IBM’s Food Trust Blockchain Adds Another Grocery Chain

International Business Machines (NYSE:IBM) sees potential in blockchain, the distributed ledger technology that underlies cryptocurrencies like …

International Business Machines(NYSE:IBM) sees potential in blockchain, the distributed ledger technology that underlies cryptocurrencies like bitcoin. The century-old tech giant is a leader in the blockchain market, with over 500 client engagements so far. Notable projects include IBM Blockchain World Wire, a platform for cross-border payments, and TradeLens, a blockchain system for the global shipping industry.

Another notable IBM blockchain project is Food Trust, a platform that enables quick tracking of food from farm to store. Tracking the source of a contamination, like recent E. coli outbreaks associated with romaine lettuce, can often take days or even weeks. IBM Food Trust can bring that time down to seconds, reducing costs for the industry while potentially saving lives.

A woman in a room full of plants.

Image source: IBM.

Growing the network

IBM Food Trust began as a pilot project with multiple food companies in 2017. In September of 2018, megaretailer Walmartfully embraced the platform, setting a timeline for its leafy-greens suppliers to join IBM Food Trust and enable end-to-end traceability. IBM Food Trust was made generally available in October, and a few more big companies joined the network. Most notably, French retailer Carrefour uses IBM Food Trust for some of its private-label products.

With Walmart jumping on board, it was only a matter of time before other supermarket chains followed suit. This morning, IBM announced that Albertsons Companies, a privately owned chain of roughly 2,300 stores, would begin piloting Food Trust for tracing bulk romaine lettuce from one of its distribution centers. If all goes well, Albertsons will explore expanding to other food categories.

Food Trust creates digital records of transactions and interactions. These records may include packaging dates, temperature readings, and dates of arrival at a grocery store. The goal is to turn the inefficient process of tracking down where a foodborne illness originated into an efficient, digitized process that can take contaminated products out of circulation quickly. The system can also help reduce food waste and food fraud (the deliberate tampering with or misrepresentation of food).

Albertsons sees Food Trust as a way to build trust in its own brands while providing greater transparency for its customers. “Blockchain technology has the potential to be transformational for us as we further build differentiation on our fresh brand. … In addition, the provenance of the products enabled by blockchain — the ability to track every move from the farm to the customer’s basket — can be very empowering for our customers,” said Albertsons chief information officer Anuj Dhanda in IBM’s press release.

The opportunity for IBM

The network effect, whereby the more people use a product or service, the more valuable that product or service becomes, is a powerful competitive advantage. Food Trust becomes more compelling for grocery chains and other food supply chain participants as more companies join the network. In fact, it begins to become necessary as large chains like Walmart mandate its use for suppliers.

If Food Trust ever reaches critical mass, becoming the de facto standard in the food industry, IBM will have a platform that generates fees and will be very difficult to disrupt. That’s just about the best kind of business there is.

It remains to be seen whether IBM can continue to grow Food Trust into an industry standard. But with Albertsons joining the network, the odds just got a little bit better.

‘Get your facts right’: Crypto firm disputes New York license denial

Cryptocurrency exchange Bittrex is protesting New York’s decision this week to deny it a virtual license exchange, claiming that its rationale contains …

The cryptocurrency exchange Bittrex is protesting New York’s decision this week to deny it a virtual license exchange, claiming that its rationale contains factual errors and its personnel were not well versed in blockchain.

While the New York State Department of Financial Services is notoriously tough on newcomers who want banking-related licenses, Bittrex, a well-established company with 1.67 million global users, operates in 40 U.S. states. It applied for a license four years ago and has been operating in New York under a safe harbor since that time. Moreover, its chief compliance and ethics officer, John Roth, is a former regulator who spent 25 years at the Justice Department, eight of them as special counsel for international money laundering policy.

Bittrex’s executives argue the decision is flawed and dispute how the state regulator is characterizing it.

“This was a bolt from the blue,” Roth said in an interview. He said the firm found out about the decision, which included a cease-and-desist to do business in New York, only fifteen minutes before it was publicly announced. He said the regulator never contacted the firm to sort our concerns it had.

“If you do a review and you find something, you allow the entity you reviewed to take a look at it and comment on it,” Roth said. “You do that as a matter of fundamental fairness and due process, but as importantly, you want to make sure you get your facts right.”

The New York agency declined to comment for this article, but the case is one of the first for the new acting superintendent, Linda Lacewell.

The case against Bittrex

Among other things, the New York regulator claimed that Bittrex lacked a “strong framework of controls” for monitoring and reporting suspicious activities and complying with Office of Foreign Assets Control requirements. It also claimed that examiners had found a large number of transactions for customers in sanctioned countries, including Iran and North Korea, that had passed through screening and been processed.

Additionally, the DFS said some Bittrex users were using obviously fake names like “Donald Duck” and “abcd.”

But Roth and Bill Shihara, Bittrex’s founder, deny such claims. For one, they argue that the fake accounts cited by the regulator were not active ones. Instead, those were created by people curious about the platform who started an application and never completed it. Those accounts were never verified, a process that includes complying with know-your-customer regulations such as providing a government-issued ID, and had no ability to engage in any transaction on the platform.

“We explained that to them, but that’s not in the letter,” Roth said.

As for its monitoring system, Roth said the company has a suspicious transaction monitoring process that’s partially automated and partially manual. It had been taking steps to fully automate it.

“We’re going to a fully automated system that DFS knew about this quarter,” he said.

According to Roth, Bittrex also has never conducted transactions for users in North Korea. “I don’t know where they got that from, but it’s absolutely not true,” Roth said.

The company did find out in October 2017 that some Iranians had been able to establish accounts and trade on Bittrex.

“When we discovered it, we immediately turned off those customers, disabled them from trading, and reported that to OFAC,” Roth said. “OFAC knows about it and is considering the matter.”

Hands-off approach

In its denial of Bittrex’s application, the regulator also describes a process of working with Bittrex to address continued deficiencies and assisting Bittrex to develop appropriate controls and compliance programs.

But Bittrex’s leaders say this never happened.

“We’ve been in New York a really long time and we were one of the first applicants for the BitLicense,” Shihara said. “Our application sat on their desk for years.”

Roth said the regulators didn’t work with or help Bittrex, but only sent requests for documents.

“There was a lot of back and forth where they thought they were missing documents that we had actually already sent them,” he said. “There were fingerprint cards that we had delivered to them that they had lost and we had to re-fingerprint.”

Though Bittrex kept the New York regulators up to date on what they were doing, it received no feedback or guidance, Roth said.

In January, the DFS sent Bittrex a supervisory agreement, which among other things would limit the number of cryptocurrencies the company could offer to ten and require Bittrex to ask permission before it could create additional corporate entities.

Bittrex’s principals saw the agreement as a contradiction of their business model and said it would have restricted their ability to grow. The company tried to negotiate the agreement, Roth said, but it was given a 10-day deadline to accept or decline it.

Bittrex declined the agreement and heard nothing until a few weeks later, when the DFS contacted the company on a Wednesday and said it was going to send a team of examiners to the company’s offices in Seattle and Washington, D.C., the following Monday.

“Typically the way an exam would work is you’d have months to prepare, gather documents and do the kinds of things you need to do to respond appropriately to a legitimate inquiry by a financial regulator,” Roth said. “We had two and a half working days to get everything ready. Then the folks they sent had no blockchain experience whatsoever, I think they were used to large banks and different kinds of systems and controls that would be put into place.”

For instance, Bittrex uses a popular transaction monitoring software program from Chainalysis that’s commonly used by cryptocurrency exchanges and by banks like Barclays that work with crypto firms and consumers who own virtual currency.

The DFS examiners didn’t know what Chainalysis was, Roth claimed.

“We tried to brief them on it, we have people who are insanely skilled at this stuff, they’re ninjas at being able to look through these transactions,” he said. “We offered to demonstrate it and show how it works. They weren’t interested. That’s in stark contrast to other regulators.”

The DFS also accused Bittrex of failing to prove that it meets its own guidelines for launching tokens. Roth said the agency cited the company for not having applications from every one of the tokens it lists on its exchange. This is because some of those tokens are decentralized, he said.

“No one owns Dogecoin, nobody owns bitcoin, there’s nobody to speak for them to file an application,” he said. “There was no guidance from anyone in the government in 2014 when a lot of these coins got listed. This is part of a fundamental misunderstanding of how blockchain works.”

The regulators also said Bittrex didn’t meet their capital requirements.

Roth said that unlike other states, New York has a capital ratio formula that is based on the percentage of tokens in hot wallets and cold wallets that doesn’t take into account the risks of moving virtual currencies from one form of storage to the other. He said the founders of Bittrex developed secure payment platforms used by Amazon, BlackBerry and Microsoft.

“If they had spent more time with us to understand our processes, they would see that we were more than willing to help mitigate these risks,” Shihara said. “But there was no intellectual curiosity to understand what we’re doing or understand blockchain at all.”

Bittrex will suspend trading on Thursday.

“We don’t have a choice in the matter,” Roth said. “We’ll comply with what New York wants.”

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Coinbase CEO Outlines 3 Things Needed For Crypto Mass Adoption

Brian Armstrong, CEO of major cryptocurrency exchange Coinbase and prominent individual in the crypto community, has done a lot to move the …

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5 hours agoBy Jeremy Wall 0Comments

Brian Armstrong, CEO of major cryptocurrency exchange Coinbaseand prominent individual in the crypto community, has done a lot to move the cryptocurrency industry forward and is very knowledgable about the space.

When he has something to say, people listen. Which is why he recently held a live ask-me-anything (AMA) session where he answered selected questions submitted by the crypto community.

The AMA ran for 45 minutes and was filled with interesting questions and keen insights.

Armstrong kicked off the AMA with a question of popular demand: what does cryptocurrency need for mass adoption? In response, Armstrong said he believes crypto mass adoption is mostly dependent on 3 things: volatility, scalability, and usability.

Volatility: Crypto Needs More Stable Price Action

The problem with Bitcoin (BTC) and most other cryptocurrencies, other than stablecoins, is that they fluctuate drastically against the US dollar. Take Bitcoin, for example. If on a FOMO-fueled impulse you’d bought $100 worth of Bitcoin in December 2018, you would have just $25 now.

Traditional investors are not comfortable or used to this heavy volatility, which presents a much greater risk for their investable capital. Armstong stated that if the crypto markets continue to swing drastically, traditional investors will be less inclined to get involved.

To combat price volatility, Armstrong suggested that stablecoins can be used as a means of exchange, and that real-world use cases will attract more and more people to crypto, thus reducing its volatility.

Scalability: Crypto Needs to Sustain Visa and PayPal Volumes

The second thing Armstrong believes is critical to crypto mass adoption is scalability solutions.

He started off by saying there are currently 5 to 10 teams working on viable scalability solutions. He named second-layer solutions like the lightning network and next-gen protocols, which he says will begin to come out over the next 6 to 12 months.

These scaling solutions and next-gen protocols will see that cryptocurrencies reach 500-5,000 transactions per second, putting them in competition with the likes of Visa and PayPal level volumes. Once crypto can attain these volume levels, applications with millions of users will be easily supported and mass adoption can occur.

Usability: Crypto Needs To Be Easy

As many people are also aware, using cryptocurrency is not nearly as intuitive as it needs to be for mass adoption. Armstrong explained that there are too many steps when it comes to buying, selling, storing, and securing your cryptocurrency. He stated that retail investors need something that works as well as the popular Chinese app, WeChat.

Adding to this he said:

“We need to get usability simpler and simpler and simpler. Kind of like having the Netscape moment or the iPhone moment.”

Armstrong couldn’t be more right on this point, as previously reported by IIB, 75% of crypto holders still fear the failure of sending transactions while sending crypto. In order for crypto mass adoption to occur, managing your crypto has to be as easy using a common messaging app.

Final Thoughts

Armstrong’s 3 points for crypto mass adoption are being worked on at this very moment. New developments to improve crypto’s scalability, usability, and even volatility are in the works, and Coinbase may be leading the way on this front.

For instance, Coinbase is already known to be one of the most user-friendly crypto exchanges available. What’s more, they are now tackling crypto’s usability and volatility problems with the launch of their new Coinbase Visa card which allows users to spend their crypto in-store and online at millions of merchants.

Crypto mass adoption may be closer than you think, as the solutions to the crypto mass adoption problems are already being developed and released.

Do you think we will begin to see cryptocurrencies being widely adopted among mainstream users this year? Let us know what you think in the comment section below.

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About Jeremy Wall

Jeremy is a financial writer and aspiring investor. He is also a cryptocurrency enthusiast that’s fascinated with blockchain technology and the financial markets. When he’s not researching and learning about cryptocurrency, he’s traveling the world with his dog and girlfriend.

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