IBM Partners Blockchain Connect's 'Czech Alliance' To Fight Fraud & Drive Digitization

The Blockchain Connect Association, a newly established Czech Alliance formed in the spring of 2018 with partners including IBM, PwC and a Prague-based fintech incubator for start-ups, has revealed plans to contribute to the development of blockchain technologies in the “economic and public spheres” within the Czech Republic.

This is a country that this year along with Slovakia celebrates the 100th anniversary the founding of the First Republic of Czechoslovakia.

The grand aim of the Alliance is to “significantly change” the Czech economy within the next three to five years by using blockchain technology – also known as Distributed Ledger Technology (DLT) – as the initiative plans to accelerate the evolution of blockchain in the country.

The protagonists behind the venture claim that it will be “integral to implementing DLT solutions” throughout the public and private sectors across the nation, which has a population of around 10.5 million.

The Czech Republic is a country – along with neighbouring Slovakia – that can lay claim to many inventions and innovations over the years. The list is long, but it includes the ship’s propeller (by a Slovak) in a landlocked country, the ‘Radio Priest’, Jozef Murgaš, and another Slovak, whose patents would go on to form the foundations for the invention of the radio before Marconi.

Then there was Štefan Banič, who emigrated to America and built a prototype of a parachute in around 1912 that was registered with the U.S. Patent Office.

On the Czech side, the sugar cube (or first ever cube-shaped sweetener) was invented in the small Bohemian town of Dačice, near the Austrian border, by Jakub Kryštof Rad. And, let’s not forget the world’s first golden pilsner larger, Pilsner Urquell, originates from 1842. Reflective of this ingenuity, there is an old adage, ’Zlaté české ručičky a chytré české hlavičky‘, which translated means “golden Czech hands and clever Czech heads.”

Mitigating Corruption, Fraud & Theft

Blockchain technology is touted by industry pundits as having the potential to significantly mitigate corruption, fraud and theft in various markets. IBM, for its part has been on a trail in recent years to bear down and stem fraud in sectors spanning gold and jewelry, logistics, shipping and digital identities applying technology from the HyperLedger project.

Founding members of the alliance include Adel, a blockchain project accelerator and innovation firm, consultancy firm PwC, technology company IBM, and Squire Patton Boggs, a full-service global law firm with a multi-disciplinary team of over 1,500 lawyers across 20 countries.

It was in December 2016 that Adel revealed plans to initiate a month-long crowdfunding exercise from March 1 2017 through an Initial Coin Offering (ICO). The incubator is headed up by a couple of Prague-based fintech advisers, with its ecosystem comprising stakeholders, registered community members, staff from around the globe, a Project Review Committee and Adel’s Board formed by three co-founders.

At the time, the incubator was to launch a website to support its initiative and aimed to develop, support and fund start-ups using blockchain technology based on the Nxt community platform. (Note: Nxt was to provide a Blockchain-as-a-Service (BaaS) platform).

Fast forward to this year and Adel plans to release Version 2 of their Incubation Portal during the fourth quarter of 2018. Earlier this year they moved their digital currency (ADL) from the Nxt blockchain to Ethereum. And, since their ICO, Adel has been working to incubate several ideas. Currently there are 14 on the table for consideration, it is understood.

Furthermore, Adel’s flagship idea is a Decentralized Cryptocurrency Exchange – or DCX for short – called iFin (ifin.io), which is planned to be launched in 2019. This is a significant project since most trading platforms released to-date have been centralized. This means that they use a decentralized open ledger such as blockchain, but centralize account details and secret keys. The upshot is that it has resulted in a massive single-point-of-failures that have been exploited by hackers.

The popularity of blockchain arrived with the rapid expansion of cryptocurrencies and the open ledger. This represents a decentralized database that keeps a record of every single transaction or interaction between two parties. In simplistic terms one could think of it as a huge Excel spreadsheet.

Traditional databases have a much wider scope. For this reason, Blockchain Connect has indicated that it will “focus on the differentiation of crypto/DLT solutions.”

Jan Lamser of Adel describing the alliance’s ambitions, remarked: “First and foremost, our goal is to educate the public and private sectors on blockchain and crypto solutions. We want to take part in the digitization of the entire Czech society and show the practical use cases.”

Blockchain Connect plans on a “three-pronged” approach to market acceptance, namely on:

• Business Challenge Focus: It is understood that the Alliance will focus on real-world solutions that solve their client’s current pain-points. Each targeted industry (e.g. real estate, financial services, automotive, healthcare, and the food industry) have specific challenges that keep their CEO’s awake at night. The first stage is in educating decision makers on the ROI of using open ledger solutions to modernize their business.
• Cultural Challenges: Many verticals are still unaware of the benefits of blockchain, nor have the expertise in-house to explore such opportunities. As such, Blockchain Connect will focus on crypto education and proof of concepts to overcome internal cultural hurdles.
• Partnership Challenges: As recently quoted by PwC in ‘Blockchain is Here. What’s Your Next Move? (PwC, 2018): “…you don’t realise the greatest return on investment [ROI] in blockchain if you’re building it just for yourself. Blockchain’s benefits are best realised when different industry participants come together to create a shared platform.” And, Blockchain Connect recognizes that engaging partnership throughout the supply chain will be a “critical success factor” for successful crypto projects.

Jiří Batěk, the director of IBM’s Infrastructure Division based in Prague and Business Unit Leader, Global Technology Services (Central Europe) at ‘Big Blue’, added: “Our ambition is not only to localize our global solutions in the Czech environment, but also to find and support innovative local partners and enable their access to international markets.”

One of blockchain’s benefits is touted as the reduction of administration between companies and customers. As such this technology offers a high level of security and supply-chain transparency.

“In traditional business models, there are many entities that play different roles. They are not easily trusted, and therefore require bilateral paper-based agreements. Blockchain can easily secure trust in a streamlined and digital sphere,” stated Petr Ložek, managing partner of consulting firm PwC ČR and lead partner of technology consulting at the firm.

A possible obstacle though to the global introduction of blockchain technology is seen as deriving from “insufficient motivation” of all the stakeholders, it was pointed out by the Association. And, the question was how to address this.

As noted by Danica Šebestová, a partner at Squire Patton Boggs law firm: “For a successful introduction of blockchain [projects] it is necessary to work with all stakeholders who want to benefit from these solutions. This is our ambition – to find “optimal” crypto/DLT solutions that will save time and money for our clients.

In relation to these optimal solutions, while Blockchain Connect has actively begun to pursue opportunities in real estate, financial services, automotive, healthcare, and the food industry, specific details cannot be disclosed at this time due to customer confidentiality. However, in each of these industries, Supply Chain Management (SCM) and logistics are key areas where crypto can play a streamlined role to Business Process Management (BPM).

“The Alliance partners will focus on traditional corporate solution benefits in the name of crypto. Namely: Return on Investment (ROI), Total Cost of Ownership (TCO), and Cost and Time savings,” explained Gabriel Dusil, Adel co-Founder and Board member, from Prague.

Given that Alliance partners have multinational offices, it should certainly benefit from the cornerstone initiatives of Blockchain Connect. In any case, crypto projects are expected to take on a multinational scope and will therefore require the engagement of relevant stakeholders in different countries, depending on the crypto opportunities that develop out of the Alliance.

Simplified Logistics To Help Global Trade

Blockchain Connect has identified a number of areas - real estate, financial services, automotive, healthcare and the food industry - as the top sectors that will be able to “maximize the benefits” of blockchain and DLT.

For example, the alliance pointed to the logistics industry being “heavily burdened” by multiple parties needing to exchange paper documents. With blockchain they can be in a position to simply share the same open ledger in order to settle transactions.

According to the World Economic Forum’s study “Enabling Trade Valuing Growth Opportunities 2013”, international trade can potentially save up to 15% by reducing legacy barriers.

A key benefit of open ledger initiatives is a common platform that is trusted by all parties along the supply chain. Currently, international supply chains are plagued by disconnected databases, outdated logistics, and disparate ICT infrastructures.

“The promise of blockchain is to streamline supply chains end-to-end, but this is only one piece of the puzzle to solving legacy problems,” posited Adel’s Dusil. He added boldly: “Enter IBM, PwC, Squire Patton Boggs, and Adel – each alliance partner offers a plethora of skills necessary to tackle the largest corporate infrastructure challenges in the world.”

Similar benefits can also be found in food safety controls, in verifying the quality of raw materials. And, in real estate, negotiations between banks and land registration can take up to 70 days within the Czech Republic.

By using blockchain these settlements can be resolved within a few days or a saving in time of “up to 95%”, it was ventured.

In the automotive industry, for example, it was pointed out that an open ledger can prevent tachometer tampering. Similarly, counterfeit spare parts can easily be identified and traced in cars, thereby protecting the supply chain of the entire automotive industry.

The Roadmap

As to a roadmap going forward over the next couple of years, in parallel with the latest development, the Alliance has begun to engage the Czech government to discuss how blockchain can enhance the digital agendas, which are within the responsibility of each ministry.

According to sources the government has already expressed their “interest in engaging” Blockchain Connect in educational seminars and in projects that will modernize their legislative framework. And, government projects are expected to have a much longer sales cycle compared to the private sector.

Of course, like so many partnerships and alliances in the blockchain and cryptocurrency spaces, it is one thing to promise much. And, the industry has had a habit of over promising and under delivering. The proof of the pudding will surely come when concrete advances are actually forged and carved out.

And, that is something the industry needs to build confidence more so than ever. For now, this is a work in progress, even if Blockchain Connect’s aim of “digitization” of Czech society to bring accelerated changes to legislation is a laudable one. And, working with partners across the CEE region might potentially pep up proceedings going forward.

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