5 Questions You’ve Always Wanted to Ask a Blockchain Expert
Let’s take a simple example — imagine that I’ve promised you $100, and we agreed that I’ll meet you in downtown San Francisco tomorrow to pass along the money. You tell your family and friends about our exchange which will take place the following day. However, when we meet the next day, I change my mind — and I decide that the deal is no longer valid. In fact, I deny that I even promised you the money in the first place. Perhaps it was a misunderstanding on your part. Your family and friends flood my inbox and accuse me of lying — but what proof do they have of our deal, besides your story?
Now, imagine a virtual world where communication is remote...my identity is digital, and my original promise to you (the $100 deal) was recorded as a (smart) contract in an open block of data. After the deal was recorded, the block was closed soon after and added to a consecutive chain of blocks (ledger). Your family and friends also have digital identities and have “read only” access to the consecutive chain of closed blocks (just like the privileges on a Google Doc, for example). Therefore, your family and friends can easily verify that we had an agreement and see that I flaked on you.
The above is a general description and a good starting point to more complex discussions on blockchain, ranging from constant synchronization of multiple replicas (around the globe) of the same ledger, the concept of virtual “Master Ledger” to the technical aspects of data encryption, dynamic and static data registry, etc.
Luckily for you, we sat down with Anton Vorontsov, Blockchain expert, McKinsey & Company alum, and MBA graduate of The University of Chicago Booth School of Business to find out more about the latest trends in blockchain.
Anton kindly agreed to answer 5 questions on the future of blockchain and upcoming trends.
Whether you’re a blockchain enthusiast or simply looking to explore the basics of blockchain, our Q&A will provide you with a breath of fresh air (and knowledge) on a popular topic.
1. How do you implement blockchain in your work?
As a blockchain researcher, I see that the most exciting thing about the blockchain technology is that it can be applied to virtually all areas of business and reporting: managerial accounting, bookkeeping, tax accounting, miscellaneous transactions/events (e.g. office discussions, competitions, corporate education, etc.).
2. Can you explain how blockchain has impacted the FinTech industry?
Blockchain technology is a natural next step after the Internet, allowing not only the pervasive real-time transmission of information but also putting it into a feasible and unique format, always allowing to:
(i) distinguish a copy from the original removing the risk of data falsification or forgery
(ii) identify two equal elements of information as two independent originals with no "original-copy" relationship.
The above can be easily verified by checking the full change history/log of information blocks and respective change operators (digital identities, external programs, scheduled internal events).
In this regard, Blockchain technology allowed FinTech to benefit not only from Internet solutions but to also materialize into a practical and real-world tool of creating originals in a digital format.
3. What's the future of blockchain?
Blockchain technology has a bright global future as it demonstrates pervasive globalization with a wide focus on all areas of human activities grouped to the 7 areas below (Magic 7):
Contracting — The ability to apply contracting solutions (e.g. smart contracts) by removing the third party (licensed attorneys, lawyers) and working at a cross-border level.
International Trade, Cross-Border Payments, and Trade Finance — In addition to cross-border contracting and payments through digital currencies, blockchain allows for more flexibility in international trade and communications. All letters (e.g. Letters of Credit), notes, questions, and agreements in international trade can be hardcoded and easily verifiable by all registered and authorized parties. It has a significant effect on Trade Finance deals and Cross-border Payments, topics currently effectively covered by S.W.I.FT. payment system, which gives solutions not only to international payments but to signing contracts for Trade Finance deals.
Patents — In the future, by registering an innovative idea in a blockchain ledger, the idea will have a clear and trackable record that can be accessed by all relevant parties, such as governments, professional authorities, companies, and researchers.
Certification and Registration of Ownership Rights and Copyrights — Currently, the certification and registration processes of ownership rights and copyrights are done solely by respective government authorities with limited access by authorized third parties such as licensed attorneys.
Blockchain ledgers allow a much more straight-forward and dynamic process of ownership rights registration and offer snapshots of all ownerships at any given point in time.
Digital (crypto) currency — This is the hot topic in every professional, business, and academic circle, especially with recent news on Facebook’s cryptocurrency, Libra.
Currently, the overwhelming majority of people treat digital currencies (e.g. Bitcoin, Ethereum) as an asset, trying to apply the classical valuation approach, yet they are failing to see that digital currency does not have a fundamental value and its price is driven only by speculative supply and demand.
Like a constant wind that bends trees and forces them to grow crooked, the constant demand for a so-called “digital currency” creates and maintains its price. Only long-term statistics could allow a researcher to make a reasonable assessment of the fundamental demand for the currency, which in turn, creates the so-called “value.”
However, the recent news on Libra, which is linked to a pool of major FIAT currencies and government bonds, addresses the issue of digital currency valuation. If you’re interested in learning more about assessing the speculative versus the fundamental value of an asset such as digital currency, I’d recommend you read the book “Manias, Panics, and Crashes: A History of Financial Crises” by Charles P. Kindleberger.
Digital Identity — The single greatest advantage of creating a digital human identity using blockchain is that it allows for a universal and indisputable accord on a master copy of a human (physical) identity. Essentially, a global digital passport is created. A digital passport would serve as the ultimate communicator between the physical and digital worlds.
Health Records — Another big advantage of blockchain technology relates to the concept of universal registration of health data, as blockchain can:
(i) remove the need for storing health data in many geographic locations,
(ii) allow universal (yet restricted) access to the data
(iii) allowing to structure, analyze and define optimal treatment processes in health records by using data mining and AI techniques
4. What are some potential problems/challenges with blockchain as it stands now?
The two biggest potential challenges for blockchain technology are the need for global accord on regulations on blockchain and the ability to generate energy to meet skyrocketing demand.
(i) Regulation: Notwithstanding the clear and indisputable advantages of the Blockchain Innovations, the biggest challenge is international regulation/accord, involving all independent countries in the world through an internationally recognized organization such as the United Nations (UN).
Blockchain innovation in one country that’s recognized by a sovereign government should be recognized by all sovereign countries around the globe. However, it’s difficult to reach international agreement on technology, innovation, and global patents.
(ii) Energy: Everything valuable comes at a cost. The main cost of blockchain technology is computer power (electricity) needed to run machines, algorithms, and calculations. For example, currently, the consumption of electricity by blockchain technology (digital currency) reaches levels comparable to a nation and is measured in Gigawatts. In this regard, renewable energy (solar, wind, etc.) is a reliable and sustainable solution, currently being promoted globally.
If you’re curious to learn more about the energy problem in blockchain, here’s some more reading for you:
Aug ’18: “How Much Power is 1 Gigawatt?”
May ’18: “Bitcoin's Growing Energy Problem”
The Bitcoin network can be estimated to consume at least 2.55 gigawatts of electricity currently, and potentially 7.67 gigawatts in the future
5. Is Blockchain truly the "be all end all" of disruptors in FinTech, or should we expect to see other disruptors?
After the Internet, blockchain technology is the next fundamental innovation as it allows giving a “passport” (unique label) to each individual element/piece of information created (e.g. to an e-document or a coin of digital currency).
Currently, in the flow of FinTech news, we can see spikes of blockchain-based disruptor innovations across all areas of human life, which creates a virtually limitless array of data and fertile grounds for the analysis through Data Mining and Machine Learning, giving way to advanced stuff like Artificial Intelligence (AI).
In sum, the fundamental disruption we are witnessing these days is the rising wave of a digital currency Libra by Facebook. Assuming its strong performance, chances are high that other big players (e.g Google, Amazon, Apple, Microsoft, etc.) will also join the global cryptocurrency market, thus, creating a new dimension at a scale similar to an opening of a new continent.
Interested in learning more about Blockchain?
Although blockchain is most famous for its connections to the blossoming cryptocurrency world, several other applications are already being explored (see points 1)-7) in the Q.3 above) — it’s a technology with an exceptionally broad set of potential uses.
Perhaps even more exciting, though, is that new ways of utilizing blockchain emerge every day.
As such, whether you’re directly involved in the digital currency space or not, it’s essential to develop an understanding of blockchain and how it may be used to transform the business and investment worlds.
If you’re still hungry for more, head over to our Learning Hub for tons of other articles on crypto, blockchain, and the latest trends in the industry.
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