Blockchain on the way to a real sector of economics
Despite its prospects for the economy, blockchain technology is only at the very beginning of its technological cycle. Bitcoin is the first and most famous case of its application. Today blockchain exists separately from Bitcoin; different companies and private developers are creating more and more new technologies based on blockchain.
The new technologies are already widely used in healthcare, education, banking, and real estate.
Real estate has been the most popular way of investment for hundreds of years. In contrast to ordinary non-core investors, who receive income comparable to the deposit rate in a bank, senior specialists can make a profit of hundreds of per cent from projects.
Blockchain provides an opportunity for its users to buy shares (tokens) of the subsidiary company being created, anonymously own and trade them, and receive dividends based on the results of work; it also provides the transparency of all processes related to construction for its users.
For the implementation of construction projects, smart contracts are created and tokens are issued with the possibility of paying dividends to their owners without disclosing their identity. Funds are attracted by holding Initial Coin Offers (ICO).
The blockchain technology is based on a distributed registry that records each operation and stores it in the global network. All participants of the system can see the transactions, which makes carrying out transactions more transparent.
As an example, there are several cases of modern companies working with blockchain without binding to finance and Bitcoin.
The government of Dubai has recently announced the need to use new technologies to solve various tasks of managing the region. One such technology is blockchain, which can be used not only for financial transactions. Probably, Dubai will become the first city in the world, the infrastructure management of which will be implemented via blockchain.
Among the areas of activity that can take advantage of blockchain, Dubai mentions real estate, banking, healthcare, transport, urban construction, energy infrastructure, e-commerce, and tourism. Moreover, the platform will be open for other regions as well.
Example of a long-term project: a strategic group in China is building the “City of the Future.” The government will build a pilot project where the entire infrastructure will be innovative; for example, unmanned cars are envisioned. Now scientists are trying to understand how such technologies can affect the city and the quality of people’s life.
According to an expert from China, blockchain is becoming an integration technology. That is, it will subsequently become a low-level platform, which is now the Internet. Blockchain is not a solution to all questions; it is a base; international colleagues call it the Second Internet, the Internet of a new kind.
Remington Ong also noted other advantages in the innovation system: “For example, even when building cities of the future in China, there is a ‘system block.’ Each party writes all relevant information into the registry of this increased transparency of information. Everyone will have access to it, which will give the possibility to pass all stages faster.”
Wanxiang will invest almost $30 billion in the construction of a smart city for the development of technological innovations. To implement this project, the company attracts experts in the field of blockchain technology and discusses options for cooperation with IBM and Microsoft.
The corporation has long started to explore and implement blockchain. In the middle of last year, a company owned by Wanxiang purchased Ethereum cryptocurrency for $500,000. In addition, the auto giant launched a venture fund Fenbushi Capital for $50 million, which is focused on blockchain startups.
Speaking at the World Blockchain Summit, Executive Director of Wanxiang Feng Xiao also talked about various scenarios of the application of technology, considered by the company. For example, with the help of blockchain, it will be possible to assert their rights to property, as well as to control devices via the Internet.
In addition, distributed registry will help monitor battery status and usage. Batteries will be rented to motorists, and their use can be tracked through blockchain. All this will reduce the final cost of the car.
As CoinDesk notes, the Wanxiang Corporation owns an American startup for the production of electric vehicles Karma. It was reported that the auto giant would build a plant for the production of electric cars worth $375 million, which would also apply blockchain technology.
An expert from China assured that blockchain is an encrypted registry, which can only be used with a private key. Thus, every citizen will control their part of the information. The citizens’ distrust must be fought with the help of the educational process; we need to show that even the best hackers cannot get the information.
This autumn, the cadastral chamber in Sweden will begin testing the distributed registry system for registering the right to land. Complex bureaucratic processes will be conducted in a single database, to which all participants in the transaction will be able to connect. Blockchain can also become the basis of the electronic state of the future, since it will allow many operations to be transferred through an open system without unnecessary intermediaries.
The popularity of the tool to attract collective investment by issuing and selling its own cryptographic tokens on the open market — ICO (Initial Coin Offering) — increases with each month.
Some recent examples include the blockchain project ChronoBank, which introduced the concept of national work time tokens, tied to the average wage in the EU, the United Kingdom, the United States, and Australia. Following a two-month ICO campaign, ChronoBank attracted investments totaling $5.4 million.
In June 2017, the owner of several international construction companies announced a new project for the crypto industry — Sosnovkino. It is a tract of land, in which an engineering infrastructure is created with the completion of construction in 2018. According to the forecast, the increase of the asset value during the creation of engineering networks will be 600%. Investments in the project will be attracted by ICO.
FirstBlood team has managed to attract around $6 million in about 10 minutes. During a crowdsale a year and a half ago, Ethereum attracted $18.5 million. The team with the Russian roots — Waves — has collected about $19 million. As for Lisk, its fund raised amounted to about $10 million. Iconomi — $11 million. In total in 2016, there was held about 30 ICOs, each of which has collected more than one million dollars.
And the biggest round in the history of crowdfunding — $156 million — took place during the ICO of the now-infamous The DAO, the developers of which obviously did not expect such an excitement and publicly announced the desire to collect a maximum of $10 million.
In the coming years, the new way of raising funds — ICO — will pass the phase of cosmic growth; this will be followed by a natural cleansing of unreliable market participants, and as a consequence, the yield will decrease to the level of standard values. After that, participants in real sectors of the economy will be able to take advantage of the definitive ins of blockchain and cryptocurrency. To date, low profitability of classic business models does not allow using ICO to attract investments in production or construction.
Blockchain is still at an early stage of development. The first practical applications were only in 2013, so the system needs to be studied. It is worth considering that there will not be a single blockchain; they are all built in different ways, for different clients and different spheres but should easily interact with each other; there should be no monopolists.
Given all of its advantages, disadvantages and risks, ICO has shown itself as a real tool to raise funds for serious projects. ICO’s ‘big brother’, crowdfunding is perceived by society as something entertaining, intended for enthusiasts. The blockchain world community has shown that it is ready to treat with full seriousness both the technology itself, and the projects that are ready to develop with its help. Undoubtedly, this public attitude and the trust that was given to us is encouraging. Previously, no project located on the ICO had any relation to the real sector of the economy, let alone to construction.
Undoubtedly, the risk for most blockchain projects is higher than that of the venture funds, but as is known, the expected profit is always a function of risk. One of the key tasks for 2017 the whole community is to create tools and rules for evaluating blockchain projects preparing for the ICO. Expertise of successful funds and investors in project evaluation will remain important in a decentralized economy, however, an increasingly important role will be played by the community and the tools for collective risk assessment.