and challenges they have faced with food items in the US because they are contaminated with e.coli, specifically in lettuce. This led customers to become ill and caused lawsuits for Walmart. Walmart went back to the supply chain and required the suppliers of the lettuce to write the provenance of the product into the blockchain to ensure they have followed all of the hygiene procedures to create a level of trust through the chain.
Trade Finance is another use case, if goods are shipped and suppliers want to get paid, there are a lot of parties who need to sign off on the shipments. This is about moving money down the supply chain as the goods exist. Again, IBM have worked on this with Mersck. Procurement is yet to pick up the torch and move this forward, there is a big opportunity for someone to pick this up for the supplier community.
Has there been any significant progress in reducing energy consumption involved in use of DLT?
Haydn begins with the analogy of comparing bitcoin to a steam engine. Driven by coal, they are big and expensive and use a lot of energy but they did get consumers from A to B. Similarly, bitcoin uses a lot of energy because it’s exposed to the threat of being hacked by up to 7 billion people every day. Now things have moved forward in technology where we can retrofit new types of cryptography to make bitcoin and distribution ledger a lot more energy efficient. VMware for example, have a great blockchain offering and there is no mention of energy overhead. We are now in a place to use this technology and use it in an enterprise context.
Kerry hands over to our second speaker, Alex Cravero, who is Digital Law Lead at Herbert Smith Freehills (HSF). Alex leads the digital law group in the UK, US and EMEA; a team of specialist lawyers from various jurisdictions who look at advising clients on the challenges presented by digital transformation, one of which is blockchain and smart legal contracts. This includes the development of blockchain infrastructure for smart contracts to run on and moving from public to private types of ledger. Alex covers the following points:
Again, several interesting questions from the floor.
How many blockchain contracts have you brokered and how many smart contracts have been done?
Alex explains that it depends where the view sits on the contractual spectrum. At one end you have the purest view that legal contacts can become computer code, and at the other end the code sits in a separate document, paired with a legal contract. Alex is seeing external based contracts in the financial sector in particular. In terms of a middle ground, the technology is in progress and being built at the moment and coming into shape. Contracts are being developed for some of HSF’s clients and although it’s a slow process, it’s a process that really needs to be considered now.
In regards to the service credit use case which was shared, is this a real time example or something to happen in the future?
Alex explains It’s not implemented into a third-party contract yet but is something that will happen in the future and is technically possible.
I am not clear on the Tax jurisdiction point? In a DL where is the transaction tax liability? Is there a global consistency in how it is viewed/ treated?
HMRC have been very clear locally in terms of tax disposition, in terms of capital gains tax, corporation tax and VAT. You have to be careful if there are interjurisdictional linkages that you have created that you then reference back to the local tax authority. As PwC we have the capability to navigate tax issues, the higher order is to get it working operationally.
What are your predictions for how quickly this will progress and has lockdown slowed down or escalated development of blockchain?
Haydn shares that, going back to the five pillars, the think to drive value in central bank digital currencies, will sit aside regulation. And that will underpin the creation of digital economy which will flow through to things like loyalty and agreements. The world has become more virtual so we need to increase our trust in people in a more secure way. We should see adoption of provenance and sustainability in the next 2 – 3 years.
Alex also shares his thoughts. HSF has the UK jurisdiction taskforce already on board with the legal enforceability of smart contracts last year and the next report will be out November this year. The technical standards will start coming out later this year, which is a necessary hurdle to drive this forward. The escalation is reliant on the infrastructure capable of running the complexity of contracts – HSF are currently moving through the processes and developing prototype into the market. As these solutions start to come out and we knock down some of the barriers in front of us, 2-3 years is a reasonable time frame to get this started.
Looking at this in terms of how it has been affected by Covid-19, HSF saw a downturn in number of conversations during the pandemic. Covid-19 has refocused energy and efforts on immediate technology issues but clients have started again to have more conversations. Ultimately Covid-19 has been a catalyst to drive this technology forward.
Both fascinating subjects and expect more on these from the GSA very soon.