Blockchain: Beyond The Frontier

Script and slides from my talk at Blackseachain Conference on Sep 1st 2022

My name is Chris, I work for a company called BCG (the Boston consulting group) in a division called Digital Ventures based in New York City.

So why this topic. You’ve probably found like I do, that there’s a lot of skepticism to blockchain. I spoke to a C-suite level leader at a global company who told me it’s all hype, it’s just a database, people are trying to push solutions on it, when there’s no fit. He told me has a meme, that has a question: do you need blockchain? And it has one arrow, pointing to a big box that says No. So for me, I like to be able to speak to how blockchain really does matter, and how it is making an impact in the real world, and that it’s more than just distributed database.

So today we’ll talk through how some of the biggest companies in the world are using blockchain to solve real problems and make a significant impact in the world.

  • A few images here to describe my journey in crypto and blockchain.
  • So I didn’t hack BTC-E, but I did learn some hard lessons on self-custody through my experiences with MtGox and BTC-E.
  • In 2018 during the ICO peak hype cycle, I co-founded a startup that was planning a token sale. We went through the startup foundry Startup Boost. I did build some smart contracts, but we didn’t launch.
  • Over the years, I’ve also been running my own crypto trading bot, written in scala.
  • I’m a street photographer, so also on the hype train – I’ve minted NFTs of my work. There’s an example.
  • But probably the most meaningful here – as part of BCG DV, I’m a leader in the engineering cohort and have had my hand in deep tech initiatives. I’ve been with the company for coming up 4 years.

So, who is BCGDV – we are a company builder – we partner with the world’s most influential companies and organizations to build new businesses.

How do we build new businesses? We leverage assets of our corporate partners, including data assets, then apply a startup mentality through business creation, while helping our partners to think like Venture Capitalists. Much of our focus is also on newer technologies such as AI, IoT and of course Blockchain.

We have launched a lot of businesses over the last 7-8 years and we’ve typically done well compared to market → 10% of our vertical ventures have reached over $100M in valuation. And there are quite a few of us (1000+ at last count) and we’re based all over the world.

(As a footnote here – we are in the process of changing our name to BCG X Ventures)

Oftentimes we can find ourselves motivated by a concept or idea and we dive head first into building and launching. But even at a macro level, we can save a lot of time and resource with early market due diligence and opportunity filtering.

So, I’m not going to tell you exactly what you should build next, but I can help by sharing some insights from our research on the top use cases we’ve seen, by industry.

For each of these verticals list out the top 3 categories of blockchain use cases we see. 

Just explaining the icons for each of the growth models:

  • Linear growth – each incremental participant or transaction adds value in a linear way.
    • Under Financial Institutions / Verified Financing, for example: trade financing, each loan contract provides value to the borrower, and the value doesn’t change outside the contract.
  • Network effects – means the value of the product increases the more participants there are, think tik tok, facebook or even the telephone. A few other examples:
    • Under Financial Institutions / Tokenization of Physical Assets – fractionalized asset trading is one,
    • Financial Institutions / Payment Automation, cross-border payments is another
  • And Mixed is some combination of the two.

Overall – linear growth models are limited to the number of items or transactions produced, whereas network effect models have the potential for enormous value, as growth is decoupled from production and sales.

Some further examples – under Consumer, we see Goods Provenance as a top use case – in 2022 consumers are very focused on where the things they buy and consume are produced, so Sustainable sourcing is a huge use case here – and we’ll walk through an example today.

Four more verticals.

So, some more examples:

  • Industrial Goods / E2E status tracking for real-time cross border trade – being decentralized means not having to trust a government or another country’s centralized body to maintain the log of movements of goods.
  • Public Sector / Compliance & Auditing – instead of asking businesses for records, auditors can verify transactions independently on the blockchain and can do so with automation. Audits can also happen continuously throughout the year instead of at year end.
  • ID & Credential Verification – this is a top use case across multiple verticals from Health care, Insurance, the Public Sector and Tech, Media and Telecomms. Today we’ll talk through an example of a self-sovereign identity platform build we stood up plus two business applications that are operating on it.

But first – Provenance use cases – we’ll cover three today. One for the diamond industry, one in the consumer food vertical and one for the Art industry.

So what is Provenance? It isn’t a concept that is new to blockchain, but at a basic level, is the ability to trace a good through the supply chain from source to finished product, so every modification from raw material through each location along the supply chain is trackable and verifiable.

Aside from validating the legitimacy of a product, reducing fraud, etc. we know it’s very important for consumers to know where their products come from, if they were made in an ethical way and for example haven’t been genetically modified.

A decentralized, immutable, trusted log of a product’s journey makes this use case a strong fit for blockchain.

Ok, so as we jump into our first use case:

imagine you have a girlfriend, and what attracted you to her in the beginning was that she cares a lot about about people, from the starving kids in africa to the homeless guy down the street. 

You gather up the courage to propose to her – she’s super excited because you finally popped the question after all these years and you’re super excited because you found a little known dealer in the city and found a great deal on a diamond ring. Win win right?

She gushes as you put the nice big rock on her finger, she looks into your eyes and smiles, then says – of course you checked this isn’t a blood diamond right?

You say – yes, I’ve seen the movie with Leonardo DiCaprio and tell her you have a certificate. And shes says, but it’s just a piece of paper… how do you that know innocent kids didn’t die to make this ring?

After 10 minutes of tears, talking about the Kimberley Process, gaps in manual processes, the supply chain, Global Witness resigning from the scheme… you walk out of the room wondering what happened.

You get home, you jump on your laptop, and a few hours later, come to the realization that blockchain could have saved your relationship.

Alright, I know that was a bit far fetched, but you get the picture.

Our first use case is Tracr (Trace-R) – a provenance initiative built for the diamond industry in partnership with De Beers – one of the largest diamond miners in the world.

De Beers over the years has received pressure from customers to make sure their engagement rings weren’t mined by child slave labor, or the profits used to fund war criminals. Their value chain wasn’t transparent which led to a lack of consumer confidence.

By setting up Tracr, they’re now able to dramatically improve the traceability of diamonds across the value chain.

One key challenge in provenance is data capture and certification. How do you certify that the diamond you’re tracking is the same stone from the mine, through polish and the entire supply chain? Existing attempts to solve this problem – the biggest being the Kimberley Process have run into many issues including:

  • The diamond passing through 8-10 different groups along the value chain before it’s available for export.
  • Traceability of a diamond once it’s cut – even experts can’t tell which mines it came from.
  • Provenance only applying to rough diamonds. The majority of diamonds are cut and polished in India and batches are mixed together, so it’s easy for a conflict diamond to be mixed in at a market.
  • Paper certificates are easy to fake
  • And so on.

Tracr solves this problem by identifying and capturing data about the diamond through every step of the supply chain, then making that data available to consumers.

It also creates impact by increasing the value of ethically sourced, genuine diamonds and rewarding legitimate miners.

Companies who can prove the source of their diamonds also receive favourable terms from banks who also demand such verification.

Key to this solution is creating a digital certificate for each diamond, including physical images of the diamond, stored on a blockchain, allowing the history to be accessible by all participants, including end consumers.

Tracr has recently evolved out of it’s MVP stage to be launched at scale just a few months ago.

Our next use case applies the same Provenance concept to the food supply chain.

The OpenSC (Open Supply Chain) is an initiative built on the blockchain. The OpenSC is a Social Impact venture in partnership with the WWF – World Wide Fund for Nature – the world’s largest conservation organization.

In this use case, consumers are still concerned about how their food supply is sourced:

  • is it done in an ethical way, is it done in a way that is destroying animals and the environment, and also is it what it says it is. We’re putting this food into our bodies so it’s top of mind for most people to know what exactly they’re eating.

Similar themes relate to the challenges in the food industry as with the diamond industry – strong ethical reasons to trace food supply (wildlife survival, millions of enslaved people), strong consumer demand for traceability and a common challenge of not having the data or trustworthy systems to capture and analyse that data to verify food movement and transformation.

The WWF has been working on this problem for 30 years, looking for ways to get large companies to develop more sustainable operations and supply chains in an effort to literally save the planet. In less than a human generation (50 years), they’ve seen wildlife populations decline by 60%.

If we drill into that number, 70% of that impact is driven by the production of 9 common commodities such as seafood, beef, sugar and cotton.

So if we think about the different parties involved in the food supply chain – at the consuming end, you have 7 billion of us eating food to stay alive. And at the other end, you have around a billion producers of that food. But somewhere in the middle are around 500 companies who control most of the supply of food. So it makes sense that if you want to make a dent in solving this problem, it’s going to be easiest to tackle the 500 companies in the middle. These were the companies targeted as part of the OpenSC initiative.

So how do we solve for this? Technology again comes to our rescue.

Data capture is a key challenge for food supply chain tracking, but as RFID (radio frequency identification) technology is now down to around 5 cents a device, sensors can be attached to individual products and scanned throughout the supply chain.

Using coffee from Nespresso as an example – every coffee bag to sleeve of capsules is traced digitally from farm to consumer.

The core data is then stored on IPFS, with a hash captured on Ethereum. APIs are built off-chain to manage the data. The result is a tamper-proof digital log of the coffee’s journey, recording when, where, and by whom it was grown, collected, processed, and shipped. 

The platform automatically verifies that each farmer is paid fairly and each sleeve of pods carries a QR code that allows consumers to track the steps their coffee has taken and to verify the producers.

In addition to persisting supply chain data, various algorithms are employed to automate checks on sustainable and ethical production, making sure the areas where produce is sourced aren’t creating a negative environmental impact.

And how it’s going?

The platform has been used to trace multiple commodities with suppliers such as Austral Fisheries in Australia and Nestle. And as we just walked through, earlier this year, Nespresso has enabled traceability of lines of coffee pods on the platform.

Our final provenance use case will be a brief mention as it’s currently under development and in stealth mode.

One of the applications of Provenance is in the Art world. Being able to track the origin and history of ownership of a piece of art is of significant value in being able to authenticate the work.

Provenance in this space has existed in manual form for a long time, but as with other industries, has it’s challenges, such as having authenticity documents falsified.

Consider the scenario where you happen upon a piece of art by Gustav Klimt (the artist who created this piece), perhaps you inherited it or you bought it from the proceeds of mining bitcoin in 2010.

You hand it down to your daughter, who doesn’t have the same taste as you in art. She attempts to sell it at an art auction, only to find that the piece had been looted during World War II, and her only face saving recourse is to return it to the family it was stolen from.

This actually happened to a Gustav Klimt art piece last year (not the bitcoin part of the story though). The piece was titled “Rosebushes Under The Trees”.

So without a provenance record, the true value of the art piece may not be realised, or you end up buying stolen art.

Additionally, this ventures aims to solve, with physical art, what NFT royalties are already solving for artists – the ability to create perpetual equity to the person who created the piece.

This venture is quite exciting and is backed by two of the biggest names in the global art world and BCG Digital Ventures, and is due to launch later this year.

Let’s jump into our second category of blockchain use case – Self-Sovereign Identity.

First, why is SSI important and how does it replace existing trust models for ID and Credentialing?

The first mode we know, is a silo’d model. You login to an application with a username and password (or MFA), which is fine until you have to do it for the hundreds of the applications you use. And you have to trust that each application is storing your identity, personal details and password securely – anyone here had their credentials exposed in a data breach?


You could use a password manager like Lastpass, but this just means you’re centralizing trust to one private organization – so you have to hope their tech is up and running when you need it, and built securely.

Lastpass had a security incident just last week.

Another common model is the federated model which aims to solve the one credential per site issue – you use your Meta or Google credentials to login to many sites. It’s convenient, but now you’re trusting Meta or Google with all your data including giving them the ability to track each site you access with their credentials. Also, if the middleman goes down, you can’t login.

But if there’s one thing we know blockchain can do for us, it’s to remove the need to trust corporate middlemen. Enter Self-Sovereign Identity.

It allows us to have sole ownership over our identity and to control how our personal data is used and who it is shared with.

So how does SSI work?

Let’s walk through a high level flow:

  • An Issuer, who is often an organization like a government, but could be a bank, a school or even a private organization, issues a credential to the Holder, which could be you or I, or it could be an organization, based on a claim of some identity trait – for example the college MIT could issue a Verified Credential that you hold a Masters in Computer Science.
  • The Holder, you, can then present the Verified Credential to a Verifier, in this example perhaps you’re applying for a job and the Verifier is a tech company who wants to verify you hold a Masters in Computer Science from MIT.
  • Now, maybe during your college years you partied a little hard and had to repeat a couple of subjects or you decided to take a take a year off half way through because you weren’t really sure computer science was for you. These are attributes you might not want to disclose to an Employer. It should be enough MIT said you passed the course.
    • So as the Holder of the verified credential, you have the ability to share with any Verifier only the necessary information (using a zero-knowledge proof for example) – and in this case that you passed your course, not your detailed academic history.
  • Because the Employer believes that MIT is a reliable organization (and that a pass is a pass) they decide to accept that the credential issued by MIT is trustworthy and reliable and validate the course attestation from MIT using their signature.
  • All of this data is persisted on the blockchain (the Verifiable Data Registry here), with the verification handshake happening even if the MIT Issuer goes offline.

Ok, so into our self-sovereign identity use case, which is actually in three parts – the first is the build out of the SSI Network itself. Then following, are two new Applications that operate on the network. A lot of talk in this space is about infrastructure, so instead today, we will focus on the apps, solutions and value propositions that come from SSI.

What I can tell you about the client is that they’re a sovereign wealth fund with hundreds of billions of assets under management.

This network and the applications running on it, are already established businesses in market today. But what I’ll talk through is some of the early thinking the team undertook to validate the concepts and how they tested them with various network participants – this will include how trust was shown to be a central element in terms of what people valued about the platform and how trust was designed into the user facing products.

What do you think about when you want to spin up a new SSI Network?

The network is only valuable if Issuers, Users and Applications are participating. You can’t have one without the other two. But you first need to start by attracting Issuers and Applications.

Issuers as we discussed before – are organizations that people trust, who can issue credentials.

In the examples here, universities, banks, hospitals, telcos, government digital ID platforms are all good candidates to be Issuers.

The User in the middle is issued a credential and presents it to a Verifier who may be enabled by an Application.

Applications in the context of our examples today are the technical platforms and business operations that enable participation in the SSI ecosystem in support of the User and Verifiers. It’s the entity that builds the user experience and systems that onboard parties to the network along with connectivity to the underlying blockchain network.

In our examples, you can think of Applications as the customers of the SSI Platform who will be the parties who pay a fee for use (to the network or to the Issuer or both, they supply a service and in return they get access to users or customers, or to enable 3rd party Verifiers access to their platform and users for a fee).

At Digital Ventures, we devote a lot of effort to understanding how different people and organizations engage with the businesses we build. So in the next couple of slides, I’ll talk through some of the questions we needed to think through in order to make the platform attractive and viable to Issuers and Application businesses.

From an Issuer’s perspective, they’re providing access to a key asset – their data, which in many cases can be quite sensitive and valuable. In addition to asking for access to this data, we also want to make money off it as a Verifiable Credential.

So what might an Issuer receive in return?

Well, for one, monetization – and this may be less of an incentive for non-profits.

But there may also be value to an Issuer in the provision of a secure, tamper-proof identity mechanism to a population of their users – for example replacing paper IDs with VCs to reduce voter fraud.

Just to call out the reference to adjacent Applications here – a self-sovereign identity platform is a network effects model (recall our early slide), so the value of the network to all participants increases as more participants join.

So, for an Issuer – the more Applications that can leverage the credentials it issues, the more potential value the platform brings them.

Similarly for Applications – to stand up a network, you need organizations to take on the build and operation.

For Applications to operate on the network, we also need to understand the value they’ll derive, which could be in terms of access to users, or monetization.

To understand what type of Applications might be a good fit for our network requires answering questions like these, through testing and direct engagement. Key is understanding the value they receive and how much they might pay for it.

This might be an existing business who is able to open up their services to a new group of users (e.g. a bank reducing KYC burdens for customers wanting to open a new bank account); or an entirely new business that might for example, establish a new marketplace between buyers and sellers who connect directly as Holders and Verifiers of credentials.

Note too that Issuers and Applications aren’t mutually exclusive – a new startup might integrate third party platforms to perform verification, then proxy Issuer credentials; or an Application could take on the burden of manually verifying documents, for example: a startup might manually verify house rental agreements and grant a credential to a person who wants to turn their electricity on with a utility who verifies the credential.

The first application deployed to the network delivered a Marketplace for seasonal blue collar workers in a market where these workers typically don’t have a lot of documented evidence or background on their work history or skills.

Many of the available jobs they take are found  through word of mouth.

Similarly, for employers – they often have to take on new temporary workers on faith that what they say their experience is, is true.

In this market, which is in a less developed nation, employers have been known to exploit workers.

In our SSI model, for this use case, the Application/Marketplace is also operating as the credential Issuer – they verify worker skills and experience through a combination of automated and manual methods (e.g. by calling worker references).

After verification, the seasonal worker is issued a credential and can choose to share it with an employer when applying for a job.

To give some insight into the process of choosing features – we conducted a series of tests to validate the value proposition for workers and employers to understand what features resonated most.

On the Worker side (tested via Facebook ads), the highest performing value props were on verifying their experience (e.g. via guaranteed experience letters) and by having access to verified employers and jobs.

On the Employer side (tested via LinkedIn ads), the highest ranking value prop was related to access to verified worker profiles and experience

As we can see, the early value of a trust based platform for this use case resonated strongly.

In a low document and non-standard environment, where most workers had phones and no computers, there was high value in providing this capability.

Workers were empowered by owning their own credential and choosing who to share their experience history with. The fact that they could control their own credential encouraged them to verify with an official ID and share references.

Credential ownership by workers also supported a commercial agreement with a third party ID provider who only allowed reuse of their service if the Application didn’t own the credential.

Employers gained access to a pool of trusted, verified workers they could draw from, without needing to ask for or call references. They were also able to have their company history validated, including evidence of fair work practices which enabled them to attract more qualified workers who had a legitimate fear of exploitation.

The second consumer of the SSI platform targets small to medium enterprises (with roughly $2-20mm in revenue) who want to conduct international trade with other businesses. Again the core value prop is centred around digitizing trust.

The problem it solves: as an example, if you’re a small headphones manufacturer in say Korea who finds a good potential supplier for a speaker component in Thailand, how do you verify that the supplier is legitimate, has a good track record and will deliver quality goods to your specification and timeline, will replace defects – without a large investment in due diligence?

As an SME, you often can’t afford the expense and lengthy time period to verify an international business, and have little recourse in case things go wrong.

Our second Application solves for this pain point by enabling SMEs to own verifiable data about their business that they can selectively share with other business before conducting trade, and by storing that data in a decentralized manner, that isn’t controlled by any one government is of high value to participants.

In this model, buyers and sellers who are counterparties are both Holders and Verifiers of credentials. The Marketplace Application is also the credential Issuer who proxy issues a Verifiable Credential by verifying companies using 3rd parties sources as Dun and Bradstreet and Government sponsored agencies that hold business profiles.

For the MVP, Computer and Communication Equipment was chosen as an initial trade product category due to trade value and addressable SME market.

The Application identified ways of confirming a company’s identity to act on behalf of a corporate identity, along with sourcing data about the company’s trade history and reputation, thereby relieving the burden of this effort on SMEs, enabling them to conduct trade with reduced counterparty risk.

[Application takes on due diligence burden to reduce counterparty risk for prospective buyers/sellers]

So, while the technology underpinning the self-sovereign infrastructure is secure and trustworthy, traditional solution elements were still required to engender trust in the trade marketplace, by users.

Trust was bolstered in many ways:

  • Walking through the onboarding process – users felt that if they had to go through all the verification checks, they new other companies would have to, too.
  • Highlighting the third party verification platform the Application was proxying as an Issuer helped, as did calling out the right attributes around trade history, business standing
  • Traditional UX approaches such as showing certificates.
  • Having the data stored in a decentralized manner that wasn’t owned by or could be revoked by a government (which was not without precedent for at least one of the piloted countries).

Once a business’s reputation and trade history was captured and stored on chain, it was literally theirs.

And of course, buyers and sellers placed more trust in a decentralized ledger than a data store that was controlled by an entity in a foreign country.

So, hopefully these two examples have given some insight into what it might take to bring an SSI platform to market, including how to engage Issuers and Applications to attract end users.

Of course the full potential of SSI is not realized by one issuer and one app – as we discussed before, it comes from users being able to use their credentials across multiple applications, storing multiple credentials in their wallet.

It’s definitely not for the faint hearted and as we’ve highlighted, you need to bridge the gap between technology and the human element to realize the full promise of a decentralized identity solution. We barely scratched the surface in this space, but hopefully it was insightful.