Blockchain: The Real Game Changer of Finance

Mikhail Golomb is a financial executive who has spurred growth at firms in a number of sectors ranging from technology to digital health. Over the course of his career, Mikhail Golomb has become well versed in emerging fintech, including cryptocurrency.

                       Source: Tech in Asia

Since its first major period of growth in the wake of the 2008 financial crisis, the fintech industry has been considered at odds with traditional finance. Big banks and other financial firms have often been painted as “at war” with Fintech in the ensuing 10 years, with many articles outlining the ways in which fintech was disrupting—and thereby set to destroy—the finance industry.

However, as much as the spread of fintech is forcing banks and other major types of financial firms to change the way that they conduct business, some pundits balk at the term “disrupt,” suggesting that it is not an entirely accurate description of what fintech is doing. In an increasingly modern world with a large number of tech-savvy citizens, some experts argue that Fintech is merely driving necessary, pioneering development—encouraging firms with outdated operational models to rethink how they facilitate value exchange services via healthy competition.

Perhaps nowhere is the benefit of fintech and the competitive pressure it has put on the banking sector more obvious than when one considers the immense potential of blockchain technology on value exchange. Blockchain has stirred the interest of some of the largest banks in existence, including J.P. Morgan Chase, Citigroup, Goldman Sachs, Wells Fargo, BBVA, and Barclays, many of which are experimenting with or participating in investigative consortiums focused on exploring the uses of the groundbreaking technology. While many aspects of fintech have worried big banks, blockchain has proved to be a source of motivation for financial institutions to invest in and acquire fintech firms themselves. Many in the industry believe that these investments on behalf of banks are positive, as blockchain has every potential to be the next big game-changer in the value exchange market. Acquiring new, high-energy fintech firms for in-house collaboration may be the only thing that can help big traditional brands stay on the right side of the coming change, which some experts believe is imminent.

They believe in this possibility because blockchain may be the technology that completely changes the landscape of the finance sector as a whole. The idea is to find the “Uber” of the banking sector—a fintech unicorn that goes beyond moderately refining existing services and instead entirely changes the way that people bank. The major tech unicorn companies to accomplish this feat in various industries over the last decade (a list that includes Uber, Facebook, Airbnb, and Amazon) have done so by acting as technology-based intermediaries between the professionals providing a service and customers who want to purchase that service. The companies have served as processing centers that mediate the interactions between sellers and buyers, rather than acting as a company that invests in the services they provide themselves (for example, Airbnb does not own any accommodations, and Uber does not own a fleet of cars).

Blockchain by its very nature offers users many of the necessary capabilities to serve as an intermediary between people who need to use banking services and those who are on the receiving end of the banking services—all at a much higher speed and much lower operating cost than the same services provided by banks. Blockchain could completely replace some of banking’s most outdated processes by operating as a decentralized processing engine that enables global, peer-to-peer value exchanges. Exchanges could be completed on the blockchain faster, more affordably, and safely through a universal ledger, rendering much of the oversight provided by banks obsolete.

Although blockchain is a type of technology, rather than a unicorn company, it could fill the same role for finance as Uber did for transportation or that Airbnb did for travel accommodations. In these rare instances of great change and development within a business sector, the old brands that survive are only those which can warmly embrace and work to further the new norms in the industry.

Expect to See These 5 Blockchain Trends in 2018

Venture capital firms have invested over $1 billion in blockchain-based firms within the last five years, according to the Harvard Business Review. By all indications, this investment may begin to pay off soon, as the coming year is expected to bring blockchain mainstream popularity and a staggering $2.3 billion in spending to the market for blockchain solutions.

To get a clearer picture of what the future of blockchain may look like, check out the following five trends that experts predict they will see surrounding this innovative technology in 2018.

1. The U.S. government will further embrace blockchain.

Government entities have already begun to use blockchain in various capacities over the last few years, including the states of Delaware, Texas, New York, and Illinois. Blockchain-based programs within the Department of Homeland Security, Health and Human Services Department, and the General Service Administration are also already in place. We can also expect to see more publicly advertised uses of the technology this year from the FDA, the U.S. Department of Defense Transportation Command, and even the U.S. Army Medical Research and Materiel Command.

2. The number of ICOs will rise.

In 2017, there was plenty of conversation surrounding initial coin offerings (ICOs) and the need for regulations, prompting a public statement from SEC chairman Jay Clayton on the U.S. Securities and Exchange Commission website in mid-December. In spite of the potential risks associated with unregulated ICOs, industry experts expect 2018 to be another bull year for the trend, potentially even overtaking this year’s levels of venture capital funding. Expect this growth to attract more experienced investors who will bring a higher degree of professionalism, greater accountability, and more stringent due diligence to the process, making ICOs more like the traditional fundraising methods that they are poised to usurp.

3. AI, IoT, and blockchain will move toward integration.

The Internet of Things, artificial intelligence, and blockchain are indisputably the three current megatrends of technology, and 2018 may be the year that they take the first steps toward convergence. Blockchain stands to further the development of both, as it can provide IoT with advanced protection by securing points of failure and may establish an avenue for affordable access to big data for AI companies looking to further enhance machine learning processes.

4. The Asia-Pacific region will push hardest for blockchain technology.

Although North America and Europe, respectively, represent the first and second largest investments in the global blockchain marketplace, the Asia-Pacific region has the greatest potential for aggressive growth in the coming year and beyond. Countries such as South Korea and Japan already have banking sectors that are embracing blockchain in order to reduce costs and improve efficiency. Their media, retail, and insurance industries will also contribute to increasing demand for blockchain-based technologies in this area of the globe.

5. The overall blockchain economy will witness an upward growth trend.

While excitement about digital currency helped blockchain to attain its status as one of the most profitable investment trends of 2017, the coming year will secure its position as an independent technology with lucrative possibilities. Although cryptocurrencies are likely to experience a surge in growth, as well, we should anticipate that blockchain will drive disruption across industries over the next year and garner a high degree of interest and investment within the tech sector outside of its use as a platform for cryptocurrencies.

3 Things that Could Happen if Cryptocurrency Remains Unregulated

The lack of regulation in the cryptocurrency market has contributed to the success of iterations such as Bitcoin, which climbed in value in 2017 from just under $1,000 to a peak of almost $20,000 12 months later. While many who have invested in Bitcoin or alt-coins such as Ripple XRP and LiteCoin on a personal or professional level contend that these digital currencies must remain unregulated in order to reach their potential and thrive, they have become so popular that to leave them unregulated could have adverse consequences. Here are three things that could happen if cryptocurrency continues to grow without a reasonable degree of macro-level regulation.

 

1. Inexperienced investors could fall prey to fraud.

 

One practice that has gained popularity as a result of the unregulated cryptocurrency market is the “initial coin offering,” or ICO. These business transactions bear some resemblance to the conventional IPO used to issue company stocks. However, instead of earning shares in a company, investors involved with ICOs earn a digital asset, known as a “token,” which provides the issuing company with the money that it needs to fund its venture and investors with the promise of a financial stake in the company’s future.

 

Unfortunately, the popularity of ICOs has drawn the attention of scam artists and hackers, who pose a serious threat to inexperienced investors who want to become involved in the cryptocurrency market. While some would argue that the fault lies with investors who fail to perform adequate research, it’s important to consider the fact that regulatory bodies have placed restrictions on IPOs to protect investors from fraud.

 

2. It could diminish the reputation of the industry.

 

The reputation of cryptocurrency has been negatively affected by the dark web and questions about whether it could be linked to activities such as terrorist financing. The U.S. Department of the Treasury is concerned enough about the prospect of terrorists leveraging cryptocurrency to commit crimes that one of its officials recently testified before the Senate Banking, Housing and Urban Affairs Committee in an effort to push for stricter regulations on cryptocurrency exchanges. Several instances of terrorists hosting online Bitcoin fundraisers to support their groups have been identified since cryptocurrency began to grow. The anonymous nature of cryptocurrencies exchanged via blockchain technology makes terrorists’ actions difficult to track, providing them with a secure way to purchase supplies for their efforts and offering them a form of currency that can be easily exchanged on the dark web for commodities. A lack of regulation could diminish the industry’s reputation.

3. It could be the beginning of another global financial crisis.

 

In the wake of the rise of Bitcoin last year, professionals within the finance sector likened the phenomenon to that of “tulip mania” in the early 1600s and the 1987 stock market crash. While most experts agree that cryptocurrencies do not have the economic power to cause a global financial crisis, many are concerned about the effect that they could have on the world economy if they continue to grow quickly in popularity and to be used without any restrictions. Major financial institutions are already trading in Bitcoin, the best-known and most widely used form of cryptocurrency. In the event that this practice becomes widespread among all major financial institutions, a surge in growth without any regulation could destabilize the international market and pose a serious threat to the world economy.

3 Solutions That Blockchain Can Provide to the Telecom Industry

Over the last two decades, the telecommunications industry has grown significantly, driven by the adoption of new technologies. According to one Colorado-based research firm, the sector, which is expected to generate $2.4 trillion in revenue by 2019, currently services a market of around 4.7 billion mobile users.

However, some industry experts suggest that companies within this sector may find that the telecom industry is reaching a tipping point in the near future, with many firms losing ground to competitors who offer simpler, streamlined services that overtake more traditional telecommunications options. In order to avoid becoming a victim of digital transformation, experts suggest that one thing telecommunications executives should be doing is looking for ways to modernize their operations, such as through the implementation of blockchain technology.

Blockchain is a secure digital ledger technology that allows for the distribution of information without replication. It can carry out transactions quickly and efficiently while protecting the sensitive information contained therein, allowing individuals and organizations to interact anonymously through a system that relies on collective transparency in order to keep business dealings honest. With regard to the telecommunications sector, blockchain technology can offer three solutions that will help modernize the industry and allow companies to develop in the digital age rather than fall victim to it.

1. Simplify and streamline internal processes

The telecommunications industry hinges on cooperation between a complex web of customers, vendors, distributors, and providers. The use of blockchain technology could allow firms to develop a more efficient business model by streamlining Operation Support System (OSS) and Business Support System (BSS) operations. In the digital age, efficiency is crucial, and blockchain is a tool that can facilitate quick dealings between a large number of parties within a single transaction, which includes accurate and efficient billing. Blockchain could also create faster on-boarding processes for new customers when a client’s new telecommunications provider operates within the same blockchain as the previous provider.

2. Reduce the incidence of roaming fraud

Each year the telecommunications industry loses revenue to fraud, approximately $6 billion of which stems from roaming fraud, which occurs when a mobile user automatically connects to the services of another network provider in the event that his home network is unavailable. The use of a telecommunications service while roaming incurs a greater expense for customers and is a major source of revenue for telecommunications companies. However, call data often does not appear on the user’s home network for days or weeks, providing a window of opportunity for fraudsters to attack. Many subscribers who commit roaming fraud have used a visiting network and then feigned ignorance about using roaming services. They deny requesting roaming services or insist that they were not educated on the charges that roaming services can incur. Industry experts suggest that the best way to curtail the incidence of roaming fraud is to reduce the time that it takes for the two networks to exchange data, and blockchain is the perfect tool to make this happen. Blockchain can serve as a platform for systems that provide subscribers with a pathway to use roaming services after authenticating their identity, and can track the data usage in real time so that the window of opportunity that allows people to make fraud claims is greatly reduced.

3. Help telecom companies reduce costs

Apart from the money saved from streamlining operations, blockchain can help telecom companies cut costs in many ways, which includes using smart transactions to allow customers to purchase digital products, including music, gift cards, and mobile games. Blockchain can facilitate the purchase of these types of products through cryptocurrency, which incurs a much lower cost to companies than transactions undertaken with credit or debit cards.