The real application and benefits of blockchain are yet to come
Has blockchain technology reached its peak and why we should not underestimate it in the long run.
The interview was conducted by Maya Boycheva-Manolcheva and published in the eighth issue of CIO from 2020. Read the original in Bulgarian.
Has blockchain technology reached its peak?
The technology is far from reaching its peak. We are seeing projects in several areas that deserve a mention as separate applications of the technology. First of all, in the banking sphere, we have the issuing of digital money by central banks (CBDC). In many countries, there are different projects related to that underway. The European Central Bank is openly speaking about the digital euro. There is a similar project and a massive movement to that regard in the central bank of the UK. Aside from all that, we know of at least 20 projects related to the digitisation of money, in different countries.
Many projects concerning international trade finance, insurance and delivery systems, especially after COVID-19, are underway and many have already been launched. The decentralized digital trade financing platform Contour was recently officially launched.
Around the world, there are also projects in the sphere of the application of blockchain and legally sound smart contracts and process automation in big non-financial sectors, including retail, real estate and many others.
There is a great boom right now in cryptocurrencies, unregulated markets, and decentralised finances, with attempts to use blockchain technology for the removal of financial intermediation.
On the international level, there are projects underway as well. Europe is working on the creation of a unified blockchain infrastructure (European Blockchain Service Infrastructure, or EBSI) and Bulgaria is participating in this process. There is a special group focused on the issue in the Ministry of Transport, Information Technology and Communications. The electronic validation of diplomas, notarized documents, SME financing and many other projects, which could use this interstate shared infrastructure, are being discussed.
There are also many projects related to identity and Know-Your-Customer (KYC).
What are your expectations for the development of the technology in the future?
I always answer this question with Amara’s law (ed. note: Roy Charles Amara, American scientist and futurist): “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” In this sense, the real application and the real benefits of blockchain are yet to come. It seems the projects are moving along slowly, but this is because the participants are big companies and institutions that need to replace existing technologies, practices, and, last but not least, the existing philosophy of the way they connect and communicate. This requires a change in the way of thinking, innovation, experimentation, and so on. Do not underestimate blockchain technology in the long run!
The lack of enough specialists in the field and the lack of standardisation are among the challenges the technology is facing. How can it overcome them and are there any other factors that are affecting the development of blockchain technology?
I am a member of ISO’s technical group for creating the standards in blockchain technology, and I daresay we have already started producing the necessary documentation that details the technology and its possible applications in institutions and business. Unfortunately, the technology is moving too fast to be encompassed by any standard.
In the context of the general transformation of the business and the need for IT specialists, I wouldn’t say that there is a “lack of specialists” only in relation to blockchain. Specialists are lacking everywhere. What matters is that the companies that work in that sphere create quality products, products that “make money” and create value for the users, so that they can attract the specialists to do that sort of work. There are enough investors (of course, there can always be more), who would assist in the realisation of these products. In Europe, in particular, there are many initiatives that the EU supports — initiatives related to the development of the technology, that can be used as a sort of “food supplement” by various startups. It is worth mentioning that, in Europe, there are no initiatives like DARPA, without which many of the informational giants in the USA would not exist.
There are also a number of controversial regulatory issues in blockchain technology, especially where GDPR and personal data protection are concerned. Will there be a universal solution?
No. And one is not necessary. GDPR is quite sufficient. I think nobody imagines storing personal data on public blockchains, so there is no issue with GDPR and CCPA (California Consumer Privacy Act). There are many alternative methods, not to mention that private networks, such as Corda, do a wonderful job of storing personal data. Of course, we are still waiting to see how blockchain-based identification systems are going to work. This is where the personal data storage policy will be very important.
Regulators have other problems and those have to do with blockchain applications that deal with cryptocurrencies. Things are very serious in that sector and regulators are moving very quickly. UK’s Financial Conduct Authority has banned trading with cryptocurrency derivatives, starting January 2021, and cites their nature and the lack of reliable basis for evaluation as reasons, as well as the many cases of market abuse and financial crimes (such as asset theft) in the secondary markets, the high volatility of the prices of cryptoassets, and, last but not least, the insufficient understanding the retail consumers have of said cryptoassets. For the UK regulator, as for many others, there is no legitimate investment need for retail consumers to invest in such products. I expect a serious conflict to arise between cryptocurrency fans and regulators on this issue.
Being one of the founders of the R3-partner enterprise blockchain/DLT solutions provider and development company INDUSTRIA, Petko Karamotchev is an experienced and hands-on leader developing innovative products and services relating to distributed ledger technology, smart legal contracts, and sovereign identity technologies while building and supporting teams through ideation to production.
Holds degrees from the University of Portsmouth, UK and Cotrugli Business School. Completed programmes at Saïd Business School, University of Oxford. Member of the British Blockchain Association and the Nordic Blockchain Association. An advisor to the All-Party Parliamentary Group on Blockchain in London and a liaison expert to the ISO/TC 307 Committee on Blockchain and distributed ledger technologies.
INDUSTRIA is a global technology consulting and development firm with extensive expertise in the field of enterprise blockchain, distributed ledger technology, smart legal contracts, app development, and UX design. Official partner of R3. Let’s talk about making your idea a reality — contact us!