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Every time humanity has faced an existential problem, innovators have responded with breakthroughs that not only solve a problem but create new economic reality. Sometimes it is centuries before people realize the magnitude of an invention.
Trust in private and government organizations around the world has drastically been eroded in the last decade. At the same time, human activities have become incredibly complex over the past 40 years.
To reinstate trust and overcome the obstacles to growth, the world stumbled into an unlikely wholistic solution in the depth of the financial crisis 10 years ago: blockchain.
Blockchain technology has evolved from the early days of Bitcoin to a formidable technology solving the industry-wide problems from finance to healthcare. Blockchain projects are moving from proof of concept to real industry solutions solving the industry-wide problems from finance to healthcare.
After signing as one of the ten founders of INATBA (International Association of the Trusted Blockchain Applications) at European Commission for Digital Economy & Society DG Connect HQ in Brussels as the ONE &ONLY Turkish Company we talked with Erol User, Founder Chairman of BlockchainArmy and Ali Sina User Founder CEO of BlockchainArmy, involved with Blockchain from its early days in 2013. BlockchainArmy has been developing blockchain solutions for diverse industries: multinational energy trading blockchain in Asia, healthcare blockchain in the US, cross-border blockchain payments for SMEs in Europe, Africa and Asia, international trade processing and supply chain management blockchain, identity management and other government services. We asked User to share his experience with us:
What is Blockchain?
- Blockchain is a software technology which creates trust in what it does by involving all interested participants in the process. Information on the blockchain is visible to concerned parties. New transactions and modifications to data are made with consensus of the concerned parties, and all prior versions are stored in a chain of blocks. Imaging storing a new version of an Excel spreadsheet with every change that is made to it. Cheating the system is virtually impossible without the agreement of the majority. Blockchain allows the creation of bilateral and multilateral contracts, which are monitored, processed and settled objectively on the system, leaving no room for non-performance or disagreement by any of the parties. Blockchain technology simply executes good practices and insures against bad behavior of any of the participants.
Where did Blockchain come from?
- In 2008 the global financial system was staring at the abyss, corrupted by its own decision making. An innovative team of developers decided to address the flaws of the financial system with blockchain technology. They created the first and successful to this day blockchain project – Bitcoin. Bitcoin was invented as a combination of 3 existing technologies: distributed ledger, cryptography and digital cash, glued to gather with mining to incentivize participants to process trades. Scientists, entrepreneurs and innovators quickly saw the potential of the open source technology and started improving it and creating entirely new blockchains and applications.
Why is blockchain significant?
- Trust in institutions and companies is at an all-time low. At the same time, our society has become increasing complex through decades of overlaying human and computer system on top of another. Blockchain is a solution to both the trust problem and the challenge to simplify society and industry. Processing bank transactions today is slower than in XV century. Bank transactions were settled same day in XV century Venice or XVII century England. In XXI century, bank transactions settle in 2-3 business days later. Through transparent processes blockchain creates instant trust and in near real-time settles trades, the fastest humanity has seen. Blockchain is the savior of industries from decades of wrong designs, slow systems, and obstacles preventing growth. Blockchain simply eliminates human flaws and opens industry participants to trusted sharing of information. Moreover, blockchain allows an industry to come together and agree on the rules of engagement and practices that with allow industry growth and profitability. Blockchain eliminates redundant processes in each industry participant and helps humanity do a specific task only once, thus unleashing incredible efficiencies, economies of scale and economic potential. For example, banks spend more than half of their revenues on back office processing, which is designed to prevent theft and errors by employees, customers and counterparties. If all transactions are on a shared, trusted blockchain banks estimate they will be able to eliminate 80% of their back office processes.
Why trust blockchain more than a human system?
- Computers simply execute the predetermined and agreed upon processes and contracts on a blockchain. Computers do not take bribes, and do not cloud their thinking in changing circumstances, computers execute the tasks with precision, on time and never forget. And when there are millions of computers on a blockchain, all containing the same information, an ill-meaning person needs to corrupt the majority of computers in the same nanosecond to achieve its malicious goal. This is an impossibility with current technology. Bitcoin blockchain, version 0 of the technology has now been in operation FOR 10 YEARS and has not experienced a single hack (plenty of exchanges and individuals, have been hacked, but this is like leaving your wallet on the sidewalk and expecting someone will return it). Bitcoin blockchain has processed $3 trillion in transactions in 2018 alone while being completely public, and without central authority administering or enforcing the blockchain. Blockchain technology has had 4 major evolutions since the early days of Bitcoin: drastically increasing processing power, fully customizable electronic smart contracts, permissioning and business logic from variety of industries being ported to industry specific blockchains.
Please share some interesting projects you have been involved with?
- First, what is interesting is that most applications that can benefit from blockchain technology have a lot in common, which allows for great deal of reuse of the core components.
- Cross-border payment systems is by far the most promising, immediate application of blockchain technology. We have been developing a complete payments system, which digitizes national currencies and enables near real-time settlement on a blockchain. We discovered a powerful side effect of using blockchain payments: all trading partners of a country can buy and sell the national currency in a single pool of liquidity and settle immediately. This enables trade between any two countries and their currencies and eliminated the need for settlement in third currencies like the US dollar or Euro. Payments happen in minutes not days or weeks the way it is now in the banking system
- We have advised several countries on digitizing the national currency and putting it on the blockchain. Several themes have emerged from our research. The best way to digitize a national currency is to let fintech startups and banks do it. Central bank solutions will attract too much hackers and bear the risk of damaging the central bank reputation. We see digital national currencies as the best solution to stimulate trade between any two countries.
- Once we have a core payments system on blockchain, any business or industry that has payments at is core can be built on top the payments system. We did exactly this for a Healthcare system with real-time management of healthcare facilities, patient profiles, scheduling, self-help knowledge base, remote doctor examinations and of course real-time payments for all these services. This system allows hospitals to utilize their resources 24/7 and earn significant new revenue from the 14 hours of down time they currently have. Patients benefit from much lower cost and faster service at any hour of the day at their fingertips
- We were approached by 3 major Asian countries to advise them on an energy and transmission trading system among them. Again, this solution was conceived with the payment blockchain and matching engine. Smart contracts perfectly addressed the needs of the 3 countries and they are actively at work to modify their energy infrastructure to connect to the energy blockchain. The blockchain allows for all players, consumers, energy producers, transmission and trading companies to be in the same system and balance out the energy needs in real-time and into the future.
- In a global interconnected world, manufacturers import parts, assemble products and then export their products. Addressing all the logistical, customs, duty/tax aspects of a complex supply chain, is best done with a blockchain solution. We are actively involved in creating the solution for the Turkish Exporters Association that will enable growth in the industry and resolve the many current obstacles.
- Blockchain stores all prior versions of current data, making it very suitable for identity management, registries, and many of the government-maintained databases. BlockchainArmy is working with several governments in this area to streamline the government databases and registries and drastically improve security of the data.
What makes a project suitable for blockchain development?
Blockchain technology is certainly not panacea for all challenges. Blockchain technology is very data and computationally intensive. To justify its use, sharing of data among multitude of industry players is the first requirement. Passing of diverse data between entities, diverse participants and consumers of data is also a prerequisite for blockchain platform. Monitoring how data changes over time and securing how data is changed can be executed with other technologies, but Blockchain does it best, especially when combined with the above requirements. Execution of smart contracts comes with Blockchain technology, but not all projects need to run smart contracts.
What are your predictions for 2019?
- Blockchain projects are being developed in every industry, 2019 will be the year we see these projects going live. We are also seeing countries like Switzerland, UAE, Singapore, using new blockchain technology to gain new competitive advantage. We will see faster adoption of blockchain technology by governments and industry to stay competitive and more importantly resolve structural hurdles to growth. Despite the steep drop in crypto asset prices, institutional investors are piling into blockchain investments, funding the well-thought-out projects. Towards the end of the year, I anticipate cooperation between competing projects this year to begin, as economies of scale in most cases will be achieved with just one blockchain offering.
