On October 24 at 20:30, Sergey Grybniak, founder of Opporty, visited Mars Finance Group to share on the theme of "international trading platform based on ETH Plasma Cash"
Guest: Charles/McDonald's(China)CIO CDO
Dialogue initiator: SergeyGrybniak / Founder of Opporty
- The money transfer time between businesses for international and domestic transactions can take from 1 to 5 business days, with the cost of international transfer usually around 40 USD.
- On average, contract enforcement takes from 490 to 1100 days,costing from 15 to 50% of the claim value, and taking up to 37 steps, depending on the country.
- Eighty percent of cases do not come to resolution at all because of the length, complexity and expense of the procedure.
This affects the speed of moving money indomestic and international market economies. For instance, it makes harder for small enterprisesparticipating in international activities, forcing them to deal through larger intermediaries.
All of the above factors affect business survival rates, impacting primarily SMEs, which are the backbone of all developed economies. Inefficiency of intermediaries affects the efficiency of the whole.
Q: Hello, Sergey. Please introduce yourself.
Sergey Grybniak, almost 15 yearsof experience in development and marketing of applications for enterprises of a different size in Central and Eastern Europe, North America and Asia.
Opporty is a company with 3 operational units which are New York, USA, business development and technology design, Shanghai, China, business development, and Odessa, Ukraine, research and development. As a member of Enterprise Ethereum Alliance we are exploring the opportunities of an applications for business transactions using blockchain technology including international trade. We use Plasma based side chains proposed by Joseph Poon and VitalikButerin in August, 2017.
We are exploring advantages of a blockchain for international trade. Chinese One Belt One Road project is currently biggest project in the world and it is directly related to the international trade. Infrastructure corridors encompassing around 60 countries, primarily in Asia and Europe but also including Oceania and East Africa, will cost an estimated US$4–8 trillion.
I would like to share some thoughts on blockhain implementations related to this initiative and to the international trade in general.
We are exploring such opportunities as a member of China Cooperative Trade Enterprise Association, and advised by Mr. Daniel Wu who is a Deputy Director of One Belt One Road Development center.
We are foreigners so it takes some time from us to get familiarwith the particular details on the local market but we closely cooperate with local partners. We are proud to be partner ofInfiniVisionin the fields of big data and blockchain integrations. Worth paying additional attention to OCR (Optical Character Recognition) which allows to digitize any document. With blockchain capabilities of doing tamper proof records there are potentially very interesting implementations for applications. Mr. Cai Dong personally advise us.
Q: As we know plasma was designed for Ethereum to solve a scalability problem. Is that correct? Can you tell us more about it?
The answer is yes and no. Plasma is applicable for Ethereum and able to solve a scalability problem. However even in Plasma Whitepaper they use term “root chain” saying directly that it could be potentially implemented on top of other root chains and not only for Ethereum.
“Plasma is a proposed framework for incentivized and enforced execution of smart contracts which is scalable to a significant amount of state updates per second (poten-tially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide. These smart contracts are incentivized to continue operation autonomously via network transaction fees, which is ultimately reliant upon the underlying blockchain (e.g. Ethereum) to enforce transactional state transitions.” – Joseph Poon, VitalikBiterin, Plasma Whitepaper.
That means that potentially smart contracts and applications on Plasma could be “integrated” with other blockchain protocols. We are highly inspired of this idea of Blockchain Agnostic applications and smart contract. It will require significant cooperation with other blockchains because in the current state it is not possible to implement “as is”. But we are already making steps in this direction and we believe that blockchains will be doing that as well because it will benefit each participant and industry overall.
Q: So Plasma allows building decentralized applications and smart contracts potentially able to work not only with Ethereum but with other Blockchains. Are there something else you would like to share about it?
Yes. Few things. First plasma allows to implement privacy and levels of access in building decentralized applications which allows them potentially “talking” to each other. Also ability towork with other blockchains is big vision.
Worth paying attention to Plasma Cash. This design pattern was proposed by VitalikButerin in March 2018. This approach has certain advantages before initial Plasma.
Plasma Cash is an enhancement to Plasma Protocol, which is imperfect due to limited scaling capabilities. Its drawbacks do not allow Plasma to support the exponential blockchain growth required to enable IoT.
Plasma Cash resolves issues of security and scalability, speeding up the process by eliminating the need to download entire Plasma blocks. Proof data is now only required for a user’s own coins.
Without going too technical Plasma Cash makes tokensindivisible and attaches to each one unique ID. It could work both with ERC-20 (fungible tokens most projects are using) and ERC-721 (non fungible tokens like the ones used for Crypto Kitties).
Q: Token ids. Can you explain more about how these implementations work in short?
“Scalability is this idea of coming up with a blockchain that can scale much larger than existing chains essentially by processing transactions in parallel. And moving away from this paradigm where every single node on the network has to process every single transaction.” – VitalikButerin
So lets go very brief how plasma works and solves scalability problem. We have certain amount of wallets with certain balances of tokens in each of them. And we have limitation of the main network of Ethereum around 15 transactions per second. So how Plasma works?
These wallets and tokens “enter” plasma and executes off chain transactions without root chain limitation of 15 transactions per second. After these computations, each wallet which have taken part in off chain transactions has updated balance in it. These remaining balances is getting updated on the main chain and “exit” happens.
So how it works with Plasma Cash?
When it goes to ERC-721 each token has its ID in the main network. So it inters side chain with this id, computation happens and then “exit” to the main network. When we use ERC-20 tokens these id is getting created when tokens “enter” side chain and tokens are becoming indivisible. Computation happens and when tokens “exit” to the root chain they are becoming standard divisible ERC-20 tokens without IDs.
It is not limited only to these 2 standards. They were taken as an example.
Q: Got it. So Share please your vision on the current state of the industry and applications you have mentioned before.
Currently wesee the penetration of blockchain in a number of industries, following its previous penetration of the financial industry. To serve this goal, many projects and protocols have been and are currently being created. Among them exist two distinct approaches:
1. One Chain, One application. By nature, these applications are easier to implement. Being mostly isolated, they have a shorter list of security and privacy requirements, which makes the integration and implementation process easier. However, this approach goes mostly in the opposite direction from the key ideology behind blockchain technology – decentralization.
2. Applications as part of a large chain. Interoperability is a key advantage of this approach. It requires sophisticated security and privacy settings, but that is the big vision onthe blockchain adoption by industries. It features decentralized applications, tamper-proof smart contracts that rely on the computation power of the whole network, distributed among millions of users and various applications “talking” to each other throughmultipleblockhain protocols.
But lets leave the blockchain industry for a moment and get back to transactions between businesses by reviewing the process of purchasing a service or product. Domestic and cross border transactions consist from 4 main elements.
They are terms confirmation by the counterparties, payment, product or service provision and dispute resolution if transaction fails.
Terms of a collaboration are confirmed by the parties and written into a contract, which is then signed either on paper or electronically. This is followed bypayment and provision. Which one happens first depends on the particular industry and the type of agreement, but the important thing is that the provision process is also reflected in various documents (shipping documents, service delivery proofs, confirmation from authorities about a change of asset ownership, cargo location updates, etc.). Either before or after shipment, a payment is transferred, using some intermediary institution (e.g. bank). This creates possibility where, if one of the parties is not happy with the outcome, he or she can just pick the phone and stop the payment, even when the service or product has already been provided. When that happens and the parties are not in agreement a dispute arises.
So how can blockchain help here?
There are currently multiple debates about the possibilities of smart contracts mimicking traditional contracts. Let’s review how smart contracts could be implemented, and what the advantages are.
Smart contracts are digital agreements, made tamper-proof because they are run on a decentralized infrastructure.
Agreement terms can be put on the blockchain via smart contracts and accepted by parties using their digital identities. The Chinese court already accepts such implementation as digital evidence. https://www.chinacourt.org/index.php/article/detail/2018/09/id/3489188.shtml
In a more sophisticated manner, such terms may be connected by an incremental payment agreement. For example: “I will pay you when the goods have arrived, when the goods are confirmed to be in the proper condition, when the customs bureau has released them, and when ownership records have been changed.”
The main concern related to smart contracts mimicking traditional agreements is the necessity of getting data from the real world. They cannot “talk” to data itself, so there must be a means of connecting to sources of such data. Among them could be different blockchain applications (supply chain visibility, production tracking, etc.), datafeeds directly from iOT devices, aggregators of such data, public/authority registries, different ERP systems, feeds from shipping companies, etc. These applications may be using different blockchains or also built using plasma implementation. For any proposedimplementation to operate efficiently, it must be blockchain-agnostic, meaning it is able to connect to different blockchains, and not designed to operate with only one root protocol.
As an example of integration with OCR paper invoices, shipping documents, certificates, documents from customs, etc.
could be converted into JSON strings and recorded to the blockchain for further processing.
Receiving such data confirms successful performance on the provider side, and payment is then executed. This is a somewhat sensitive topic in China, but for informational purposes we will review a few possible implementations:
1. The smart contract is connected to a banking or other payment system. When Oracles deliver information about the successful performance of a provider, the smart contract sendsan unconditional signal to a bank account or other payment system to initiate a payment.
2. The smart contract initiates payment using cryptocurrencies. This is not currently possible in China, but let’s review it, just as an example. This is an initial sample of asmart contract on the blockchain.
Currently such constructions, if present, are mostly connected to one particular protocol and/or cryptocurrency, which makes it a bit selective and limited. We think the ability of such transactions to connect to multiple blockhainsfor processing transactions is a must. In the long run, if and when different entities, industries or governments accept standards based on different blockchains, cross-blockchain and cross-protocol implementation will be more favorable, providing more flexibility and advantages.
3. The smart contract initiates payment in stable coins associated witha particular currency. This is an interesting sample. In our implementation, each token has its unique ID, similar to the money we have in our pockets. Combining this with the fact that participants have unique digital identities presents interesting opportunities for implementation. For example, an authority may issue a certain amount of such tokens to a responsible company, to deliver a particularly complex project. With token IDs, the issuing organization would be able to track how the issued amount of money was spent, and to whom it was transferred. This allows for the control of cash flow and prevents the use of the funds for fraudulent purposes. Basically, it closes the gap thatonce allowed Bitcoin to be spent on various illegal activities and become a tool for shady money transfer between countries.
Having the terms of an agreement confirmed in one place and approved by the counterparties, provision and payment information enables a perfect “container” for arbitration should a dispute among the counterparties arise. For certain types of agreements (e.g. certain types of international trade agreements) arbitration could take place directly “in” this smart contract, where the arbitrator, after reviewing all the stored material, makes a decision to execute or not execute the transaction.
For other types of agreements, it givesboth parties and arbitrator faster access to all the relevant information, which helps to increase the speed and reduce the cost of the arbitration procedure.
Chinese arbitrator in Nanjing is already implementing blockchain to store and process cases and negotiate resolutions. It is quite realistic that such activities will end up providing access points for implementation, similar to the one described above, because of the obvious advantages for all participants in the market. http://ac.nanjing.gov.cn/zczx/gzdt/201809/t20180927_5801949.html
Q: Interesting. So where do you think these implementations might work?
Such implementation has a number of use cases, from building interoperable applications, to being used only to create transaction smart contracts, to being integrated into applications built on other blockchains. International trade smart contracts have been also take just as an example. There is a very big amount of use cases for domestic transactions and different non transactional applications as well.
As one of the use cases, we are building a B2B marketplace platform. The big vision of this platform regarding the international trade is to allow an SME from, for example, Africa to get direct access to international markets, with the ability to execute standards-based contracts, and bypass intermediaries
Chinese trading companies, to gain access to a foreign provider from, say, New Zealand. The platform has a number of use cases for domestic markets as well. The main idea is to create a trusted and efficient environment for businesses to utilize the advantages of blockchain technology.
Using classification models provided by InfiniVision we would be able to separate client, provider, products and orders to certain classes and implement a better matching. A very broad example just to have a vision, client who are looking to buy 500 kg of some grain or fruits delivered in one week will go to different provider like than client who are looking to buy 500 000 kg delivered during the 6 month period separated by 6 portions and covered by 6 incremental payments. Having terms of order, timing, type of the contract, buying and selling patterns based on the previous history and industry relevant details we could provide significantly better matching making process easier and more efficient for both sides.
We are happy to get connected to trading or manufacturing enterprises to potentially establish mutually beneficial partnerships.
That is pretty much it. Thank you so much for having us here.