Once a month in London, a small group of enthusiasts gather at a “Tech meet-up” to talk about the latest technology developments around the world. I was invited to my first event in 2014. The venue was a dimly-lit underground bar in Shoreditch, then an upcoming area. The conversation, eclectic, animated and passionate was interspersed with investor presentations, pizza and beer. There was talk of a new cryptocurrency, Bitcoin and a mysterious Mr. Satoshi. It all seemed exciting, so I did some research…

The first Blockchain was conceptualised by ‘Satoshi Nakamoto’ in 2008 and implemented the following year as a core component of the digital currency bitcoin, where it served as the public ledger for all transactions. Using a peer-to-peer network and a distributed ledger server, a blockchain database could be managed autonomously. The invention of the blockchain for Bitcoin made it possible to operate a digital currency without the use of a trusted authority or central server.

“A Blockchain is a distributed database that maintains a continuously-growing list of ordered records called blocks. Each block contains a timestamp and a link to a previous block. It can be used to create a permanent that records transactions between parties, efficiently and in a verifiable and permanent way.”

How Blockchain works

Blockchains are secure by design. Decentralised consensus can be achieved, which makes it suitable for providing an immutable record of data, events, transactions, and identity. They are inherently resistant to modification; once recorded, the data in a block cannot be altered retroactively. The ledger may be programmed to trigger transactions automatically. The success of the Blockchain, and other forms of distributed ledger technology such as ‘Ethereum’‘Smart Contracts’ and ‘HyperLedger’ has become an inspiration for many other applications. They anticipate to offer a range of transformational solutions for effecting and recording value transfers via a resilient, decentralised P2P system.

Examining the opportunity in Emerging Markets

At the Blockchain Expo in London this week, it was clear that the nascent ecosystem had come a long way to achieve its new global status. But, more than just glory, blockchain technology could make real impact in many parts of the world. We need to better understand particularly in the emerging economies, how the technology can be developed to be useful. For example, can blockchain influence the changing role of government? By exploring the possibilities to improve governance, it ought to be harnessed to access real-time information for transparent decision-making. As an enabling tool, it can facilitate healthcare, housing, education and other community service delivery. It is a call for governments to recognise and welcome an opportunity for transformative, unambiguous policies and regulation that offer the right support for the ecosystem to flourish.

Other institutions, like the UN, are examining how Blockchain can be adopted to address the problems faced by countries to meet the sustainable development goals. The efficient allocation of public resources is one such challenge, as well as an improvement in the way governments procure services. But, the real benefit of adopting Blockchain would be a shift in the mind-sets of key stakeholders towards a new approach collaborative to creating outcomes that positively impact local communities.

A Case Study in Europe

An interesting innovation by the City of Antwerp local government, Belgium has been the introduction of a system to validate the home addresses of its local citizens. Whilst, it’s a nascent application, it is an example of many ways how technology could provide practical applications. Adopting new technologies is always a challenge, even more so for governments. Innovations such as Blockchain may empower the citizen, speed up processes, but also usurp the role of policy-making, thereby creating conflicts of interest. In the emerging economies, a lack of effective government functionality is still a strong challenge; blockchain may offer an opportunity to take the appropriate remedy measures that improve service delivery without the need for cumbersome regulatory oversight. In all cases, experts agree that there is a fundamental need for complete overhaul to streamline current governance processes. And, if blockchain technology is the catalyst that makes this happen, so be it.

Value-addition in the financial services ecosystem

A trusted distributed ledger is invaluable in financial transactions. Blockchain technology allows for two parties to transact with each other in a trusted way, without the need for an intermediary to validate their decision. It becomes an independent trusted platform for data storage, and recording other asset information. In this relationship, only relevant stakeholders are invited, and permissions allocated accordingly. The use of ‘Smart Contracts’ in transaction processing, as an example, enables automatic decision-making once a consensus has been reached by the parties. No centralised or external validation is required, which streamlines the whole process. In this regard, ‘Smart Contracts’ offer a more efficient and effective way of managing the workflow of the whole transaction process.

Examining the potential impact on Peer-to-Peer Payments

What Blockchain brings to the peer-to-peer are faster payments, low, or potentially zero-fee transaction process. It creates a bond of immutable trust between the parties similar to one of the earliest forms of money transfer, the ‘Hawala’ system. For banks and other financial institutions, adopting the technology could change the risk to business models, as well as the profile of the end-user consumers. From an emerging markets perspective, this would be a positive development towards financial inclusion and poverty alleviation. Currently, finance service providers leverage their business models to apply high transaction fees for international remittances to poorer countries. An innovative money transfer system, like Cashaa’s would benefit all parties, in that citizens will be able to access financial services (insurance, money, savings, etc..) that would be have previously been cost-prohibitive.

What does the Future hold?

Still uncertain about new technologies, early adoption by the innovators has not been swiftly followed by the established players, to update their legacy systems. The idea of innovative approaches to improve processes is more than welcome, but how could they be applied in a slow-moving regulatory environment. A shift in the basic requirements for “know-your-customer” would be a good start, as would open and collaborative discourse to design new, or update existing regulations and policies, to make them friendly to the new environment.

The West may have led the race for Fintech supremacy, but the East is fast catching up. For example, Alipay, the $60 billion mobile payment application of Ant Financial, subsidiary of Alibaba is planning to implement Blockchain technology. Its vision is to serve customers in the next 10 years, using technology that reduces cost and speed currently required to settle transactions. In an interview with CBNC, the CEO acknowledged that “Blockchain technology can be used as a base protocol to process transactions in a cheaper, more robust, efficient ecosystem… offer security and decentralisation for higher transparency.”

It seems like a long time ago since the pioneering mobile payment service, M-Pesa was launched. Like most innovations, it was ground-breaking, but time has since moved on. Today, we are at the cross-roads of the Fourth Industrial Revolution. “Technology-at-the-speed-of-light” is real and powerful. Despite its doubters, Blockchain is here to stay. Indeed, like the Nebula, it has the potential to create stellar micro-enterprises, which could play a significant role in driving global socio-economic growth and sustainability.