Technology of the week: Smart Contracts and Electronic Markets

12

October

2017

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As blockchain technology is gaining lots of attention across different industries, appliances like smart contracts will also bring fundamental change in the way online retail markets work.

Blockchain works through a system of consensus building, where multiple computers all participate in the management of the blockchain ledger, a digital document that keeps track of all the payments. As the data in the blockchain is distributed among all users, it eliminates dependency on third parties which decreases costs and increases reliability of transactions. Transactions are anonymous and immutable as data cannot be changed after it has been written.

A smart contract is defined as a set of promises, including protocols within which the parties perform on the other promises. Electronic protocols are usually implemented with programs on computer networks or other digital electronics, making them smarter than their paper-based ancestors. The execution of these smart contract is done by the entire blockchain, which means trusted third parties are redundant, violation of the contract is impossible and peer-to-peer transactions are forever traceable (Szabo, 1997).

The implementation of smart contracts is expected to disrupt the online retail industry. Currently, major players like Amazon and Alibaba operate mainly as a third-party platform, allowing buyers and sellers to connect and gaining profit by charging services fees. With blockchain technology, consumers will not need these third-party platforms anymore, which means no costs and other advantages. The smart contracts will only be executed upon fulfillment of specified agreements, tackling problems considering product and seller uncertainty, and also lessening the dependency on third party assurances (McMeekin, 2017).

Moreover, the appliance of smart contracts will improve both communication and coordination in the online retail industry. Firstly, the electronic communication effect is strengthened through smart contracts as these reduce the time and effort in communicating requirements as compared to conventional methods because there are no middlemen involved anymore. Secondly, the electronic integration effect is strengthened as smart contracts lead to tighter integration of business processes within value chains. Thirdly, the electronic brokerage effect will be strengthened after a larger base of entities have entered the buyer and seller positions. This will bring an increased quantity and quality in alternatives, and leads to overall decreased costs in time and effort in the product selection process (Malone et al., 1987).

A prominent innovator in the online retail industry is OpenBazaar, a decentralized electronic marketplace enabled by smart contracts. Unlike Amazon and eBay, there is no centralized ownership, no fees and no accounts to create. This approach may very well evolve the current electronic markets through the aforementioned advantages into an even more unbiased market. Additionally, the absence of corporate interests is expected to perpetuate the shift of online retailer markets to one with less restrictions.

References:
Szabo, N. (1997). Formalizing and securing relationships on public networks. First Monday, 2(9). Retrieved from: http://firstmonday.org/ojs/index.php/fm/article/view/548/469-publisher=First

Malone, T.W., Yates, J., and Benjamin, R.I. (1987). Electronic Markets and Electronic Hierarchies. Communications of the ACM, 30(6). 484-497.

McMeekin, P. (2017). Blockchain for Retailers: Producing Real Business Benefits. Retrieved from: https://www.aciworldwide.com/insights/expert-view/2017/march/blockchain-for-retailers-producing- real-business-benefits

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Group 70: Bart Kögeler, Ricardo Prins, Derrick Bakhuis, Niels Visser

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Uber’s secret permission

6

October

2017

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We all use Snapchat and we all don’t like people taking screenshots of our sent pictures. But what if someone else could see everything you do on your smartphone without you knowing it? Last Thursday researchers discovered that Apple allowed Uber to record a user’s iPhone screen, even if you were not using the Uber app, to improve the functionality between the Uber’s app and the Apple Watch.

This is not the first time Apple has been involved in a case concerning the privacy of applications. Until iOS 9, apps were able to scan which other apps were installed on the device. Developers used a API that originally was created as a tool for communication between apps to discover which other apps were installed. In particular, Facebook and Twitter used this API for targeting ads. After privacy concerns, Apple decided to change its privacy policy and removed this particular functionality of the API.

Now Apple faces again privacy concerns. But this time it is different. It appears that Apple gave Uber an exclusive permission to use a function which records the user’s iPhone screen. As Apple wanted to extent the functions of the Apple Watch, they helped Uber launching a compatible Apple Watch app back in 2015. Therefore, they considered Uber as a trusted developer and gave them special permissions.

So, how does it work? Apple allowed Uber to use a piece of code, called an ‘entitlement’. This piece of code can only be used by Apple’s explicit permission and no other app developer is entitled to use this. Entitlement is not intended to use for screen recordings, but it could be used to control each color of each pixel of your screen. With this information, Uber was able to draw the screen and potentially see what the user was doing. Even more striking, they could have potentially see your passwords.

Uber explained that they did not used this functionality to record the user’s screen and only used it for map rendering. But concerning the recent revelations about Uber’s spy program ‘Hell’ which gave them the ability to see where the competitor Lyft’s drivers were driving, do we trust them? We all love the functionality of Uber, but do they need to get this far in order to gain more customers and track down competitors? What do you think?

 

References:

Conger, K. (2017, October 5). Researchers: Uber’s iOS App Had Secret Permissions That Allowed It to Copy Your Phone Screen. Retrieved October 6, 2017, from https://gizmodo.com/researchers-uber-s-ios-app-had-secret-permissions-that-1819177235

Hook, L. (2017, September 8). Uber confirms FBI probe of ‘Hell’ tracker programme. Retrieved October 6, 2017, from https://www.ft.com/content/f2482242-94a6-11e7-a9e6-11d2f0ebb7f0

Kriel, C. (2015, June 25). Apple steps up user privacy in iOS 9, prevents apps from scanning for other installed apps. Retrieved October 6, 2017, from https://siliconangle.com/blog/2015/06/25/apple-steps-up-user-privacy-in-ios-9-prevents-apps-from-scanning-for-other-installed-apps/

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Who owns your financial data?

20

September

2017

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Today your bank is the only organization which has direct access to your personal financial data. As of January next year, new European financial regulation could fundamentally change the way we are interacting with our bank. EU’s Payment Services Directive (PSD2) enforces banks to share your financial data with third parties after you have agreed to do so. Will this disrupt the banking industry the same way as the iPhone disrupted the phone industry? What would be the effect if third parties have access to your financial data? Who owns it?

The aim of PSD2 is to increase competition and innovation in the banking industry. You keep your bank account, but third parties are able to provide services by using your personal financial data, accessing the customer’s banking account through an API. Fintechs like PayPal could offer all kind of services when they have direct access to your personal financial data. These services can be more integrated in our daily lives. Therefore, traditional banks are concerned that they will lose customers in the long run as many banks are not as innovation driven as many fintechs. Also, many traditional banks do not have an organization framework which supports a quick reaction on new developments. Furthermore, they are concerned with security problems for which they will be probably blamed. (Caplen, 2017)

In particular, the vast amounts of data could be analyzed by Big Data analysis creating many personalized services to customers. Artificial intelligence (AI) can learn from purchase behavior, creating a high-quality level of interaction with financial companies, reducing the human factor. (Guibaud, 2017)

Sharing your personal financial data is not restricted to solely financial companies but also to social networks. Think about it, what can Google and Facebook do if they have direct access to your personal financial data? Google, Apple and Facebook already have interests in financial services. For example, Google already offers a Google API allowing anyone using this API to pay using one of their cards stored in their Google account. As the market for mobile payments will continue to grow, Google and other social networks are likely to step in further when the new EU regulation has been fully implemented. With Google and Facebook involved, personal financial data could be linked to other personal data, creating a more comprehensive profile, which can be sold to the highest bidder in advertisement. So, who will own your financial data at this point? (Döderlein, 2017)

 

 

References

Caplen, B. (2017, September 19). Is open banking the industry’s Netflix moment? Retrieved September 19, 2017, from http://www.thebanker.com/Editor-s-Blog/Is-open-banking-the-industry-s-Netflix-moment

Döderlein, D. (2017, June 2). What Google’s new payments functionality really means for banks. Retrieved September 19, 2017, from http://www.itproportal.com/features/what-googles-new-payments-functionality-really-means-for-banks/

Guibaud, S. (2017, September 19). Five changes to the way people will use banks in the future. Retrieved September 20, 2017, from http://www.itproportal.com/features/five-changes-to-the-way-people-will-use-banks-in-the-future/

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