Blockchain: The fabric connecting all the future economy’s industries
- Canadian regulators are taking an active interest in the development and application of blockchain solutions within their industries, and participating in this design process is essential to them receiving the reporting and notifications they need in order to carry out their functions more effectively.
- Canadian educational institutions should offer formal degree programs focused on blockchain in order to produce the top talent the industry needs to grow, and the Canadian industry must ensure its able to retain this valuable talent to avoid seeing it flow elsewhere.
- There are many considerations for Canadian companies seeking to integrate blockchain into their operations, and the process needs to start with a reframing of the critical problems to solve and the roles of all the participants within an ecosystem or process.
To maintain Canada’s advantage and competitiveness in the international blockchain market, our ecosystem must coordinate essential activities, such as awareness raising, talent development, hosting international delegations, among other activities, through a neutral entity mandated to execute on behalf of the ecosystem.
How would you describe the state-of-play of the Canadian blockchain market, its ecosystem and its main stakeholders, and our position and competitiveness within the international blockchain space?
The Canadian blockchain market is certainly vibrant and it is growing on pace with the global market. In terms of its key stakeholders, I see them in three different categories: the research component, the solution development component and the industrialization that we need to get from early stage ideas to actual impact.
“The Canadian blockchain market is certainly vibrant and it is growing on pace with the global market.”
Our comprehensive review of the Canadian landscape uncovered a couple of interesting observations. Firstly, there is a lot of collaboration in the Canadian blockchain research space. Of all the publications we have reviewed, at least 50% of them are collaborations between at least two or more Canadian institutions, and about 25% of the research that Canadians have been involved with includes international collaboration. This bodes quite well given the global borderless nature of the technology. Canadian research also covers a wide range of industries and topics – 7 out of the 11 we reviewed, which is a fairly even spread.
“There is a lot of collaboration in the Canadian blockchain research space.”
Secondly, in the Canadian ecosystem we are seeing a number of industry and research groups. The Blockchain Research Institute focuses on strategic implications of blockchain. There is also a focus on core technical research and development that is being promoted by groups such as ColliderX and other self-forming industry associations as well. From an academic institute perspective, there is a lot of pan-Canadian activity from universities such as the University of Waterloo, from the University of Toronto, York University, as well as Concordia University, among others.
You have said that “blockchain is the heart of the Fourth Industrial Revolution” and that the technology is a “cross-industry enabler”. Please explain what you mean by this and what the implications are for Canadian industries.
Blockchain is an enabling technology; it is backend and behind the scenes, but it ultimately converges with other emerging trends we are seeing right now, such as the transition to the cloud and a lot of the developments in artificial intelligence and IOT. We can also envision blockchain’s applications for the Fourth Industrial Revolution when we consider the proliferation of smart devices that do computation on the edge of a network and where the information from those IoT devices is being stored. This has created a lot of interest from an analytics standpoint as well, since blockchain could potentially create new data links and data sources for that analysis.
From an industry perspective, blockchain can enable the transfer of valuable information between multiple stakeholders. This represents a considerable opportunity since every business is predicated on various business process flows involving multiple stakeholders. It presents a fundamentally different way of transferring that information away from the typical silos that we have today. This blockchain technology backbone opens up new business possibilities that either lead to savings from an existing process or introduces entirely new revenue streams that have not yet been contemplated.
“We can envision blockchain’s applications for the Fourth Industrial Revolution when we consider the proliferation of smart devices that do computation on the edge of a network and where the information from those IoT devices is being stored.”
In terms of cross-industry applications and connection, blockchain is a network play. It has been very interesting watching the process that companies follow as they go on their blockchain journey. It starts with ideation, looking at different use cases, prioritizing areas of focus, and prototyping. Often, after an organization has completed its first few proof-of-concepts within their own four walls, they come to the conclusion that they need to bring on board other stakeholders who are part of their value chain for more meaningful pilots and to get to production-readiness. That often leads to industry-wide solutions and the rise of consortia including multiple stakeholders.
For example, the transportation industry runs all the way from parts manufacturers to fully completed vehicles to how those vehicles might be used to move products through a supply chain process to ultimately getting food on the shelves of large grocery stores. We can then add the agricultural industry at the very beginning of that cycle and the value chains that it depends on, and so on and so forth. In this respect, industries are interconnected in many different ways and we are looking at blockchain as the fabric to connect all these industries.
How do you see blockchain impacting different Canadian industries?
Blockchain has many applications across a variety of industries. In retail there is a lot of emphasis on track-and-trace abilities through the supply chain to ensure that products are not counterfeit and to be able to trace where they came from in the event of a recall. The technology also assists in retailers’ focus on customer centricity, digital identity, new forms of loyalty mechanisms – and these apply to everything from food grocery all the way through to high-end luxury items.
In financial services, payments has traditionally been a large area of focus for blockchain technology, as well as the clearing and settlement of securities. Phase 3 of The Bank of Canada’s “Project Jasper”, which is focused on the creation of an integrated securities and payment settlement platform based on a distributed ledger, is a significant example of this and is in line with what we are seeing in the international markets.
“We are seeing governments adopt the technology as users and that sends a very positive signal to the private sector that innovation is encouraged.”
We are also seeing a lot of work in the utilities and energy space in the European market but we have not seen as much progress here in Canada. But opportunities certainly exist in both the upstream and downstream sectors. One of the examples that is very illustrative is the concept of peer-to-peer energy grids and the ability for neighbours to transact off the main grid, which in turn lightens the load on the grid.
Governments are also businesses to a certain extent, which means they need to purchase products and deal with multiple stakeholders. In a lot of those processes the use of distributed ledger technology could be helpful. We are seeing governments adopt the technology as users and that sends a very positive signal to the private sector that innovation is encouraged.
For me these applications and the many others that exist are just proof that the genie is out of the bottle – blockchain is no longer a purely experimental technology.
What are the challenges and benefits for Canadian companies integrating blockchain technology into their operations? What are the main considerations in terms of strategic shifts and change management needed to maximize benefits and mitigate risks?
We are involved in helping our clients through their blockchain journey – from A to Z. This covers everything from education to strategy development to small controlled pilots to scale and integration into existing systems.
We are seeing efficiencies introduced in a lot of processes, and essentially this starts by companies or governments reimagining why it is that they are doing what they currently do, and what the goal was at the beginning. To do so they must literally go back to first principles, redesign what the most effective solution is, and incorporate blockchain tech as one of the many key enablers to get there.The first step is mapping out the main problems or pain points their organizations experience, and then figuring out which problems are potentially addressed by the use of a distributed ledger as part of the solution. To do this process effectively, it’s important to have the right people in the room that have a very good high-level understanding of all the processes that a company is involved with rather than being very focused on just one business area. It does require an element of creativity and critical thinking, not simply retaining the status quo.
And sometimes the answer is that blockchain isn’t part of the solution – and that is entirely okay. We don’t want the audience to come away thinking that blockchain is going to be the solution for every problem they’ve ever encountered.
“Companies must literally go back to first principles, redesign what the most effective solution is, and incorporate blockchain tech as one of the many key enablers to get there.”
There are challenges organizations run into while they are trying to comprehend the blockchain space. From a technology standpoint, there is a misconception that “it’s all or nothing” – blockchain instead of other systems. We are of the belief that blockchain needs to coexist with many of the systems a company may have spent many millions of dollars investing in over the past few years – companies need not throw out everything they have previously done and start entirely from scratch, but rather consider the jump on the S-curve.
Another challenge is that “blockchain” is a large category term and it has different interpretations depending on who you speak to. The biggest misconception we encounter when speaking to enterprise clients is that they are only familiar with the public, completely open-sourced blockchain networks out there. The reality is that there are various types of blockchain-inspired distributed ledger technologies. In a business construct, the idea that the details of your transactions and interactions with your partners will be fully available to anyone, anywhere in the world is a tough proposition. So we spend a lot of our time educating clients that there is a broader market that has emerged to specifically cater to enterprise blockchain needs. A number of commonly used blockchain platforms include Quorum, Hyperledger Fabric, R3’s Corda and Digital Asset Holdings, amongst a number of others. We have the benefit of being technology agnostic; this means that we work with all the different blockchain platforms on the market and we help our clients determine which technology stacks might be the best fit for their overall problem.
The other challenge is actually not technology related, but rather, stakeholder management since integrating blockchain requires getting multiple people with various perspectives into the same room at the same time and thinking through what they might be able to do jointly on behalf of their organization or industry.
What blockchain-related strategic implications – such as regulation and the establishment of a national blockchain strategy – should Canadian governments prioritize to position Canada as a global leader in blockchain technology development and adoption?
Blockchain is a technology and regulators have the most interest in how it is being used in a particular industry or in a particular process. In fact, the Canadian regulators have been fairly open to exploring blockchain opportunities.
In December 2017, I had the pleasure of being invited as a speaker to participate in the Community of Federal Regulators of Canada roundtable, and there were 28 different government agencies represented. It was a very diverse group ranging from the Canadian Food Inspection Agency to various financial services oversight groups. For the blockchain sessions, participants were very keen to understand more about the technology and how the constituents in each of the industries they are involved with are looking at blockchain’s applications. The general consensus was that regulators want to be engaged and if an industry consortium is formed it is far more effective for the regulator to be in that room early on and providing input and feedback that is part of the product design process, so that when these consortiums are fully operational, the regulators get access to the type of reporting and notifications they need in order to carry out their functions more effectively. So I think that active engagement between the private sector and the regulators is going to be really helpful in driving this industry forward.
“Canadian regulators have been fairly open to exploring blockchain opportunities.”
In terms of a national blockchain strategy, Canada has a relatively small population and, in many cases, we are punching above our weight in the blockchain industry. In order for us to maintain that advantage the industry’s players must be coordinated and on the same page.
What is happening now is that a number of essential activities are undertaken by each participant in the ecosystem. These include, for example, building awareness and general education of what blockchain technology is and is not, the development of talent so we have experts who can be hired into start-ups or large corporations, participation in international trade missions, and so on. These are all examples of activities that need to happen but it does not make sense for all of the start-ups and all of the universities and all of the corporations to be individually involved in such activities. These activities must take place but as part of a separate, neutral entity that is doing this on behalf of an ecosystem.
Another area we must focus on is talent. Canada doesnot have any formal degree programs focused on blockchain. Resolving this issue would be a recommendation we would need to ensure that we are globally competitive going forward. From an immigration policy standpoint – and this goes for the technology sector overall – Canadian policies have been viewed very positively in the global community. We do, however, need to be competitive in terms of retaining talent in Canada such that very high in-demand blockchain software developers remain in Canada rather than flowing south of the border in search of higher wages.