Q&A with Brett King, Best Selling Author, Speaker, Founder, Radio Host, TV Commentator
#Topic: Non- Conventional Use of Blockchain
Blockchain is emerging as an important technology because of:
– Strong performance from a security perspective
– Regulatory acceptance worldwide
– Use of identity systems in the near future (biometric, digital passport)
– Implementation of smart infrastructure in the next phase of economic growth
-Marriage of AI (Artificial Intelligence) and blockchain
More about Non-conventional use of Blockchain:
- Non-conventional use of Blockchain = non financial applications of Blockchain
- Financial Sector — first to use the distributed ledger technology (DLT) which essentially led to the creation of the Bitcoin architecture
- Every use of Blockchain is non-conventional because it’s a new technology as conventional means standard
Non-Finance Blockchain Applications :
1. Government & Legal
2. IP content & Rights Management
3. Utilities & Smart Infrastructure
5. Networking & Data
6. Blockchain as a service
Key Question 1
What is the capability of Blockchain? With most ICOs (Initial Coin Offering) and project deputies popping up everywhere, they say that there is scalability because their growth is related to the capacity of Blockchain to support their growth. Do you think there would be some constraints?
In traditional blockchains like bitcoins, ICOs exists in a gray area in terms of scalability. One of the reasons is that bitcoins are facing criticism as a payments network. As a currency these days, particularly the hoarding around bitcoin, there’s limited transaction capability on the current blockchain that supports bitcoin. A classic example is, if you want to buy coffee and you use bitcoin, the transaction fee will cost as much as the coffee itself. The architecture of these transactions has improved but there are still severe limitations.
I think from a regulatory perspective, you’ve really got the world split on these. I’ll give you details from the new book I have written: The Philippines and U.S. have regulations allowing ICOs but for registered investors on the SEC. South Korea has a framework that provides legal architecture for ICOs. Japan is probably the most forward-thinking environment in this respect. Some of the biggest Japanese corporations are doing their own cryptocurrencies and tokens so it has broad regulatory support there. Singapore wants to differentiate their market from an acceptance perspective. The European Union is still working on its framework for acceptance. Thailand has come out and said they are wiling to support ICOs in some form. China, Vietnam and Indonesia have heavily restricted or banned ICOs in those markets. This is sort of the regulatory landscape but certainly not a one size fits all or consistent across different markets.
All of these currencies and coins form the cryptocurrencies and that they’re a new digital form of equity in companies that are being listed. It’s not a traditional form of equity because it’s not a stockshare you get in the company. Companies are raising money using an initial coin offering (ICO) and they’re doing this to grow their business, then tying the performance of their business back to the growth or appreciation of that token or coin. So many companies issuing coins or tokens have tried to make clear from a legal perspective that this is not equity but it is an investment in the company. Now you can understand why the capital market operators and regulators across the globe have been looking at ways to approach it.
In the overall capital markets, technology companies are dominating the traditional stock markets. Now cryptocurrencies and crypto assets in general are now responsible for the creation of digital commodity, digital assets and digital equity that are built for real time transmissions. The question is, how will regulatory authorities treat this phenomenon? Because at this stage, the structures surrounding these digital assets and equities are imperfect.
Key Question 2
Some governments are not a hundred percent supportive of ICOs and are blocking the movement of blockchain to be developed and researched for progress. Will the adoption of blockchain in government projects like biometric registry change their perspective?
2017 was the biggest year we’ve had for commercialization of blockchain projects. So even if there are a lot of regulatory uncertainty around ICOs, I don’t think there’s evidence that it’s slowing down blockchain development. Over 5 billion was raised alone last year for ICO funding. The governments at the moment are hesitant in supporting ICOs because of the fact that there’s a lot of attention given on its incredible growth in the past years and is still gaining momentum so far. So will 2018 surpass the ICO growth of 2017? Experts predicted that ICOs are replacing early stage capital because of its more efficient ways for founders to raise money and that they don’t have to give away huge chunks of equity to be able to raise cash. Then this is going to continue to grow and move on to replace early stage funding that we see through traditional Venture Capital fundings. So I think we’re going to start seeing governments compete on regulatory framework for the issuance of ICOs if they want to be international leaders of digital financial centers.
Key Question 3
Do you think the western world, particularly in Eastern Europe, would readily adopt to regulating ICOs soon?
I think a good proxy for that is China right now in terms of blockchain adoption and things like payment technology. Last year, China did 5.5 trillion in mobile payments and Alipay together with WeChat contributed 92% of that. That’s 50 times what the US did last year in mobile payments. We see China aggressively growing in this space. So why is this possible? It’s because there was not a lot of regulation favoring the traditional payments networks in the US. There were a lot of restrictions, heavily regulated and defined use of payment methods in the United States. The use of legacy payments like using plastic cards and writing check payments makes that change a lot slower because of the legacy payment regulations. In the same context, I think the same is true of blockchain. They have to transition from their legacy architecture and infastructure on to blockchain and that’s going to take many years to accomplish because they have to make sure their banks will not be affected. In emerging markets where they don’t have such extensive legacy behavior, it’s much easier to accomplish the transition of replacing traditional systems to new capabilities. So, I think we’re going to see the fastest scores in application of blockchain in emerging markets rather than in developed economies.
Key Question 4
Will blockchain affect the energy consumption should it progress further?
Someone has stated that if we continue to mine Bitcoin, it will have more electricity consumption in the entire planet which obviously is not possible. Then there was this story on Motherboard which says that one bitcoin transaction uses more energy than your weekly energy consumption. So it is definitely energy intensive for bitcoin mining. There’s another view about this topic which is if we’re going to continue creating cryptocurrencies, we are going to have to radically change the way we think about energy production. If we base it in the way we generate electricity at the moment, then mining of cryptocurrencies will be an issue. However, if we make a strong shift towards renewable energy sources, then we will have perhaps an abundant energy supply for mining cryptocurrencies.
Key Question 5
Why do you think people are afraid of blockchain and don’t see the difference between blockchain and cryptocurrencies? Why is it hard to convince people that this is the future?
During the early years that we’re talking about blockchain, it was intertwined with bitcoin as a technology so a lot of people still think that blockchain is the underlying architecture and fundamental technology behind bitcoin. Nowadays, that is a pretty limited view of the world of blockchain. In reality, blockchain is a distributed database just like your own computer or an email database. It’s silly to be afraid of blockchain from that perspective. I think what is scary around blockchain is the way it is going to change the rules. It’s going to change the way we think about things like legal contracts, value chain and procurement. Blockchain is going to be part of the foundational technology that is going to provide a vehicle for extremely disruptive technology moves. If you look at technology development over the last 250 years, every time a major technology has come along and impacted the way people think about the industry, work, employment or structure of companies, massive fear is always associated with the disruptive nature of these technologies. Fear had zero effect in the adoption of those technologies. Over time, the reality is that blockchain and artificial intelligence are inevitable. People can be fearful of it but your fear or even a collective fear is not going to slow down adoption of these technologies one iota.
Key Question 6
What resources can you recommend about blockchain and cryptocurrencies for beginners and for people who have advanced knowledge about it?
There are great pieces of work out there. There are two books I can recommend that has general pieces about blockchain and crytocurrencies. If you are interested in blockchain as a topic, read Michael J. Casey’s work especially his latest book, The Truth Machine. If you’re interested in crytocurrencies specifically as an application on blockchain, I can recommend the book by David G.W. Birch which is called Before Babylon, Beyond Bitcoin.
If you’re quite advanced, do some readings on transaction throughput which I think is the biggest thing that we have to solve right now.