“Blockchain is always the work of a large number of counterparties”, - Konstantin Goldstein, Microsoft

Konstantin Goldstein— leading expert on strategic technologies at Microsoft in Russia. For several years now

within the framework of conferences explains to entrepreneurs inRussia, Central and Eastern Europe, how and why to implement blockchain in their business flows. He is also directly involved in the implementation of blockchain in business.

HYIP cycle for blockchain

- In December 2016, Russia conducted the first transaction using the blockchain. When did you start doing this at Microsoft?

- Microsoft is working with technologyblockchain since 2015. At the DevCon conference, we announced that Ethereum will now be available in the Azure Marketplace (“Hightech ”’s marketplace for developers). I started working on the blockchain in 2016 - when the wave of interest in technology began. That year was marked by the fact that the projects were more theoretical than practical. And then even the pilots began to appear, and the MVP (minimally viable projects - “High-tech”), prototypes.

- What now consider the most interesting in the development of technology?

- In 2019 we enter with several main development vectors.

The first is standardization. The market needs to understand how to work according to general standards in order to implement such solutions, answer multi-protocol questions, work with off-chains.

Off-chain transaction- is the transfer of information outside the blockchain. An on-chain transaction is usually called simply a transaction and performs operations within the blockchain, depending on it. The off-chain transaction, in turn, relies on other methods of recording and validation. Their similarity is that in both cases, all parties must agree on the mechanism of the network. The question remains how to convince the participants of the legality and irreversibility of the operation using the off-chain model. Such services were implemented in such a way that contractors could trust the blockchain in conjunction with the off-chain (Microsoft, for example, has Enterprise Smart Contracts for this).

Second: to make these decisions soar, the work of consortia and alliances is needed. Because blockchain is always about the work of a large number of counterparties.

Perhaps the most interesting in terms ofTechnology is a growing “battle of platforms”, or competitiveness. We see that technology is starting to compete with each other. There are corporate development platforms: Corda, Hyperledger, Ethereum, now Vostok has appeared last year, and we will find out which of them will take the leading positions.

Photo: Anton Karliner / Haytek

- Interest in the blockchain has fallen since 2018. How did this affect the susceptibility of companies to technology?

- I would not say that there is a drop in interest. On the contrary, if in 2017 it was something new and incomprehensible, then over time, those who make decisions received enough knowledge to understand the blockchain. Therefore, rather, we are not talking about a drop in interest: now we are talking about pragmatism, where we can really apply it. Business looks at technology not from the point of view of “How cool: a new story!”, But paying attention to where you can enter the digital world and implement digital transformation using this technology. The last couple of years is a pragmatic approach to technology.

- What does “pragmatic” mean here?

- This suggests that the market has matured in terms of understanding technology. Companies are looking where it can really benefit.

The second point: nothing new really happens. If you look at the HYIP cycle (the curve describing the adoption of a new technology - “High-tech”), we will see that all technologies go through a period of frustration. The news noise passes, everyone switches to something else. Less news, but more work. In the end, this curve brings to practical use. The strongest will pass this line, those who need technology and who are willing to invest in it.

- What are the problems when introducing the blockchain in Russia?

- I would not look for differences in the processesimplementation in Russia or elsewhere: these are technologies, and they are plus or minus identical for everyone. If we compare the applicability of the same artificial intelligence to trends, we will see that this happens through the same HYIP cycle - for example, the mass introduction of AI will presumably happen around 2025. Speaking about the blockchain, it’s clear from the cycle that commercial introduction will start from about 2021, and by 2029-2030 we will see a massive development of technology.

The question is what distinguishes one from the other. If we implement AI or everything related to machine learning and various algorithms, then the task is applied. We take some data and work with them.

The blockchain is harder because it's not onlyabout technology, it's also about existing processes that need to be digitized and prepared. That is, if we are doing a project where ten companies are not related, all of them need to be brought to the same denominator, prepare all processes, understand their interaction with each other, how to work with new business models in this format. This is now one of the most significant difficulties in the implementation of technology.

Personality protection and food quality control

— Tell us about successful examples of blockchain implementation.

- One of the industries that took the flag of implementationblockchain is a financial industry. And if we talk about successful cases, this is an interesting story in which we participated - working with MasterCard in the framework of the Digital Identity project.

In December 2018, Microsoft talked about a joint project with MasterCard: companies will reconsider the practice of using digital identity.

Current identity verification system inThe Internet depends largely on the availability of physical documents or the need to remember dozens of passwords from different services. In addition, the practice of confirming identity in one country may differ from a similar system in another.

Companies offer to move to universala digital identity system based on the blockchain technology, accessible to all people from everywhere. Users will be able to decide when they want to make changes to it or share from their electronic devices.

The transition to this solution, according to Microsoft andMasterCard will be able to simplify work with finances, the procedure for completing documents. In addition, the system will reduce the risk of identity theft and give access to the necessary services to a billion people who now cannot confirm that they are they.

- You at the AI ​​Conference said that the blockchain is really useful when used in conjunction with other technologies. What was meant?

- Actually, this is about the value of the decision. The main task of the blockchain is the certification of facts. That is, the technology says: the event happened, and I confirm it. There is a transaction from point A to point C, and I confirm it. But when we are faced with the actual implementation of the solution on the blockchain, this will be only one of the elements of a holistic solution.

If we look at those innovative solutions,which are within the digital transformation, we will see just a bunch of AI, the Internet of things and the blockchain. This combination really brings the possibility of the very transformation, new business models and optimization of various processes.

Photo: Anton Karliner / Haytek

One example I gave onconference is a Microsoft project with the Swiss company Bühler. The topic of food quality control is very fashionable now for blockchain technology. In addition to the use of food, it is also very important to make sure that the products or ingredients, in this case cereals, are not spoiled.

Bühler project allowed to combine technologyInternet of things, blockchain and AI. They made a solution based on Microsoft Azure Workbench: they built a supply chain in such a way that at each stage the transition of these products from the manufacturer to the end user is visible. And at each stage, using telemetry, when this cargo is transported, there is an understanding of where it is located and what its condition is. If something does not correspond to the stated metrics for one reason or another, the system will be able to track it and say: “You know, this part of this delivery is corrupted, it cannot be used in production.” The Internet of Things works just like that: sensors that allow you to track this product all the way, transferring information, the very blockchain that, when receiving information, tests: “Yes, accepted, moved to another stage”, translating from one state to another. We see the whole story transparently and can make decisions dynamically.

DevelopmentBühleraimed at identifying grains infected with fungi,which produce aflatoxin: a dangerous carcinogen that has been linked to the risk of liver cancer. Aflatoxin outbreaks most often occur in developing countries where maize is a major part of the diet. In 2003, such an outbreak led to the deaths of 120 people in Kenya, and a 2014 study showed the harmful effects of the toxin on the livers of unborn children whose mothers ate contaminated corn in Bangladesh and Nepal.

— If it’s grains, is it an exclusively B2B solution? I can’t imagine that someone will go to the store and buy grain for themselves.

- It does not change anything in essence: b2b or b2c. If someone comes to the store, scan and see that the product is fresh or stale, then you need to add one step to the solution: conditionally, a mobile application.

Another case at the junction of IoT, AI and the blockchain is the Russian project Airalab. This topic is called "robonomics".

We go to a world where robots will communicate withrobots. That is, the Internet of things on the one hand, the Internet of things on the other hand. They are already transmitting telemetry somewhere, but we are leaving for a world where there are also agreements between them.

Practical case, more mundane. Suppose a company wants to take a robot in licensed use - leasing in this case. She takes it conditionally for a year and pays for using this robot. Now, how does the company that gave this robot understand that, say, it was used exactly as long as it was announced? The Airalab team made a project that allows using the blockchain technology to collect information that a robot has, to synchronize it transparently and show counterparties in a chain.

Airalab, together with the Russian Carbon Foundation inconditions of the Paris climate agreement proposed to move to a whole decentralized ecosystem of carbon credits: a universal system for calculating carbon emissions to the atmosphere, which will allow to control the damage to the environment. In addition, the agreement allows you to "deploy marketplace" solutions.

“In the future, any interested participantthe market in any part of the world will be able to log into the system, look at operators, auditors and customers, choose the right one and start working with it. All market participants will operate in a single digital space - without a main central hub. The potential volume of the global market is about $ 10 trillion. "

- You said earlier that solutions on the blockchain are well suited for protecting intellectual property. How can they be used?

- Now this is a market situation when, on the onehand, there are companies that have a lot of information, on the other hand, there are those who develop algorithms. And those and others need each other to apply these technologies. But we face the following problem: data owners are often sensitive: they are afraid to give them to someone. For various reasons, the data can go away, and they will lose their intellectual property, or the data is sensitive.

At the same time, there are more and morea growing trend to monetize this data. Those who have the very data science experts who develop the algorithms, they need this necessary information to hone them.

Photo: Anton Karliner / Haytek

And the blockchain can provide an answer to this problem. One of the important technologies that allows it to implement is the so-called homomorphic encryption.


Our research center Microsoft Research, which is engaged in scientific tasks, laid out in the public domain everything related to our developments in the field of this type of encryption.

I, for example, do calculations on a computer andI consider two plus five, it turns out seven. Accordingly, the data belongs to me. And the actions, this plus, belong to some company that develops this algorithm.

Now we encrypt this “two” by applyinghomomorphic encryption, then - "five" and we get the result - the encrypted "seven". Accordingly, the one who developed the algorithm and uses this data does not understand that there are two and five. But the one who gets this seven, has the key, and when he decrypts, he will get the desired result. The one who processes the data using this story does not see what is inside, and the data owner does not compromise it.

Blockchain Enthusiast Ecosystem

- What is the difference between working with the blockchain in Russia and Eastern Europe from the rest of the world?

- Our region was characterized by the fact that there have been many different blockchain-enthusiasts since 2016, there was a community.

— Do you mean entrepreneurs?

- No, not only, more developers, those whoThis technology was interesting. And when the technology came, the market was not something ready, but some work had already been done, there were those people who took the initiative. As a result, in Russia, perhaps, one of the most powerful developers in the world. The second point - really a very strong community of blockchain specialists, or enthusiasts, allowed this wave to be realized and popularize history. Thus, thanks to these conferences, the activities that have taken place, we have a very large market. It is more correct to say so: we have an ecosystem, there are developers, architects, analysts, also lawyers and people who know how to build various business models. There are media that can cover this technology, understanding that this is necessary. If you look at the totality of such things, you can see that Russia is in the lead in the world in this technology.

- In which countries, in your area of ​​responsibility, is there a similar situation with a sustainable ecosystem of people?

- Belarus, Estonia, Ukraine.

- What connects them?

- There are very similar factors. Everyone has their own, but in Belarus, Russia and Ukraine, probably, the factors are similar: enthusiasts and desire. In Estonia, this lay within the framework of the digital transformation that is currently taking place in this country. Interest is everywhere, but I would say that we see the center of expertise and activities in these regions.

- What is the dynamics of this ecosystem in the past tense? If you say that the peak has already passed.

- The peak has passed, but the experts have remained. Expertise is growing, and this suggests that experts work not only inside - this is international history. We see, on the one hand, a lot of speakers with a Russian focus on conferences on the blockchain technology. On the other hand, we see businessmen, lawyers - and projects that are also represented at different venues, at different conferences. It distinguishes us from others.