From Bitcoin to Blockchain: Industry Review April 2017 from OLMA NEXT Ltd

APRIL 2017
BLOCKCHAIN
DISRUPTIVE INDUSTRY REVIEW

BLOCKCHAIN INDUSTRY REVIEW
OLMA NEXT LTD APRIL 2017
Together with traditional financial analysis, OLMA Next Fund
commissions independent researchers to prepare challenging studies
relating to current and future potential investments.
This case study has been prepared by Frederic Bonelli at the request of
OLMA Next Fund.
OLMA Next is pleased to provide this review of the promising blockchain
industry and hope it will shed light on this revolutionary development for
transactions, financial and otherwise.
2
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license.
OLMA Next is contemplating the launch of a fund
that will focus on current and future disruptive
market leaders. With its combination of youth and
experience, OLMA Next plans to scrutinize high
performing businesses in developed and emerging
markets.
adm@olmafund.com
OLMA Next Fund
Frederic Bonelli is an independent research
consultant and VC entrepreneur who prepares
content about trends and companies for funds and
investors. He also helps start-ups and SMEs to
produce corporate support materials to help with
fundraising and other promotional activities.
contact@fredbonelli.com
Frédéric Bonelli

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KEY FACTS
$210M TOTAL REVENUE FOR THE BLOCKCHAIN TECHNOLOGY MARKET
$18.1B TOTAL BITCOIN CAPITALISATION
90% OF MA JOR NORTH AMERICAN AND EUROPEAN BANKS ARE
EXPLORING BLOCKCHAIN SOLUTIONS
$1.4B TOTAL AMOUNT INVESTED IN BLOCKCHAIN TECHNOLOGY IN 2016

INTRODUCTION
Blockchain: The Next Big Thing?
Building on the foundation of the Internet of Information, the blockchain concept has initiated an “Internet of Transactions” that is
already revolutionising the digital transaction world.
INTERNET OF THINGS BIG DATA
DRONES & ROBOTICS BLOCKCHAIN
MOBILITY
THE CLOUD
SOCIAL NETWORKS
ARTIFICIAL INTELLIGENCE
Blockchain: the Next Big Thing?

INTRODUCTION
In 2008, an individual, disguised as username “Satoshi Nakamoto”, published a research paper
called Bitcoin: A Peer-to-Peer Electronic Cash System. This paper is considered to be the first
written trace of the blockchain concept. The identity of Satoshi Nakamoto remains unclear. The
paper described a transactional system that avoids centralised financial intermediaries by
promulgating a peer-to-peer electronic cash network that uses cryptocurrencies (e.g. bitcoins).
This blockchain peer-to-peer network securely authorises and legitimises each transaction, and
the ownership of a bitcoin over a shared public ledger known as a blockchain.
Over the past decade, cryptocurrencies and blockchains have created the basis for a
technological revolution for financial transactions. Blockchain techniques are now being applied
to other types of transactions such as securities settlements. The blockchain provides a
distributed ledger that enforces uniform transactional rules in a secure manner that foils
attempts to cheat the system.
Since 2013, more than $1.8B has been invested in ventures that develop blockchain based
systems. Banks, insurance companies, and large corporations have announced multi-million
dollar collaborations with blockchain startups in order to find applications in their respective
sectors. The blockchain concept challenges established commercial and institutional models
across borders throughout various parts of the world.
The terms bitcoin and blockchain, though often used synonymously, are not: blockchain is the
technology that enables secure cryptocurrency transactions, and bitcoin is the moniker for the
cryptocurrency described in the Nakamoto research paper.

OLMA NEXT FUND APRIL 2017
The appearance and development of blockchain
technology was due to two main factors
Limits of financial Infrastructures in the new digital world
With institutional (central bank) control of the monetary order, payment transaction systems
must ensure that:
1) Those who are party to a transaction are truly in possession of the assets subject to the
transaction;
2) Ownership of the assets (e.g. bitcoin and a good or service) has truly changed after the
transaction;
3) Each monetary unit is spent just once (i.e. the original holder cannot twice spend the
bitcoin).
In a traditional financial system, trust comes from the guarantee provided by central banks for
their state currencies. The financial crisis of 2007-2008 challenged established public trust for
central bank institutions because they failed to properly regulate the financial system. Blockchain
based systems emerged as a new means to arrange financial transactions free of central bank
control and international borders.
Blockchain has the potential to bring transparency to the ownership of assets. The monitoring of
the ownership of alternative assets has always been opaque.
Bitcoin challenges the traditional monetary order that is based
upon the powers of central banks, and the concept of their
currencies as sovereign and territorially centralised
Transparency of ownership of assets
6
EMERGENCE OF BLOCKCHAIN
Centralised Payment System
Blockchain Distributed Ledger System

EMERGENCE OF BLOCKCHAIN
The Role of the World Wide Web
The convergence of several Internet technologies has had a pivotal role in the emergence of
blockchain technology.
Rapid and secure online payments were one of the first imagined uses of the Internet, however
double spending has been a difficult problem for developers. With a physical currency (coin or
paper) the act of spending transfers it to the new owner; so how does a digital system enforce
this process?. The first electronic money platforms took months to develop and implement and
encountered many obstacles such as fraud and transaction record-keeping. DigiCash, the first
secure online electronic money system, used a system similar to that now used by airlines for in-
flight credit cards: payers and receivers exchange serial numbers and, once electronically
connected to the central registrar, the transaction is verified. DigiCash went bankrupt in 1998,
though not due to technological fault, but because of timing and poor management.
The blockchain and bitcoin concepts were primarily inspired by two technologies:
1) A method to discourage spam and piracy: the commonly used method to avoid spam is to
require a sender to solve a digital puzzle before a message is sent. This requires insignificant
computer power and it makes sending spam messages uneconomical. Also, because many
forms of piracy require "brute force" techniques to exploit systems, an integrated retardant
such as puzzle solving provides a considerable increase in security. This technique is an
essential aspect of blockchain technology.
2) The Tor anonymous decentralised network: The 1990s saw the emergence of anonymous
communication on the Tor network, which was developed by research teams in partnership
with the United States military. The Tor network encrypts data and sends it via a network of
nodes that make tracking impossible. This enables user anonymity because the traffic is widely
distributed throughout the network. Rather than relying upon a centralised server chain, traffic
is routed through nodes that have the resources available to manage bandwidth. The Tor
network has paved the way for private document sharing and communication.
Blockchain: IoT Network Revolution
When the Blockchain Technology meets the Internet of Things

BLOCKCHAIN INDUSTRY OVERVIEW (1/2)
TO DATE
The blockchain market is growing rapidly ...
The blockchain market is rapidly growing and had a turnover of $210 million in 2016. Projected
total market revenue in 2021 is $2.3 billion. The number of FinTech startups, and in particular
blockchain startups, is growing exponentially.
The blockchain market remains dominated by the United States (75%), largely driven by Silicon
Valley investments (27.1%). Europe is second (16%) followed by Asia (6%).
… but the market is changing
Two major trends stand out in the blockchain universe:
1) Cryptocurrencies: the majority of investments in the blockchain universe are bitcoin related.
The three startups that received the largest investments in 2016 were all involved with Bitcoin
(21 Inc., Coinbase and Circle). However, non-bitcoin-related investments within the blockchain
universe have accelerated in recent years. In 2013, only four of 76 major blockchain
investments were not associated to bitcoin. In the first three quarters of 2016, this increased to
26 out of 87 deals. Ethereum and other similar platforms will continue to increase the
attractiveness of blockchain technology and will make possible a range of previously theoretical
business models. Investments in blockchain technology are expected to accelerate.
2) Blockchain Types: There are three main types of blockchain:
• Public blockchains, which allow users to carry out transactions without intermediaries thanks
to a virtual currency;
• Corporate blockchains, which function in the same way but on a corporate scale and without
virtual money;
• Hybrids, which are built on public blockhouses and operate on closed networks.
Hybrid blockchains captured the bulk of investment in the third quarter of 2016, but public
blockchains remain the most significant for investment.
Blockchain Technology Market Worldwide (2016-2021)
Bitcoin vs. Blockchain % of Total Activity
(only equity investments included)

BLOCKCHAIN INDUSTRY OVERVIEW (2/2)
Commitment from Investors
Blockchain startups have attracted investor interest once the price of the bitcoin surpassed
the $200 in 2013. A new wave of investors surfaced in this developing market, and peaked
in 2014 with a total of 381 investors. In addition to venture capitalists, corporate investors,
business angels and banks participated. Digital Currency Group (64 transactions) and
Blockchain Capital (42 transactions) are the most active investors in the market.
Equity Investment
Since 2013, over $1.8 billion has been invested through 550 deals. Investor interest peaked
in the first quarter of 2015, with 67 companies funded with $210 million. Business is down
in 2016 with a fall of 18% in transactions as compared with 2015.
Four fundraisers surpassed $50 million in 2016: Circle ($60M, Series D), Digital Asset Holdings
($60M, Series A), Ripple ($55M, Series B) and Blockstream ($55M, Series A).
Investment targets are gradually becoming more mature. While investments were solely
seed capital in 2012, 2015 was marked by investments in Series A (8.7%), B (4.3%) and C
(2.5%). The year 2016 saw the first Series D blockchain funding.
Development of Proof-of-Concept Projects
At present, nearly seventy proof-of-concept blockchain projects (POCs) have been
announced by major global companies. Businesses in the banking, insurance and trading
sectors are most interested in blockchain technology. Almost half of the world's major
banks are working on a POC project including Société Générale, ING, and HSBC. Within the R3
consortium, seventy banks, including France's Natixis, have deployed an Ethereum
infrastructure to exchange virtual currency between them.
Bitcoin & Blockchain Annual Global Financing
(only equity investments included)
2012-2016 Best funded Blockchain Startups

- Ecosystem simplification
- Faster interbank clearing &
settlement
- Lower transaction costs
- Reduced counter-party risk
- Transparency and auditability
- Ease of software development  
and integration
- Unproven technology
- Untested capacity / scalability
- Low transaction speed
- Possible consensus protocol
flaws
- Cryptocurrency price volatility
- Uncertain regulatory status
10
INTRODUCTION TO THE BLOCKCHAIN PROTOCOL
The Anatomy of a Transaction
Blockchain: Balancing the Benefits
Introduction to the Blockchain Protocol
A blockchain is an information storage and transmission technology that is transparent, secure, and
operates without a central control device. By extension, a blockchain is a database that contains the history
of all exchanges between its users since its creation. This registry is decentralized and stored on the servers
of its users. It operates without a central intermediary, thus eliminating infrastructure costs.
The security of a blockchain is guaranteed by a cryptographic protocol and it is updated in real time
independently by decentralized computational power and a network contributed and conducted by users.
In the case of bitcoins, these users are called “bitcoin miners”. Bitcoin miners check the validity of bitcoin
transactions, and graft a new line to a block, which forms an unbroken chain: the blockchain. The “miners”
are rewarded for their work though issuance of new bitcoins for a “block” of transactions.
The legitimacy of a blockchain cryptocurrency is ensured by recording all prior transactions on the
blockchain and within the network. New transactions are distributed to each node. The complexity of the
blockchain protocol algorithms makes transactions unfalsifiable. Each node collects the new transactions in
a block. For the bitcoin there are an average of 1,500 transactions per block every 10 minutes.
Blockchain components
1) The currency: The medium for transaction settlement within the network and rewarding miners.
Cryptographically generated, protocol rules determine issuance and destruction. May be tradable  
“off the network” or only exist on network.
2) The ledger: A public record of all transactions – stored across a distributed P2P network of servers.
3) Consensus: Prevents “double spend” or validation of fraudulent transactions:
• Proof of work: Miners compete to validate blocks by solving highly processor/RAM intensive
cryptographic problems for reward; -
• Distributed consensus: Majority validation by trusted subnetworks of peer nodes within the network;
• Proof of stake: Achieves distributed consensus by network users proving their ownership of currency.

THE BLOCKCHAIN ECOSYSTEM
TECHNOLOGICAL LAYER
“BLOCKCHAIN-AS-A-SERVICE”
USERS
BLOCKCHAINS
Bitcoin Ethereum
CryptoNote
Bitshare
NXT
Colu
Ripple
Chain
Goochain
Filament
R3
Backfeed
Startumm
Enigma
Factom
Linq
Notaries
Logistics
Crowdfunding
Data Storage
Payments Insurance Energy Culture IoT
Governments
International organisations
Political parties and
associations
Companies
Individuals
Storj.jo
JetCoin
ThingChain
Stanmpd.io OneName Augur Solarcoin UjoMusic Tileplay
1
2
3
4
1
2
3
4
The public ledger that records users and transactions for a given service;
Companies that act as the technical interface between a blockchain and end users (transacting parties). They process the information contained in a blockchain
on behalf of the transacting parties;
Applications for the transacting parties;
State organizations, private actors, associations and individuals that beneﬁt from blockchain services.

FOCUS ON THE BITCOIN
The bitcoin was the name of the cryptocurrency used by Satoshi Nakamoto; it was put into
circulation in 2009. The bitcoin gained popularity when its price rose from $217 in January 2015
to $697 in October 2016. There were more than 830 bitcoin ATM's around the world at the end
of 2016, with the majority located in North America (73%) and Europe (20%). The leader in this
market is Genesis Coin with 35% market share.
The figures below highlight the power of the bitcoin network:
Twenty thousand times the most powerful computer
The bitcoin blockchain is currently a 50-gigabyte file. The total computer power currently
devoted to bitcoin mining is 2,250,000 petaflops. This is more than 20,000 times the power of
the world's most powerful computer, China's Sunway TianheLight (rated at 93 petaflops) and is
well over 100 times the cumulative power of the 500 most powerful computers.
The bid for 21 million BTC
There are currently nearly 16 million bitcoins. The bitcoin rewards that are given to bitcoin
miners increase the number of bitcoins in circulation, like a treasury does when it prints new
currency.
The Nakamoto protocol provides that the amount distributed to the winners of the mining
should be halved every four years. The reward was initially 50 bitcoins per block but it is now
12.5 bitcoins. This reward will be reduced by half again by July 2020. The process of issuing new
bitcoins will have ceased in 2140 leaving a total of 21 million bitcoins in circulation.
Bitcoin Capitalisation, in $B
Bitcoin : Top Currency in 2016
Bitcoin capitalisation December 2016
Wallet owners
of the capital value of all cryptocurrencies
Market price
Transaction volume
Number of transactions
$15.5B
10M
90%
$1145
$55.4M
281k

CURRENT APPLICATIONS AND MARKET DEVELOPMENT (1/5)
Today there are four major applications of blockchain technology as a means of transferring
monetary value:
1) Payment Systems
2) International Fund Transfers
3) Micropayments
4) Interbank Transactions
Payment Systems
Reduced transaction costs: To accept credit card transactions, a merchant pays a discount
rate of approximately 3% for each transaction. These processing fees are lower for large retailers
and debit card transactions, and more important for premium credit cards. This discount rate
consists largely of bank exchange fees, which go entirely to the issuer of the card. For bitcoin, the
overhead for transfer of money is free in 99% of the cases. Thus the blockchain allows traders to
improve their margins.
Transaction security: MasterCard and Visa payment processors (which process 88% of
transactions) are known for their anti-competitive practices aimed at maintaining their
commission level. Exclusivity agreements prevent merchants from offering alternative and
cheaper payment methods, such as American Express and Discover. However, these high
royalties do not protect merchants, who lost about 1.47% of their turnover due to fraud in Q1
2016. Bitcoin offers a secure way to make transactions.
Simplification of the payment system: With the blockchain, no registration is required. The
user simply downloads an “electronic wallet” and creates a free bitcoin (or other crypto-currency)
address. Digital portfolios are user-friendly platforms for initiating and receiving transactions.
Traders are usually charged a fixed fee of about 1% by companies that specialize in bitcoin such
as BitPay or Coinbase. These portfolio services offer immediate spot price conversions and the
bitcoin network ensures pseudo-anonymity.
The Various Cyptocurrencies
Bitcoin
First working cryptocurrency. It
remains dominant but lack of
scalability and other inherent flaws
that will likely prevent mass adoptions
Validation: Proof of work
Latency: 10 minutes
Currency: BTC (on and of network)
Issuance: Mining reward.  
21M limit
Ripple
Consensus based protocol designed
specifically for existing financial
institutions. Supplements existing
processes and directly supports flat
currencies.
Validation: Distributed consensus
Latency: 3 seconds
Currency: XRP (on network only)
Issuance: At inception – 100BN
units created
Ether
Smart contract and distributed app
focus.
Validation: Proof of work
Latency: 12 seconds
Currency: ETH (on network only)
Issuance: Mining Reward
Lifecoin
Consensus: Proof of work
Latency: 2.5 minutes
Currency: LTC (on and off network)
Issuance: Mining Reward.  
84M limit
Dogcoin
Consensus: Proof of work
Latency: 1 minute
Currency: Doge (on and off
network)
Issuance: Mining reward 
Unlimited
Stellar
Ripple derivative. Financial focus
Validation: Distributed consensus
Latency: 2-5 seconds
Currency: Lumens (on network only)
Issuance: 100 BN  
then 1% issued PA

International Fund Transfers
The sending of money from person-to-person and from one country to another has become
common practice. The total annual remittance volume of such transfers is expected to exceed
$600 billion by 2017. However, annual international remittance market turnover is now just over
$40 billion.
Current Solutions
The traditional players, Western Union, MoneyGram and Euronet Worldwide, dominate the market
with franchise systems around the world. They manage compliance and money transfer
operations while providing local traders with a complementary service and revenue source. The
transfer fee is generally between 2% and 6% of the transaction amount. Banks also oﬀer this
service, but it requires on average three days, and bank transfers are more expensive, with fees of
up to 10-15%. Another limitation is that banks may operate only in areas where they have a strong
branch network, thus making access to these services impossible in other locales.
Blockchain Potential
In recent years, several specialized bitcoin remittance services to speciﬁc countries have
appeared: Palarin for the Philippines, BitPesa for Africa, CoinPip for several countries (Australia,
Brazil, Canada, China). Most of these bitcoin remittance services operate in a similar way: bitcoins
are sent to the country of origin and then immediately converted to the local currency. By using
blockchain technology to bypass traditional actors, individuals can theoretically send money faster
and at lower cost. However, these companies continue to face regulatory constraints that vary
from country to country including KYC (Know Your Customer) and money laundering regulation.
They also face liquidity problems. The fact that the use and exchange of bitcoins is limited is still a
major obstacle to wider adoption.
Main Players for International Transfers
Rising volumes and improving liquidity on regional exchanges
are driving growth in cross–border payments

Micro-payments
Expanding Horizons
Some of the most disrupted industries could be reborn through online micro-payments, for
instance music and online media, which have business models based upon advertising and
subscriptions. These models often provide poor quality content and do not allow the user to solely
purchase content that is of interest.
Single item purchases of some types of content have been rare because payment fees make small
payments prohibitive (e.g. PayPal has a minimum transaction fee of €0.28). Only strong
distributors such as Apple iTunes have been able to sell individual digital content by grouping
multiple purchases into one payment to reduce fixed fee costs.
Micro-payments can impact such business models by enabling monetization of previously
untenable services.
The Potential for Blockchain
The very low transaction costs of bitcoin technology and the decimalisation of transactions make
micro-payments possible. This makes viable business models based on a high volume of small
transactions. Micro-payments create the possibility for very effective subscription and tailor-made
services of many types. A current example is BitMonet, which provides a platform for content
creators to be paid directly by consumers with micro-payments through bitcoins.
However, how can a multitude of micro-payments be achieved without polluting the blockchain
with so many micro-transactions? A new technology called sideblock provides a mechanism for
micro-payments via a second blockchain that records embedded transactions at the top of the
primary blockchain. These systems, developed by the startups 21 Inc and Blockstream enable the
opening of sidechain "channels" between the parties that register only the opening and closing
transactions in the primary blockchain.
Bitmonet: Enabling Micro-payments

Interbank Transactions
Institutions are increasingly interested in the potential for using blockchain technology for
interbank transfers:
1) Security: Central banks have explored blockchain technology with great interest. The piracy
that allowed the theft of hundreds of millions of dollars from the Bank of Bangladesh's
account with the US Federal Reserve via the SWIFT system demonstrated that existing
protocols had enormous loopholes. While the Federal Reserve has only met with industry
leaders and lobbyists, the People's Bank of China, the Bank of Canada and the Bank of
England are exploring the possibilities for implementing distributed accounting systems.
2) Systems control: Experiments have focused on private blockchains, where a limited number
of players can register transactions or have access to the registry. Partnerships involving
major players in financial services, technology and industry were formed by R3, the Digital
Asset Holdings project and Hyper Ledger. The Ripple Network was founded in 2012 to
provide institutions with a private, fast and secure blockchain network. More recently, UBS
announced the opening of a research center for blockchain technology in London and
Citibank has its own project to issue a proprietary digital currency, the Citicoin.
3) Cost reduction: Banks are also interested in the potential for using blockchain to facilitate
trade and validate ownership for their back-office operations. A blockchain could, for
example, enable them to dispense with clearing and clearing chambers, which are complex,
centralized and costly. Business centers need to boost their profit margins and the potential
of the blockchain in this area is considerable. The use of blockchain could save banks 15 to
20 billion dollars a year by 2022 thanks to lower infrastructure costs related to international
payments, trading and compliance.
Top Banks Tackle Blockchain Proof-of-Concept
In 2016, 14 of the top 30 banks engaged in blockchain Proof-of-Concept
Estimated Bank Spending on Blockchain Tech

Illustration in the Energy Sector: TRANSACTIVE GRID
17
The Power of Blockchain Disruption
Beyond the transfer of monetary value, blockchain technology has revolutionised contracts. For
example, Smart-Property uses blockchain to enable the transfer of real property. Since 2014,
Blockchain 2.0 has included Smart Contracts.
Examples of Blockchain Applications
In addition to applications for digital transactions such as real estate transactions, crowdfunding, and
cryptocurrencies, there are two new application categories:
• Record-keeping: a blockchain may be used as a storage register to deposit data that requires
guarantee of existence and information such as date of creation and ownership. Examples
include patents and medical data.
• Smart-contracts: a blockchain may be used to develop and retain stand-alone contracts, for
example contracts between several parties that are in digital format and that have been
executed without human intervention according to their terms and conditions.
Any situation involving an expensive or fallible trusted third party is an opportunity to create a
blockchain application. Banking, real estate, health and transportation are sectors that are currently
considering the opportunities oﬀered by blockchain to improve or replace current models.
Power of Blockchain Disruption
Blockchain technology invalidates economic, political or social power derived from technical or
regulatory control. It does so without added costs perceptible by the end user since it enables the
development of an equivalent autonomous service at a lower cost. Blockchain technology enables
creativity with little constraint and its application is virtually limitless. It obliges annuity managers to
fundamentally question themselves or be "disrupted" - anteriority is no longer a guarantee of
legitimacy.
Blockchain Pops Up in Numerous Sectors
Works on top of
existing
infrastructure
Utilities can receive
transaction &
maintenance fees.
Local
Transactive Microgrid
Regional
Renewable Provider
Smart Meter
Produces Surplus
Regular Meter
Consumes Surplus
Consumers can choose where to
buy renewables:
Monthly bills:
10% from regional
10% from Local Microgrid

BLOCKCHAIN 2.0 (1/3)
BLOCKCHAIN 2.0: Smart Contracts and Decentralized Autonomous
Organizations (DAO)
Distributed applications are the future of the blockchain. Two new tools are available to register
exchanges in a blockchain: Smart Contracts and Decentralized Autonomous Organizations (DAO).
Smart contracts
A smart contract is a computer algorithm of the "If This Then That" (IFTTT) type; it executes a contract
once given parameters and conditions have been achieved. The verification and application of the terms
of the contract are carried out by the technology itself, not by a trusted third party. A smart contract
executed using a blockchain makes possible the automated and secure transfer of digital assets.
Smart contracts are a powerful tool to connect the digital world and the physical world in a reliable way,
without going through costly and imperfect human control.
The underlying contracts can be intangible or physical
Intangible Assets: These include property titles or financial asset shares. Derivatives markets have
weakened since the financial crisis due to high management and compliance costs. The automatic
execution of transactions which is enabled by smart contracts could allow a return to profitability. A
public register of exposures to derivatives could reduce the types of counter-party risk that led to the
fall of Bear Stearns and Lehman Brothers.
Physical Assets: With a smart contract, connected objects provide information intended to activate the
contract. There are numerous examples:
• Driver access to the on-board computer of a connected car for a car rental;
• A smart contract that binds the payment for a property to a lock so that when the funds have been
received, the private key to the lock is transmitted to the new owner;
• Geolocation data for a package delivery can automatically trigger a payment when it arrives at its
destination;
• A moisture controller could check the quality of a cargo and cause a payment without any agent
intervention.
Evolution: Traditional to Smart Contracts
Traditional contracts Smart contracts

Blockchain 2.0: Smart Contracts and DAO
Decentralized Autonomous Organizations and Instruments of Coordination
A Decentralized Autonomous Organization (DAO) is a computer process that seals the set of
rules that govern a transactional or operations system in a blockchain for an organization. The
protocols of operation (membership, hierarchy, retribution) are defined upstream by the
community at the origin of the organization. They are then registered in the blockchain in the
form of lines of code and executed automatically. This is a tool for transferring the properties
of the blockchain to the scale of an organization: security, transparency, fluidity. DAO
eliminates error and human arbitrariness in trade. It can be likened to a matrix that
articulates a multitude of smart contracts between them.
In this configuration, Lawrence Lessing's phrase "Code is Law" extends from cyberspace
to the world in its entirety.
For now, the users of DAO blockchain technology are primarily listed venture capitalists, which
use it to automate their investment process. Some organizations publish their own stand-
alone contracts in the form of tokens to remunerate users. This remuneration allows the
organization to set its own infrastructure requirements thus eliminating "2/20" management
and performance fees. TheDAO is the only DAO on Ethereum; it carried out $117 million of
crowdfunding in 2016.
Other potential applications of DAO are numerous. An organization such as the Social Security
Administration could use a DAO that would consist of thousands of smart contracts to respond
to the specific situation of each insured. Automation of transactions would generate
productivity gains (processing time), avoid fraud and maximize security.
In the short term, the Internet of objects will become a major field of application for DAOs.
The multiplication of connected objects will increase the need for intelligent, automated,
secure protocols with little computer power consumption. DAOs offer the appropriate
technological foundation for "machine-to-machine" exchanges.
DAO
Illustration: OpenBazaar.org - dCommerce
• Free Market for all.
No fees. No
restrictions. With
total anonymity
• Open-source p2p
markets without
any middlemen
• No Amazon, eBay
or Paypal payment
processors. Runs
from desktop apps

Etherureum and the Future of Blockchain
Although bitcoin promises to revolutionise payments, its range of programmable functions
does not make it possible to take blockchain technology to its full potential. New protocols
that use blockchain concepts are emerging. An example is Ethereum, which enables the
use of smart contracts and DAO.
Ethereum is an open source blockchain platform that that is widely used for smart
contracts. It was developed by Vitalik Buterin and is owned by the Ethereum Foundation. In
2014, the Ethereum team raised €14 million and broke the funding record for a
crowdfunding platform. Ethereum has been available to the public since spring 2015 and
brings together an extensive community of independent developers. The Ethereum
cryptocurrency is called Ether but it is also a distributed global computer network that uses
blockchain technology. The Ether has grown rapidly to become the second largest digital
currency with a total market capitalization of more than one billion dollars.
Ethereum’s competitive advantage lies in a dedicated programming language with its own
cryptocurrency. These together allow it to build its own autonomous decentralized
applications. By structuring the access layers to its blockchain, Ethereum has played a key
role in the adoption of alternate blockchain technology. The Ether can be traded as a
currency or used inside Ethereum to run applications or monetize the work. Developers
can code intelligent contracts and other applications, and pay peers with Ether to run the
code.
Due to its lead over the rest of the market, the majority of the most successful blockchain
projects are now written with Ethereum. Will this domination turn into a monopoly? In this
age of digital innovation where networks promote their own emergence, one thinks the
achievements by Google with search engines, Amazon for e-commerce or Facebook for
social networks.
Protocol Complete protocol Limited script language
Duration of
transaction
12 seconds 10 minutes
Creation of new
currency
Ether emitted in blocks of 5 ET.
Amount emitted per year
constant at 15.6 M units of ether
Reward divided by 2 every 4 years
Size of a block No limit 1 MB
Proof of work
Ghost protocol - discourages
mining by centralized pools: 
no advantage to associate to gain
success probability for issuing
new blocks.
Centralised pools of professional
miners
Hash algorithm
Encourages mining with graphics
processing units
Bitcoin rewards application specific
integrated circuits, ASIC built
specifically for bitcoin mining
Ether - Price Evolution (in $)

Crossing the Chasm – Blockchain Hyper Cycle
Bitcoin
Experiment
BaaS
Widening of
Vertical use cases
Use-case crossover
Aligned markets
21
FACING CHALLENGES
The large potential for disruption by blockchain technology is not yet reflected in technological
advances. At this stage the most significant uses of blockchain technology are the bitcoin and
experimentation by institutions. This paradox, with expectations higher than current capacity of
technology, is recurrent and expressed in the Gartner Hyper Cycle.
The challenges for blockchain technology are:
1) Performance and scalability: With the exception of the bitcoin, and to a lesser extent some of the
projects on Ethereum and NXT, blockchain initiatives remain on a relatively limited scale. Also, the
capacity of blockchain technology remains yet to be proven. By way of example, the bitcoin network
makes it possible to record seven transactions per second, compared with the current 2,000
transactions per second for VISA. 
The overall weight of the bitcoin blockchain, on the order of 50gb, testifies to the current limits of
the technology. To develop new cases for its use and to make the technology accessible to all,
blockchain technology must be able to improve its performance.
2) User experience: Blockchain services are handicapped by a route that users find too complex, and
that limits the value perceived by users. To enter the blockchain universe, the user must install
several software components to enjoy even basic services. These prerequisites limit the adoption of
the blockchain to a population of savvy technology enthusiasts.
3) Ecology: By 2015, the electricity consumption of the bitcoin network was equivalent to 280,000 US
households. With the increase in the size of the bitcoin blockchain and the expansion of
cryptocurrencies, the energy impact of the blockchain will become much more consequential.
4) Regulation: The blockchain ecosystem must find its place in the world of regulation to convince; the
regulation of blockchain services is still a blank page. For example, it is not certain that a smart
contract has legal value. However, progress is being made and several court decisions in Europe
and the United States recognize the bitcoin and admit de facto the dynamics of disintermediation of
the blockchain. In France, the Caisse des Dépôts et Consignations has sided with the banks. Also, the
standards for governmental surveillance and security could be a major barrier to the universal
adoption of cryptocurrencies.
“From a currency perspective, the state-by-state licensing
regime is by far the biggest hurdle to anyone trying to use
bitcoin as a payment instrument.”
Perianne Boring, Chamber of Digital Commerce
Open Ledger
Standards

BLOCKCHAIN : CONFIDENCE WITHOUT LIMITS?
General confidence in the system is the greatest risk for adoption of blockchain technology.
Bitcoin and Ethereum each have had negative publicity due to incidents of piracy or pure
theft. There have been two major piracies of the bitcoin to date that raised concerns over
the platforms:
• Mt. Gox in 2013 ($500M loss);
• Bitfinex in 2016 ($53M loss).
These two examples relate more to rapidly changing individual societies than to fundamental
flaws in the protocol, but this does not mean that fundamental security risks do not exist.
The greatest vulnerability to an attack is when an actor controls the majority of computing
power of the mining. In reality, the large size of the bitcoin network makes it difficult to
capture a significant market share. At one point, the BTC group controlled 20% of the bitcoin
network, but the consortium voluntarily dissolved since the perceived security vulnerability
could considerably reduce the value of BTC’s massive bitcoin holdings.
The consequences of a coding error can be catastrophic and hardly reversible, as evidenced
by The DAO. Due to a vulnerability discovered in the source code of the smart contract, a
member of the network drained the main account of the application to the tune of $50
million. Although the sum is impressive, this was not the heart of the problem. With this
incident, investors were confronted with a dilemma: lose their stake or agree to manually
modify the blockchain code (which was considered inviolable) to return the funds to safety.
The second option prevailed and the funds were partly recovered following an operation
called a "hard fork".
This event requires rethinking the limitations of human intervention. A blockchain system
was considered safe by nature, but the attacks have shown otherwise. The nature of the
platforms used by blockchain, the complexity of smart contracts, and the number of
blockchain miners are all factors that can influence the security of the services that use
blockchain technology.
THE DAO ATTACK – Times and Figures
The 51% Attack, or the limits of the principle of consensus
The attacker mines alternative blocks, from the previous block
The attacker publishes the string he obtains on the network since it is longer than the existing string (which is
possible because it has more than 51% of the network power)
As the channel is longer and uses the consensus principle, it replaces the existing string and the transactions
contained in it are canceled
1
3
An attacker wants to rewrite the Blockchain in order to cancel certain transactions present in a block:
2
FIRST PART OF THE CHAIN
MAIN CHAIN
SECONDARY CHAIN, BUILT BY STRIKER
Has at least 51%
of mining computing power
Transaction
Transaction selected
by striker to be deleted

CONCLUSION
Blockchain technology has paved the way for an Internet of Transactions.
Blockchain technology has already proved its worth in such areas as means of
payment, interbank exchanges and international remittances. Touted as the next
digital revolution, blockchain technology has the potential to transform
traditional industries and alter society through disintermediation of trade. Any
situation that involves an intermediary that is expensive or fallible represents an
opportunity to create a blockchain application case. No industry is immune to
the blockchain’s disruption potential.
In 2017, the blockchain technology is at an inflection point. The industry is in a
state of transition and must move to Blockchain 2.0, which means the adoption
of more sophisticated applications, such as micro-payments and smart contracts.
Having outgrown its original bitcoin community, the majority of blockchain
applications have yet to pass beyond the prototype stage to make blockchain
technology the greatest restructuring technology of the next decade.
The current state of the blockchain technology is similar to the state of the
Internet of the early 1990s, which suggests that the future of the blockchain is
very promising. However, many obstacles must be overcome to allow a wider
adoption of the blockchain, in particular the terms of performance, regulation
and environment. Trust in this system must also be strengthened since its
reputation has been repeatedly undermined following scandals and piracy in
recent years.

Q&A
Bitcoin – Direct Investment in Cryptocurrency
The Bitcoin: Which asset class?
Opinions differ as to the asset class of the bitcoin:
• Since the function of the bitcoin is to process and store value, many investors consider it a
financial investment.
• The US Commodity Futures Trading Commission classifies the bitcoin as a raw material.
However, the bitcoin has no other real world application, unlike traditional commodities
such as gold, which can be used in the production of computers, jewelry, mirrors and
batteries as well as money.
• The bitcoin is often seen as an emerging technology with a risk/return profile similar to a
venture capital investment. However, the bitcoin is liquid, while venture capital
investments can often take years for liquidity. Indeed, the bitcoin has the same liquidity as
the largest Exchange Traded Fund: Gold (GLD).
Principal features of the bitcoin as an investment
• Deflationary asset: The bitcoin is deflationary by nature due to its future rarity. Its growth
is capped at 21 million units, which means that by 2040 the cessation of bitcoin mining will
naturally increase its value. Conversely, cash is inflationary by nature, particularly because
of central bank manipulation.
• Volatility: Due to its decentralized nature and the lack of government regulation, the
volatility of the bitcoin is very high. Speculators in China have turned to bitcoin trade to
exploit this volatility. More than 94% of the volume of trade in bitcoin was in Yuan in
August 2016.
• Low market capitalization: The bitcoin’s relatively small market capitalization, which is
equivalent to that of companies such as Foot Locker, hampers investment in the bitcoin. It
is difficult for institutional investors to take a stake. Thus, it is often combined with other
assets in management of a portfolio.
• The lack of correlation of the bitcoin with traditional asset classes and its risk/return profile
make it a medium of choice for a diversification of a portfolio.
Sharpe Ratio: Bitcoin Risk-Reward Profile
Bitcoin Weekly Volatility

Q&A
,
How the Safety of the Bitcoin System is Assured?
The security of the bitcoin protocol is ensured by  
advanced cryptographic techniques
The stages of the bitcoin mining process
When a new transaction is issued, it is not directly registered in the blockchain. "Miners" perform a
validation and transaction certification process (“Proof of Work”). This process is mainly based upon
solving a complex cryptographic formula:
• The miner must first verify the authenticity of the transaction: this step could be compared to the
verification of a check transaction (verifying funds as well as the signature of the owner). Each
blockchain transaction has a “signature” that is based upon a cryptographic key.
• The bitcoin miner then attaches the transaction to a “block” of transactions. This step requires
substantial computational power since the miner must create a robust encryption hash (a
sequence of letters and numbers) to link a new block of transactions to the blockchain.
• Once a miner calculates the hash of the new block, he adds it to the blockchain and distributes
the new version to the whole network. The network then attests to its validity during a process
called the distributed consensus.
• This process ensures the chronology of transactions and provides security against modifications
to the blockchain. Any modification of a block would change its “hash” and therefore break its link
to other blocks and compromise the integrity of the entire blockchain.
Incentive for miners to lend their computing power
Computational power is the principal resource required for proper functioning of a transaction
network. The bitcoin protocol allows miners to monetize their computing power. Miners are
remunerated with a quantum of a cryptocurrency. Bitcoin senders typically attach between 5 and 20
basis points to a transaction to entice miners to attach it to the next block. The miner who first solves
the cryptographic problem necessary to create the hash for the block is paid. There is an additional
incentive for miners to check each block.
Mining - A Key Step in the Bitcoin Process
Blockchain Mining Center C7 (Utah, USA)
Transaction 1
Transaction 5
Transaction 34
Transaction 54
Transaction 65
Memory pool
Block header
Transaction list
Block hash (Block ID)
Previous block id
Transactions hash (Merkle root)
Number of transactions
Transaction 1
Transaction 5
Transaction 34
Transaction 54
Transaction 65
Bitcoin block
Block is added to the node’s
blockchain
Miner
4.
Bitcoin user
Validates all transactions
and creates a block
Transaction 1
Transaction 5
Transaction 34
Transaction 54
Transaction 65
Transaction 86
1.
3.2.
Node

BLOCKCHAIN CASE STUDY
CASE STUDY: BLOCKCHAIN REAL ESTATE TRANSACTION MAP
This process map summarizes how a typical real estate transaction can occur using a
blockchain to simplify and disintermediate the process (no need of physical signature,
meeting or contact between seller and buyer).

OLMA NEXT LTD APRIL 2017 27
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OLMA NEXT LTD APRIL 2017 28
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The content of this document has been researched and implemented with a high degree of care. However,
the possibility of errors in the processing of sources acknowledgement and copyright respect for external
content use cannot be fully excluded.
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