Cryptocurrencies, Bitcoin, Token, why, in procurement, should we care ?

Cryptocurrency, Bitcoin, Blockchain, you must have crossed these words over the past few months or weeks. The mainstream media get a lot interest on these subjects, so difficult to escape. But Tokens, have you heard about it? Kodak, that is one of the example of a company that lost its business due to technological major transformation, has just launched its token, the KodakCoin and is probably re-inventing its future, interesting, no?

Why are we concerned in our respective "business", sometimes very traditional, by tokens? Why some companies (rooted in the real economy), start-ups decide to create / to use tokens? Why tokens will support the transformation of business models in our organisations?

Well, if you have marketing partners, business developers, innovation managers, etc…, it may be interesting to think with them about creating a service token, to develop a new service, support the growth of an existing service, or increase loyalty of customers.

Kodak is a good example. It created its token, the KodakCoin, which facilitates the use of photographs in a secure and transparent way, between owners and users. This is an important answer for artists, and a simple way for fans to use these photographs legally.

The Disney company has also its token, the Dragon, which targets is to support the selling of entrance tickets, to manage rights in digital medias and licensees, among others.

The SIA is another service token. Created by a start-up, it facilitates the transfer of available memory of personal computers between "peers". Unused PC memory is a value that can be registered and transferred between its owner and a user in total confidence. This is a new service, at a cost that is much lower than current solutions, without the data being centralized at a single intermediary.

Another start-up has developed the Medcoin, token supporting the safe transfer of medical data between patients and healthcare practitioners or researchers who need data to conduct their studies.

Finally, the Burger King chain has also developed its own service token, the WhooperCoin designed to increase loyalty of its customers. Is it this relevant? the future will tell.

On the other hand, if you have supplychain, manufacturing, or quality managers as business partners, then it can be accurate to think about the digitization of assets to facilitate their transfer along the supplychain for example, and to prove their origin, their characteristics, via Blockchain. This is called "tokenization" of assets. The asset is then represented by a unique identification number.

Any material asset (container, raw material, finished products, etc.) or intangible asset (insurance contract, patent, intellectual property, ISO certification, etc.) can be "tokenized", to be stored and / or transmitted via Blockchain.

For example, a container can be tokenized from its origin. Its token then contains its own attributes: for example, the port of origin, the loading date, the associated documentation, the goods transported, etc. This container can then be transferred along the supply chain to the end customer. The tracking of this container via its token in Blockchain will give each actor the confidence of its origin, its merchandise, its status etc, because tokens are unfalsifiable. A quality certification can also be tokenized to give confidence to all actors (customers, authorities, certification body) that a factory is certified according to the required specifications. The token will give access this information to all actors in a simple and secure way.

Synthesis of the added-value opportunities for tokens per Business Partner :

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Many initiatives to create service tokens are in progress, some of which are starting to become known. To date 1101 cryptocurrencies are referenced on the Coingekco website, a sign of the strength of the movement. Are all these service tokens justified or serious? Certainly not, but without a doubt some will become, by the relevance of their usefulness, references in the future.

Many asset-tokenization projects are also being tested. From the tokenization of the logistic documentation that follows the goods on the "overseas" routes and that needs to go through customs, tax services, many logistical intermediaries etc. But we can also mention the tokenization of freshly caught salmon to prove its (unfalsifiable) origin to the final consumer.

How does all this work?

Let's start with the basic concepts: Blockchain, Cryptocurrency, Token.

Blockchain is the basic technology on which are built the protocols to transfer value between people or entities. There are already several Blockchain protocols: Bitcoin (the first set up), or Ethereum or Neo and others. These protocols allow to verify and validate that a proposed transaction complies with the rules and can therefore take place.

In the "real world" these securities trading protocols are established and managed by third parties (central banks, banks, governments).

Each protocol has its own cryptocurrency (digital currency) called "native". Bitcoin for Bitcoin protocol, Ether for Ethereum or Neo for Neo. In particular, it remunerates the process of validation transaction.

These cryptocurrencies are close to classical currencies and some even have the ambition to be used as means of payment. Bitcoin is an example, and sale/purchase transactions (from drinks in a bar to real estate) begin to be made in Bitcoin.

Finally, on these protocols can be created a second type of cryptocurrency, called "service tokens". Unlike "native" cryptocurrency, they are not used to remunerate protocol transaction validation. But, they allow the purchase, rental, sale of a product or service.

A service token can be closer to the token of a game or a bracelet to access a festival. It represents a value, but only in the associated environment. It facilitates the purchase and sale of related products / services because it does not involve cash transfer or credit card transaction.

These 3 concepts can be summarized as in the below diagram:

2018 © AchazConsulting

Service tokens do not have own attribute. They are destined to become marketplace products, and thus to see their value fluctuating according to supply and demand. This is the case of KodakCoin, Sia, or Medcoin.

The tokens that we could call "generic" contain the attributes of the asset they represent. They only have this vocation to be the digital representation of an asset in the Blockchain, they do not become trading values.

The emission of tokens, their exchanges, their use, are recorded on Blockchain. It is the essential structure for transactions to be made securely without the intervention of a central governance. It is the essential structure for storing the available value of each user.

The digitization of assets (tokenization) and services tokens will enter in the majority of businesses, at the same pace as blockchain does. Without becoming a specialist, it is important to understand their characteristics (beyond the speculation relayed in general media), and their limits. This will help to be proactive in creating the future products and services and to participate in the transformation of work processes.