The concept of blockchain seems to draw its fame from the bitcoin but it is now rapidly implemented in quasi-all traditional business sectors. Blockchain is a decentralized and digitalized ledger accessible for the public at large. It is like a common file which everyone is able to modify in the same time, with the upstream approval of everyone.

Through information-sharing, blockchain has revolutionized our conception of organization and processes, enabling disintermediation, and consequently reaching transparency, efficiency and confidence.

Use cases for blockchain technology

Sometimes blockchain seems to be quite complicated for the common knowledge of people and is sometimes feared, but most persons won’t need to have a deep understanding of its technology; think of internet protocol, how many people know that websites’ names are converted into numbers that act as addresses to servers?!. Blockchain has started to be implemented in many industries and may become omnipresent in our life.

Blockchain rests on the unanimously-agreed updating of records on a public database by any member of the network having access to this database. This process enables disintermediation, and the consequences are massive for most business sectors.

Business sector perspective

• Finance: The reduced need for intermediaries will facilitate for instance, the audit of accounts. Furthermore, blockchain allows the independent verification of all accounts and figures recorded in companies. “Big 4” companies’ huge investments in blockchain delivers a clear understanding of the kind of opportunity it represents.
• Financial transactions: Blockchain projects have the potential to become real currencies, cryptocurrencies should we be saying, taking the increased use of the bitcoin as a witness to this statement. Furthermore, real implementation of a cryptocurrency at a country level can enable a stable (and politically independent) monetary policy with inflation being regulated by an algorithm. For instance, this has been proven by Zimbabwean demand for bitcoin to compensate hyperinflation striking the country since the late 1990. As explained by Tendai Biti, the Zimbabwean Minister of Finance, “Zimbabwe Should Adopt Bitcoin As The National Currency”^[1]Buntinx, JP (2016). “Zimbabwe Should Adopt Bitcoin as The National Currency”. NewsBTC, [online]. Available at: … Continue reading, adopting cryptocurrency as a fiat currency might enable the maintaining of personal savings value through a safe mean of storing this value.
  Apart currencies, all payment processing, funds’ operations, crowdfunding campaigns, bonds or stocks issuances, annuities or pensions payments, and even market forecasts are to be transformed. Blockchain could enable instantaneous settlement on financial markets and credit history recording.
• Investment management: As blockchain allows the removal of intermediaries, it can furthermore improve investment management in several ways, such as insuring a high and nonreached yet level of consistency within the accounting procedures, reducing administrative costs and the time to process transactions for both asset managers and other asset services, allowing real-time deals and agreements, alleviating risks through audit and automatic verification and establishing financial background of customers. This will make the existing level of security to rise significantly.
• Sharing economy: Used in the “sharing economy” (eBay, AirBnB, Wiseed, etc) decentralized applications can be supported by the blockchain and lighten payment procedures, facilitates documentation requirements, record customers’ previous utilization.
• Real estate: Blockchain implementation in real estate activities will, for instance, insure contracts and agreement disclosure and guarantee a high level of transparency, realize leasing procedure monitoring, certify property titles, automate loan, fees, house payment procedure.
• Medical: The impact of utilization of blockchain as a medium of medical information, will be reflected in an increase in the use of EHR (Electronic Health Records), and will furthermore make it more automatized and transparent. A unique medical history about the patient about made accessible to all competent medical staff might be able to eliminate medical mistakes, to facilitate and record medical monitoring, to automatize social security administrative and reimbursement procedures.
• Law: Immediate recording of all contracts, contents, biding consequences for parties, and validity dates on the blockchain will enable contracts monitoring, expiration dates surveillance, ensure evidence integrity, alleviate any chance of falsification, and settle the genuine chronological chain of facts.
• Travel: The travelling sector can also leverage from blockchain implementation. Indeed, thanks to the automatic and gathering travelling data blockchain will allow automatic transport reservation, facilitate flight booking and passenger identification, luggage requirements and registration, insure ID validity, simplify boarding process, ease visa procurement procedure.
• Insurance: Blockchain can simplify insurance contracts thanks to “smart contracts”. Smart contracts are public and complex codes, which can transfer provided some conditions met. This public feature will provide proof of insurance, facilitate the use of multi-party contracts, help reaching risk contract efficiency, eliminate conflicts between insured parties concerning facts or claims adjudication, and automatize transactions.
• Not for profit sector: As private transactions will be recorded on a public medium, this will permit to reach traceability in donation, control donation allocation, improve fraud prevention, allow overhead reducing.
• Retail: Blockchain could be used in the retail industry. Indeed, the process of selling goods (or services) to a consumer can be supported and facilitate by blockchain. QR codes, for instance, could insure goods traceability e.g. food protection and safety, and prevent health crisis spreading. Furthermore, implementation on a more global scale could improve traceability for fashion industry, and thus eradicate counterfeit in luxury (perfumes, diamonds, clothes etc)

Company perspective

• Supply chain management: Blockchain applied to SCM will, through a public and holistic view of the supply chain, enable real time tracking and lifecycle vision of the product within it, instantaneity of payments, coordination of logistics efforts, automatization of the sending of invoices, increase in confidence for each stage of the supply chain, and, in fine respect of lead times, optimize overall cost of the supply chain by optimizing the costs (dematerialization of documents).
• Human resources: On a HR perspective, blockchain might be able to automatize wages and benefits allocation, to realize background controls such as identity authentication, work experience certification, and prevent any type of employment fraud.
• Marketing: Applied to marketing department, blockchain will help the company to communicate directly with the customer, thus reduce considerably advertising costs, and facilitate loyalty scheme adaptability through real-time tracking. Blockchain will facilitate too copyrights enforcement. Another modification is to be waited in the field of decentralized marketing, since blockchain could record “proof of views”, Facebook likes, Twitter retweets etc.
• Security: On a security-based analysis, a decentralized and consensus-based network will enable cybersecurity improvement, guarantee data integrity and ledger consistency for accounting purposes. Furthermore, compared to nowadays internet protocol, blockchain will be able to eliminate the double spending risk. Indeed, all transactions recorded on the blockchain are non-reversible and submitted to confirmation procedure. Thus, they cannot be recorded twice, which contributes to establish security and increase trust in dematerialized transactions.

Contracts and properties perspective

• Certification and proof of existence: Concerning every kind of certification and proof of existence, blockchain will provide an unfailing kind of proof: insurance (proof of the existence of contracts, proof of the occurrence of the default event), as well as ownership (provide a proof of existing real estate purchase contract, of rental lease agreement, of land registration, and certified notarized documentations).
• Physical assets: The automatic registration on a decentralized medium will ascertain both companies’ assets and private belongings (equipment, electronic devices, infrastructure and facilities ownership).
• Intangible assets: Automatic registration on a decentralized medium also applies to intangible assets, and blockchain will soon be able to establish the veracity of patent licensing, trademarks, copyrights protecting procedure, domain name registration, and assert data ownership.
• Private and public records: Both individuals and governments could benefit from blockchain implementation. Indeed, it will register and guarantee data integrity, such as for example vehicle registrations, acknowledgement of debts, loans and mortgage agreement, contracts concluding and certificates of all types, land registration, wills and inheritance declarations).

Downsides to be taken into account

On the other hand, several downsides risks are to be taken into account when considering the implementation of blockchain.

First of all, there is the issue of centralization of the mining power. Mining power could be roughly defined as a kind of mechanism that guarantees blockchain security through decentralized computing power. Stunning figures highlight the fact that on June 2018, bitcoin mining power was concentrated for at least 70% in China^[2]Tuwiner, J (2018). “Bitcoin Mining Pools”. Buy Bitcoin Worldwide, [online]. Available at: https://www.buybitcoinworldwide.com/mining/pools [Accessed 4 Jul. 2018]. Tan, W (2017) … Continue reading, with big pools like BTC.com, Antpool, ViaBTC, F2pool… This could easily be explained through the cheap electricity price in China. But this is to be balanced: if 70% of the mining power is concentrated in China, not all the miners are Chinese. Even if, on those 70%, not all miners are Chinese, they sell their computing powers to those Chinese platforms, in order to syndicate it and maximize the likelihood to find blocks and make money, this concentration can still be seen as a threat.

Indeed, one of the most important issue that this acknowledgement raises is the risk of curbing or cutting supplies of electricity and thus shutdown the vast majority of the mining pools and the bitcoin production. Should we take the risk of losing everything?

The second alarming problem remains the electricity consumption. As a matter of fact, the electricity consumption required by the mining power is getting more and more disproportionate, and reached country scaled electricity consumptions on an annual basis. For example, in November, the whole bitcoin network consumed more electricity than the Republic of Ireland.^[3]Hern, A (2018). “Bitcoin’s energy usage is huge”, The Guardian, [online]. Available at: … Continue reading As it is growing exponentially, it is expected to overtake Austrian power consumption by the end of 2018.^[4]Maloney, C (2018). “0.5% Of World’s Electricity By Year’s End: Bitcoin Mining Power Consumption Is Insane”. Ethereum World News, [online]. Available at: … Continue reading It has reached in the beginning of July 2018 more than 70 TWh, which nearly twice as big as Romanian consumption of electricity for a year. To put it in a nutshell, if Bitcoin miners where considered as a fully-fledged country, it would be ranked 61^st (out of 195) country in terms of energy consumption.^[5]Hebblethwaite, C (2017) “Bitcoin mining electricity usage higher than 159 countries: Power Compare”. The Block, Blockchain Technology News, [online]. Available at: … Continue reading This is to be considered as a tremendous threat for environment since it boosts CO₂ emissions in the atmosphere.

Measures are to be taken in order to get the energy required for mining through renewables and try to keep emissions and wastes of all kind down.

Blockchain in Luxembourg

Blockchain has become famous thanks to cryptocurrencies and especially the spectacular rise of the bitcoin. In the past year 2017, Luxembourg has welcomed two major actors in bitcoin trading:

1. Bitstamp, one of the most important cryptocurrencies trading platform in Europe;
2. And bitFlyer, leader platform in cryptocurrencies in Japan, but the procedure is quite arduous since you have to get a ministerial agreement closely monitored by the CSSF.

As blockchain utilization will not only revolutionize cryptocurrency, but also the whole traditional business world as we know it, Luxembourg positioning itself as a pioneer of this technology is a great incentive to invest in it.

How can we help?

Hoogewerf & Cie is, through its wide network of experienced finance professionals and following Luxembourg position on blockchain, establishing itself as a pioneer in supporting and the launching of blockchain-based projects by:

• Providing advisory services concerning structures to be used, project financing, project assessment and strategy.

Should you have any inquiries, please don’t hesitate to contact us.