Lately, a growing amount of attention has been turned to Bitcoin and Ethereum. These are based on blockchain technology. Blockchain technology is behind countless new trends such as cryptocurrency, initial coin offerings (ICOs), and non-fungible tokens (NFTs). Blockchain technology uses a fundamentally different approach than conventional core technologies, and many people lack familiarity with it. We have explained about the blockchain technologies in the previous articles.

The first issue of the running feature focused on general blockchain technologies, while the second issue explained the features of DNCWARE Blockchain+, the private blockchain developed by Toshiba Digital Solutions. In this third and final issue of the series, we will look at how blockchain can be applied in the business area. 

* DNCWARE Blockchain+ is a registered trademark of Toshiba Digital Solutions Corporation in Japan.
* DNCWARE Blockchain+ is not currently available for purchase outside Japan.

Blockchain technologies have evolved tremendously from when they were first created until they came to be applied to the business field.

Blockchain was first developed as the core technology of Bitcoin cryptocurrency. Hash chain structures in the blockchain and consensus algorithms made transactions highly tamper resistant.

The smart contract (automated contract) function made it possible for blockchains to be used for purposes other than cryptocurrencies, which led to a movement to apply blockchain technology to business. Furthermore, the core technology of blockchain itself also changed, leading to the birth of the private blockchain.

Smart contracts are programs recorded in the blockchain, that are called when a transaction is processed and determine the specific content of the processing that will be performed. As application developers program smart contracts for their respective purposes, various applications other than cryptocurrency can be performed. Smart contracts are one of the exceptional features of blockchains.

Private blockchains are operated by specific administrators or consortiums, and the scope of information that is disclosed to participants can be specified. The ability to pay usage fees without dealing with cryptocurrency transactions makes things easier for businesses, and this technology is already being used in a wide range of businesses other than finance.

DNCWARE Blockchain+ (referred to hereafter as "BC+") is a private blockchain developed by Toshiba Digital Solutions. It offers ease of application development, flexible access control, high levels of reliability and availability, tamper resistance (see issue 2 for details). The ease of application development it makes possible has been received particularly well, and it is being used by companies and local governments in their projects.

We believe that the features of private blockchains can be leveraged in fields such as government and social infrastructure. Let's look at how private blockchains are being applied to business and other fields through three examples of digital transformation (DX) currently being carried out using BC+.

① Local government DX: Using BC+ in the digitalization of contract administration

The local government DX promotion plan being advanced by the Ministry of Internal Affairs and Communications advocates using digital technologies to improve the efficiency of operations. Until now, contract administration has been a field where efficiency improvements are difficult to achieve, because contracts are concluded by applying seals to physical contracts. The Enforcement Regulations of the Local Autonomy Act were revised in January 2021, making it possible to conclude electronic contracts with electronic signatures in accordance with the Electronic Signature Act. A great deal of progress has since been made in the digitalization of contract procedures. We have proposed an electronic contract service that utilizes BC+, and are currently working with local governments to perform verification testing of contract administration for procurement operations (covering all operations from operator registration to bidding, contract conclusion, contract execution, and delivery).

This electronic contract service creates the hash value of contract documents (electronic files) between parties, and stores the electronically signed hash value in the blockchain. This makes it possible to detect if the contents of the contract are changed after the contract is concluded. Contracts themselves continue to be managed using a contract management DB, while the blockchain technology records the factual matters of contracts, such as who the contracting parties are and when they concluded the contract, and ensures that the contents are not tampered with. Unlike the PDF signatures adopted by many electronic contract systems (a mechanism in which the hash value of the document part of the contract created in PDF is electronically signed and added to the second half of the PDF), various signatures attached to the contract documents other than PDF, such as notifications, drawings, and books, can also be tied to the contracts and managed in blockchain, making it possible to eliminate the use of seals and realize paperless documentation. This blockchain-based electronic contract service has been checked against the Ministry of Economy, Trade and Industry's The System to Eliminate Regulatory Gray Zones* and confirmed to meet the requirements for electronic signatures stipulated in the Electronic Signature Act.

* The System to Eliminate Regulatory Gray Zones: A system that allows businesses to confirm in advance whether regulations will be applied to their specific business plans. Even if the scope of application of the current regulation is unclear, business operators can engage in new business activities with peace of mind.

This test verifies that BC+-based electronic contract services can be deployed and linked with other existing procurement operation systems, such as whether existing electronic bidding qualification registration information can be used for the individual identification necessary for electronic contracts. By deploying electronic contract services, blockchain infrastructures for local governments can be developed. This will greatly contribute towards the promotion of local government DX in the future.

For example, application submissions which require identity confirmation could be digitalized and greater transparency could be achieved with respect to the execution of contracts between the private sector and local governments. This could improve the efficiency of the work carried out to respond to information disclosure requests. Smart contracts enable automated processing of business triggered by the conclusion of contracts within local governments, and with private companies. Making BC+ part of the system's foundation is expected to accelerate the digitalization and smartening of society as a whole, including members of the community, companies, and nearby local governments (Fig. 1).

② Inheritance DX: Use in identify confirmation

Blockchain has the potential for use in end-of-life planning and inheritance proceedings.

During inheritance proceedings, it is essential to clearly identify the assets that make up the inheritance and are subject to inheritance tax. For example, until now, bereaved family members used to investigate the savings of the deceased using printed passbooks printed by financial institutions. However, in recent years a growing number of people have been using electronic passbooks (digital passbooks) and internet banking, managing their savings online. This has made it harder for bereaved family members to determine what savings the deceased had. Even beyond inheritance, there are also many cases of the bereaved being unable to access digital photographs, which are valuable memories, and having to simply abandon them. Therefore, it is important to create an inventory of one’s inheritance and mementos, as well as clarifying what to do with them.

Digital services are now being created to make this easy to do. One of those services is an online inheritance support service offered by SAMURAI Security Inc. With this service, users can create a list of their assets and conclude corresponding family trust contracts. The KAMS authentication system, which makes it possible for parties to conclude electronic contracts, is built on a BC+ base. Blockchain distributed authentication technologies are used to prevent the unauthorized use of created and registered electronic seals. In addition, identification history information and contracts are recorded in the blockchain, making tampering difficult (Fig. 2).

In the future, if discussions on the digitalization of the holographic will system progress and legislation is enacted, this technology can further be applied to online will creation services.

* Reference: Cabinet Office Regulatory Reform Implementation Plan (Cabinet Decision of June 7, 2022) P66

Data contained in the blockchain could, for example, also be applied to real estate contract proceedings and loan screening procedures.

③ Logistics DX: Use in tracing physical goods

BC+ is also being used in traceability, to track objects such as products.

Traceability is one of the often cited applications of blockchain technology, in which transaction records can be mutually confirmed by related parties and are difficult to tamper with.

"Trace Ledger" is a logistics supply chain management service provided by ZEROBILLBANK JAPAN Inc. This service operates on a platform that utilizes BC+, and has already undergone several verification tests (Fig. 3).

How can blockchain be used for traceability to be effective? In the logistics field, transactions are performed based on data from individual operators who manage enterprise resource planning (ERPs) and warehouse management systems (WMS). Coordinating information with other operators therefore takes time and is often cumbersome, involving the use of paper forms.

ZEROBILLBANK JAPAN Inc. has developed a service in which QR codes are used to record information about who handled products, where, when, and in what way, in the blockchain. In addition to increasing the transparency of traceability, it also eliminates the need for paperwork such as inspection documents and delivery documents, serves as certificates of sale, and assists in authenticity management by managing documentation that goods are genuine articles in secondary distribution. Another potential future application is certification of logistics insurance related to the loss of insured articles.

From a business application perspective, blockchain technology can do three things: ① "Retain records in a way that is resistant to tampering" ② "Automatically execute contracts (smart contracts)" and ③ "Give shape to value and sell it." Examples of ① and ② were presented above in the BC+ utilization case examples. Now let's look at ③ "Give shape to value and sell it." In other words, let's learn about tokens.

Tokens are items that symbolize value. Everyday examples include gift cards, coupons, loyalty points, and membership cards that provide discounts. In cryptocurrency and blockchain contexts, "token" is used to refer to digital vouchers that are issued using blockchain technology (cryptocurrencies themselves are sometimes categorized as tokens, but the term is not being used in that sense here).

Tokens are exchanged within specific communities, and they are often used as community currency or as fan tokens (tokens issued by sports teams).

One type of token that has become a household word recently is the "NFT." NFTs, or non-fungible tokens, are tokens assigned to digital data, which can be easily copied or tampered with, indicating that the data has value as a unique item. Tokens contain individual identifying signs (token IDs) which indicate that they are unique. These token IDs are embedded and linked to content to uniquely identify the content and, at the same time, make it possible to trade it as an object with asset value. NFTs are a popular topic in fields like art, music, and gaming. In recent years, they have also been applied to real estate transactions, and services like appraisal services, which determine the market prices of works and their authenticity. NFTs have the potential to create even more new businesses.

However, NFTs also have their own problems. First, NFTs can be issued by anyone, making it hard to separate the wheat from the chaff. Second, many NFTs are issued on the Ethereum, and the rapid increase in demand is causing Ethereum transaction fees (known as "gas fees") to soar.

In order to promote a business that leverages the features of NFTs, we are conducting research and development into what approaches can be used by private blockchains.

Because of the background that led to the development of blockchains, they are often seen as being synonymous with cryptocurrencies. However, we believe that these technologies can be used in applications other than cryptocurrencies to bring about a better society. We think that blockchain technology can be effective in realizing new societies that are carbon-free, decentralized, and utilize recycling and recirculation. This is why we have developed private blockchains that can be more conveniently used by companies and local governments. A great deal of attention was paid to making sure that applications could be developed easily by application developers who were using blockchain for the first time, while at the same time providing the private blockchains with advanced functions. For example, data can be disclosed to all parties, or only to specific users and groups, and the sections of information that can be disclosed can be specified.

We recommend using blockchain in new systems such as operations where customers want to carry out digital transformation (DX).

Blockchain is particularly suited to operations passing contracts and certifications between multiple companies and related parties in printed form, as discussed earlier in a case example. With blockchain, digitalized documents can be securely and easily handled together with others. The reason that these printed documents have not been digitalized before is that digital files can be easily copied or tampered with, and because of the costs involved in building systems for handling these files. Blockchain technology addresses these problems.

If blockchain technology is viewed not as a digitalization tool for printed documents, but instead as a data platform, it can be used for traceability. With blockchain technology, if a problem occurs during transactions, the cause can be rapidly identified and addressed. Blockchain technology also has the potential to change how auditing and information disclosure are performed. We believe that blockchain can assist companies with their DX promotion efforts.

Blockchain is seen as a technology that will change how the world works. The sheer number of new blockchain-centered concepts, such as Web3, NFTs, and DAOs, is a testament to blockchain's potential. Blockchain will continue to evolve, and its applications will continue to grow. It is one of the key technologies to keep a close eye on. Our BC+ is designed to be as easy as possible to use, and we hope that everyone uses it without hesitation to accelerate their DX efforts. We will continue to use blockchain technology to contribute to the betterment of society.