Blockchain Workshop Position Statement

Author: Kazuyoshi Hayase (Rakuten)

I have been working in Rakuten for 15+ years to experience various aspects in the internet service industry in Japan. Rakuten started as an e-commerce marketplace business (B2B2C) in Japan about 20 years ago, and now, it has become beyond a shopping mall (with tens of thousands of merchants) by consolidating various kinds of business units such as auction (C2C), first party commerce (B2C), digital contents, FinTech (Bank, Securities, Credit Card, and Insurance) and so forth. In Rakuten, I started as software engineer and contributed to migration of its business core system to JavaEE based architecture. I had become familiar with all layers from basic infrastructure like server and network to business applications with vital needs to run the business system efficiently as well as creating new businesses. For these eight years, I have been working with FinTech subsidiaries to promote collaborative initiatives to enhance synergy effect within Rakuten.

I have been investigating blockchain technology because it would possibly resolve issues in applying "Rakuten Ecosystem" to FinTech subsidiaries and because it would enhance our reliability from customers thanks to its secure, efficient and robust way to share private or confidential information in a visible manner to external authorities or governing organizations. "Rakuten Ecosystem" consists of (1) end-users (consumers), (2) business partners (such as merchants in Rakuten Ichiba shopping mall), and (3) our own business units. We are all connected with the central platform to provide membership program for end-users with rewarding service "Rakuten Super Point", which attracts users to use multiple services repeatedly. It benefits to all participants or stakeholders by providing economical values to individual party by creating synergy with other parties; new business opportunity among several business units within Rakuten group, for example, Rakuten Card can acquire good customers who are repeatedly purchasing products in Rakuten Ichiba by proposing a higher point back rate for them.

However, some business units in FinTech have had to compromise to make use of full power of Rakuten Ecosystem in order to be compliant with strict regulations or laws by governments or financial services agency in Japan. In particular, they must be separated as independent organizations which should make decisions appropriately as those businesses. Moreover, they have to disclose information about their internal operation to the external governing authorities when they request it. We have been seeking for practical solutions to share information among independent parties (or subsidiaries) with an appropriate manner to be compliant with regulations and to protect our customers which should also be so convenient and efficient to provide the best experience to our customers. We expect some blockchain technologies such as Hyperledger which enable each party to have rights to decide who see or utilize how much information for what by interconnecting multiple networks of independent organizations based on decentralized infrastructure for that purpose. In our current operation, we should make documents to prove that we are compliant with regulations when external authorities want to check, which needs lots of efforts for both sides, operations and authorities. Moreover, we should keep trusted by customers as well. I expect blockchain would enable us to prove ourselves to handle customers' information rightly. I am also interested in what would be the changes in network traffic, in particular, data format and data volume when we move from web based network to decentralized blockchain network. Regarding to Rakuten Ecosystem, we might provide more than 100 million of individual members to control access rights by themselves, which should cause a certain change in traffic in order to provide secure, robust and auditable environment. Therefore Rakuten Ecosystem should be a good example to discuss the changes of the network traffic in migration to the decentralized infrastructure.

(Reference: data such as #Rakuten Membership (Cumulative)

So far, I stated an applicable direction of blockchain to a specific group of organizations, Rakuten, but I believe there would be similar utilization cases where independent but closely related organizations to conduct existing or new kind of business processes with highly secured individual privacy information in an efficient way. It should be visible or auditable to not only the operating organizations but also to the external auditing organizations and individual beneficiaries (== customers). I believe most of decentralized blockchain wouldn't provide such kind of categorized visibility for operation/authority/beneficiary. Therefore I am so interested in this workshop to discuss what should be changed in network traffic to realize this kind of interconnected networks to provide secure, efficient and visible way to share privacy or confidential information based on decentralized infrastructure.