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citizens, some experts argue that Fintech is merely driving necessary, pioneering development—encouraging firms with outdated operational models to rethink how they facilitate value exchange services via healthy competition.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.

How Blockchain Can Dramatically Improve these 3 Major Industries

In a January 2018 article published on the Forbes magazine website, blockchain was named as one of 11 industries poised to become among the most significant digital disruptors of the future. While the experts believe that all industries will be affected by blockchain in the next several years, the following will have particularly significant gains to make if they choose to fully embrace the technology.

 

1. Real Estate

 

The real estate sector could benefit most from blockchain in an important way: the ability to abandon paper-based records in favor of a highly secure digital approach. Even the simplest real estate transaction is rife with paperwork. Every step—from opening escrow and obtaining insurance to securing mortgage approval and negotiating closing services and costs—requires hours of paperwork sent back and forth between the buyer, seller, and all involved intermediaries. In addition to unnecessarily prolonging the property-buying process, all paperwork is susceptible to human error, creating the possibility for mistakes that could later become public record. Paper-based records also have a greater potential for fraud, which can result in higher operating costs. Since the blockchain can automate the process of tracking documents, confirming their accuracy, and seamlessly transferring property deeds, real estate transactions can be conducted quickly, cleanly, and more precisely. Additionally, blockchain could completely eliminate the need to involve escrow companies, as funds within a real estate transaction could be released to the appropriate parties once the conditions of a smart contract on the blockchain are met.

 

2. Health Care

 

The field of health care has a lot to gain from the implementation of blockchain technology because it has the potential to restructure the entire health care system in a way that can help patients to obtain more accurate information and more comprehensive care. One of the foremost problems that health care providers struggle with is the inability to access the full picture of a patient’s medical history. This is due to the fact that patient data is not always easy to track down from past medical providers and because sensitive information is difficult to share with new doctors due to security threats posed by cyberattacks. Blockchain presents medical providers with the option of storing their patients’ medical history within a secure hub where they can safely and easily be shared with other professionals. Ultimately, this leads to a reduced likelihood that records will become lost, which can cause an individual to encounter issues with continuity of care. The more accurate of a picture that members of the medical community have of their patients’ entire medical history, the more likely they will be to correctly diagnose illnesses and prescribe treatments that save lives.

 

3. Crowdfunding

 

The impact that blockchain can have on the crowdfunding industry has everything to do with its affordability. Crowdfunding is a relatively modern concept that many in the business world see as a more accessible, small-scale alternative to venture capital funding. However, what these two forms of raising capital have in common are the high fees that entrepreneurs encounter when attempting to fund their creative ventures. Centralized crowdfunding sites such as Indiegogo and Kickstarter serve as an intermediary between individual online investors and the entrepreneurs who are trying to gather financial support for their ideas. They retain investors’ donations in escrow until the contract between an entrepreneur and his or her investors has been fulfilled. While this is in the best interests of donors, the fees for using these services are surprisingly high, and they reduce donations that could otherwise be put directly toward the entrepreneurial venture that donors intended to support. To retain these donations in full, entrepreneurs can use the blockchain to issue their own cryptocurrencies, which investors later have the option to trade in for services, products, or cash from the entrepreneur’s company. These investments are secured by smart contracts in which rewards and equity in exchange for contributions to a venture are distributed automatically once the terms of the blockchain-based contract are met.

3 Industries that Blockchain Will Undoubtedly Disrupt

The most popular online business periodicals have been populated with articles that detail the many ways in which blockchain is expected to change the world. While many people still think of blockchain as synonymous with cryptocurrencies such as Bitcoin, its expansion as a technology has expanded beyond the exchange of funds.

 

According to some business professionals, no industry will be left untouched by this modern technology, and evidence supporting this assertion continues to manifest itself across many different sectors. Following are three industries that blockchain is sure to change in the near future.

 

1. Banking and payments

 

Leaders from some of the world’s most powerful banking institutions are moving quickly to leverage the power of blockchain to their advantage, with one recent survey from Accenture, a business management consulting company, indicating that 90 percent of the banking executives surveyed confirmed that their firms are investigating the potential use of blockchain in business. Further, research performed by IBM indicates that around 15 percent of the world’s banks are expected to implement blockchain by the end of 2017, and the reasons are clear: the technology has wide-reaching potential for reducing costs, streamlining operations, and offering better products to customers. Blockchain could help to reduce the incidence of fraud due to its resilience against cyberattacks and the ease of compliance with current regulations, as well as lower costs, while providing better security when it comes to facilitating payments for clients.

 

2. Private transport and ridesharing

 

The ridesharing industry has seen a lot of change in the last several years, with companies such as Uber and Lyft revolutionizing the way that people around the world arrange private transportation. Blockchain may yet further change the industry in the near future, as it could pave the way for peer-to-peer ridesharing and private transport services that eliminate the need for management by a corporate third party. Currently, drivers and passengers alike rely on a centralized platform controlled by companies such as Uber, which has set the standard for the ridesharing industry and its cost for both parties. The company ultimately profits from the transaction by recouping a fee for facilitating services. Blockchain could allow individual car owners to arrange for the provision of ride services directly with passengers after both have digitally verified their identity. Then it could be paid for using cryptocurrency exchanged via e-wallets owned by both the driver and the passenger and protected through smart contracts that outline the terms of the ride. This use of blockchain could put power directly in the hands of users via peer-to-peer networks.

 

3. Online music

 

As with the ridesharing industry, the peer-to-peer capabilities enabled by blockchain hold enormous potential for the online music world. In current practice, the artists who actually create the music that is then distributed through various mediums end up seeing very little of the profits. This is particularly true in an age when file sharing between listeners and streaming services such as Spotify and Apple Music have overtaken traditional music-buying habits. Consumers are no longer purchasing music. Even when they are, it often takes years for payment to reach musicians, leaving most of them unable to make a living off of their craft. However, because blockchain acts as a decentralized distributed ledger, it holds significant potential for artists’ ability to share their music in several ways. First, blockchain technology could establish a database that accurately records the digital rights of individual songs, which is a problem that the industry struggles with. Second, by uploading music to the blockchain, the copyright information could be unalterably encoded into a song’s file, with smart contracts detailing the percentage of royalty fees paid out to each contributor each time a song is played. Artists could then be compensated fairly and immediately for their work, without the need for management through and payment for a third party.