Unlocking Value Opportunities at the Intersection of Provenance, Proof, and Protocols

Abstract

The advent of Web3, driven by distributed ledger technology (DLT) and blockchain, marks a significant paradigm shift in the landscape of Industry 4.0. Our thesis is that Web3 technologies, with their emphasis on the 3P’s of Provenance, Proof, and Protocols, are reshaping traditional business models and creating evolutionary opportunities across industries. This is the genesis of mainstream adoption of the computable economy and Trustchain Labs aims to capitalize on this new paradigm. By collaborating with ecosystem partners and adhering to our core values of innovation grounded by ESG principles, Trustchain Labs sole purpose and mission is to unlock transformative value and drive a more sustainable future.

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Introduction

Industry 4.0 represents the convergence of digital technologies with traditional industrial processes, revolutionizing manufacturing, supply chains, and business operations. Web3, powered by DLT and blockchain, introduces new dimensions to this transformation by emphasizing transparency, trust, and decentralization. At the heart of Web3 lies Provenance, Proof, and Protocols, offering unprecedented opportunities for innovation and disruption. DLT represents a “trust machine” because it minimizes the need for trust between different stakeholders in their interactions.

Web3 is similar to other technological revolution from the past and is undergoing this familiar boom and bust cycle. Up to now, Web3 has succeeded in installing a cluster of technologies with enormous potential for economic growth and transformation. DeFi or decentralized finance, arguably the most advanced of the web3 use cases, has installed the infrastructure to enable a new financial system which replaces intermediaries with code and replaces trust with the assurance of computational certainty.

The technological infrastructure laid down in the initial installation period from 2017 during a frenzy of investment, was followed inevitably by a failure to meet such high expectations and a financial crash. However, it is this superior technological infrastructure like DLT that will form the basis of the next phase of growth for the computational web.

 

Web3 Technology Revolution

The Perez Surge Cycle provides a framework to predict the development of emerging technologies. The core idea is that revolutionary technologies typically go through 4 distinct phases as they are implemented & deployed:

1) The Irruption Phase,

2) The Frenzy Phase,

3) The Synergy Phase, and

4) The Maturity Phase.

According to this model, new technologies first take hold in society and then transform society by creating new business models and introducing a new “techno-economic paradigm.”

In between Frenzy and Synergy comes The Turning Point. It is our contention that the current status of web3 is at that turning point.

 

At one point the bubble bursts and a recession follows, which marks a turning point in which social and regulatory changes happen. These changes alter and leverage the newly created economic and technological infrastructure. If done successfully, a “deployment phase” follows during which technologies mature, merge with other technologies and eventually reach mass adoption.

Mainstream adoption is coming and with it will be the emergence of new business models, increased investment in the blockchain space, a shift in paradigm, and significant disruption of various industries; a new techno-economic paradigm.

Boston Consulting Group estimates that about 10% of global GDP or $16 trillion a year will be made up of tokenised legal assets by 2030.

 

The Intersection of Provenance, Proof, and Protocols

  1. Provenance: Data provenance, facilitated by DLT, offers a myriad of benefits across various industries. By leveraging DLT for data provenance, organizations can establish a transparent and immutable record of the origin, transformation, and ownership of data throughout its lifecycle. This fosters trust among stakeholders by ensuring data integrity, authenticity, and tamper-proof auditing capabilities. With a verifiable trail of data lineage, organizations can enhance regulatory compliance, mitigate fraud, and improve decision-making processes. Additionally, data provenance enables enhanced data quality assurance, facilitating the identification and resolution of discrepancies or inconsistencies. Ultimately, leveraging DLT for data provenance empowers organizations to optimize operational efficiency, enhance transparency, and foster greater trust in data-driven ecosystems.
  2. Proof: Through cryptographic techniques like multisig and smart contracts, Web3 enables the verification of transactions, agreements, and ownership rights without relying on centralized intermediaries. This eliminates the need for trust-based relationships, reduces transaction costs, and streamlines processes across industries. Moreover, cryptographic proofs ensure data integrity, enhancing security and compliance.
  3. Protocols: Web3 protocols govern interactions within decentralized networks, enabling seamless interoperability and collaboration among diverse stakeholders. By adopting open standards and interoperable protocols, organizations can unlock network effects, foster innovation, and scale solutions globally. Web3 protocols democratize access to resources and incentivize participation, driving collective value creation.

The 3P’s give us the ability store data immutably with the ability to trace and verify the data sources so that we can trust it to be used programmatically. This the nucleus of our ability to disintermediate and automate conventional processes and decouple the customer value chain.

A good example of this paradigm shift is in the process of transacting a property. The conventional method is for both parties to employ a lawyer. It is the lawyer’s job to verify the ownership and attributes of the property by making a property search at the local land registry. The lawyer is also the trusted party to receive the purchase price from the buyer and to transfer the funds to the seller when the change in ownership can be effected in favour of the buyer.

When the property title is tokenized, the property ownership and attributes can be verified immediately on-chain. A peer-to-peer transfer of the purchase price in exchange for the token that represents the property can be executed between the parties immediately and will not incur the expense of engaging third parties.

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Decoupling The Customer Value Chain

Adoption of web3 will depend on how it is employed to each specific use case. To find the “low hanging fruit” we begin by analyze the Customer Value Chain, for businesses or individuals in order to discover:

  1. Expensive activities.
  2. Time consuming activities.
  3. Activities that take effort.

Our ethos at Trustchain Labs is fundamentally about searching for these weak links in the Customer Value Chain and decoupling them by either value creating, value eroding and / or  value capturing. To achieve our goal we follow a simple iterative methodology:

  1. Identify Industries and Stakeholders:
    • List industries where Web3 can have significant impacts (e.g., finance, supply chain, healthcare, real estate).
    • Identify key stakeholders within each industry (customers, service providers, intermediaries).
  2. Map the Existing Value Chain:
    • Document the current value chain for each industry.
    • Identify processes, intermediaries, and touchpoints.
    • Highlight pain points, inefficiencies, and high-cost areas.
  3. Analyze Web3 Opportunities:
    • Evaluate how blockchain technology with smart contracts, tokenization and decentralized applications (dApps) can streamline processes.
    • Identify opportunities to remove intermediaries, automate transactions, improve transparency, and enhance security.
  4. Propose Web3-Based Solutions:
    • Develop specific use cases showing how Web3 implements improvements.
      • Example in Finance: Use decentralized finance (DeFi) to enable peer-to-peer lending, reducing the need for traditional banks.
      • Example in Supply Chain:Implement a transparent blockchain ledger to track goods, reducing fraud and improving logistics.
      • Example in Healthcare: Use verifiable credentials to secure patient data sharing among authorized entities.
  5. Evaluate Impact:
    • Assess potential cost savings, efficiency gains, and improvements in customer convenience.
    • Consider qualitative benefits like enhanced trust and customer satisfaction.
  6. Pilot and Test:
    • Select a small-scale project or specific segment within an industry to implement a pilot project.
    • Measure performance, gather feedback, and refine the solution.
  7. Scale and Optimize:
    • Based on the pilot results, scale the solution to larger parts of the industry.
    • Continuously optimize processes and adapt to technological advancements.

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Tokenization and the Computational Economy

Tokenization through DLT offer a practical solution to the challenges of fragmented, non-standardized processes across multiple participants in the alternatives value chain. At its core, tokenization can enable creation of a shared platform and workflow that enables more seamless, automated order processing, settlement, ownership tracking, and data management.

As a primitive, tokenization represents a transformative mechanism for unlocking liquidity and resources, democratizing access to investment opportunities, and promoting financial inclusion.

We are able to fractionalize real-world assets such as real estate, art, and commodities with tokens that can enhance liquidity, facilitate peer-to-peer transactions, and enable fractional ownership. Therefore, tokenization democratizes access to investment opportunities, unlocking previously illiquid assets and enabling broader participation in wealth creation.

However our view on the mechanics of tokenization as a catalyst for transformation is much broader than just fractionalization.

Asset tokenisation specifically, as fungible financial capital, token-wrapped assets and non-fungible tokenized assets (NFTs) facilitate the development of more computational capital. Computational capital can be created with digital wrapping around physical inputs using tokenization. This digital wrapping stored on chain then interacts with other computable objects.

Capital is not naturally digital but with Web3 tools capital can be digitally wrapped, and connected into institutional protocols. In this way tokens can represent computational capital. Computational capital is searchable, programmable, integrates with any economic agent (including IoT devices, algorithms, oracles, i.e. tools that sense or emit information), and works at global scale. Computational capital creates the ability to bring resources, as inputs into production (i.e. the definition of capital), into programmable decision-making so that market activities, from search for opportunities, verification of rights, and assurance of the safety and efficacy of the exchange of property rights, or other mutually agreed upon contracts can then execute.

 

Token Engineering

Tokens are a breakthrough in open network design that enables:

  1. The creation of open, decentralized networks that combine the best architectural properties of open and proprietary networks, and
  2. New ways to incentivize open network participants, including users, developers, investors, and service providers.

By enabling the development of new open networks, tokens could help reverse the centralization of the internet, thereby keeping it accessible, vibrant and fair, and resulting in greater innovation.

The core feature of tokenized ecosystems is getting the participants to take certain desired action through incentives. The goal of token engineering is to create a balanced and sustainable ecosystem that aligns the interests of different stakeholders within the network and incentivises them to act in the best interests of the network as a whole. Therefore, token engineering lies at the heart of web3 and the creation of new business models.

Employing token engineering, disconnected participants can be connected and aligned towards a common goal that has a greater value to each participant than if they operated in their own silo. This is known at the “Network Flywheel Effect”. To for a project to create this Network Flywheel Effect, we overlay a robust methodology to design, simulate and verify the optimization of incentives to achieve a desired set of objectives.

Trustchain Labs uses economic game theory in its token engineering approach to analyse strategic situations where individuals make decisions based on the choices of others towards achieving a common goal. Token engineering and game theory are integral to the design and operation of web3 networks. By understanding the economic incentives driving participants’ behavior, developers can create robust and resilient ecosystems that promote decentralization, security, and innovation. As web3 technology continues to evolve, the intersection of tokenomics and game theory will play a crucial role in shaping the future of decentralized finance, governance, and digital assets in Industry 4.0.

The Network Flywheel Effect

The Network Flywheel Effect occurs where the value of the network V grows supra-proportionately to the number of users n participating in the network. Therefore, we define network effects to occur in cryptocurrencies when a positive value change ∆V > 0 is larger than a positive user base change ∆u > 0 or when a negative value change ∆V < 0 is smaller than a negative user base change ∆u < 0.
The algebraic formula representing exponential growth in value V as the number of users u increases can be represented as follows:

V(u) = V(0) * e^(ku)

In this formula:
• V(u) represents the value at a given number of users u.
• V(0) represents the initial value when there are no users (u = 0).
•  e is the base of the natural logarithm, approximately equal to 2.71828.
•  k is the growth rate constant that determines how quickly the value grows as the number of users increases.

 

Developing The Ecosystem Through Collaboration

  1. Partnerships: Collaboration with developers, technology providers, and Layer 1 blockchain platforms is essential to harnessing the full potential of Web3 technologies. By fostering an open and inclusive ecosystem, organizations can co-create solutions, share best practices, and accelerate innovation. Ecosystem partnerships enable access to diverse skill sets, resources, and market insights, facilitating rapid prototyping and deployment.
  2. Value Creation: The convergence of Web3 technologies with Industry 4.0 presents a myriad of opportunities for value creation. From optimizing supply chain logistics to enhancing product traceability and improving operational efficiency, organizations can leverage Web3 to drive cost savings, revenue growth, and competitive advantage. By embracing experimentation and iteration, organizations can continuously adapt to evolving market dynamics and customer preferences.

 

Upholding Our Core Values

  1. Innovation: At the core of Web3 transformation lies a commitment to innovation that improves humanity. By embracing disruptive technologies and experimenting with novel business models, organizations can address societal challenges, foster inclusivity, and drive positive impact. Innovation to Trustchain Labs entails a mindset of continuous learning, agility, and resilience in the face of uncertainty.
  2. ESG Principles: Environmental, Social, and Governance (ESG) considerations are integral to responsible business practices in the Web3 era. Organizations must prioritize sustainability, ethical conduct, and social responsibility in all facets of their operations. By integrating ESG principles into our decision-making processes and stakeholder engagements, we can work with our ecosystem partners to build trust, enhance resilience, and create long-term value for society.

 

Conclusion

Web3 technologies hold immense potential to transform Industry 4.0 by emphasizing provenance, proof, and protocols. By collaborating with ecosystem partners and adhering to our core values of innovation and ESG principles, Trustchain Labs collaborates with organizations to unlock transformative value while contributing to a more sustainable future. The tokenization of real-world assets further augments opportunities for liquidity unlocking and societal impact of a computable economy. Embracing Web3 is not merely a technological evolution but a cultural shift towards decentralization, transparency, and shared prosperity. Through collective action and purpose-driven innovation, we can shape a future where Web3 enables inclusive growth, empowers individuals, and advances humanity towards a more equitable and resilient world.