The Blockchain Technology Will Transform Businesses and Optimise Costs
‘Blockchain is an infrastructure that aims to improve communications’, says INDUSTRIA Director Petko Karamotchev in an interview with economic.bg.
‘Mr Karamotchev, tell us more about your company, INDUSTRIA. How long has it been in the market and how has it evolved throughout the years?’
‘The company is not new. We have been in the business since 2002, and we have been developing big websites for a long time. However, the market niche gradually shrunk, as the barriers to entry for the business dropped very low. So we decided to change the business model. We started developing products, and now we are taking up blockchain.’
‘Why did you decide to start developing blockchain technologies?’
‘Although we have been working primarily on front-end projects, I have wanted to delve into infrastructural ones for a long time. Unlike people who associate blockchain with myths and legends, I see it as an infrastructural technology. Fascinating and challenging, but still in the process of proving itself.
‘Many people associate blockchain with cryptocurrencies.’
‘Yes, but take the speculation aspect away, and blockchain is a wonderful technology. It is not some sexy application, doing all sorts of incredible things. It is more like a plumbing system. It is about improving communications between the agents in the market — making them faster, more effective, and more trustworthy.
‘Could you give us an example for what blockchain can change and what it can be useful for?’
‘It could completely transform the bookkeeping aspect of business. Now, every business keeps its own books, but with blockchain, different market agents will depend on one system to keep track of who owes whom and what, and the transactions between them will be carried out in real time. VAT could also be reimbursed in real time — all companies could be connected to one centralized state entity, which would be responsible for issuing invoices. That way, there will be no need for recalculating VAT and all of this can happen in real time. Automatization of processes and connection between systems will transform businesses and optimise costs.’
‘Would that require considerable multi-layered connectivity?’
‘Yes, but it would also be much more transparent. Right now we have silos of data and everyone is communicating via different means — web applications, Excel documents, emails, et cetera. Blockchain offers a system that is unified, but decentralized.
‘Do blockchain technologies have a dark side?’
‘It can do a lot for the public and private good, but it can also be a threat to people’s personal information. It provides for the accumulation of an eternal record — the question is how we are going to make use of it. It is possible, for example, to keep a file on someone’s behaviour as a form of mass surveillance. Blockchain can be dangerous if it stores indelible information on a person. Social experiments like that are being conducted right now in some places — the database just keeps growing and there is no deleting anything.
‘Is state support necessary for the positive consequences of blockchain to materialize?’
‘Very little, as the state can muddle the whole process. It is a matter of philosophy — blockchain is about decentralization and removing the middle man. So the technology might be a thorn in the side for the state. On the other hand, there are countries like Estonia and Latvia, where the technology is met with approval, and Dubai even aspires to be the first blockchain country in the world. In Singapore, they have realized that the state should not be allowed to meddle in the market, and that it only needs access to the information.
The state’s role is to verify blockchain relationships, like it would with a traditional contract. This so-called “smart contract” is not a traditional one at all, though — it is a computer code. That raises further questions about its legal standing and the consequences of bugs and infringements. The topic of regulations is a fascinating one and we will be discussing it at the CEE Block Sofia 2018.
‘What are the main challenges for the mass adoption of blockchain?’
‘The market as a whole needs to embrace the idea. For a technology like that to start working effectively, it takes more than one or two organisations — it takes an entire ecosystem. That requires a change in mentality.
Market agents need to establish something called coopetition — to cooperate and compete with each other at the same time. Banks are a good example — they are currently working towards reducing the cost of communication amongst themselves.’
‘When digital currencies appeared, it started a conversation about the end of banking. You are very involved in that sector, what are your observations?’
‘It is widely assumed that banks are not innovative, but that is not the case. On the contrary, they are very dynamic. Take JP Morgan, for example — a few days ago, they announced that they plan to only hire people with programming skills for some of their departments. That shows how much more forward-thinking banks are than people think. They are also a good example of effective communication, and public institutions can learn from them and put an end to rushing people back and forth to deliver documents to one place or another.’
‘Your company works with many banks. Tell us more about your clients and the markets you are aiming for.’
‘Yes, our clients are big and small banking institutions and insurance providers in Bulgaria and abroad. These are actors who are looking to experiment with blockchain technology and see what value it brings. Right now we are embarking on a compelling blockchain project with our partners in R3 — it has to do with liquidity and cash availability in banks. As a company who is involved in the fintech sphere, we are also interested in markets such as London, New York, and Singapore. After Brexit, it would be intriguing to look into Frankfurt and maybe Paris, where we also have good positions as a result of our partnership with R3.
‘Together with R3, you got an award at DerivHack 2018 in London. Do you often participate in such competitions and how does this benefit you?’
‘We went to the DerivHack 2018 mostly to listen and learn, we were not expecting an award. We often participate in such events, because they are the way to seek innovation and partnership in the present day.’