Blockchain, a vector of technological innovation – Invest.ch

Popularized by digital assets and sometimes compared to the emergence of the Internet, blockchain technology could revolutionize many sectors of activity. Charles-Edouard Bilbault returns to its key principles and concrete applications.

By Charles-Edouard Bilbault, International Equity Manager

How does blockchain technology work?

Blockchain technology can be compared to a ledger shared between all its users, allowing ownership to be determined and transactions to be carried out without recourse to a trusted intermediary. This database is based on three key principles: it is distributed, decentralized and immutable. Distributed, because operators are grouped in a network where each member has a copy of the entire register, which ensures data security and transparency. Decentralized because no central entity needs to certify the veracity and authenticity of the data added to the register. Immutable, because any new data, once validated by the consensus, is instantly added to each operator’s register and cannot be modified or deleted.

When was this technology developed?

This technology is based on asymmetric cryptography theories, that is to say, solutions for encoding and decrypting data from a private key. This concept dates from the 70s and constitutes the first branch on which the first scientific research efforts on the blockchain were based from the 90s. The democratization of this technology did not however take place until 2008 with the publication of the white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” and the ensuing craze for digital assets.

Are there multiple blockchains?

While some blockchains particularly stand out for their popularity and their multiple applications, such as the Ethereum or Solana networks, there is almost one blockchain per use case. This is one of the particularities of this technology and, in this, it differs from the Internet because it does not rely on a single infrastructure. Some blockchains will be more secure but with reduced speed, while others will focus on speed of execution or storage capacity. The possibilities are linked to the design. Similarly, there are different consensus algorithms, so not all blockchain technologies are linked to mining logic(1). This solution had been used for Bitcoin, since it was then one of the only consensus techniques known to be able to operate a decentralized model. The computing effort was then intended to ensure the security of the network.

How is this technology revolutionary?

Just as the Internet has revolutionized the exchange of information, the blockchain has the potential to revolutionize the exchange of values, the transfer of property while ensuring the security of transactions. This technology is destined to become the backbone of the next generation of digital infrastructures because it offers the possibility of simplifying complex value chains and can be deployed with the aim of optimizing processes and reducing costs.

It supports the development of fundamental technological trends, such as tokenization, which consists of merging physical assets with digital proof of ownership. The advent of “Web 3.0”, a decentralized version of the Internet intended to allow users to replace the large technological groups and to ensure the recovery of their digital identity, should also take place through this technology. Companies and institutions alike have been beginning to grasp the value of the blockchain for several years and are developing solutions for their own use or for their clients.

What are its concrete applications?

Companies in many sectors such as industry, health, agri-food or raw materials are investing in blockchain-based tools to improve their operational efficiency and ensure the traceability of their products, resources or carbon emissions. Supply chains also use it for logistics tracking, optimizing their carbon footprint or providing real-time audit trails. In the finance sector, the blockchain is revolutionizing money transfers, payment solutions as well as asset exchanges thanks to tokenization and opening up considerable avenues for fintechs. Insurers have been using it for nearly ten years through “smart contracts”, contracts whose execution is automated once previously defined clauses are fulfilled.

On the institutional side, central banks have already begun to implement strategies to substitute physical currencies called CBDC(2). These digital currencies make it possible to reduce intermediation costs, ensure better traceability of capital flows, develop financial inclusion, or even stimulate the economy in a targeted manner. More generally, blockchain technology can respond to all issues related to a question of flow management or property, whether physical or intellectual.

Have companies been led to develop their own blockchain?

Some companies have, in fact, developed their own blockchain. IBM, for example, relied on the open source(3) Hyperledger model to work with some of its customers. It is a private blockchain in which the members of the network and the operators dedicated to validating the blocks, the nodes, or even the operations, are selected. An internal corporate network can also operate entirely using blockchain technology. For their part, GAFAM(4) are invested at different levels of the value chain, whether it concerns cloud structuring activities, data storage, digital assets, or even payment systems.

The Nike group has acquired a French NFT(5) company called RTFKT to deploy certain brand products in a metaverse(6) universe. This marketing strategy demonstrates the company’s capacity for innovation and its ability to capture new customers. One can easily imagine that in a few years, the purchase of a product will allow the acquisition of an NFT which will have the advantage of not degrading over time. Its economic model could evolve since royalties are generally associated with NFTs. With each resale, part of the amount could thus be donated to him.

What prospects does this technology offer?

In the future, we can envisage that the blockchain ecosystem will foster the emergence of a new generation of companies that will have to rethink the value creation models and the service offer of many sectors. Investors are beginning to perceive the market opportunities associated with this theme, but it is not always easy to grasp its impact and its ability to disrupt the established order. The blockchain is, in fact, only a support for innovation. Players willing to find new applications for it should multiply over the coming years, especially as the technology itself will continue to develop.

International equity fund, R-co Thematic Blockchain Global Equity invests in companies for which blockchain is a vector of innovation and growth. Its management strategy is structured around five major investment themes. The result is multi-sector exposure, through “pure players(1)”or “traditional” players who have developed concrete blockchain applications. The fund is likely to be invested in all capitalization sizes, including in unlisted stocks, a source of opportunities and diversification.


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Blockchain, a vector of technological innovation – Invest.ch


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