BLOCKERMAG - The Blockchain Business Magazine - Issue 2, February 2019 by Richard Potts

ISSUE 2. February 2019

BLOCKERMAG CRYPTO // ICO’S & STO’S // LATEST TECH // FUTURE TRENDS // INNOVATOR SPOTLIGHT // INVESTMENT // EVENTS

JUSTICE

CAN BLOCKCHAIN CREATE FAIRNESS? more on Page 33

blockchain in law Special Report We delve into the legal sector and examine blockchain’s potential role. more on Page 15

USING BLOCKCHAIN TO ERADICATE HOMELESSNESS more on Page 7

building peace & defeating the drugs trade

We talk to Matt Whiteman of Choco4Peace about how the organisation is using blockchain to empower Colombian cacao farmers. more on Page 27

in brief

Blockchain news and updates more on Page 6

07 M A RC O RO BI N SON Using blockchain to eradicate homelessness

hello@blockermag.com www.blockermag.com

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EDITORIAL R ICH AR D P OT T S Publisher K AR IS COPP Editor

ADVERTISING Contact us to f ind out about advertising in Bl o cker ma g E:

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CONTRIBUTORS Marco Robinson, Cal Evans, Rhiannon Payne, David Fisher, Declan Goodwin, Amit Joshi, Matt Whiteman, Will Foulkes, Chris Pritchett, Stevie Ghiassi

C A L E VANS Legislators ﬁnding new solutions to solved problems

SUBSCRIPTIONS SUB SCR IBE ONLINE www.blockermag.com Blocker ma g is FR EE in digital format, or you can get it in print.

15 SPECI AL R E P ORT Blockchain in Law

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IN THIS ISSUE —

W IL L FOULK E S & CHR IS PR I TCH ET T

Page 7-10 US I NG BL O CKCH AI N TO E R A DI C AT E H OM E L E S S N E S S Marco Robinson, a blockchain entrepreneur, philanthropist and author, shares his inspirational story

ICOs - Staying on the right side of the law

27 M AT T W HITEM AN Beating the drugs trade and transforming lives with blockchain

Page 11-13 L E GI S L ATOR S FI ND I NG N EW SOLU T I ON S TO SOLV E D PROBL E MS Cal Evans explains why the future of regulating cryptocurrency and blockchain could mean looking to the past Page 15-19 S PEC I A L R E P ORT: BL O CKCH A I N I N L AW Editor Karis Copp takes a detailed look at blockchain in the legal sector Page 21-23 I C O S – STAY I NG ON T HE R I GH T S I DE OF T HE L AW Will Foulkes and Chris Pritchett take a deep dive into the legal intricacies of Initial Coin Offerings Page 27-32 US I NG BL O CKCH AI N TO BU I L D PE AC E & DE FE AT T H E DRU GS T R A DE Matt Whiteman of Choco4Peace talks about using blockchain to empower Colombian cacao farmers, and how the same principles can transform lives all over the world

29 K AR IS COPP Amplifying access to justice with blockchain

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31 R H I A N NON PAY N E Turning ideas into reality and empowering women in blockchain and beyond

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INNOVATOR SPOTLIGHT Page 37-38 A M I T J OS H I Founder & CEO of HashPrix talks about how blockchain is changing the insurance industry and some of the legal implications Page 39-41 R H I A N NON PAY N E Founder & CEO at Sea Foam Media talks about turning ideas into reality and empowering women in blockchain & beyond

WELCOME Richard Potts, Publisher, Blockermag

blockchain technology has the potential to transform business as we know it. our mission is to facilitate that change through insight, analysis and expert opinion from the world’s blockchain and business leaders.

Welcome to this, the second issue, of Blockermag. We were so pleased with the industry feedback from the first issue and the level of interest in contributing has been outstanding, so thank you for your ongoing support. Blockchain is at once a very simple concept – it’s just a database, right? – while also being terrif ically complicated. It’s a nascent technology that is seeing an unprecedented surge of adoption across a wide variety of sectors. With this uptake comes a plethora of use cases, marketing campaigns, startups, funding rounds and an increasingly confused picture of what’s working and what’s just noise. Which blockchain projects are having real-world impact and solving problems? Which businesses are genuine disrupters and have the potential, through blockchain, to transform lives? Blockermag once again seeks to answer these questions, to cut through the noise and help you discover what matters in the world of blockchain technology. This issue has as strong undercurrent of ‘tech for good’. Something our business is passionate about supporting and that we’d like to amplify in forthcoming editions. Future editions will include a special focus on blockchain in: f inance (April); the future of blockchain ( June); transport, logistics & supply chain ( July); energy & utilities (September); and security, privacy & identity (November). Please do get in touch if you have a story to share, we’d love to hear from you.

RI C H ARD P OT TS Publisher - rich@whisper.media IS S UE 2

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editor’s Note Karis Copp, Editor, Blockermag

“Almost everybody I speak to talks at some point about blockchain’s ability to alleviate poverty, empower the disenfranchised and change the world for the better. How many industries can say that?” As it is our f irst issue of 2019, allow me to wish you an enthusiastic, if somewhat belated, Happy New Year! If the research we have done for this issue is anything to go by, this industry looks set for some exciting and transformative months ahead. This issue has a focus on blockchain in law, with insights from Integra Ledger, Foot Anstey, Legaler, Vistra and Gresham International. But it also includes so much more; using blockchain to improve the lives of cacao farmers in Colombia, to make homelessness obsolete, to bring

access to justice to millions without it, to create more inclusive spaces for women through distributed working. Almost everybody I speak to for this, a businessfocused publication, talks at some point about blockchain’s ability to alleviate poverty, empower the disenfranchised and change the world for the better. How many industries can say that? I hope you are as positive about the space as I am as we look ahead to 2019 and beyond.

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IN BRIEF New and noteworthy

Davos warms up to blockchain

Facebook ramps up its crypto play

The annual World Economic Forum (WEF) took place from the 22nd to the 25th of January in Davos, Switzerland. Founder and CEO of cryptocurrency payments provider BitPesa, Elizabeth Rossiello, was appointed co-chair of the Global Council on Blockchain, which will convene in San Francisco in May commencing its formal advisory role to the WEF. Experts took part in a panel on ‘Building a Sustainable Crypto-Architecture’. Cryptocurrency and blockchain, as in 2018, were key discussion points, and some commentators felt the forum held a more positive outlook on blockchain than in previous years.

Further details of Facebook’s cryptocurrency plans are likely to come to the fore this year as the social media giant aims to position itself as a major player in the crypto market, reportedly developing a mobile payments system for the Whatsapp platform. The organisation has made hires from the blockchain space as it continues its covert project.

Cryptopia hack continues Early this year it was reported that cryptocurrency exchange Cryptopia had experienced a hack, which still continues at time of going to press. Services were suspended following ‘significant losses’, although the reason for this was not disclosed immediately. After reports that up to $16million in ETH was stolen in the initial breach, it seems that hackers have struck again, and many more users could be vulnerable.

GM Financial becomes the latest enterprise to invest in blockchain GM Financial – the finance arm of enterprise behemoth General Motors – has announced a partnership with blockchain startup Spring Labs, following a $15 million seed investment round. GM first explored blockchain as one of a number of big business firms including IBM, FedEx and J.P. Morgan that joined the open-source blockchain project, Hyperledger. Spring Labs is developing a protocol to share and verify sensitive customer information such as credit history.

Funding for blockchain property investment platform Capital management firm Morgan Creek has backed blockchain-based real estate firm RealBlocks for $3.1m in a round of seed funding, which tokenises private equity funds and allows property investors to operate using crypto and fiat currencies as well as sell shares in domestic and international markets. In a release, Anthony Pompliano of Morgan Creek Digital said: “2019 is going to be an incredibly important year for blockchain projects. One of our core theses at Morgan Creek Digital has been that every stock, bond, currency and commodity will be tokenized at some point in the future.”

Crypto exchange “loses” $190 million Canadian crypto exchange QuadrigaCX is unable to repay $190 million in cryptocurrency and fiat money after founder Gerald Cotton dies unexpectedly, taking with him the cold storage passwords. In the latest in a long string of dramatic crypto exchange collapses, the QuadrigaCX debacle highlights major flaws in crypto asset management. Questions remain as to whether this is an elaborate “exit scam” or a genuine failing of Private Key management.

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01 M ARCO ROBINSON Blockchain entrepreneur, philanthropist and author

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USING BLOCKCHAIN TO ERADICATE HOMELESSNESS Karis Copp speaks to Marco Robinson, a blockchain entrepreneur, philanthropist and author who shares his inspirational story.

Of all the interviewees that I have asked to provide some information on their background, I can’t remember anyone being more thorough than Marco Robinson. It is especially impressive when you consider the fact that in many places it can’t be an easy story to tell. It’s a story with a number of twists and turns, highs and lows, but ultimately a story of extreme resilience in the face of, at times, extreme hardship. And Marco’s story is far from over, as he is poised to continue using his success to improve countless lives with blockchain. Marco paints a picture of a childhood that wasn’t really a childhood at all, blighted by homelessness, poverty and abuse. He left school at around 15 in order to start work to support his mother, who had experienced unimaginable suffering as she raised her young son. Finding a job in sales, he credits his success in the role to ‘no longer having any fear, not giving a s***, and having nothing to lose’. He became so successful in the industry that he was headhunted for a role in Malaysia in 1997, and he describes turning that organisation into a billion-dollar company. However, this period of good fortune was shortlived, as Marco suffered a heart attack aged just 29. Marriage difficulties and huge stock market losses followed, and that marked the beginning of Marco’s entrepreneurial journey (by default, he says: ‘being an entrepreneur these days means you haven’t got any money!’). “I did make a promise to myself that I didn’t want to work for anyone else ever again,” Marco explains, “I didn’t want a boss ever again as I felt I had been lied to and taken advantage of.” After some success running seminars around Malaysia, he eventually became down on his luck again a few years later, and went back to the drawing board. “I had no money, no car no © B L OC KE R M AG - 8 -

office. I thought: ‘I’m going to contact hotels and see if they have any spare rooms that they don’t use’. I was in the hotel industry, and I knew a lot of the hotel rooms weren’t used by guests all through the year. I also did a research test and found that if people didn’t get a hotel bill, they would actually spend more in the hotel. “So, what I did was get a few free rooms, package it as a voucher, and sell it as an incentive to companies, saying ‘I can help you increase your sales by giving a vacation for free’. My first client was Citibank, and I sold them around 10,000 vouchers each on Christmas Eve and made nearly $12million.” “WE THEN DID A PRESALE OF THE TOKEN, SOLD OUT, AND RAISED ABOUT $8MILLION ALTOGETHER, WHICH WE PUT TOWARDS THE TECHNOLOGY” Marco went on to flex his entrepreneurial muscles further with forays into the property market, the restaurant trade, the cosmetics industry and other projects that interested him. His varied portfolio led him to the question: ‘how can I tie all these in to a loyalty programme that keeps customers in an ecosystem within my brands?’ Of course, cryptocurrency was the eventual solution. “I had heard about Bitcoin – I was very interested, but didn’t buy any unfortunately! I did a seminar for my company NKD Technologies, and I made up a cryptocurrency called NKD$. At the end of the seminar, people were asking to buy the currency! So, I went on to do a webinar all about NKD$ and we raised about $200k in 15 minutes. We then did a presale of the token, sold out, and raised about $8million altogether, which we put towards the technology.”

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- INNOVATOR SPOTLIGHT To explain Marco’s ambitions and plans for utilising blockchain and his company’s cryptocurrency, we need to revisit his personal story. Having experienced homelessness along with his mother himself, it’s an issue close to his heart, and an issue he had already gained

is it that cryptocurrency and blockchain still gets such a bad rap despite the many use cases demonstrating how many positive applications it can offer? “THE BANKS HAVE DEMONISED BITCOIN EVER SINCE IT CAME OUT, BUT BITCOIN IS THE MOST SUCCESSFUL INVESTMENT EVER WHEN IT COMES TO RETURNS. PEOPLE AREN’T AWARE OF THAT, HAVING BEEN CONDITIONED BY BANKS, POWERFUL PEOPLE AND ALSO THE MEDIA, THAT BITCOIN AND CRYPTOCURRENCY IS BAD”

e can make homelessness obsolete. With the blockchain technology, you can actually see where the money goes – the charity sector is possibly one of the most abused industries in the world as you just don’t know where the money is going

“The banks have controlled people now for over 100 years. It’s not the government that are in charge anymore, it’s the banks. Think about the subprime crisis of 2008 that hit everyone around the world and made nearly 40 million people homeless. The bankers got bonuses, and the victims lost everything. and that’s just one example of the banks’ power; people can only get a loan with a credit record, there are 3 billion socially excluded people in the world who don’t have a bank account because they don’t have an address. Banks have made the world only for the elite.

experience in tackling in the form of a Channel 4 show in the UK, ‘Get a House for Free’. He was delighted to be asked by the broadcaster to help with the country’s social housing problems, and the show was successful, going on to be syndicated to 35 countries, serving as the building blocks for the registered charity Freedom X. Now licensed in the UK and the US, NKD$ serves as the currency of the project, and the team are now finishing development on the dApp.

“The banks have demonised Bitcoin ever since it came out, but Bitcoin is the most successful investment ever when it comes to returns. People aren’t aware of that, having been conditioned by banks, powerful people and also the media, that Bitcoin and cryptocurrency is bad.” To Marco, the responsibility lies with those in the know, those that know the true scale opportunities that cryptocurrency and blockchain can provide, to spread the word and counteract some of the negative rhetoric that surrounds the technology: “Reach out programmes are the key to adoption, because right now only one percent of the world even know about Bitcoin. The adoption we are seeing is in places like Venezuela, where they have to use cryptocurrency or they could die, so it is being embraced by people who really need it, which has never happened before.”

“We can make homelessness obsolete. With the blockchain technology, you can actually see where the money goes – the charity sector is possibly one of the most abused industries in the world as you just don’t know where the money is going, but this need for transparency goes beyond charitable donations, and that’s why I am also setting up a ratings platform that allows people to rate companies. “For example, say you have a coffee shop that can take people off the streets as staff and house them, and help the local community. All kinds of businesses can do this and show their support for the project by displaying a ‘Freedom X sticker in the window. I truly believe this will bring more attention to the business as you are highlighting your commitment to social change and philanthropy. It’s not just about cost for consumers anymore; we care about what businesses are doing for their communities.”

“MY FOCUS NOW IS COMPLETELY ON DISRUPTING THE ENTIRE CHARITY INDUSTRY” So where does the ‘big picture’ go from here? When it comes to the future of blockchain, Marco thinks ‘we aren’t even on the afternoon of day one yet’. “Amazon have received a blockchain patent, Facebook are going to start their own cryptocurrency, huge companies are investing billions. It’s going to be widespread, the end user will eventually insist that organisations use blockchain or they will go elsewhere.”

It seems no coincidence that someone with Marco’s resilience and vision has thrown his support behind blockchain and its ability to change and improve the world in a myriad of ways. It takes a unique ability to visualise the big picture in order to imagine systems so radically different to those currently in place. But why IS S UE 2

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matters most to him. “My focus now is completely on Freedom X, and that is a huge undertaking; I’m disrupting the entire charity industry. My vision is every charity coming to me and saying ‘Marco, I need to use your blockchain solution in order for us to keep receiving donations’. It’s going to take a lot of work, but it’s going to change the world more than anything else I could do - this will actually help the people that need it.” I will leave you with a pithy summary from Marco about what it all boils down to: “Philanthropy is my number one priority, and should be for all human beings. Now that we can audit it using blockchain, it’s the biggest movement that we’ve got.” M ARCO RO B I NSO N is Founder of NKD

Got a blockchain story to share? Get in touch editor@blockermag.com

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01 C AL E VANS Founder of Gresham International, and a UK lawyer and US Litigation Consultant

“ L I K E A L L GOOD T E CH N OLOGIES, IT SIMPLY TAKES AN EXI STI NG TECHNOL OGY AND BUI LDS UPON T H E BA SIC PRIN CI PL ES TO I MPROVE THE METHOD.” — Cal Evans

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LEGISLATORS FINDING NEW SOLUTIONS TO SOLVED PROBLEMS —

Cal Evans, Founder of cryptocurrency compliance f irm Gresham International, explains why the future of regulating cryptocurrency and blockchain could mean looking to the past. The explosion of cryptocurrency technology in the last 12 months has left legislators scrambling to deal with the wave of apparent ‘issues’ that these new technology sets could or have caused. Although the technology has been around longer, it’s within this 12-month period we have seen the most drastic changes. To date, blockchain seems to be welcomed by most international governments as a legitimate technology set, with most governments being able to see its deployable application in a range of sectors including legal, ﬁnancial, medical, logistics and even defence. However, as time is passing, we are also starting to see the regulation of blockchain within some jurisdictions (including, most recently, China, which has placed a mandatory requirement on licenses being obtained by any organisation working in blockchain within the country). “MANY REGULATORY BODIES HAVE FAILED TO RECOGNISE THAT THE LEGISLATION THEY ARE ATTEMPTING TO PASS IS, FOR THE MOST PART, TOTALLY UNNECESSARY” There is a multitude of arguments about why governments are tightening up their legislative position on cryptocurrencies, and there are a number of differences in viewpoints between national regulators, including how they can and cannot be used within their jurisdiction. However, in looking at this new technology set, many regulatory bodies have failed to recognise that the legislation they are attempting to pass is, for the most part, totally unnecessary. During a period when I was speaking with the Crypto Taskforce in England (including the Bank of England, FCA, and The Treasury) I took the time to explain that actually, what we are dealing with here is a technology set © B L OC KE RM A G - 1 2 -

that is not necessarily ‘new’. Like all good technologies, it simply takes an existing technology and builds upon the basic principles to improve the method. The jet engine is a great example of this; we already knew how to ﬂy fast with propeller engines when we created the jet

he last time people had the ability to have such economical freedom was when we traded in gold. At that time, there was little to no need for banks. The whole system was, in its purest form, peer to peer, exactly the same as cryptocurrencies today

engine, so essentially what we did was create a better, more effective way to fly. Cryptocurrencies do this with money - when you pause and think about what cryptocurrencies are, they are essentially a more effective way of using a financial instrument (money) which take us back to transactions ‘at their core’. The last time people had the ability to have such economical freedom was when we traded in gold. At that time, there was little to no need for banks (which, essentially act as the broker to ensure transactions happen). The whole system was, in its purest form, peer to peer, exactly the same as cryptocurrencies today. The concept of cryptocurrencies does not do away with government control as a future concept; it simply takes people, transactions, and legislators back in time - not forward.

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- BLOCKERCON SPEAKER Conﬁrmation of this can be found all over. The expression ‘hitting the nail on the head’ does not give reference to someone accurately hitting something with a hammer. ‘Hitting the nail on the head’ dates back to when there was a ‘nail’ in old English squares, where sales/ trades happened. - they are still present in many English villages s we are simply expanding today. When an agreement upon a traditional way to was made the do things, the laws around parties, including a third party, it have existed for literally would hit the hundreds of years nail to signify the completion of the transaction. In cryptocurrencies, we go back to using a third party to verify these transactions have taken place.

“WHEN REGULATING CRYPTOCURRENCIES, PERHAPS LAWMAKERS SHOULD LOOK MORE TO THEIR ARCHIVES THAN THE LEGISLATIVE FLOOR” People were ‘self-transacting’ with each other (using independent third parties to confirm those transactions) for years before banks were created. The banks were created, in part, because they enabled more broad transactions. Countries at that time in history were not lawless; the laws reflected how people transacted, and in many locations these laws are still very much in existence. For the first time people have the ability to go back to transacting like that, and many people actually want to. Therefore, when looking at regulating cryptocurrencies, perhaps lawmakers should look more to their archives than the legislative floor.

Get inspired by Cal in person at Blockercon 2019, taking place 4-6 June in Bristol, UK

This is one of many examples of cryptocurrencies taking us back to basics. As we are simply expanding upon a traditional way to do things, the laws around it have existed for literally hundreds of years.

C A L E VA N S is the Founder of Gresham International, a UK lawyer and US Litigation Consultant with experience working in top law firms in both California and London.

expert speakers blockercon 2019

Ali Azam

Rhiannon Payne

Cloudesley J. C. R. Hobbs

Senior Blockchain Developer

CEO

Chief Legal Officer

Vaultplatform

Sea Foam Media

Dominion Bitcoin Mining Company

Find Out More www.blockercon.com IS S U E 2

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SPECIAL REPORT

blockchain in law —

We take an in-depth look at how blockchain is changing legal transactions across a number of industries, as well as driving eff iciencies in the legal sector itself.

It is fitting that Blockermag is following on from its previous report on blockchain in insurance with a close look at blockchain in law, as there are many fundamentals in both industries that mean blockchain technology is perfectly poised to transform how they operate. Some could argue that because trust is so integral to both of these sectors, previous technological innovations that have been more easily adopted by industries such as banking have not been as easy to incorporate, as they simply don’t serve the imperative need for unbreachable trust.

SPECIAL REPORT

“RARELY IS TRUST MORE IMPORTANT THAN IN LAW. TRUST THAT THE FACTS PRESENTED ARE ACCURATE; TRUST THAT INFORMATION IS CONFIDENTIAL; TRUST THAT YOUR BEST INTERESTS ARE AT HEART; TRUST YOU WILL RECEIVE A FAIR OUTCOME; TRUST THAT THE DESIRED OUTCOME WILL BE HONOURED. IN LAW, BUYING THAT TRUST COSTS MONEY”

BLOCKCHAIN IN LAW

That’s not to say technology in law practices is uncommon – many key tasks such as the reviewing of documents or research are becoming automated where possible, and there is a huge amount of money going into the adoption of legal technology, but ‘trust’ could not previously be emulated digitally. And rarely is trust more important than in law. Trust that the facts presented are accurate; trust that information is confidential; trust that your best interests are at heart; trust you will receive a fair outcome; trust that the desired outcome will be honoured. In law, buying that trust costs money – many of the day-to-day services in the sector could be eliminated or at least significantly simplified by blockchain, and as we

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01 S M A RT C ON T R AC T S A R E NOT H I NG N EW Blockchain is accelerating uptake of an established concept

know, time is money, so efficiency will inevitably be on the up as well.

Get smart Smart contracts are a major game-changer for the legal industry. The term ‘smart contract’ in this sense is slightly controversial, as it isn’t a new term coined for the blockchain era, rather an idea that dates back to the mid-1990s. Credit for originally envisioning the premise of a smart contract is attributed to legal scholar Nick Szabo, with the way a vending machine operates being used as an example. The idea is now a reality, and has become more prevalent in part to the popularity of self-executing smart contracts on the Ethereum platform. “THE LEGAL INDUSTRY IS ABOUT TO GO THROUGH A RADICAL REVOLUTION” So does this shake up of the legal industry that will reduce the need for a trusted third party in a number of services spell good news for clients, but bad news for lawyers? According to those well-versed in blockchain applications in law, it doesn’t have to. Stevie Ghiassi, cofounder of Legaler, a smart communications platform for legal based in Australia, says: “The changes in the industry will mean lawyers are concentrating on high-value work that clients actually want to pay for. The legal industry is about to go through a radical revolution, and this will stand to benefit businesses and law firms, allowing them to provide value in other areas. With Ethereum smart contracts, you might see many consumers using smart contracts before lawyers do – there will definitely be uptake on both sides. “Lawyers are often intermediaries between people’s relationships and are the people that enforce trust. Now we have created digital © B L OC KE RM A G - 1 6 -

trust, those roles will inevitably change. That really changes the way we look at relationships, it changes the way a lawyer is perceived in their role. At the moment it’s also clear that there are increasing client pressures here will be more value on law firms, for money, a higher return other companies encroaching on investment and legal on what has expenditures – there’s going traditionally been to be higher demand for legal lawyers’ work, the ‘big four’ services become leaders in more and more industries – there are more opportunities than ever for new areas of law.”

David Fisher, CEO and Founder of blockchain for law platform Integra Ledger and a founding member of the Global Legal Blockchain Consortium, looks at blockchain making the legal industry itself more productive using blockchain, and broadly agrees that the capabilities of blockchain technology will not make the role of lawyers any less valuable: “For most of what the world’s legal industry does, it’s not simple stuff. No one is going to programatise M&A contracts, for example. The reason lawyers charge so much per hour is the advice, perspective and wisdom, it’s not their ability to write on a piece of paper – you’re looking for their insight, their interpretation of law. “Look at what happens when a new iPhone comes out. It has new functionalities, but you don’t see the revenue of Apple declining. They are making things easier, adding functionalities, to the extent that those lower value functions can be simplified or automated, that then frees up capital for higher value activities. We think WWW. B L O CK E R M A G.CO M

02 ADV ICE, PER SPECT I V E & W ISDOM Still essential commodities in legal practice and unlikely to be entirely replaced by technology

03 T ECHNIC AL K NOW-HOW New service lawyers are helping lawers gain a f irm grasp on the technology without being bogged down in complexity

04 GL OBAL R EGUL AT ION Blockchain in the legal sector needs to overcome differences in law and regulation across different regions

SPECIAL REPORT that will be the experience in the legal industry. There will be more value for money, a higher return on investment and legal expenditures – there’s going to be higher demand for legal services and we think this will be bullish for the legal market.”

Blockchain for legal

Know the tech For legal professionals, it is important to have a firm grasp on the technology, but not necessarily the same level of expertise as a blockchain whizz; striking a balance between knowing enough to understand your clients needs while not getting too bogged down in the complexities. Legaler aims to enable lawyers to see the bigger picture without focusing too much on technicality, as Stevie explains: “We want to stop talking so much about the ‘what’. Take electricity – you only need to know how to turn the light switch on, you don’t need to know how it gets there, so let’s look more at the ‘why’. Why is blockchain important? Make that the area to get conversations started. We want to talk about why blockchain matters and why the legal industry could be looking at opportunities and also disruption.” “IT’S SLIGHTLY MORE COMPLEX THAN THE AVERAGE NEW PIECE OF TECHNOLOGY, BUT ONCE YOU GET OVER THAT, AND HAVE THE ABILITY TO DRAFT AN ACCURATE CONTRACT IT’S NOT THAT COMPLICATED” While the ‘why’ of blockchain is crucial, legal professionals that don’t at least have an entry level grasp of the basic technology could be at risk of failing to adapt, if what the experts say about blockchain’s effects on the sector come to fruition. Declan Goodwin, Solicitor and Associate Director at Vistra Corporate Law in Bristol, UK, feels that blockchain businesses want legal representation with a basic understanding of the technology, which can be lacking. He says: “From a business development point of view, blockchain is a relatively easy sell in terms of picking up new clients. There is a lot of excitement around the technology, but mainly because a lot of people have had pretty bad experiences with lawyers in this space. What I’ve found is that it is vital to know what you’re talking about and understand the technology. Yes, it’s slightly more complex than the average new piece of technology, but once you get over that, and have the ability to draft an accurate contract it’s not that complicated. “THE SMART CONTRACT IS POISED TO BRING ABOUT SERIOUS DISRUPTION” “However, because of the blockchain ecosystems, it’s very different. The concepts within a contract that you would apply to that © B L OC KE RM A G - 1 8 -

scenario are very different to the standard practice that a lawyer would typically take. A lot of lawyers have struggled with that. I think clients find it refreshing when they come across a lawyer who is familiar with the technology.”

For Integra Ledger, it’s less about serving the blockchain community in a legal capacity, but rather how blockchain can be applied to the legal profession itself. “It’s an important distinction – most of what you hear about in the legal industry is blockchain use cases with regard to client industries. You might hear about blockchain smart contracts in the insurance industry or securities industry, and you’ll have a lot of lawyers who are supporting tech clients or applications via other industries, but they are not focused on the legal industry as an industry itself. “WE ARE USING BLOCKCHAIN TO CREATE A DATA INTEGRITY UTILITY FOR THE WORLD’S LEGAL DATA” “We are focused on the way blockchain technology can make the legal industry operate in a more secure, frictionless and productive

the trillion-dollar Ftheorglobal legal industry ‘coin of the realm’ is

information, to the extent where you can add integrity, authenticity, provenance, security

fashion and what that means is the way information flows between law firm to law firm, law firm to client and client to client. All of business has a legal context that tends to be a lot of communication, documents and contracts.” “We are using blockchain to create a data integrity utility for the world’s legal data. That’s perhaps not as sexy as the folks who are in cryptocurrency or using blockchain to transfer assets! But if you think about it, for the trilliondollar global legal industry the ‘coin of the realm’ is information, to the extent where you can add integrity, authenticity, provenance, security. All those things are nice descriptors to legal data, so you actually make the legal industry function more efficiently, and if the legal layer of business life is critical to all business, legal functioning more efficiently stands to reason that business should function more efficiently as well.”

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- BLOCKCHAIN IN LAW -

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so, one of the barriers being reputation, and then they don’t want to take any risks. This is applicable to all startups, not just in blockchain, they can all suffer from the ‘red tape approach’ that large corporate customers have in terms of their procurement, and any type of regulation is going to cut down on the amount of pain you have to go through in a procurement process.”

The regulation barrier “THE BUSINESSES THAT ARE LIKELY TO BECOME THE MOST SUCCESSFUL ARE THE ONES THAT ARE GOING TO HAVE SOUND REGULATION AND GOVERNANCE IN PLACE” As in many tightly regulated sectors, governance remains a major barrier to blockchain adoption. This can hinder startups getting off the ground and prevent larger, established businesses from embracing the technology in the way they would like. The law also operates so differently in different regions, so there is a grey area over parties entering into contracts in separate jurisdictions. Declan sees the need for more stringent regulations across the board as key if the blockchain industry is going to thrive: “The businesses that are likely to become the most successful are the ones that are going to overcome all that and ensure they have sound regulation and governance in place. The sector is crying out for it, really.

Embrace the future of law Blockchain and smart contracts aren’t going to make the need for lawyers obsolete, but it will change the legal profession and the way legal transactions occur. Lawyers in all jurisdictions will need to become au fait with the basics of the technology; if blockchain experts in all fields are to be believed, it will become as ingrained in the way we operate as the internet, and the technology is still coming to maturity. As the experts claim, it will serve to make crucial but often laborious tasks, such as ensuring everyone is agreed on the same version of a contract more efficient, vital tasks such as documenting legal evidence more secure, and free up more time for legal professionals to use their knowledge and expertise to resolve cases and provide consultancy.

“Initially in this sector, there was a lot of scaremongering over frauds and scams, and Bitcoin being used for illicit purposes – it got, and still gets, a lot of bad press. Unfortunately, it has tarnished the sector as a whole rather than just cryptocurrency; enterprise blockchain has suffered as a result as well, so reputation is important. You’ve got startups flocking to countries that have put ompanies want to be regulation in regulated so they place, initially can show that they are it was Zug in Sw itzerland, compliant, and it isn’t a then in barrier to them selling their November of last year we had services and products Malta put its legislation in place.

As the technology matures, hopefully regulations and governance will develop in step, and allow blockchain applications in law to continue to flourish.

K A R I S C OPP is Blockermag Editor at Whisper Media

“Our firm has an office in Malta, and I went out there for their conference – they had almost double the amount of attendees than expected, so it’s really evident that people are crying out for regulation. Companies in the space want to be regulated so they can show that they are compliant, and it isn’t a barrier to them selling their services and products.

Karis Copp from Blockermag

Stevie Ghiassi from Legaler

David Fisher from Integra Ledger

Declan Goodwin from Vistra Corporate Law

“ANY TYPE OF REGULATION IS GOING TO CUT DOWN ON THE AMOUNT OF PAIN YOU HAVE TO GO THROUGH IN A PROCUREMENT PROCESS” “There is that danger of an initial excitement about how they can benefit from the technology, then a deeper dive into the implications of doing IS S U E 2

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next issue: blockchain in FINANCE

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- BLOCKCHAIN IN LAW -

ICOS – STAYING ON THE RIGHT SIDE OF THE LAW —

Will Foulkes and Chris Pritchett of Foot Anstey’s Commercial Team based in Bristol, UK with a combined focus on Energy, Data and DLT technologies, take a deep dive into the legal intricacies of Initial Coin Offerings Initial Coin Offerings (ICOs) are a much talked about mechanism for raising funds for blockchain companies using digital assets, or cryptocurrencies. Also commonly known as ‘token raises’, the first ICO occurred in 2013 but it was not until 2016/17 that they really took off as an alternative to, and in conjunction

have failed is a get-rich-quick mentality that has led both founders and investors to ignore well-established rules. Many of the cases that have involved investor loss can be attributed to traditional mistakes associated with venture investing, such as being overly-reliant on a pitch, not fully researching the market opportunity independently of the founders’ claims, lack of technical understanding of the product and insufficient time spent researching the background of the founder team.

the number of ICOs has Atotallthough reduced, the value has grown – the amount raised in 2018 via ICOs was

The large number of these ‘science project’ failures has led to a general scepticism around the legitimacy and benefits of the ICO method of fundraising, which is both unfair and inaccurate. The underlying technology of ICO fundraising itself is not to blame, but rather its method of exploitation. It should be remembered that although the dotcom bust led to many internet start-ups losing investors’ money, the survivors have grown into some spectacularly successful internet enterprises that have changed the face of business forever.

actually up to $21.5 billion from $5.6 billion in 2017

with, traditional fundraisings. They are still controversial, not least because a number of high-profile cases have been linked to fraud, but the underlying technology is solid, with legitimate cases raising large amounts of capital in short timeframes: the largest to date is the blockchain architecture company EOS that raised $4.2bn in 2018.

“GETTING IT WRONG COULD HAVE DIRE CONSEQUENCES INCLUDING CRIMINAL PROSECUTION, FINES AND RESTRICTED ACCESS TO THE MONEY RAISED”

“MANY OF THE CASES THAT HAVE INVOLVED INVESTOR LOSS CAN BE ATTRIBUTED TO TRADITIONAL MISTAKES ASSOCIATED WITH VENTURE INVESTING, SUCH AS BEING OVERLY-RELIANT ON A PITCH”

There is, however, another potential pitfall associated with this new method of fundraising, and that involves how it is treated by regulators and how it complies with the law. Even if the other mistakes are avoided, failure to heed this aspect could bring down a project. Getting it wrong could have dire consequences including criminal prosecution, fines and restricted access to the money raised.

Although there was a sharp downturn in the number of ICOs last year, leading to claims that we were witnessing a ‘bubble’, many market commentators claim that this dip is temporary. Although the number of ICOs has reduced, the value has grown – the total amount raised in 2018 via ICOs was actually up to $21.5 billion from $5.6 billion in 2017.

So how should a founder who is legitimately motivated by the potential for global reach, efficiency and cost-savings associated with ICOs, avoid the potential legal pitfalls around using this new approach when approaching investors?

It could be argued that the reason many ICOs IS S U E 2

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- BLOCKCHAIN IN LAW -

The law Most legal concerns revolve around the way an ICO works. An ICO involves the issue of a digital token in return for funds (usually paid in the form of established cryptocurrency), and the digital token confers certain rights or benefits. The nature of these benefits will determine whether the token is treated by regulators as a utility token or a security token. • A utility token typically only grants access rights to a platform or service. An analogy could be a supermarket trolley token, or mobile phone credit. • A security token resembles a digitised equity or share in a company, usually conferring a combination of ownership, voting and profit rights on the owner. Leading on from this there are three key considerations: 1. Understanding the characteristics of the token that is being offered to investors in relation to existing securities law 2. Where existing securities law does not clearly apply, understanding the full range of risks and potential mitigating actions associated with the evolving regulatory regime across jurisdictions 3. The content of the related documents presented to the market to encourage investment Owing to the relatively nascent stage of this fundraising approach, the law is evolving and specific regulation relating to cryptoassets is expected in the near future, which may change some or all of the below (Please note that this is for information purposes only and should not be relied upon as legal advice).

Types of token and securities law “MANY FOUNDERS HAVE ATTEMPTED TO LABEL THEIR TOKEN AS A UTILITY TOKEN THEREBY AVOIDING SOME OF THE MORE STRINGENT COMPLIANCE OBLIGATIONS” At the time of writing, utility tokens are unregulated and therefore circumvent the need to comply with many of the onerous obligations in place to mitigate the risk of investor fraud. Security tokens, however, are treated as transferable securities and regulated as such. Because of the difference in compliance requirements, many founders have attempted to label their token as a utility token thereby avoiding some of the more stringent compliance obligations, whilst giving it attributes that would attract investors, such as a promise of an © B L OC KE RM A G - 2 4 -

increase in value or share of future profits (e.g. stating that the token is ‘asset-backed’, where it is subsequently claimed that the underlying asset will increase in value). Where an ICO will be based on a utility token, it will be essential to ensure that potential investors understand the mechanics and will be comfortable investing on that basis (i.e. with no rights to profit or ownership). If they are not, and there is a need to give them those additional rights, expert advice must be taken on what to include in relevant documentation and how to meet other obligations in order that the ICO complies with the law. Founders and investors must note, however, that in a recent advice paper from the European Securities and Exchange Commission, the majority of member states surveyed took he whitepaper must give the view that a a balanced view of the utility token which promises profits potential outcome of the should in fact be investment including the classed as a security. downsides It is therefore expected that future legislation in the UK will adopt this approach. This would be taking a similar position to the US Securities and Exchange Commission that applies the ‘Howey’ test when determining if an asset is a security. The approach of other EU countries (such as France) may differ.

Content of documents issued to investors Whitepapers are written by ICO issuers in order to invite people to buy their tokens. It is similar in concept to an investment memorandum although the content will vary according to the characteristics of the token; whitepapers to date range from providing detailed technical description of the solution and use cases, to being very generalised and aspirational. Set out below are some considerations that appear absent from many whitepapers; it is our view that some form of all the below should be included in a whitepaper, regardless of the classification of the underlying token.

Risks involved with the investment Explaining risks is crucial in order to ensure that there cannot be an accusation of misleading investors. The whitepaper must give a balanced view of the potential outcome of the investment including the downsides – in short, what could go wrong. Downsides could relate to changes in law, changes in market appetite, technology WWW. B L O CK E R M A G.CO M

- BLOCKCHAIN IN LAW obsolescence, data breaches, changes in the blockchain protocol (e.g. hard forks), loss of keys and so on, all having the potential effect of either reducing the value of the investment or impacting the investor’s ability to liquidate its investment and exit.

trade in a secondary market.

WHAT IS THE BLOCKCHAIN SOLUTION? Typically, an ICO involves raising funds for a project which harnesses blockchain technology. Where this is the case, the white paper should describe why a blockchain solution is the most relevant to solving the problem at hand. The solution must be accurately described, clearly stating how blockchain technology will be used; whether it will be using an existing ‘off the shelf’ chain or one that is bespoke; and if it will be a public, private or hybrid chain. This will need to tie in with the section on risks (for example a private chain with a small number of participating ‘nodes’ lacks many of the security and integrity benefits that come with public, widely distributed blockchains).

Representations and warranties Inclusion of representations and warranties is one of the ways a company running an ICO limits its liability in any subsequent dispute. Representations are a set of statements which the investor is required to stand behind when he invests. For example, an investor representing that he is not a U.S. investor, or stating that he is a sophisticated investor with detailed knowledge of cryptoassets. Warranties are a set of promises that an investor makes when he agrees to invest in an ICO, for example that an investor will not use the ICO to launder money or finance terrorism.

Governing law and resolution procedure

“ALL THESE ELEMENTS ARE OF COURSE IN A STATE OF FLUX. IT IS ESSENTIAL TO SECURE THE BEST ADVICE POSSIBLE FROM EXPERTS FAMILIAR WITH THESE TOPICS IN ORDER TO AVOID POTENTIAL COMPLICATIONS”

dispute

Given the global nature of the technology, it is crucial to clarify which country’s laws will apply to any disputes. For example, it may be straightforward to get a whitepaper approved in Malta, but would it be straightforward to resolve a problem with a disgruntled investor in

WHO ARE THE TARGET INVESTORS? If the white paper is targeting investors from outside the UK (a key advantage to ICOs is their potential to have a global reach), then it will be necessary that the whitepaper complies with local securities legislation, which may differ from that in the UK.

ypically, an ICO involves raising funds for a project which harnesses blockchain technology. Where this is the case, the white paper should describe why a blockchain solution is the most relevant to solving the problem at hand

It would not be possible in a short article to cover all the complexities of the law applying to ICOs, nor to enumerate all factors that need to be taken into consideration when preparing relevant documentation. What we have done is to flag some of the key points that one should consider when seeking to launch an ICO. Firstly, how the token would be structured and how would that be viewed under existing securities legislation; secondly, identifying risks and mitigating actions associated with evolving regulation; and thirdly, what information needs to be provided in a fundraising document to address this. All these elements are of course in a state of flux. It is essential to secure the best advice possible from experts familiar with these topics in order to avoid potential complications further down the line and to give your fundraising the best chance of success.

a Maltese court? It may also be a good idea to set out a process that governs how any disputes with an investor would be managed, to avoid unnecessary litigation.

Token subscription and disposal process It is important to include how the investor should subscribe for the tokens, including whether that is by exchange for fiat currency, exchange for other cryptocurrencies, or by an airdrop (where tokens are sent to subscriber wallets for free with the goal of stimulating the use of a new platform). It is equally important to cover how the investor may dispose of his token, including any restrictions on subsequent transfers of the token, as this will affect the investor’s ability to IS S U E 2

W I L L FOU L K E S , Associate at Foot Anstey Commercial Team & CH R I S PR I TCH ET T, Partner at Foot Anstey Commercial Team

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- INNOVATOR SPOTLIGHT -

USING BLOCKCHAIN TO BUILD PEACE & DEFEAT THE DRUGS TRADE —

We talk to Matt Whiteman of Choco4Peace about how the organisation is using blockchain to empower Colombian cacao farmers, and how the same principles can transform lives all over the world. One of the great things about blockchain technology is that, no matter how much you know, someone can come along with a project that uses blockchain to achieve a result or resolve a problem that you couldn’t have dreamed up in a million years. We know the transformative powers of the technology, and yet we can still be blown away by its applications.

go to a traditional bank for that kind of money, but they can’t go to a micro finance institution either because often the interest rates are astronomically high and completely unsustainable. You can’t do micro finance when you are tied into a three-year agricultural programme – how do you solve that problem?” “YOU WOULD BE ABLE TO TRACE YOUR CACAO ALL THE WAY BACK TO THE LEVEL OF THE FARMER, AND THEN YOU CAN ALSO SEE THE SOCIOECONOMIC AND ENVIRONMENTAL IMPACT THAT BUYING THAT CHOCOLATE HAS”

Choco4Peace is a great example. Sergio Figueredo began the organisation in early 2018, bringing on Matt Whiteman to work alongside him shortly after. “Sergio and I have worked together since 2016,” Matt explains. “We met as project managers at our last place of work, the Finance Alliance for Sustainable Trade in Montreal, specialising in access to finance services for small to medium enterprises in sustainable agriculture and forestry in emerging economies.

Sergio began looking at blockchain as a potential solution, putting together a model that connected ex-cocaine producers and war victims in Colombia with ways of successfully transitioning to growing other crops such as cacao. They would be aggregated on a blockchain platform, given digital cryptographic identifications and connected with international markets and services.

“THERE ARE 450 MILLION SMALLHOLDER FARMERS IN THE WORLD, TOGETHER THEY MAKE A FINANCIAL GAP OF HALF A TRILLION DOLLARS”

Matt continues: “You would be able to trace your cacao all the way back to the level of the farmer, and then you can also see the socioeconomic and environmental impact that buying that chocolate has. By purchasing, this farmer is not farming coca leaf, and this is what they are paid per kilo which is ‘x’ amount above the NYSE price that they would be getting if they were to sell to the domestic market – it’s like a level above fair trade. You don’t have to trust a human being any more.

“We were struggling to find ways of aggregating smallholder farmers in ways that would allow them to be bankable to impact investors. Rural and remote farmers are about as risky as you can get from an investor standpoint; there’s no land tenure, there’s no access, there’s no financial statements of any kind. But they are the people that feed us. There are 450 million smallholder farmers in the world, together they make a financial gap of half a trillion dollars which is kind of a big issue, and that’s the number we are trying to attack with everything we have. We started off focusing on medium sized companies that had some financial history.

“All of those things create a risk profile for investors, so if they can see through transparency that a farmer has access to a buyer, crop insurance capacity building or someone that’s been supporting them to improve their yield or quality of their cacao for five years, that creates

“However, think of a farmer needing a loan of $5000, there’s no way they could IS S U E 2

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01 M AT T W H I T EM AN (Previous page)

WWW. B LOC KE RM A G.C OM - 30 B L OC KE RM A G “Think of a farmer needing a loan of $5000, there’s no way they could go to a traditional bank for that kind of money, but they can’t go to a micro finance institution either because often the interest rates are astronomically high and completely unsustainable. You can’t do micro finance when you are tied into a three-year agricultural programme – how do you solve that problem?”

02 C AC AO FA R M E R in C OL OM BI A (Above)

- INNOVATOR SPOTLIGHT valuable information that says to investors, well they have insurance, a contract, it’s all going to be executed using a smart contract so I’ll get my money back. And you can aggregate them through these cacao cooperatives that we partner with.”

maximise the potential of these beans because they aren’t going to be able to command a high enough price for it. If we can transform the way our culture looks at chocolate and say ‘OK, try this, and then try this – taste the difference. “HOW DIFFICULT IS IT TO MEASURE THE EXTENT TO WHICH THE BLOCKCHAIN SOLUTION IS HAVING A IMPACT ON PEOPLE’S LIVES?”

M a t t highlights the project’s potential – it his is why we’re calling can be used it a movement. This is a with any commodity, way you can use blockchain in any to create those broad country societal changes. (although chocolate is sexier than onions, he concedes). “This is just the first step. Colombia is a foothold into the problem that we see in Venezuela. There are 1.2m Venezuelan refugees on the Colombian side who need a way of sustaining themselves.

“I’ve done this test with a few people, and they say I have ruined chocolate for them now and they can’t go back! And that is what we want, why not demand high quality and traceability and to know you could have a positive effect on the environment and people’s lives, just by making that ethical choice? There is a reason you would pay ten dollars for a really nice chocolate bar rather than $1.50 for a not so good one.” But how do you quantify the success of a project like this? How difficult is it to measure the extent to which the blockchain solution is having a measurable impact on people’s lives? Matt tells me: “This comes from demand from the farmers themselves for a more dignified solution. We align our work with six of the UN’S Sustainable Development Goals and we work to create a positive effect.

“If we think about it from a peace standpoint, Peru has the exact same problem with cocaine production, just like Bolivia and El Salvador, there is opium production in Afghanistan or hashish in Morocco – there are many possibilities for application. This is why we’re calling it a movement. This is a way you can use blockchain to create those broad societal changes.”

“For example, no poverty – if you can increase someone’s income by 50, 100, 250 percent, being paid by kilogram for the cacao, already that’s a big win. What you do is create a baseline by doing the data gathering, again through cacao cooperatives, gather the data that you need and then track the changes over time. The quality of the cacao is another reliable indicator. The price tends to go up in step with quality.

“THE INCENTIVE TO CARE ABOUT WHERE OUR CHOCOLATE COMES FROM ISN’T JUST SOCIALLY CONSCIOUS – IT’S BETTER FOR US FROM A TASTE STANDPOINT”

“THERE ARE 38,000 CACAO FARMERS IN COLOMBIA ALONE”

While blockchain can make a huge impact in this area, we need to bear some responsibility for societal attitudes, too. Matt likens the necessary cultural shift to the way we view coffee, where every bean is now traceable. He sees cacao and chocolate culture following the same trajectory, but about 15 to 20 years behind. The incentive to care about where our chocolate comes from isn’t just socially conscious – it’s better for us from a taste standpoint.

Planning the scale-up of a project with such huge scope must be tough, but Choco4Peace are not facing these problems alone. They are working alongside governments to ensure that tackling these issues is a many-pronged approach. “There are 38,000 cacao farmers in Colombia alone and I would say the vast majority sell to the domestic market. But there are also 77,000 families that are currently cultivating coca leaf, and are voluntarily agreeing through the crop substitution programme from the Colombian government to destroy their coca crops and plant something else. We know that the programme is going to cost around 50bn dollars, and the Colombian government is footing some of that bill, but not all of it.

Matt explains: “Most of the chocolate we consume comes from what is called bulk cacao, which is lower quality, so it’s bitter, it’s astringent and woody, and you need to add water, sugar and milk in order to make it taste any good. But 95 percent of Colombian cacao is ‘fino de aroma’ or fine flavour cacao. It’s naturally much more fruity and floral, and it’s a much more pleasant taste, so you can make that 70, 85 or even 95 percent dark chocolate that tastes delicious all by itself. This is the advantage Colombia has, but there is no incentive for these farmers to IS S U E 2

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- INNOVATOR SPOTLIGHT -

There is a potential to not only secure a life with dignity for existing cacao producers, but also to create a credit incubation programme for other tens of thousands of families who would really love to not farm coca leaf

Choco4Peace Founder Sergio Figueredo (centre) Find out more at: www.choco4peace.org

“We have been working with both the present and former Colombian governments, Sergio met both of them and they said this is a great project, how fast can you get us a prototype. There is a potential to not only secure a life with dignity for existing cacao producers, but also to create a credit incubation programme for other tens of thousands of families who would really love to not farm coca leaf but because it’s so much more lucrative, but they don’t have any real choice.

might pursue in order to meet their objectives. Such an objective might be how to create environmental security through some kind of financing mechanism to farmers and what is the best way to do that, so they are interested in the kind of data we produce. If we can create those kind of international policy recommendations to governments, that’s where the real potential for leverage exists. An institution like the World Bank demonstrating that this is possible, then you’re really talking.”

Beyond that, I think we would like to think of ourselves as a multi-institutional movement, and the idea is to try and change way the world thinks about and consumes chocolate.

M AT T W H I T E M A N is Partnership and Growth Manager at Choco4Peace.

“AN OBJECTIVE MIGHT BE HOW TO CREATE ENVIRONMENTAL SECURITY THROUGH SOME KIND OF FINANCING MECHANISM TO FARMERS” “We are also in conversation with the World Bank, and among many other things they advise governments on what kind of strategies they © B L OC KE RM A G - 3 2 -

WWW. B L O CK E R M A G.CO M

01 AC C E S S to L E GA L SERV I C E S Can Blockchain help close the poverty gap through smart contracts?

IS S U E 2

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he opposite of poverty isn’t wealth, but justice - Bryan Stevenson

Amplifying access to justice with blockchain Karis Copp explains how blockchain could go beyond transforming standard legal services to providing billions of people with a fairer system. American lawyer and activist Bryan Stevenson said that ‘the opposite of poverty isn’t wealth, but justice’. There are billions of people worldwide that don’t have the same access to legal services and therefore don’t have access to the justice they deserve. Smart contracts are a major game-changer for blockchain use cases in the legal space demonstrate that it is likely the industry will be set for a shake-up, but that doesn’t just mean the evolution of day-to-day lawyer-client relationships and transactions; it will also open up opportunities for disenfranchised groups of society to receive legal assistance. US firm Rocket Lawyer, having started out as a service allowing users to set up legal documents online, now integrates blockchain technology to take the service a step further and execute smart contracts. Chief executive Charley Moore said the latest venture would ‘increase access to justice by closing the gap between contract execution and trusted, secure performance of agreed-upon obligations’. LegalZoom is heading down the same path in a partnership with Clause. © B L OC KE RM A G - 3 4 -

“AS MANY AS FOUR BILLION PEOPLE STILL LIVE OUTSIDE OF ACCESS TO JUSTICE” Stevie Ghiassi, co-founder of Legaler who speaks to us about blockchain in law in more depth in our special report, explains how bad the problem might be, and how it inspired the direction of the business. “If you look at the high -level numbers in the legal industry, according to the United Nations as many as four billion people still live outside of access to justice, and new figures from the Hague put it at six billion. We were really taken aback by how much work had to be done, and that’s why we really got into the throes of using blockchain to make legal services more accessible.” Stevie was fascinated by the unique model of Salvos Legal, a commercial law firm owned by the Salvation Army, which puts all profits into its not for profit fund Salvos Legal Humanitarian. He continues: “We were also learning a lot about decentralised autonomous organisations (DAOs) and how they could be used for charities. We wanted to use blockchain WWW. B L O CK E R M A G.CO M

- BLOCKCHAIN IN LAW to combine those two things, to see if we could create a really transparent way to bring legal services to the disadvantaged, and part of that was learning how to build that and why it didn’t exist.” Now that the technology is there, it could be

the potential to bolster this vital work further, with its capabilities for identity verification and tracking personal data and records, which is a particular issue in regimes without standardised practices. “THERE IS A HUGE OPPORTUNITY FOR BLOCKCHAIN TO TRANSFORM INDIA’S FLAWED LAND REGISTRY SYSTEM”

lockchain has the potential to bolster asylum processing with its capabilities for identity verification and tracking personal data and records, which is a particular issue in regimes without standardised practices.

In India, millions of cases are pending in the country’s district courts, many for more than a decade, and prisons are hugely overcrowded as people wait years for their cases to be heard. Two-thirds of all civil cases are related to property and land registry – there is a huge opportunity for blockchain to substantially alleviate this backlog and transform India’s flawed land registry system, and in a way that leaves no capacity for corruption. These are just a few examples of how blockchain can improve access to justice for everyone, but there are sure to be many life-changing projects on the horizon as technology firms partner with NGOs, governments and other industries to tackle a host of barriers to justice. It is certainly one of the most heartening ways in which the technology is set to revolutionise the legal sector.

a significant step towards a more even playing field. Keeping a focus on Australia, lawyers from Sydney-based firm Gilbert and Tobin carried out a project with a software team from Thomson Reuters to automate the processing asylum requests. Tens of thousands of refugees travel to the country annually, and previously all applications were handwritten. Blockchain has

K A R I S C OPP is Blockermag Editor at Whisper Media

expert speakers blockercon 2019

Dr. Mihaela Ulieru

Cal Evans

Adé Molajo

Chief Alchemist

Founder

Endor.com

Gresham International

Halcyonite Digital

Find Out More www.blockercon.com IS S U E 2

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- INNOVATOR SPOTLIGHT -

SECURE AND SUCCESSFUL INSURANCE WITH BLOCKCHAIN —

Following our last issue where Blockermag delved deep into Blockchain in Insurance, Amit Joshi looks at some of the ways blockchain is changing the insurance industry, including some of the legal implications. Though blockchain might not be the one solution to problems faced by insurers, it does provide the foundational technology that promotes trust, transparency and stability. There are a few ways that insurers have already

Making insurance efficient and compliant Fraud Detection and Risk Prevention: The complexity alone of the insurance industry creates gaps in visibility that can be exploited to perpetrate fraud. Shuffled claims from insurees to insurers and reinsurers in a slow, paperwork-driven process creates opportunities for misappropriation to make multiple claims across different insurers for a single loss or enables brokers to sell insurance policies and pocket the premiums.

mart contracts are set to revolutionise insurance: personalised pre-defined contracts connecting realtime information from different systems across physical documents and activities which trigger processes such as claims, payments and reimbursements faster and with greater accuracy

Blockchain technology can enable better coordination between insurers to combat fraud. On a distributed ledger, insurers can record permanent transactions, with granular access controls to protect data security. Storing claims information on a shared ledger helps insurers collaborate and identify suspicious behaviour across the ecosystem.

begun to leverage the technology to mitigate the insurance industry challenges.

“COMBATING FRAUD IS ONE OF THE MOST COMPELLING USECASES OF THE BLOCKCHAIN, WHICH CAN PROVIDE INSURERS AND INSUREES WITH A PERMANENT AUDIT TRAIL”

Take security, for example. Through blockchain’s use of public ledger, it can potentially eliminate suspicious and duplicate transactions by logging each transaction. Through its decentralised digital repository, it can verify the authenticity of customers, policies and transactions by providing historical records. This makes it more difficult for hackers to corrupt and steal files.

Insurance fraud is one of the biggest pain points of the industry, leading to higher premiums and worse coverage for consumers. Combating fraud is one of the most compelling use-cases of the blockchain, which can provide insurers and insurees with a permanent audit trail that can be used to evaluate claims. It can bring automation and efficiency to the claims processing system apart from combating fraud.

Smart contracts are also set to revolutionise insurance: personalised pre-defined contracts connecting real-time information from different systems across physical documents and activities which trigger processes such as claims, payments and reimbursements faster and with greater accuracy thereby saving the insurance company time and money and ensures there are no legal disputes, all while providing the customer with a better experience. IS S U E 2

Property and Casualty Insurance: Gathering the necessary data to evaluate and process claims are the biggest issue with property and casualty insurance due to the lengthy manual process as well as a long supply chain. - 37 -

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- INNOVATOR SPOTLIGHT Blockchain technology can codify business rules and automate claims processing through smart contracts while providing a permanent audit trail thereby providing the policyholders and insurers to track and manage physical assets digitally. Insurance is by and large thought to be as a contract that stipulates the premium an insurer pays, as well as the conditions in which the insurer is liable for damages. The tricky bit is that the definition of “damages” can be pretty subjective, and insurance revolves around verifying that the conditions for each policy are met. “A SECURED OR PERMISSIONED BLOCKCHAIN CAN MAINTAIN PATIENT PRIVACY, WHILE CREATING AN INDUSTRY-WIDE, SYNCHRONISED REPOSITORY OF HEALTHCARE DATA” Healthcare: Health insurance is plagued by an inefficient ecosystem of providers, insurers, and patients. A single patient typically sees multiple doctors and specialists over the course of his life. Due to there being so many different parties involved in healthcare, it’s next to impossible to share and coordinate sensitive medical data between them. As a result, medical records get siloed within different healthcare providers and insurers, leading to duplicate and erroneous records across different organizations accompanies by costly administrative overhead along with unnecessary procedures for patients. A secured or permissioned blockchain can maintain patient privacy, while creating an industry-wide, synchronised repository of healthcare data, delivering industry wide savings. Blockchain usage can return control to patients over their medical data and give them access to it on a case-by-case basis. Rather than forcing insurers and providers to reconcile patient data across separate databases, a blockchain system for medical records could store a cryptographic signature for each record on a distributed ledger. The signature indexes the content of each document cryptographically and timestamps it, without actually storing any sensitive information on the blockchain. Reinsurance: Reinsurers provide insurance for insurers in different scenarios. Depending on the type of reinsurance purchased, it can cover a proportion of an insurer’s risk during the set time period or cover specific risks. The current reinsurance process is extremely complex and notoriously inefficient. With facultative reinsurance, each risk in a contract needs to be individually underwritten, and contracts typically take up to three months of wrangling between parties before they’re signed. Insurers will typically engage multiple reinsurers, which means that data has to be exchanged between various parties to process claims. Different data standards between institutions often lead to different interpretations of how a contract © B L OC KE RM A G - 3 8 -

should be implemented. The blockchain has the potential to upend current reinsurance processes by streamlining the flow of information between insurers and reinsurers on a shared ledger at the same time, eliminating the need to reconcile books between institutions for each individual claim. Rather than relying on primary insurers for data around losses, reinsurers can query the blockchain directly to provide coverage.

Towards a Blockchain-Powered Insurance Industry While still in its infancy, there are already a number of promising use cases and applications for the blockchain technology in the insurance industry. Even though the enthusiasm and lockchain has the interest in blockchain technology is high, potential to upend there’s a lot of current reinsurance ground to cover processes by streamlining before it can make a significant impact the flow of information on the insurance industry. From an industry perspective, the legal and regulatory frameworks for insurance needs to evolve for blockchain implementations to succeed. While blockchain technology can provide insurers with better tools for collaborating and sharing data, the insurers themselves must be willing to work with each other.

“PUBLIC BLOCKCHAINS, WHERE EVERYONE HAS ACCESS TO EACH TRANSACTION ON THE LEDGER, ARE UNFEASIBLE FOR THE INSURANCE INDUSTRY DUE TO PRIVACY AND SECURITY CONCERNS. PRIVATE, PERMISSIONED BLOCKCHAINS ARE STILL UNDER ACTIVE DEVELOPMENT” The technology itself has a long way to go with security, speed and scalability all being worked upon. Public blockchains, where everyone has access to each transaction on the ledger, are unfeasible for the insurance industry due to privacy and security concerns. Private, permissioned blockchains are still under active development. Catch Amit speaking at Blockercon 2019, taking place 4-6 June in Bristol, UK. A M I T J OS H I is CEO and Co-founder of HashPrix

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SPEAKER PROFILE:

Rhiannon Payne KARIS COPP SPEAKS TO RHIANNON PAYNE, FOUNDER AND CEO AT BLOCKCHAIN MEDIA AND TECHNOLOGY STUDIO SEA FOAM MEDIA ABOUT HELPING TO MAKE STRONG BLOCKCHAIN IDEAS A REALITY, TRUSTING YOUR GUT WITH ICOS AND EMPOWERING WOMEN IN THE INDUSTRY for fintech companies. Following on from this, Sea Foam Media was born, but without an initial specialism in blockchain. In fact, Sea Foam’s first project was a unique one: “Our first client was an AI company from Dublin, Ireland, and they had built an AI computer vision platform for detecting and identifying unique cows in dairy farms, analysing biometric data based on their eating and drinking habits and providing that back to farmers. “Sea Foam helped them get through their Series B fundraise in which they raised $13m. My team was initially doing data curation and annotation work for such companies, so we had 20 people going through and annotating data that was around one million pictures of cows in dairy farms around the world! That was a really interesting experience and an interesting start for the company.”

01 R H I A N NON PAY NE Founder & CEO at Blockchain Media and Sea Foam Media

“BLOCKCHAIN CREATES A MORE LEVEL PLAYING FIELD, AND THE WAY IN WHICH THAT APPLIES TO WOMEN AND WOMEN IN BUSINESS AND TECH IS SO IMPORTANT TO ME” Like many blockchain entrepreneurs, Rhiannon Payne was instantly fascinated by the technology, and as her understanding of blockchain and distributed systems grew, she began to imagine the huge range of applications it could make possible. But Rhiannon’s journey as an entrepreneur didn’t begin in the blockchain space; her first company began as a ‘side hustle’ around one of her major passions; amplifying women’s voices. “In 2012, I was working full-time in fintech marketing in LA, and I started a women’s media website where I hired a team of writers and editors over three years. I trained these women and we produced daily content – by women for women, and from there started expanding into other areas, working on product management IS S U E 2

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“THERE WAS A RAMPANT FERVOUR SURROUNDING THAT WITH SO MANY PEOPLE WANTING TO START PROJECTS AND GO TO MARKET AS QUICKLY AS POSSIBLE AND START RAISING MONEY, OFTEN WITHOUT A SOLID BUSINESS PLAN OR ANY KIND OF NPV” It wasn’t long until pivoting to blockchain became a key focus for the business, as Rhiannon explains: “Because of my journalism background and my experience in content marketing earlier in my career, I started writing blockchain whitepapers for a couple of different ICOs, and we scaled the blockchain side of the business really quickly from there because of the demand. We started bringing on designers and more writers, developers and then I brought on my business partner and CTO Justin Bowen who brought on his design and engineering and data science team. We’ve recently been working with companies more on security token offering (STO) projects, and fewer ICOs.” Sea Foam was in an interesting position when it began in 2017. As the business took off, ICOs were exploding, and striking the right balance between viable and unviable projects while still getting to grips with the market was a learning curve. “When we started working with F E B R UA RY 2 0 1 9

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“We became a lot more selective about who we were partnering with, tightening the way we validate and vet people, and then obviously just trusting our guts more – as soon as we realise a client isn’t serious, we cut that relationship off”

blockchain companies on their ICOs at the beginning of 2017, there was a rampant fervour surrounding that with so many people wanting to start projects and go to market as quickly as possible and start raising money, often without a solid business plan or any kind of NPV. “It’s been kind of a process for us in identifying the serious clients and the right kind of clients that we want to work with, making sure we were working with clients with interesting businesses who are very knowledgeable in their industry. But how do you tell the serious clients from the not-so-serious? “Luckily it becomes very clear very quickly. Unfortunately, there were instances last year with partners we had what we thought was a really strong relationship with, and really trusted their referrals, that ended up being projects that weren’t serious with teams who didn’t actually have a real intention of launching a product, and while we haven’t worked with a lot of them, it is something I have seen a lot of. “Another issue I have seen is an idea being so ‘blue sky’ that their attitude was: ‘Oh, we’re just going to put our whitepaper out there and start raising money, and figure it out later’. After one bad experience like that, we became a lot more selective about who we were partnering with, tightening the way we validate and vet people, and then obviously just trusting our guts more – as soon as we realise a client isn’t serious, we cut that relationship off.” “WE ARE STARTING TO BUILD OUT A BLOCKCHAIN HYPERLEDGER BASED MARKETPLACE FOR ONE OF OUR FIRST CLIENTS, AND BUILT A TRIVIA APP INTEGRATED WITH SMART CONTRACT TOKEN AWARDS” It seems that trusting their guts has paid off, as Sea Foam Media now works with an impressive roster of clients doing exciting and creative work in the blockchain space. So how do they take a great idea and turn it into a great business? “Typically, we will start working with a company in its early stages, helping them find the vision for their project, taking what are often optimistic ideas and translating them into something a lot more viable that there is a real © B L OC KE RM A G - 4 0 -

need for. “We are working with a lot of people in the very early stages, so those initial days when we’re helping them brush up their whitepaper and decks, the work is very non-stop – I typically have clients calling me at all hours of the night! I’ve taken 11pm calls from clients often. Obviously, the projects are so personal to them, and they want to make sure that their vision is properly captured, and they are staying on the right page.” “We help them with their early stage messaging and basic tokenomics, fundamental technology architecture that we can package into their whitepaper and their investor decks, working on the whitepaper, their branding, design work, landing pages and everything in between – that package is at the core of our business. “Then our strategy as a company has been to grow their relationships, so as we help companies get their (typically private) funding, with those early stage materials we are offering them as well as introductions to the investor relationship firms that we partner with, from there we do work to grow those relationships, so we are working with them to a time when they start actually building out their technology. Right now we are starting to build out a blockchain hyperledger based marketplace for one of our first clients, and actually we built a trivia app integrated with smart contract token awards for their industry last year. “They are in the rare arts and coin antiquities trade, and we are at the forefront of creating their own token economy where these very enthusiastic coin traders and dealers can engage with one another, and more easily trade these rare items and validate authenticity. This will all be integrated with the trivia app as their audience is very engaged and actively sharing their coin and art knowledge daily with others in their community, so it’s a great way to engage them.” Sea Foam’s comprehensive service has led the business to expand at pace, and Rhiannon is ready to take the business to a new level this year. She explains: “For 2019 I want to focus on a larger vision – what is Sea Foam? Now that we have gone through the trial and error of 2018 and now have a real feel for this evolving WWW. B L O CK E R M A G.CO M

- BLOCKERCON SPEAKER industry, who do we want to be?

building is specifically relevant to female entrepreneurs.”

“We definitely want to be thought leaders in the space, and our team is constantly creating our own original content such as blogs and all kinds of blockchain-related media so we can lead ongoing conversations, share information and provide resources for people in the industry who need it. “We are thinking a lot about building our own products, when it comes to blockchain I think it’s something that will be at the core of everything we are doing in 2019.”

The team are looking at creating materials and building out a product that will help women start a remote business or career, and Rhiannon is also in the process of putting together a free guidebook on the subject. “Blockchain creates a more level playing field, and the way in which that applies to women and women in business and tech is so important to me, and it’s definitely something that we will be focusing on more in 2019. I’m going to be speaking on a panel at a UN conference in April, focusing on women in technology – it will be all-female, with half the panel being women of colour.

lockchain provides more inclusive spaces for women. Allowing women to start their own businesses more easily

With everything going on at the business, Rhiannon still prioritises her passion for empowering women, and she feels that blockchain technology plays a pivotal role in providing opportunities for women in the business and tech space. “It’s something I actually talked about at the European Women in Technology Conference in Amsterdam in November 2018, about how remote work and distributed team

“Blockchain provides more inclusive spaces for women. Allowing women to start their own businesses more easily, creating a distributed environment where there is so much collaboration, we definitely want to be part of that more, and be at the forefront of creating these spaces that are more inclusive using blockchain.” Rhiannon will be speaking at Blockercon, taking place 4 – 6 June in Bristol, UK R H I A N NON PAY N E is Founder & CEO at Sea Foam Media

expert speakers blockercon 2019

Danielle Khayat Saikaly

Aviva Õunap

Michael Kwok

Founder

Chief Executive Officer

Project Lead

The Chain Economy

Savii Digital Marketing Agency

Decentralized Machine Learning

Find Out More www.blockercon.com IS S U E 2

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Fireside i The off-grid startup technology festival 3-4 September 2019 | Near Bath Fireside Summit is the UK's first off-grid startup technology festival, taking place just 5 miles from the city of Bath on Tuesday 3rd & Wednesday 4th September, 2019.

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STUNNING NEW VENUE! TUESDAY 4TH - THURSDAY 6TH JUNE 2019 The Sansovino Hall, Bristol Harbourside Hotel, Bristol, UK www.blockercon.com

ATTENDEE DEMOGRAPHICS: 45% ENTERPRISE BUSINESSES 55% STARTUPS & SMES +50 COUNTRIES 60% CEOS & FOUNDERS 20% DIRECTORS & MANAGERS 200+ DEVELOPERS & PROGRAMMERS

New Expo area to showcase the latest Blockchain, Fintech and related technology. Interactive workshops and coaching sessions to help you start and scale your blockchain venture.