Diego Pandolfi (Research and Consulting Manager, Europe)

The first quarter of the year continued to see the negative effects of the COVID-19 crisis in Europe and some innovative projects based on blockchain technology have slowed as companies focus their investments more on short- and medium-term priorities. Despite this, blockchain remains an area of strong attention, with several industries continuing to explore its potential use for supply chain traceability activities or cryptocurrency regulation.

Supply Chain Traceability Continues to Rise

Many European organizations from the fashion, clothing, food, and health services sectors expanded the use of blockchain for their supply chain operations. The aim ranges from tracing products and their provenance, to strengthening and improving data monitoring activities, to spotting inefficiencies, and to implementing more sustainable practices.

In the first quarter of the year, for example, Carrefour (which has been a member of the IBM Food Trust since 2018) announced that it will start to expand the use of blockchain to trace textile products and that this expansion will be the first for non-food products.

Blockchain adoption is also rising in the fashion and clothing industry: the Spanish brand Desigual is implementing a blockchain solution in partnership with the startup Finboot to increase visibility around logistical processes for its products.

Also, German workwear company KAYA&KATO has partnered with IBM to develop a blockchain network for traceability.

The use of blockchain technology is definitively expanding beyond the food industry, and there are also some interesting use cases for health services. In the UK, for example, blockchain has started to be used in the fight against COVID-19, specifically to improve the efficiency of vaccine supply chains. Two National Health Service (NHS) hospitals have expanded their use of a distributed ledger for the tracking and storing of COVID-19 vaccines.

The use of blockchain to reduce inefficiencies is not, however, an exclusive benefit for supply chain activities, as we can also see it being used by the financial and payments regulated industries.

Central Bank Digital Currencies Continue Development Across European Nations

After some period of preliminary research, it seems that Central Bank Digital Currencies (or CBDC) is not only here to stay but active measures are being taken to speed up the process of its introduction. CBDC uses an electronic record or digital token to represent the virtual form of a fiat currency of a particular nation or region.

Unlike decentralized cryptocurrency projects like Bitcoin, a CBDC would be centralized and regulated by a country’s monetary authority.

The Bank of England and HM Treasury jointly announced the creation of a taskforce to explore central bank digital currencies. A digital pound would be a third form of money alongside bank accounts and physical cash and what’s being investigated is a general CBDC available to businesses and consumers. The Central Bank of Norway also announced that its working group for central bank digital currencies has decided to start exploring technical CBDC solutions.

While blockchain continues to show its potential for cryptocurrency regulation, we are also seeing its applicability to digital tokens that are not necessarily financial.

Non-fungible Tokens (NFTs) Are Heating Up

A non-fungible token is a unit of data stored on a blockchain that certifies a digital asset to be unique and therefore not interchangeable. This differs from fungible tokens like cryptocurrencies, which are identical to each other and can be used as a medium for commercial transactions.

We are seeing a strong acceleration in the selling and purchasing of these non-fungible assets as certificates of ownership for virtual or physical goods, artworks, or other products. With NFTs, an artwork can be “tokenized” to create a digital certificate of ownership that can be bought and sold, but there are other emerging examples of how NFTs can create value.

Non-fungible tokens are taking the cryptocurrency space by storm in the beginning of 2021 as various forms of digital collectibles have attracted multimillion-dollar price tags. It is likely that the trajectory of NFTs will follow a truncated version of blockchain itself: a stratospheric rise in popularity, followed by a slump in excitement and perhaps scepticism.

However, in both cases innovation with the technology will continue and will steadily be applied across a variety of use cases and industries. Regulation needs also to catch up with the latest developments, but once in place, NFTs can be transformative for finance, digital rights management, ownership of assets, and payments.

 Internet of Things, Standards, and Autonomous Payments

The ETSI Industry Specification Group on Permissioned Distributed Ledger (ISG PDL) recently released several reports covering data record compliance to regulation, application scenarios, and smart contracts, defining architectures and frameworks that could facilitate the use of PDL.

At the start of 2021, the ETSI defines an architecture and functional framework for blockchain smart contracts and PDLT on the Internet of Things (IoT) space. IoT use cases and applications based on blockchain are experiencing interesting growth in Europe, especially for autonomous micro-payments.

In Germany, for example, the startup PolyCrypt has launched a project based on blockchain to enable real-time payment of e-car charging processes. This solution can process significantly more transactions quickly and cheaply, enabling networked things to exchange information and conclude contracts with each other.

For the wide diffusion of solutions like this, it will be necessary to define shared standards to allow a complete interoperability between systems and a trusted ecosystem for monetary transactions and for the signing of contracts. These are the main challenges that could influence the wide use of blockchain also in supply chain, in the regulation of cryptocurrencies, or for digital tokens.

 

If you want to learn more about this topic or have any questions, please contact Diego Pandolfi, or head over to https://uk.idc.com and drop your details in the form on the top right.

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