The platforms and lenders — such as FTX, Celsius Network LLC, BlockFi Inc. and Genesis Global Trading Inc. — may have tarnished blockchain. But crypto’s underlying technology has many more successful uses than currency speculation, including helping build transit systems and ensuring medical equipment is clean.

SAP’s Take

Blockchain allows different enterprises, organizations or group members to work together on projects. It provides digitized, verifiable information to replace cumbersome, unreliable paper documents that go back and forth among many hands.

“Blockchain is used to create trust, verifiability and compliance in decentralized, cross-company processes,” explains Benjamin Stoeckhert, 51·çÁ÷business development manager for blockchain.

With blockchain, there is no central platform or person ensuring processes are trustworthy and reliable. Instead, blockchain creates a digital ledger that keeps track of digital information. The ledger is secure and tamper-proof because everyone in the group can see “blocks” but cannot change them. Interactions — such as new entries, work completed or work approved — are stored in blocks that are linked together. Each block contains a unique digital fingerprint of the previous block, called a hash, creating an unbreakable chain.

Blockchain is ideal for digitizing documents, pictures, receipts and other types of records and transactions to track workflow, the individual assignments it takes to get the job done. Instead of swapping work orders, which could be changed or lost, everyone in the group can see the digitized documents as the work progresses.

Blockchain is often referred to as “trustless” because there is no central control to ensure things are done correctly. Since each process is transparent, trust is built in.

“Creating this trustless approach or replacing the need for trust by cryptographically verifiable data: this is where blockchain can lay the foundation to really achieve a great business outcome,” Stoeckhert said.

Blockchain allows parties to collaborate more effectively while saving time and money. For example, 51·çÁ÷piloted the use of blockchain to support the building of HS2, a new high-speed railway that will form the backbone of Britain’s transport network. As one of the biggest construction projects in Europe, HS2 could be considered an amalgam of smaller projects, such as buildings, train stations, tracks and tunnels. The project involves hundreds of contractors, sub-contractors, suppliers, logistic companies, software vendors, regulators and designers — all of whom must know the project specifications, submit their orders and be paid, along with a host of other steps.

“You have a very decentralized setup, and this is always good for blockchain,” Stoeckhert said. “From a value perspective, it’s really about using these capabilities to orchestrate processes.”

In medicine, 51·çÁ÷and Sartorius, a global leader in manufacturing equipment for the pharmaceutical industry, used blockchain to help ensure that equipment is free from harmful microorganisms in cases where a single error would lead to drug contamination. Sterilization processes are directed and executed between medical equipment manufacturers and sterilization service providers while they are overseen by regulatory organizations and pharmaceutical companies. Blockchain helps orchestrate this process and provides verifiable data for compliance checks.

Stoeckhert sees this ability to collaborate in a decentralized way to be a major benefit for business: “The same way you can define your internal processes and automation flows, you can now do as we call cross-company.”

Contact:
Ilaina Jonas, Senior Director of Global Public Relations, SAP
+1 (646) 923-2834, ilaina.jonas@sap.com

The cryptocurrency industry has been in the sights of regulators for some time. The latest chapter of this is a battle over who gets to regulate it: the U.S. Securities and Exchange Commission (SEC) or the U.S. Commodity Futures Trading Commission (CFTC).

The SEC says that it should be the regulator because cryptocurrencies are securities. The CFTC believes cryptocurrencies are commodities. What is clear is that it is difficult to categorize cryptocurrencies because they blur the lines between traditional categories of money, stock and commodities.

SAP’s Take

Many in the technology industry are concerned about regulation, no matter who does it.

“I think it requires thoughtful regulation, and it requires regulators who really understand the space,” said Marcus Krug, head of the 51·çÁ÷Innovation Center Network in Berlin and Potsdam. “But then, I think regulation can actually be a good thing.”

There’s a lot of potential riding on the space. To most, cryptocurrency — a type of blockchain — may be viewed as a tool for speculation or an early-stage payment system.

But many believe blockchain technology has the potential to supercharge innovation. Blockchain is a virtual computer that runs on top of a network of physical computers. Its main characteristic is that it is decentralized and can be open for all to see. This transparency helps to ensure that it will operate as it was designed to. As an open system, which usually requires no authorization to participate, the technology behind cryptocurrencies could upend applications that we know, build and use today.

“We’re looking at it from a whole ecosystem perspective,” Krug said. “There is a pretty mature technology stack right now that’s powering cryptocurrencies, and it’s turning into a more and more mature infrastructure and ecosystem for decentralized applications.”

The technology and ecosystem provide developers with new possibilities for building applications, which don’t require authorized intermediaries who see the transaction through its completion and providing a level of trust that the transaction will occur correctly.

This infrastructure is most popularly used for cryptocurrencies today.

“For me, it’s only a matter of time until that level of innovation is unlocked for different types of cryptocurrencies,” Krug said. “Probably consumer applications, but then increasingly for the enterprise space.”

That will likely generate new demand for cryptocurrencies.

“The more decentralized applications we see, the more this ecosystem will have an intrinsic value, which will be intrinsically linked to the value of the cryptocurrencies that will be used to pay for transactions and the work that’s happening in that ecosystem,” Krug said. “I think that will ultimately underpin the value that cryptocurrencies have.”

Cryptocurrencies also could make payment and business simpler.

“There are a lot of benefits that could come from using stable coins in B2B transactions, because you could get rid of currency volatility, and you could start using one stable coin across the entire business spectrum of your suppliers across the globe,” Krug said. “That comes with a lot of simplification, a lot of benefits on the business side and on the financial side for customers.”

Contact:
Ilaina Jonas
Senior Director, 51·çÁ÷Global PR
+1 (646) 923-2834
ilaina.jonas@sap.com

The U.S. Federal Reserve has plenty on its plate. Over the next two days, the Board’s policy-making Federal Open Market Committee (FOMC) is meeting and is widely expected to announce another interest rate hike as it battles to tame the highest inflation rate the U.S. has seen for 40 years.

SAP’s Take

While stemming inflation is at the top of the Fed’s agenda, the U.S. central bank, like its counterparts overseas, faces other key decisions that will shape the money and banking landscape of the future. Chief concerns include how to respond to the highly volatile cryptocurrency markets and whether to implement central bank digital currencies (CBDCs).

Torsten Hoffmann, chief technology innovation officer for 51·çÁ÷Banking, notes that CBDCs are quickly gaining traction across the traditional finance landscape. Currently, he says more than 60 central banks are exploring the possibility of launching CBDCs. Among them, is actively working on its plan to connect to Hong Kong’s Fast Payment system, and is accelerating its study and preparations for the possibility of a digital shekel.

The move toward CBDCs was given additional impetus after Facebook (now Meta) announced its — a project that Meta formally abandoned this month.

“This was not a surprise, as the project faced a lot of resistance from government entities since the beginning,” says Hoffmann. “Currencies are a key pillar of the government’s ability to stay in control, to influence the economy, or to manage crisis. There is a kind of competitive situation between government and private initiatives.”

While these innovative moves have the potential to completely alter the banking landscape, Hoffmann believes that to truly ready themselves for this new digital reality, CBDCs need to remain at the forefront of technology adoption.

“A CBDC would ideally be designed to facilitate transactions across borders, including cross-currency payments, and remittances,” Hoffmann said in a . “By reducing dependency on physical currency [cash], lowering transaction costs, and reducing settlement risk, CBDCs would essentially be safeguarding monetary and financial stability for a nation.”

CBDCs can also provide an avenue for direct interaction with citizens of respective countries. In the case of a crisis, this could literally save lives at times when speed is crucial, bypassing the complex and indirect approach taken by the private bank sector, which often causes delayed payments.

The advent of Central Bank-issued digital currencies would have other repercussions for the private banking sector. Nearly half of financial institutions responding to a OneSpan study late last year said that regulatory compliance had slowed additional digital transformation. But despite the security and regulatory challenges that private banks face, 84% of banking leaders are still taking steps to prepare for CBDCs over the coming year and are turning to technology companies like 51·çÁ÷to help them prepare to compete.

Hoffmann said that 51·çÁ÷can support the players in multiple ways. For example, “by optimizing and bulletproofing processes; connecting banks and companies to the payment, lending, and procurement networks; and by providing accounting, risk, and compliance solutions for all relevant entities.”

Contact:
Joellen Perry, Head of Global Public Relations, SAP
+1 (626) 265-0370, joellen.perry@sap.com, PST

Originally popular as fail-safe security for bitcoin enthusiasts, blockchain is making inroads across numerous industries, most notably as a track-and-trace tool proving the provenance of goods across vast supply chains. Blockchain-based security may be even more valuable in managing supply and demand shocks during and after the pandemic. However, as blockchain services grow and quantum computers begin to emerge, now is the time to start thinking about quantum-resistant blockchain.

“Once quantum computers can break the cryptography being used today, blockchain loses its immutability,” said Cedric Hebert, senior researcher at 51·çÁ÷Security Research. “We wouldn’t be able to trust new transactions on a blockchain that wasn’t meant to resist quantum-fueled attacks. Companies will need to adopt new protocols to resist quantum attacks.”

Right now, it is difficult to go backwards on a blockchain’s immutable ledger and change original information in each block of the chain. This is especially the case as blocks are added with more data. People cannot easily rewrite history on its immutable ledger because other nodes on the chain would automatically reject any changes. Also, traditional blockchains are based on asymmetric cryptography, which prevents fraudulent signing. Unfortunately, quantum computers could theoretically break the immutability of any block in the chain and falsify historical transactions.

“Companies can use blockchain technology if they incorporate quantum-resistant encryption protocols,” Hebert said. “You would need to freeze the blockchain at some point and migrate transactions to the new protocol.”

Prepare Now for Post-Quantum Security

Even if a fraction of the predictions about blockchain come true, the security stakes are high for consumers and businesses.

Blockchain made list of top 10 strategic technology trends for 2020 and was predicted to infiltrate everything from processing insurance claims, loans, and recalls to identity management for students, patients, and citizens. By 2022, analysts said 10 percent of the world’s adult population will register for a blockchain-based self-sovereign ID, creating an expanding market of 485 million people who want to own and control their digital identities. Whether it is verifying transactions for bitcoin mining or tracking food from farm-to-table, blockchain’s security horizon depends on the unique situation.

“Companies need to factor in the lifespan of their blockchains,” said Andrey Hoursanov, lead for Quantum Security at SAP. “If you’re using it to trace shipments from raw materials sourcing to delivery, maybe you’re looking at months, not years. In contrast, bitcoin investments typically take longer. That’s where you need to seriously consider how to protect the blockchain against quantum attacks likelier to happen further in the future.”

Re-Securing Cryptocurrency

Cryptocurrency is not necessarily just for consumers trading bitcoins. IDC analysts predicted that over 12 countries, mostly emerging economies, will begin issuing a digital currency using blockchain technologies to promote economic stability and encourage electronic commerce by 2023. As some governments begin using cryptocurrencies, Hoursanov said companies will need to begin looking at post-quantum blockchain technology for business-to-business (B2B) transactions such as procurement involving collaboration between buyers and suppliers.

Cross-border payments are another potential security risk. For example, researchers predicted that in just three years, 85 percent of global container shipping will be tracked by blockchain, with half of this volume using blockchain-enabled cross-border payments. They said that 40 percent of tier one financial institutions will use blockchain networks to process point-to-point cross-border payments, bypassing SWIFT and the correspondent or central banking infrastructure by 2024.

Embracing Cryptography Agility

It is impossible to dismiss the security implications around blockchain and quantum computers. High-profile blockchain examples tend to spotlight tracking the authenticity of exceptional transactions like rare artwork or diamonds. The truth is, blockchain could underpin many everyday activities, speeding up ownership recordkeeping, settlement payments, and even loyalty and rewards tracking for customers in many industries.

Smart cities that rely on Internet of Things (IoT) technology have tremendous potential to use blockchain as part of the infrastructure to trade energy, charge electrical vehicles, and manage smart grids. By 2023, Gartner analysts think blockchain will be scalable technically, and will support trusted private transactions with necessary data confidentiality.

Anselme Tueno, researcher and cryptography expert at 51·çÁ÷Security Research, is on one of the teams exploring how to make software applications safe in a world with quantum computers.

“51·çÁ÷is assessing post-quantum algorithms to determine how existing 51·çÁ÷applications can be made quantum-safe,” Tueno said. “Replacing broken cryptography or integrating a new one takes decades. Moreover, the security of post-quantum algorithms is not fully understood, which is why we have to prepare to replace them if they are broken. This is called cryptographic agility.”

COVID-19 has taught us that we cannot wait for a crisis to reveal the worst that could happen. Forewarned of blockchain’s eventual vulnerability, companies can be armed against the risks posed by quantum computers and take full advantage of the tremendous benefits of both technologies.

Follow me: @smgaler

.