Thanks to THE BRIDGE, The Journal Of SwissCham China, (SUMMER 2019, ISSUE 53) for this article!
Blockchain technology will play a key role in the shape up of China’s fourth industrial revolution. In a not too distant future, everything from banking, supply chains, law, accountancy, communications services or art may well have to be redefined, writes Pauline Houl, Co-Founder and CEO of monart.
After internet, blockchain is ruling the world of technology. Blockchain is the one of the proposed technologies that will drive the world into the fourth industrial revolution. It has already started disrupting almost all sectors, such as fintech, edtech, healthcare, art and more. Due to the progress of blockchain, hundreds and thousands of entrepreneurs and SMEs have jumped on to this bandwagon and have started implementing blockchain to reshape various sectors.
The blockchain allows data and metadata to be traced, offering many opportunities. It secures information while making it accessible anywhere, anytime. The art world may well be leveraging the technology further to make sure it remains relevant. From the artists themselves being tech-forward, to buyers and sellers of precious artworks, the blockchain offers a lot of advantages for the ecosystem.
As a fast-growing technology, the Blockchain development is supported by China, which is listed in China’s “13th Five-Year Plan.” The People’s Bank of China (PBOC) announced that they planned to issue digital currency. The China Development Bank also signed a memorandum of understanding for a joint research cooperation on distributed ledger technology (DLT) like blockchain with Brazil, Russia, India and South Africa. China is now implementing blockchain for supply-chain management, tax collection, food and drug safety, and more. Blockchain has offered tremendous opportunities not only to large corporates, but also to SMEs in China.
Fund-Raising for SME
How can SMEs find a solution and benefit from the blockchain? Blockchain and token or cryptocurrency are inseparably linked. As much as a decentralized form of token simply cannot exist without the security provided to it by blockchain, a blockchain cannot be created without giving people incentives to create it. SMEs could leverage the Initial Coin Offering offered by blockchain to raise funds.
According to the “One Belt, One Road initiative on the IPO market”, the Chinese SMEs are encouraged to “go out” and enter into the international market. However, they will face more obstacles compared to the large-sized enterprises. For instance, it is hard to find financing due to the lack of high product evaluation and brand reputation. As an unbreakable contract, the blockchain technology is a risk-free way for businesses to manage and regulate relationships with vendors and subcontractors, which will definitely facilitate the SMEs to explore oversea markets, establish international partnerships and obtain the project contracts, moreover, to benefit the brand building and promotion.
Limited risk of bankruptcy due to liabilities
Blockchain offers real-time solutions. Since the business transactions can be settled in real-time, the risk of fraud will be reduced. The automation of the blockchain technology can speed up the problem solving. Smart contracts can aid the efficiency of business processes. Blockchain technology facilitates transactions in the trusted way at the lowest costs. China is a market where the trust is low and very opaque.
Blockchain moves the market towards more transparency and sharing. To some degrees, small and medium-sized enterprises or start-ups may gain more, as they are finally qualified to compete with larger-sized business, thanks to the characteristics of blockchain — “trust, transparency and immutability”, which are inevitable issues for companies of any size. Blockchain allows saving digital information and transactions in a way that they are tamper-proof.
Transaction security, employee tokens and supply chain
Blockchain makes the payment and transaction more secure, convenient, and faster — where all is recorded on the blockchain. You can accept payments, pay the vendors or subcontractors, or transfer wages to employees without an intermediary to control and charge for the services. Blockchain transactions are not restricted by country borders, which will increase the opportunities for businesses to grow globally, employ foreign workers and collaborate with foreign partners. However, the cryptos are not considered as financial products by some central banks and therefore are not regulated. If SMEs are considering to pay in cryptocurrencies, they may need to obtain permission in advance in China.
The token system based on the blockchain technology can play an important role in HR. The company can motivate employees by offering tokens, in this way, the SMEs can close the gap with large-sized enterprises in recruiting talents. This kind of incentive will provide companies with more chances to attract and retain the talents not only in China but from overseas. A good project and rewarding system will build an international “community” with talents from all over the world.
Supply chain is key in the Chinese market. Blockchain technology allows to keep and track the record of every stage of the shipping and logistics in real-time on the blockchain, getting a proof of provenance for all the details of each product. A study showed that over 20% of businesses use supply chain financing and the majority of companies are small and medium-sized enterprises (SMEs). The blockchain can be applied into the supply chain finance to: optimize cash flow, increase trust between buyers, sellers, and financial institutions, as well as prevent supply chain disruption, and lastly, secure and save the cost of transactions. Nevertheless, how to optimize the industrial chain and adopt the supply chain finance into the business becomes a challenge for traditional industries.
Privacy and safe storage of data
Chinese authorities leverage blockchain technology to enhance many fields such as Tax/Auditing and Privacy and safe storage of data and more. By applying the automatic system such as pay-as- you-go (PAYG) for making regular payments towards your expected annual income tax liability, the blockchain technology simplifies tax management and makes verification requests fast and simple. This evidently saves time and cost.
As blockchain allows users to store data in a secure way, all blockchain users can mutually store and encrypt data on each other’s computers. Blockchain offers a solution that enables businesses to keep their data secure from hackers or cybercrime.
A new form of virtual nation?
However, the Chinese market is always challenging for foreign enterprises, particularly for foreign SMEs. Nevertheless, it is worth mentioning that the challenges for SMEs in China to develop and adopt the blockchain technology are still tough. Initial Coin Offering is completely banned in China. In regards to the mass adaption of DLT (Blockchain), we can disagree with those who said that it may not happen until the U.S. or Europe creates or adapts a decentralized currency to integrate it within their monetary system.
The blockchain raises a more fundamental question about a new world order. The making of a new world order will not happen overnight. But when 20% of the world population adheres to the blockchain ecosystem, it is a community large enough to sustain itself. It is more beneficial than a quick and superficial mass adoption. You cannot force people to embrace the values of the blockchain without creating unwelcome tension. Ultimately, the blockchain community may become a new form of virtual nation without borders with its own ecosystem. Although it is difficult to predict a timeline, a larger adoption of the population might happen as soon as the crypto winter is over.
Currently, monart works with scientists who allow us to go beyond the field of art. They help us build solutions for the future of the blockchain that also offer a chance to eradicate poverty in the world. The radical truth is that blockchain is intimately related to the digital money. “Tokenization” is the next quantum leap in asset-based securitization, which is already happening in some of the traditional asset classes such as real estate, equity funding and even venture capital. The world will eventually move from securitization to tokenization, essentially because blockchain technology can automate the trustless transfer of digital assets thereby decentralizing and enabling the performance of valuable contractual deliverables without human engagement.
Read the full magazine here: http://www.swisscham.org/shanghai/wp-content/uploads/sites/3/2019/07/Bridge-Magazine-53-SwissCham-Summer-2019-1.pdf
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