blockchain Archives

KoreChain’s KoreProtocol: Safe & Compliant Management of Digital Securities

Tuesday March 5, 2024

Introduction to KoreChain Infrastructure

The KoreChain infrastructure provides a digital securities protocol for a permissioned blockchain that enables fully compliant securities transactions in multiple jurisdictions. The KoreProtocol is a specificaton for managing securities throughout their complete lifecycle phases, the main ones being issuance (birth), trading, corporate actions, and dissolution or exit.

The KoreProtocol has been specifically designed to handle financial securities. It is not a protocol for tokens or cryptocurrencies. It does not require mining by a decentralized community of unknown miners who must be incentivized to perform mining. The selection of Hyperledger Fabric as the base on which to build the KoreChain was dictated by the requirements of securities law, corporate law, and the need for flexibility and richness of securities transactions in the private capital markets.

Diverse Securities Types and the KoreProtocol

The KoreProtocol handles many types of securities, not just equity. It includes options, warrants, units, bonds, debentures, promissory notes, loans, SAFE, commercial paper, etc. All of these are represented as digital securities implemented in accordance with the specifications of the KoreProtocol and based on the underlying KoreContract, as designed in cooperation with securities lawyers.

Authorization Basis for Securities Transactions

Every securities transaction has a source that authorizes that transaction. The authorizing basis can be securities law, corporate law, offering documents, shareholders’ agreements, directors’ resolutions, voting results, or any contract. There can be more than one authorizing basis.

Example of Dividend Authorization

For example, a dividend payment derives its authorization from two documents: the shareholders’ agreement that contains a clause that the company may pay a dividend and a directors’ resolution that a specific dividend shall be paid.

KoreContract and Ricardian Contracts

Here is an example of a clause in a shareholders agreement stating the company’s dividend policy:

3.2.2. The Shareholders are entitled to the distribution of the profits of the Company for each Shareholder in proportion to the number of Shares that the Shareholder holds.

An accompanying directors resolution that declares dividends might be (ignoring preambles and other clauses):

NOW, THEREFORE, BE IT RESOLVED, that this corporation declares a dividend of $[Amount] per share of Common Stock to holders of record as of [Date], payable on [Date], subject to compliance with applicable provisions of law in [Jurisdiction(s)].

The KoreChain converts each authorizing document into a Ricardian contract, the KoreContract, which codifies deep references to clauses, variables, and data. The KoreContract is then digitally signed to make it tamper-evident. The term ‘contract’ is used here in the sense of legal contracts and not as ‘smart contracts’ (which, ironically, are neither smart nor true contracts). This implies that KoreContracts must be able to prove that they adhere to the legal doctrinal principles of contracts.

Transaction Integrity and Referential Integrity on KoreChain

The KoreProtocol, therefore, provides the functions to support a sound legal basis for KoreContracts to the extent that is possible in an electronic contract. Obviously, the structure and terms of a KoreContract are provided by the originating parties and their legal counsel; the ability of the KoreProtocol to prove the legal soundness of KoreContracts is dependent on the actual legal clauses and data within the contracts as well as the accuracy and integrity of subsequent transactions.

All securities transactions include references to the associated authorizing documents, parties involved in the transaction, and regulatory filings where required. The diagram to the right shows how immutable referential integrity is achieved on the KoreChain.

Continuing the above example, a dividend payment is not one simple transaction. It contains a number of sub-transactions such as board of directors’ approval of the dividend payout, notification of dividend payment to the company’s transfer agent, disbursement of funds from the company account to transfer agent’s account (with references to the wire or other means of money transfer), and for each shareholder, validation that they are a shareholder of record as of the record date as stipulated in the directors resolution, computation of dividend, confirmation of money transfer to shareholder’s account, and record of acknowledgment if any.

Finally, the company is notified of the completion of dividend payments. Since the KoreConX platform is fully integrated, the company’s dashboard as well as the individual dashboards of each shareholder are updated in real time.

Each of these sub-transactions as well as the full transaction (which may be thought of as a ‘use case’) contain immutable references to immutable and authorizing documents. The KoreProtocol provides for numerous use cases and the complex transactions that implement those use cases.

Use Cases for Financial Instruments

Below, we identify the major use cases for some of these financial instruments.

For equity securities, the main use cases include (details here):

Issuance
Trading (incl. trading restrictions)
Transfers
Exercise of rights
Financial participation
Corporate actions (such as AGM, M&A, exits, etc.)
External actions (such as regulatory actions)

Other securities also have their own collection of use cases.

Options and warrants

Options and warrants are equity derivative instruments. Use cases of options include granting, vesting, acceleration, exercise, and conversion. Warrants are similar to options, except that they are usually issued in a financing transaction to brokers or investors while options are generally issued to staff, advisors or consultants. While their use cases are slightly different, warrants and options transactions will be quite similar.

Debt securities

Debt securities are more varied and include bonds, debentures, promissory notes, loans, SAFE, and commercial paper. Each of these have similar use cases, such as issuance or grant, potential trading on a secondary market, and finally exercise through payout or conversion to equity at a pre-defined ratio or premium to the price of equity at the time of the grant.

Bonds and debentures are both debt instruments used by companies that wish to raise money without the dilution of issuing stock in the company. Most commonly and in the US, bonds generally refer to debt secured against specific assets while debentures are generally unsecured debt (and therefore carry higher interest). From the perspective of securities transactions, bonds and debentures are issued (or granted) and exercised upon maturity. The treatment of interest payments (installments or lump sum) or redemption of face value of the instrument (as in the case of a zero coupon bond) varies based on the terms of issuance. Further, issuers may issue bonds and debentures that are convertible to equity. These instruments may potentially trade on secondary markets.

Included in the arsenal of debt securities are promissory notes, loans, and commercial paper. All these differ from each other and from bonds and debentures in the level of formality, well-known and defined terms and conditions, and the nature of risk. Commercial Paper is a short-term debt security, with a maturity period that does not exceed 270 days. Commercial paper can be rolled over upon maturity. These debt securities can also have convertible components, making them convertible into equity using defined conversion rates and under various terms and conditions.

SAFE stands for Simple Agreement for Future Equity, designed to replace convertible notes while being compliant with securities regulation. It is similar to a warrant, except that it does not specify a price for the shares. It is also not a traditional debt security, since no interest payments are provided. Conversion to equity happens based on pre-defined events such as future investment rounds.

The KoreProtocol for Capital Raising and Securities Management

Raising capital is a complicated process. It requires a sound understanding of the various avenues open to issuers in both equity and debt. Raising capital is also not a one-time event. Any serious startup should plan for multiple rounds, where each round could focus on one type of capital or even a combination of them.

Each of these types of securities impacts the captable in different ways during issuance, transfer, trading, payments, exercise, conversion, and redemption.

The KoreConX all-in-one platform deals with the changes to the captable, while the KoreChain creates immutable records of these transactions. The value of the KoreChain lies in the independent validation of these transactions and their results by nodes that are parties to these transactions, have subject matter expertise, or have fiduciary responsibilities to the parties to these transactions.

The results are available on the DLT for future reference, verification, auditing, and reporting.

Conclusion: Comprehensive Management of Securities Lifecycle

The KoreProtocol is designed to handle the complex use cases of capital raise and the numerous sub-transactions that implement these use cases, while remaining compliant with securities regulation in multiple jurisdictions. It is important to note that the KoreProtocol is not restricted to just the issuance or even just the trading of these securities.

In fact, the KoreProtocol handles the complete lifecycle of the various types of securities. It provides for the effects of corporate actions, regulatory actions, and other external events (such as, for example, temporary halt on trading by a secondary market operator due to extraordinary circumstances).

At a deeply granular level, the KoreProtocol ensures immutable referential integrity to satisfy transparency and audibility.

What are digital assets?

Thursday January 25, 2024

In the ever-evolving landscape of finance and technology, digital assets have emerged as a transformative force, reshaping how we perceive and manage ownership and value. Digital assets represent a broad category of assets that are digitized and stored on blockchain technology, providing unprecedented security, transparency, and accessibility.

Keep reading and learn more.

What Are Digital Assets?
5 Examples That You Need to Know
Digital Assets and Blockchain: How Do They Work?
The Difference Between Crypto and Digital Assets
Types of Digital Assets in the Blockchain Ecosystem
Impact on Private Capital Markets
Final Insights

What Are Digital Assets?

Digital assets, in essence, are assets that exist in a digital form, represented and secured by cryptographic technology, often on a blockchain. These assets can represent various forms of value, including ownership, rights, or entitlements to physical or digital assets. Digital assets are versatile and can encompass a wide range of items, from financial instruments to intellectual property and more.

5 examples that you need to know

The table below categorizes and describes various types, such as Cryptocurrencies, Security Tokens, NFTs, and others, providing a clear and concise overview of this dynamic field.

Asset	Description
Cryptocurrencies	Cryptocurrencies like Bitcoin and Ethereum are perhaps the most well-known digital assets. They represent units of value and are used as a medium of exchange on their respective blockchains.
Security Tokens	These represent ownership in traditional financial instruments, such as stocks, bonds, or real estate, and are often subject to regulatory oversight.
Non-Fungible Tokens (NFTs)	NFTs are unique digital assets that represent ownership of one-of-a-kind items, such as digital art, collectibles, or even virtual real estate.
Utility Tokens	Utility Tokens grant holders access to specific functions or services within a blockchain ecosystem, like accessing a platform’s features or participating in a network’s governance.
Digital Securities	These are tokenized versions of traditional securities, such as stocks or bonds, that offer enhanced liquidity and automation of regulatory compliance.

Digital Assets and Blockchain: How Do They Work?

Blockchain technology is at the heart of this kind of asset. A blockchain is a decentralized, immutable ledger that records transactions across a network of computers. Digital assets are created and managed through smart contracts, which are self-executing agreements with predefined rules and conditions.

When a digital asset is created, it is assigned a unique identifier on the blockchain. Transactions involving the asset are recorded in blocks, which are added to the chain in chronological order. This ledger is distributed across the network, making it highly secure and resistant to tampering. All participants can verify transactions, ensuring transparency and trust in the system.

The Difference Between Crypto and Digital Assets

While the terms “crypto” and “digital assets” are sometimes used interchangeably, there is a distinction between them:

Cryptocurrency: Cryptocurrencies, like Bitcoin or Litecoin, are a subset of digital assets. They are primarily used as a medium of exchange or store of value, aiming to replace or complement traditional currencies. Cryptocurrencies focus on monetary use cases.
Digital Assets: Digital assets encompass a broader range of tokens that represent ownership, rights, or value. They include security tokens, NFTs, utility tokens, and digital securities, among others. It serves various purposes beyond being a medium of exchange.

Types of Digital Assets in the Blockchain Ecosystem

The blockchain ecosystem is teeming with diverse digital assets, each with its unique characteristics and use cases. Here are some key types:

Cryptocurrencies: As mentioned earlier, cryptocurrencies are digital assets designed for use as a digital currency. They facilitate peer-to-peer transactions, providing a decentralized and borderless means of transferring value.

Security Tokens: represent ownership in real-world assets such as stocks, bonds, or real estate. Security tokens are subject to regulatory compliance and are aimed at digitizing traditional financial instruments.

Utility Tokens: Utility tokens grant access to specific functions or services within a blockchain ecosystem. They are often used to pay for platform services, access features, or participate in governance.

Non-Fungible Tokens (NFTs): NFTs are unique and indivisible, representing ownership of a specific item or piece of content. They have gained popularity in the art, entertainment, and gaming industries.

Digital Securities: Digital securities are tokenized versions of traditional securities like stocks and bonds. They offer increased liquidity, automation of regulatory compliance, and the potential to streamline capital markets.

Impact on Private Capital Markets

Now that we have a better understanding of the area, we can delve deeper into their landscape. It is revolutionizing the private capital markets in significant ways.

Let’s check more details:

Enhanced Transparency: Blockchain technology ensures transparent and immutable records of ownership and transactions. This transparency builds trust among investors and stakeholders.

Liquidity and Accessibility: The tokenization of private assets through digital securities enables fractional ownership, reducing investment barriers and increasing liquidity.

Automated Compliance: Smart contracts embedded in digital securities can automate compliance with SEC regulations, reducing administrative burden and ensuring adherence to legal requirements.

Reduced Intermediaries: By eliminating intermediaries and streamlining processes, they lower transaction costs and reduce friction in private capital markets.

Global Reach: These kinds of assets are accessible to a global audience, expanding opportunities for fundraising and investment beyond traditional geographic boundaries.

Fractional Ownership: Investors can purchase fractions of high-value assets, enabling diversified portfolios and increased participation.

Final insights

Digital assets, powered by blockchain technology, are poised to disrupt and revitalize private capital markets. They offer transparency, accessibility, and compliance, making it easier for companies to engage in fundraising and investors to access previously illiquid assets.

Also, they represent a transformative force that will reshape how we perceive, trade, and invest in assets.

Although, to fully reap these benefits, is important to partner with trustworthy platforms. Ensuring that operations adhere to regulations, along with transparent policies on data management, usage, and privacy, is key to protecting your business and investments.

As the financial landscape continues to evolve, understanding the potential of digital assets is paramount for businesses and investors alike.

It’s definitely a new era in private capital markets, but trust remains a highly valuable asset.

What are securities in blockchain?

Tuesday January 23, 2024

What are securities in Blockchain?

Securities, in the traditional sense, represent various financial instruments such as stocks, bonds, and derivatives that signify ownership, equity, or rights in an underlying asset or entity. In the context of blockchain, securities are digital tokens or smart contracts that represent ownership, equity, or other financial interests in a real-world asset or company. These tokens are securely recorded on a blockchain, providing immutable records of ownership and enabling efficient and transparent trading.

Transparency: A Game-Changer

One of the primary benefits of using blockchain technology for securities lies in its transparency. Unlike traditional financial systems, where transactions are often opaque and intermediaries are numerous, blockchain offers a transparent ledger where every transaction is recorded and visible to authorized parties.

This transparency fosters trust among stakeholders, reduces the risk of fraud, and enhances the overall integrity of the private capital markets.

Democratizing Finance with Blockchain

In the world of finance, private capital markets play a pivotal role in shaping investment opportunities, fostering economic growth, and providing innovative financing solutions. However, the complex nature of private capital markets has often led to inefficiencies, lack of transparency, and limited access for investors.

Enter blockchain technology, which has the potential to revolutionize these markets by offering transparency, trust, and enhanced efficiency. In this blog, we will explore the concept of securities in the blockchain, the differences between private and public chains, and why private blockchains are particularly well-suited for the private capital markets, catering specifically to CEOs, CFOs, and board directors without delving into technical jargon.

Differences Between Private and Public Chains

When we talk about securities in blockhain is interesting to deep the knowledge about the technology, keep reading and learn about these important topics.

Blockchain networks can be categorized into two main types: public and private chains. Each has its own set of characteristics and use cases.

➨ Public Blockchains: Public blockchains, like Bitcoin and Ethereum, are open and permissionless networks. They are maintained by a decentralized community of participants, and anyone can join, validate transactions, and access the ledger. While they offer a high degree of security and decentralization, public blockchains may not be suitable for private capital markets due to their lack of privacy and scalability. Transactions on public chains are visible to anyone, making them unsuitable for sensitive financial information.

➨ Private Blockchains: On the other hand, private blockchains are closed and permissioned networks. They are typically used by organizations, consortia, or groups of trusted parties who have control over access and participation. Private blockchains offer higher privacy, scalability, and customization options, making them ideal for private capital markets. Transactions and data are kept confidential among participants, ensuring the security of sensitive financial information.

Why private blockchains are better for private capital markets

Now we know what are securities in blockchain, let’s take a closer look at other aspects.

Private capital markets are characterized by complex transactions, stringent regulatory requirements, and the need for confidentiality. Here’s why private blockchains are particularly well-suited for these markets:

Enhanced Privacy: Private blockchains offer a controlled environment where sensitive financial data can be securely shared among authorized parties while remaining hidden from the public. This level of privacy is crucial for protecting the interests of both issuers and investors.

Customized Governance: Private blockchains allow organizations to tailor the governance structure according to their specific needs and regulatory requirements. This flexibility enables efficient compliance management and regulatory reporting.

Scalability: As private capital markets involve a relatively lower number of participants compared to public markets, private blockchains can offer greater scalability without compromising performance.

Reduced Costs: By streamlining processes and reducing the need for intermediaries, private blockchains can lower transaction costs, making private capital markets more accessible to a wider range of investors.

Faster Settlements: Blockchain technology enables real-time settlement and automated execution of smart contracts, reducing settlement times and the risk of errors.

Securities in blockchain: highlights about trust

The adoption of private blockchains in private capital markets brings a level of trust and transparency that has been sorely lacking in traditional systems. Here’s how private blockchains instill trust among investors and stakeholders:

Benefit	Description
Immutable Records	Transactions recorded on a private blockchain are tamper-proof, ensuring that once a transaction is confirmed, it cannot be altered. This immutability provides confidence in the accuracy of ownership records.
Transparency for Authorized Parties	While private blockchains maintain confidentiality, they provide transparency to authorized participants, allowing them to verify ownership, track transactions, and ensure compliance with regulations.
Reduced Counterparty Risk	Blockchain technology eliminates counterparty risk by enabling automated smart contracts that execute predefined terms when conditions are met. This reduces the risk of disputes and defaults.
Improved Due Diligence	Investors can conduct more efficient due diligence processes by accessing real-time, transparent information on assets and transactions, reducing uncertainty and enhancing trust.

Trustworthiness in blockchain solutions

As we know, blockchain technology has the potential to revolutionize many industries, offering benefits such as security, transparency, and efficiency. However, it is important to choose a company that offers reliable and secure solutions.

Trust is a valuable asset in any relationship, especially when operations involve your business, investors, and private capital markets. When choosing a blockchain company, it is important to consider factors like:

Clarity and transparency: The company should be clear and transparent in its actions, from the first contact to the signing of the contract. It should provide complete information about its services, pricing, and terms of use.
Reputation: It is important to check the company’s reputation before doing business with it. Do some online research, read customer reviews, and consult with experts.
Compliance: The company should be in compliance with applicable laws and regulations. This is important to ensure the security and reliability of its solutions.

3 tips that can save your life when working with securities in blockchain

As you see in the past section, verifying the trustworthiness of a blockchain company is an essential topic for those who work with securities in blockchain and private capital markets. Now let’s check 3 practical tips that can help a lot when you’re looking for a blockchain company.

1. Read the contract carefully: The contract should be clear and concise, and should specify the rights and obligations of both parties.

2. Request references: Ask for references from the company’s previous customers.

3. Ask questions: Do not hesitate to ask the company questions about its services and processes.

Examples of questions you can ask:

📣 How does the company ensure the security of its solutions?

📣 How does the company handle security incidents?

📣 How does the company comply with applicable laws and regulations?

By asking these questions, you can gain a better understanding of the company’s resources and processes, and make a more informed decision about whether it is the right one for you.

Future of blockchain and its impact on investments

The adoption of blockchain technology in private capital markets has the potential to revolutionize the way securities are managed, traded, and accessed. Private blockchains, with their emphasis on privacy, scalability, and customized governance, provide a robust solution for enhancing transparency and trust in these markets.

As CEOs, CFOs, and board directors, embracing this technology can empower your organizations to operate more efficiently, comply with regulations, and attract a wider pool of investors, all while instilling trust in the private capital markets of the future.

By understanding the power of securities in blockchain and the advantages of private chains, you can position your organization for success in this evolving landscape.

What are the private capital markets in business

Wednesday January 10, 2024

Beyond the familiar world of financial headlines, a vast network of private companies fuels global growth. In this context, many people are researching the subject to understand What are the private capital markets in business.

Firstly, the private capital markets, operates under different rules and holds potential for investors and businesses alike. In today’s post, we’ll explore practical aspects regarding the inner workings of this hidden ecosystem, its challenges, and its future.

What are private capital markets in business

If you’re looking about What are private capital markets in business, there’s a simple way to explain it. Basically, the private capital markets are a field of the financial system where investors provide funding to privately held companies, i.e. those not listed on public stock exchanges.

These companies can vary from start-ups to more established companies seeking to expand or restructure.

With its particularities and own regulations, the private capital markets are and dynamic ecosystem that plays an important role in the world economy. In the next section, we’ll talk more about this, contextualizing with public markets.

Public vs private markets

The financial world is broadly divided into two segments. Both segments contribute approximately 50% of the world’s GDP. That’s where the similarities end. These two segments are the public and private financial markets, and they are vastly different.

The public markets generate 95% of the noise and the news. They are generally very efficient, fluid, and well-served by technology. These are the financial institutions and companies that we read about and see daily on TV. As of May, 2022, there are approximately 58,500 publicly listed companies on the planet. In all, these companies have a market capitalization of about $90 trillion.

Public companies have been increasingly going private for over a decade, fueled by the costs of keeping a public profile and the requirements of Dodd-Frank and Basel III. A larger proportion of public capital is in the form of debt, with many companies implementing aggressive share buyback programs. This has also decreased the secondary market liquidity, while the illusion of liquidity is maintained by the approximately 70% of trades generated by algorithmic trading. The retail investor is increasingly underserverd in the public markets.

Compare all this with the approximately 285 million private companies, of which private equity invests barely $9 trillion. However, the trend is rapidly changing. Since 2009, more capital raising has been done by private companies than by public companies, sometimes by a factor of 2.

Insights on private capital markets

What is especially interesting about the rise of private markets is that the trend is changing despite the private markets not having any unifying central authority or even a regulatory consortium. Private markets are significantly underserved by technology. For many participants in the private markets, technology means moving from a physical Rolodex to an electronic one (mostly, a spreadsheet).

Traditional banks have evolved into institutions that make it easy to collect retail savings and funnel them into institutional investment firms or lending back to retail or SME customers. There has been no infrastructure for retail private investments or private capital raising over the last couple of hundred years. For this reason, the private markets remain fractured and fragmented. The participants include broker-dealers, CPAs, law firms, funding platforms, auditors, transfer agents, and various auxiliary service providers (such as for KYC screening, custody, escrow, payment processing, etc.). All of these participants exist to connect private companies seeking to raise capital with private retail investors.

Attitudinally, private market participants want to remain private. They want to retain their individual branding and serve their communities and niche markets. However, they see the potential for tapping into the wider retail market, even internationally. The challenge remains how to do it efficiently.

On the public side of the market, it is easy to conduct trades after the accounts have been set up with brokerages. Anyone with a smartphone can place a trade for a publicly listed company and get a trade confirmation within seconds (assuming high liquidity and that the markets are open). A similar trade with private shares takes several weeks.

Final thoughts

From all this, we can see that the private markets are on the rise and, with supportive forward-thinking legislation such as the JOBS Act, opening up participation by the retail investors in a much more direct way. Private markets are not only here to stay but increasingly becoming more democratized.

What is missing is an efficient infrastructure of trust. That is a topic for another blog.

AI and Blockchain: Divergence at the Entropic Boundary

Wednesday August 2, 2023

To begin our journey on AI and Blockchain, let’s look up into the night sky.

If in this nocturne period, you look in the direction of the constellation Ophiuchus, you won’t see the nearest (as of this date) black hole called Gaia BH1 (aka Gaia DR3 4373465352415301632), which is a mere 1560 light years away (i.e., practically in our backyard). If you get to within 17 kms from it (please don’t try this at home), no power in the universe can save you from its clutches. This point of no return is called the Scwharzschild radius. From our human perspective, that’s nothing to worry about.

Now, look up 38.8987° N latitude, 77.0056° West longitude on the third rock from the sun in the Milky Way galaxy. There, you will find another black hole called the SEC (Securities Exchange Commission). Its physical Schwarzschild radius is not really a “radius”, but its physical event horizon (another name for the S radius) is the U.S.A, while its virtual event horizon is the planet Earth (i.e., there’s no escape!). From our private capital markets perspective, this is definitely something to worry about.

Blockchain and SEC

Public blockchains in the financial markets today have one leg within the SEC’s event horizon while, with the other leg, they are trying very hard to escape its clutches. Any guesses who is going to win this tug of war? The SEC has far more resources and staying power than the advocates of the public blockchains. The SEC’s event horizon is the JOBS Act and securities regulation in general.

Now, imagine a bright blue luminous star. Stars don’t have the equivalent of a “clutching” boundary like a black hole does (you can thank Newton for that). But, there is a boundary beyond which there isn’t enough energy or influence to sustain life. Think of it as an “entropic boundary”. Beyond that boundary, there are no laws, no order, no life, just a frigid waste. Inside the entropic boundary and way closer to the star is the hot crucible of innovative hype that can destroy wealth, demolish dreams, and diminish hope.

It is only at or close to the entropic boundary that responsible and game-changing innovation is to be found. The public blockchains were spawned far outside the entropic boundary of investor-centric responsible innovation, out in the dark, frigid, lawless, and wild space, wandering dangerously close to the SEC’s event horizon.

Beyond Decentralization: AI and responsability

At KoreChain, we believe in the power of a distributed ledger and subscribe to the benefits of decentralized data and processing. But, we stop far short of decentralizing intelligence and common sense. Unconditional freedom is the hunting ground of crooks and free-loaders.

Surprisingly, artificial intelligence (AI) has had a much more responsible evolutionary path. For decades, AI could only be found in the halls of academia. With increasing computational power and availability of massive amounts of transactional data, AI found another home in the corporate world. Because the corporate world values monetization over privacy and ownership of data, it was inevitable that AI stepped over the entropic boundary. With the dramatic Cambrian explosion of large language models (LLMs) such as ChatGPT and hundreds of other AI tools (numbering at the present time to over 100 and rapidly growing), AI clearly broke free of the protective fence of the entropic boundary.

Watch in the evolution of AI and Blockchain: Insights and Considerations

On the other side of the entropic boundary there are dangerous black holes lying in wait for the unwary users of AI (let’s call these the ‘dark’ holes to distinguish them from the blameless astronomical black holes). Some of these dark holes are independent criminal organizations and terrorists, others are state-sponsored hackers, yet others are the misanthropes and misfits whose motives are death, desolation, and destruction. Like black holes, you can’t spot them easily.

The difference between these dark holes and the SEC is that the dark holes are out to catch the good guys while the SEC tries to catch the bad guys. Unfortunately for us, there is no equivalent of the SEC in the AI world. I doubt there will ever be one. Putting any guardrails around AI at this point in time is like smoking a cigar outside in a hurricane and trying to stuff the cigar smoke back into the cigar. Any bets on how this will play out?

At KoreChain, we focus exclusively on using AI for good within the strictly defined universe of the global private markets. We use AI to help, to protect, and to guide. The KoreChain empowers the convergence of AI and blockchain around the right side of the entropic boundary.

The Relationship Between Cryptocurrency and Blockchain

Thursday June 8, 2023

The relationship between blockchain and cryptocurrency has been an area of increasing interest over the past few years. For those looking to use cryptocurrency or blockchain technology to transfer, store, and track data, understanding the differences between the two technologies is essential. Though they are related in many ways, blockchain and cryptocurrency should not be confused with one another as they are different. Knowing how to leverage each technology can help individuals make better use of these assets while avoiding pitfalls associated with a lack of knowledge. Those looking to invest in cryptocurrency or leverage blockchain should take the time to learn and understand the nuances of both technologies so that they can make informed decisions when it comes to utilizing these digital assets.

Cryptocurrency: Definition and Use Cases

Cryptocurrency refers to a type of digital asset designed to be used as a medium of exchange, a store of value, and a unit of measure. It is usually underpinned by blockchain technology, the use of advanced cryptography techniques for securing online transactions, and can exist either as a centralized token (one with a centralized issuer such as Bitcoin or Ether) or decentralized tokens (without a single issuer such as Libra or Ripple).

Cryptocurrency is gaining traction around the world, with its use cases ranging from being used to buy goods and services to savings and investments, to trading and speculation. Cryptocurrency is also being utilized in areas of financial inclusion, such as providing access to banking services and other financial products to those who lack traditional banking accounts.

Blockchain Technology: Definition and Use Cases

Blockchain is the underlying technology powering cryptocurrency transactions. It is a secure, tamper-proof, decentralized ledger system that allows for peer-to-peer transactions without the need for a middleman. It is also highly secure, as blockchain technology doesn’t rely on a single central authority or server to control and monitor its operations. Instead, it relies on a distributed network of computers to verify and validate the transactions that take place.

This technology is finding its use cases in many industries outside of cryptocurrency, such as healthcare, supply chain management, and real estate. For example, blockchain can help increase transparency and trust in these sectors by providing immutable records of all transactions securely stored across multiple nodes in a network. Such records can then be used to trace the source of a product, helping to ensure that it is authentic and untampered with.

Still, the relationship between blockchain and cryptocurrency does not end there. Cryptocurrency is actually one of the earliest use cases for blockchain, with Bitcoin being the first digital asset to take advantage of this technology in 2009. To this day, blockchain remains a key technology underlying most cryptocurrency transactions, allowing them to be securely transferred while avoiding double-spending and other fraudulent activities.

The Relationship Between Cryptocurrency and Blockchain: Similarities and Differences

While the two are not the same, blockchain and cryptocurrency do share some similarities. Both are digital assets, designed to be used as mediums of exchange and units of measure. They also both use cryptography for secure online transactions. However, there are notable differences such as blockchain being a distributed ledger system that is used to securely store and transfer data, while cryptocurrency is a digital asset designed to be used as a medium of exchange.

The relationship between blockchain and cryptocurrency is not always easy to understand. Though they share some similarities, they are two distinct technologies with different use cases. Blockchain is the underlying technology that supports cryptocurrency transactions, while cryptocurrency itself is a digital asset designed to be used as a medium of exchange and unit of measure. By understanding their differences, businesses and individuals can make more informed decisions when it comes to utilizing these digital assets.

The Origins of Blockchain

Tuesday June 6, 2023

It’s been a little over a decade since Blockchain technology was first introduced, but it’s already revolutionizing the way we do business. By eliminating the need for a central authority in transactions, Blockchain enables secure and tamper-proof data exchanges between parties. This has allowed companies to improve productivity, reduce costs, and ensure accuracy in payments or copyright verification. Let’s explore how the Blockchain came to be.

A Brief History

1979: Ralph Merkle, a computer scientist and Stanford University Ph.D. student, described a public key distribution and digital signatures in his doctoral thesis, an idea he eventually patented. This came to be known as the Merkle tree.
1982: David Chaum, a Ph.D. student at the Univerity of California, Berkeley, described a system for maintaining and trusting computer systems.
1991: Stuart Haber and W. Scott Stornetta proposed a cryptographically secured chain of blocks that would enable timestamping of documents, then proceeded to upgrade their system the following year to incorporate Merkle trees for more efficient document collection.
2008: Someone under the pseudonym Satoshi Nakamoto conceptualized the first Blockchain, from which the technology has evolved and found its way into many applications, from cryptocurrencies to others.
2009: Satoshi Nakamoto released the first whitepaper about Blockchain technology and Bitcoin, detailing how it was well equipped to enhance digital trust due to its decentralization aspect.
2009: The first Bitcoin block was mined by Nakamoto, validating the blockchain concept.
2011: Litecoin is released, becoming the second-ever cryptocurrency to be based on Blockchain technology.
2013: Ethereum launches, introducing a whole new concept of smart contracts and dApps, ushering in the era of Blockchain 2.0.
2015: The world’s first Blockchain-based stock exchange is launched in Estonia.
2016: Hyperledger project begins to take shape with IBM leading the charge for private enterprises to adopt Blockchain technology for internal use.
2017: Bitcoin experiences a monumental rise in price as the cryptocurrency market cap surpasses $100 billion.
2022: KoreChain first to be qualified by the SEC for the issuance of a private offering under RegA+ (JOBS Act) Regulation

The Benefits of Blockchain

Blockchain technology has a lot to offer from scalability and cost savings. Here’s how it’s been adopted in various sectors over the last decade:

Decentralization: A significant benefit of Blockchain technology is its ability to remove the need for a third-party authority. This means that transactions can be carried out securely with much faster processing times and lower costs. Utilizing Blockchain technology for payments and data storage ensures that the exchange of information is accurate, secure, and immutable.

Energy: Blockchain is being used to create decentralized energy systems that enable users to buy and sell electricity directly with each other without relying on any central authority. This helps reduce costs while providing more transparent financial transactions.

Finance: Banks, payment companies, and other financial institutions are embracing Blockchain technology to reduce costs while increasing the speed of transactions. Blockchain is also being used to enhance security in stock exchanges by providing an immutable ledger to track ownership of stocks and bonds.

Media & Entertainment: Companies like Spotify and Facebook are leveraging blockchain technology to explore emerging trends like NFTs.

Supply Chain Management: By eliminating intermediaries, Blockchain technology makes it easier to track shipments and trace products in the supply chain. This not only enhances transparency but also reduces costs while improving customer service.

Healthcare: Blockchain technology can play a significant role in streamlining the healthcare industry by providing an immutable ledger to store and share patient records. This will help reduce costs and improve security as sensitive health data is securely stored on the Blockchain.

Blockchain technology has come a long way since its introduction over 10 years ago. What started as a revolutionary concept for cryptocurrency has now been widely adopted across various industries. The possibilities are endless and the future looks bright for Blockchain technology. With its scalability, cost savings, transparency, and security advancements, Blockchain is set to revolutionize many aspects of our lives in the years ahead.

What is Blockchain? Expert insights and definition

Thursday December 8, 2022

The simplest and most simplistic definition of a blockchain is that it is a chain of blocks. That’s somewhat like calling a naval destroyer a big boat. This simple definition belies the tremendous power of blockchain to transform whole industries. What gives the blockchain the power? Why do we need it? What caused it to engage the public imagination? Why is it so polarizing? Let’s explore this idea a bit.

From a technical perspective, a blockchain is a list of blocks linked to each other, where each block contains a number of transactions. This is where the story gets interesting. The transaction data is immutably locked using cryptographic methods. It is virtually impossible to modify the data without incurring tremendous expense or collusion between the participants.

There is more to it than that – the blockchain is not just an immutable database. It is also a processing powerhouse. Smart contracts drive the verification of participants and the validation of transactions through a consensus mechanism before cryptographically locking the transaction data into immutable records. Moreover, smart contracts can perform many types of processing tasks just like any computer code, but with the difference that the parties to the transaction and other responsible parties must agree and approve the processing steps. This agreement and approval, formally called consensus, is a powerful concept. We will see why shortly.

There are two types of blockchains, broadly speaking: public and permissioned. In a public blockchain, anyone can participate. The classic examples are Bitcoin and Ethereum. In a permissioned blockchain, those who want to participate must obtain permission. Permissioned blockchains are more appropriate for business use or for those applications where the participants are subject to regulatory oversight. Examples of permissioned chains include Hyperledger Fabric, Corda, and Quorum.

All blockchains have three important components: cryptography, distributed systems, and consensus. Cryptographic methods are vital for storing data securely. Distributed systems technology is essential for processing data and transactions across a widely distributed and loosely coupled group of participants. Finally, consensus ensures that only data and processing that is accepted by the majority of the stakeholders is immutably recorded on the chain.

Bitcoin is the first and most widely recognized application of blockchain technology, but is only an application built on blockchain; Bitcoin is not synonymous with blockchain. There are many other applications built on both public and permissioned blockchains.

To understand the business appeal of blockhcain, consider the simple paper-based ledger. Many decades ago, I had the good fortune of training under an auditor. My task was to examine double-entry accounting ledgers and certify their accuracy. On every page of a ledger there were a bunch of transactions (debits and credits). The column totals were recorded at the bottom, signed by the accounting assistant, and countersigned by the accounting supervisor. These debit and credit totals were carried forward to the top of the next page. New accounting entries were added to the next page. When that page was full, the debit and credit totals (which included the totals from the previous page) were recorded at the bottom of that page. And so on.

If the company that we were auditing wanted to fudge the numbers on one of the accounting entries, it would be practically impossible to do it in an undetectable way (all entries were made in ink). Suppose a crooked accountant managed to do it, they would then have to re-compute the debit and credit totals at the bottom of that page, change the brought-forward totals at the top of the next page, recompute and change the totals at the bottom of the next page, and so on. Tearing out an entire page of entries would also be easily detectable in a paper-based ledger since the method of binding the pages would make it very difficult to tear out the pages in an detectable way. Besides, the page numbers wouldn’t match.

In short, the paper-based ledger was practically fool-proof. Crooked companies found it easier to just maintain two ledgers, one for the auditors and one for the “real” transactions.

When computers and databases became widespread, the paper-based accounting system gave way to an electronic ledger. While system safeguards are built into electronic ledgers, it was much easier to make alterations in the database through “backdoor traps” and by people who had direct access to the systems.

Blockchain technology changed all that. It combined the efficiency of modern computer technology with the fool-proof nature of paper-based ledgers, but in a much more sophisticated way. The whole blockchain (viewing it as a database) is the ledger itself. Blocks that make up the blockchain are like the pages of a paper-based ledger. The blocks are linked together through cryptographic links, similar to the page numbers of a paper-based ledger. Each block records a number of transactions (similar to the rows of accounting entries in a paper-based ledger). Transactions inside each block are cryptographically bound together using sophisticated mechanisms such as Merkle trees.

The analogy to a paper-based ledger makes it easy to understand why blockchains are much more secure than just regular databases. The story gets better: paper-based ledgers, while reasonably secure from tampering, suffer from two disadvantages: they can be destroyed in a fire or stolen, and they represent the “truth” only from the viewpoint of the company that owns the ledger. The counterparties to each transaction (for every debit there is a counterparty creditor, and vice versa) may not agree with the recorded numbers. This raises the thorny problem of reconciliation. Companies spend enormous amounts of time and money performing reconciliation and settlements.

To overcome these two disadvantages, imagine if the ledger has multiple copies stored with distributed parties. Moreover, every block (“page”) of transactions are replicated in real-time. This makes it a real-time distributed ledger. Finally, assume that entries in the ledger can be made only when both (or all, or a majority of) parties agree that the numbers are correct. This is an agreement by consensus, which avoids post-facto reconciliation.

This is why a blockchain is also called a distributed ledger. The benefits are enormous: instant reconciliation, settlement, immutability, multiple copies, and agreement by consensus.

This is only scratching the surface of the benefits of a blockchain. There’s more, with smart contracts that perform distributed processing, removing some of the inefficiencies of intermediary processing. Blockchain technology is really a combination of distributed data and distributed processing. These fundamental capabilities enable many fascinating applications that are not possible through traditional and legacy technologies. More on that later!