Technologies in Corporate Environments
Which technologies do you think will shape
the future of business in the next 10 years?
Is it Blockchain, Big Data, Artificial Intelligence, Internet of Things,
Smart Contracts, Cloud technologies or something else?
What is blockchain? What are smart contracts?
Even though using blockchain and smart contracts in concrete business cases has proven to be quite a difficult step to implement for many companies, there are enough successful cases that show the possible success of these technologies. On the one side there is a lack of experience and on the other side there is a lack of information about changes and costs and benefits of remodelling some processes and letting them work on blockchain technology.
They will explain in a very simple way the technical side and function of blockchains and smart contracts but also their use in business.
If you are interested in knowing more about these technologies and their possible use in “real world” business cases, watch our very insightful webinars and read our published paper about Blockchain and Smart Contract technologies.
Ever heard someone talking about Blockchain and not talking about cryptocurrencies at the same time? Is Blockchain just a hype or
there is something real hiding behind it?
Can you imagine doing business with your partners without using a bank for your transactions
and still trusting your partner? Do you believe in a decentralised network based on Blockchain?
internet of value, blockchain technology and network, trust, risk, solidarity and changes in legal governance.
topic of your interest within the following slides and find detailed information about it in the published paper.
Logic of statements:
Trend toward peer-to-peer business and decentralised business models
Continues Trend towards decentralisation and peer-to-peer business. In the last ten years in almost all sectors of the economy, new organizational models are emerging that operate as peer-to-peer platform businesses. They create value by facilitating the exchange of information or values between their users. In order to make these exchanges happen, platforms harness and create large, scalable networks of users and resources that can be accessed on demand.
Traditional corporates are organised in a linear way as pipeline businesses
Characterized by a clear hierarchy with different management levels focused on the value creating process of production. Unlike peer-to-peer (P2P) platforms, traditional corporates are brick- and mortar solutions with a limited scalability as they take the risk of having employees on long-term contracts and their own production lines with machines as fixed assets on their balance sheet.
Peer-to-peer business has significant economic advantages
Distributed Ledger Technology as facilitator of P2P-collaboration
Collaboration needs a lot of trust between partners as the desired result could only be reached together. Everyone depends on each other, like participants of a rope party when climbing mountains. Trust could be created when every participant has access to the same reliable information, at the same time, about activities and trans-actions. If only one shared database exists in the distributed network, recording all past transactions as a single source of truth for all participants, this is likely to be the case.
That is exactly what the Blockchain technology allows. It is a database technology for recording transactions within a network of peer-to-peer businesses. Blockchain has the advantage that data can be stored in the individual "blocks" in a tamper-proof way, which means that participants in the Blockchain are able to check the authenticity, origin and integrity of the stored data. As a peer-to-peer network, combined with a distributed time-stamping server, Blockchain databases can be managed autonomously. There is no need for a single administrator as administrator rights are distributed to all network participants.
Blockchain is a very simple database technology that enables collaboration, but it is not a magic bullet for success. It is just a technology to solve certain information problems, but if the problem itself is not well defined (no. 1), the participants are reluctant to share information (no. 2), decision-making processes are static and imbedded in a strong hierarchy (no. 3), data interfaces are not automated and standardized (no. 4), and the business process itself is not sustainable (no. 5), then a Blockchain application might be a waste of time and resources.
Understand the “Internet of Value” concept!

The Internet of Value based on the Distributed Ledger Technology strives for a strictly decentralised organisation of interactivities between peers without any centralised platform acting as intermediary. The technology is disruptive as core elements of the current organisation of value exchange change radically:
- Proof of identity of customers, of clients, of user, of patients and the associated handling of private data;
- Recording, documenting and certificating of transactions, of the change of value and of entrepreneurial success;
- Organisation of the value exchange and the transfer of values and utilities; and
- Integration of objects, of machines and of robots in communication and transaction processes.
The concept “Internet of Value” demonstrated by an example car sale:
Car Sale: physical meeting - car against cash

The easiest way to sell a car is probably via a physical meeting between seller and buyer, signing a sales contract and handing over the car against cash.
But is it secure?

- No integrity of paper contract: Despite the fact that both parties receive a paper copy of the sales contract, the integrity of this document is not guaranteed. For instance, the time or other details within the contract could be fraudulently changed by one side after the event.
- Maybe the buyer still drives the car on your insurance? After the deal is done, seller and buyer immediately inform their local vehicle registration offices and their insurers about the change in ownership. However, it would be optimal if vehicle registration offices and insurers were informed at the same time as the change of ownership happens. The time gap between change of ownership of the car and submitting the information to insurers and vehicle registration offices exposes seller and buyer to certain risks.
Car Sale: physical meeting - car against bank payment

However, some cars might be too expensive to pay cash, so the buyer prefers to do the payment via their bank account.

Payment via a bank account makes this process of a car sale even more costly and cumbersome.
- A bank remittance for changing the state of two different organisational ledgers takes one or two bank working days.
- This time difference between exchange of ownership of the car and the payment creates some credit risk for the seller not knowing if he or she will get paid. An ideal transfer would be “against-trade”, meaning the car is transferred against payment, as with cash.
Car sale entirely online by using Distributed Ledger Technology
The optimal sale in this case would be “against-trade”, as in example (1) in the sense of a direct exchange of values, without any intermediary between seller and buyer, “car against cash” but in a digital way. Therefore, the car needs to be substituted by a digital identifier and the physical cash by digital cash such as a payment token.

Every participant involved in the car deal would be connected to the network and have access to the publicly distributed ledger. Access implies that everyone keeps their own copy of the database and has the right to see and to change the status of the database by writing and reading. The ledger is permanently synchronized making sure that every participant sees the same data at the same time.

The DLT solution for the online trade of the car is based on the following assumptions:
- Buyer & Seller - Proof of Identity: Buyer and seller are the sovereign of their own digital ID and verify each other’s identity by using cryptographic tools such as private and public keys.
- The car token represents a legal title of ownership and transfer of title is recorded on a Blockchain making it secure and accessible by all relevant parties. The car has its own ID as the token serves as digital identifier.
- Seller as car owner identified? Proof of Ownership: By having the complete history of recorded transactions
- Car sold twice? - Prevention of double spending: The problem with digital assets is that they could easily be double spent. This problem is solved by the network protocol and some algorithm software, which determine the way to select only one of the conflicting transactions.
- Payment tokens like Bitcoin are used as a means of payment for acquiring goods or services to enable a direct exchange of value between network peers without the use of banks and banking ledgers.
- Smart Contracts could provide an automated way to trigger payments to a supplier once performance has been proven by tokens.
- The deal is fixed! Immutability and irreversibility of recorded data by using Blockchain Technology
Payment order, car insurance and vehicle registration could be done by smart contracts. At the same time as the ownership of the car is transferred, then the payment order should be sent out, the vehicle registration automatically changed, and the insurance contracted. Besides the convenience, the simultaneity of executed transactions reduces several risks for the parties involved and is an important feature of DLT.

The Distributed Ledger Technology facilitates the adaption of our economic life and its organizational framework towards the decentralized network structure of the Internet.
Until now, the Internet was primarily used for decentralized communication, the public use of information via web pages and for social media. But the direct digital exchange of values between peers has been hardly possible as it still requires the involvement of several intermediaries which know and check the identities of those involved and document the change of ownership in siloed organisational ledgers.
The Distributed Ledger Technology empowers peers to exchange digital assets without intermediates and without the use of platforms in a secured and trustful way. Within the new Internet of Value, the ability to initiate the exchange of values, the legitimacy of authorisation of ownership, the proof of identity and the transaction consent of a change in ownership rely totally on the responsibility of the peers and are done in a decentralised way within the network without using a central authority.
Internet of Value is constituted by four building blocks
- Concept of Identity: The Distributed Ledger Technology is based on a decentralised concept of identification: Every network participant is the sovereign of their own private data and especially their digital identification. The private data and its attributes are owned and controlled by the individual, are stored by their in a digital safe and could be shared partly or fully, temporally or permanently and restricted or unrestricted concerning the use with other network peers via a public key
- Recording of data in a shared ledger: The use of cryptography enables DLT to record and to store the data in a tamper-proof way, which means that network participants can check the authenticity, origin and integrity of the stored data. In this way, the distributed ledger becomes an ideal solution for the storage of all kinds of certificates, registrations, reports and grades which are currently kept securely at high cost in the siloed databases of issuing organisations such as universities, corporates, health organisations, public administrations or land registry offices etc..
- Use of tokens for the exchange of value: The decentralised setting of DLT does not need a central authority to run a central account for value or execute the exchange of value. Peers are empowered to exchange value via tokens by their own initiative. Tokens are categorized into three types:
- Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects.
- Utility tokens are tokens which are intended to provide digital access to an application or service.
- Asset tokens represent assets such as participations in real physical underlyings, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.
- Internet of things: Objects are enabled to act and interact autonomously within a network by recording transactions and by just in-time validation and verification of transactions within the network

In order to gain a coherent picture of Blockchain technology and its network design it makes sense to distinguish between three different layers: (1) Application Layer, (2) Network Layer, and (3) Technology Layer. Following the design-thinking mode the intended application of Blockchain determines the design of the network (Layer 2) and at the same time the selection of the right technology (Layer 3).
Layers of Blockchain technology and its network

- Technology Layer
Blockchain has the advantage that data can be stored in the individual "blocks" in a tamper-proof way, which means that the participants in the Blockchain are able to check the authenticity, origin and integrity of the stored data. Thus, it is possible with Blockchains to provide the proofs of asset (i.e., token), transfer authentication and thus the proofs of asset ownership. For the process designer, using Blockchain technology means trusted collaboration between different participants within a network of peers and to exchange value by using tokens on a digital basis. - Network Layer
Blockchain technology records all transactions within a network in a shared, albeit distributed ledger. The distributed ledger data is stored redundantly on all computers of the network. Since there is no central authority or central accountant for the ledger, but each user has the same read and write permission, there must be a common consensus mechanism for checking the logical consistency of the data in the database and preventing contradictory data from being stored. The consensus mechanism is the backbone of every distributed ledger and is of overall importance for the functioning of the Blockchain network.
Depending on whether the Blockchain is freely accessible to everyone or not, a distinction is made between public permissionless and public permissioned Blockchains. If you not only limit access to the network, but also restrict the circle of network participants who are allowed to validate new information in the data, this is referred to as a private permissioned Blockchain.
A trade-off relationship exists between scalability, security, and decentralisation. Public and decentralised blockchain networks like Bitcoin lack in scalability. Where as consortium networks (public permissioned) have a lower latency time and are more scalable for a higher volume of data. Governance issues could be solved within the consortium by stakeholder consensus agreements. - Application layer
Blockchain solutions are therefore advantageous for processes in which a large number of participants are involved and in which it is of immanent importance for the participants to obtain complete and reliable information about the current status of the process at all times. The reliable information about the current process status enables the participants to react to changes at any time so that the process does not run statically but remains dynamic.

When reading the first lines of Satoshi Nakamoto (2008) famous white paper “Bitcoin: A Peer-to-Peer Electronic Cash System”, the idea of creating a private cryptocurrency called Bitcoin could be easily linked to the Libertarian school of thought.
In short Libertarians distrust central authorities and the power of the government and stand for a maximum of individual autonomy and freedom. Satoshi Nakamoto goes a step further by suggesting that cryptographic proof should substitute for interpersonal trust. In this sense the Blockchain is often called a trust machine.
According to this idea, technological progress brings a series of shifts of trust within society from interpersonal trust in the community, to institutional trust, to trust in peer-assessments on web based platforms, and finally to trust in the Distributed Ledger Technology.

Source: Based on video of R. Botsman, We’ve stopped trusting institutions and trusting strangers (Botsman, 2016)
It is probably an illusion to believe that DLT could work without trust as long as human peers interact in the network but the interface between the real and digital worlds is not perfectly covered. There are still some loopholes in the system.

With regard to the impact on society, another point seems to be important. The use of Distributed Ledger Technology strengthens the power of the individual vis-à-vis institutions, but at the same time shifts the risk to the individual. Intermediaries also absorb risks for their users. Should these cease to exist, individuals will have to bear the risks. One example is the concept of self-sovereignty of private data: For some individuals it will be a blessing but others will find it difficult to cope with this new responsibility.
Therefore, the solidarity systems from the "old" world of central institutions (such as health, pension, unemployment insurance, etc.) must be integrated in a new form into the decentralized world of peer-to-peer networks. Perhaps completely new digital forms of social security for the individual will emerge in regional networks and communities. Whatever the peer-to-peer world will look like in the end, it will need a layer of solidarity between the peers, so that the law of the strongest does not apply here alone.
The current system of legislation is based on a two-tier, central and institutional system: Legislators and public authorities are regulating organisations like corporates, banks, administration etc. to provide protection for their clients, users, consumers.
For example banking laws and ECB (regulating authorities) target banks to protect banking clients. Corporate laws regulate corporates to protect corporate clients.

What is needed is a transformation towards a one-tier system with focus on the protection of the individual and his/her rights.

Digital identity of citizens
Peer-to-peer trading without intermediaries requires a digital identity of the peers. Without a state-based digital identity of the individuals, there is no legal certainty and no accountability on the part of the trading parties.
Blockchain as a public infrastructure?
It is not an easy task to regulate this network technology without a local anchor, starting with the jurisdiction and court that will be responsible for regulating a web-based network distributed throughout the world. Any regulation would need to develop a concept of democratic governance for the distributed ledger and the network behind it, without putting a central regulatory authority in place. A central regulator would probably contradict the idea of a distributed and decentralised network. It will be something totally new for any government and legislative authority to develop regulation for a network without direct intervention or enforcement power for public network authorities. It might be a good idea to develop a multinational, publicly governed Blockchain network as a kind of public infrastructure.
Euro-Cryptocurrency as legal tender?
Having a publicly governed Blockchain network the central bank should issue Euro-cryptocurrency as payment token, which is legal tender.
Legal issues of smart contracts
Distributed Ledger Technology and the associated automatic execution of transactions by software code ("Smart Contracts") entail considerable legal problems and contractual uncertainties for its users. It remains to be seen how this problem of the missing link between software code and the legal code of the lawyers will be solved.
Privacy, tracking and data protection
The overall idea of the General Data Protection Regulation (GDPR) approach is to return some data sovereignty back to users, which is clearly in line with the Distributed Ledger approach. However, the main issue is that GDPR regulation was designed for the current business world, which collects, stores and processes data in a centralised way and not for the decentralised distributed ledger world. Both worlds are so different that the GDPR seems hardly applicable to DLT in its current form and needs to be modified.
Wüst and Gervais (2018) sketched this in the following decision tree demonstrating for which case Blockchain solutions are most appropriate and for which case a central database might be the better solution.
Do you need a Blockchain?

Source: Wüst and Gervais (2018, p. 3)
Guidance for starting a Blockchain project
In general, no Blockchain project should be started solely because of the Blockchain. The technology should be the solution to a specific problem and not vice versa. In some way this relates to the design thinking approach (p. 9): First get the best understanding of the needs and underlying problem before selecting the right technology to solve it. This basic principle is often forgotten in the hype surrounding Blockchain.
The development and implementation of a Blockchain project consists largely of change management and process management work. Contrary to expectation, the selection of the technical Blockchain solution plays a subordinate role. Intensive communication, understanding each other's interests, taking people with you and convincing them, explaining the technical possibilities of the Blockchain in simple terms - these are the components for the success of a project and for the selection of project team members.
Sequence of starting a Blockchain project

Source: the authors
Identification of suitable process
Blockchain projects are suitable for decentralized processes with a larger number of external participants, for whom it is absolutely essential to obtain reliable information about the status of a project or process at all times.
Recording of current workflow with key performance indicators
Once such a process has been identified, the next step is to record the workflow and the key performance indicators of the current process. The recording of the entire process with its key performance indicators can hardly be carried out by a single organization and requires the cooperation of all participants.
Design of a Blockchain based process
This is the main challenge. Distributed Ledger Technology enables completely new problem solutions and therefore requires not only a deep understanding of the technological possibilities, but also the ability to think "out of the box".
Process designers should consider the following aspects:
- Design Thinking: The decisive factor for success is thinking from the point of view of the customer, the user or the user of the product.
- Win-Win Situation: Blockchain applications require a collaborative interaction of a variety of stakeholders. This is only possible if each of the parties involved derives a substantial advantage from the redesign. Win-win solutions require a mutual understanding of the interests involved, intensive communication and persuasion in the community and the openness of all parties involved. Consequently, creating synergetic processes is very time-consuming.
- Selection of information: Starting from the ideal case, the question has to be answered for whom which information is optimal at which point in time. The use of tokens and digital identifiers makes it possible to completely record the value chains of a product and also to precisely record environmental data.
- Use of intermediaries: With the increasing automation of process flows via Smart Contracts, the use of some of the existing intermediaries will probably no longer be necessary.
- Scalability/Agility: The newly designed process should not be static, but agile and scalable. This has the decisive advantage of rapid adaptability to changing environmental conditions.
Development of a governance model
This is certainly the most important part of the collaborative process. A governance structure must be created that is shared by all stakeholders. Ultimately, it is about hierarchies and the distribution of power.
Convincing the top management
Ultimately, a decision to convert complex processes with a large number of external interfaces will always be made by the company's Executive Board. The decisive argument in favour of testing the technology will ultimately be the prospect of considerable cost savings and higher profits. So the key performance indicators of the current process have to be compared with those of the new Blockchain designed process.
Convincing the management by KPIs

Source: the authors
The future savings by the newly designed Blockchain process must clearly exceed the costs of the process conversion, otherwise such an investment would not be worthwhile. However, in a win-win-situation the net present value of such an investment must be positive for each stakeholder involved in the process.
Positive Net Present Value for all stakeholders?

Source: the authors
If for each involved stakeholder the expected future profits exceed the initial costs of the process transformation, then the respective management can decide to carry out this investment or project.
Of course, the Blockchain technology is totally new and everyone lacks experience. This naturally creates a considerable uncertainty and a not negligible risk of investment failure. Consequently, it is recommendable to start with a small simulation project that should be scalable. In the case of a successful test run, the project could be implemented on a wider scale.
