The final session of the blockchain forum of InnoVEX 2019 was a panel discussion featuring Mr. Dominik Schiener, CEO and Founder of IOTA Foundation; Ms. Peko Wan, Vice President of PUNDI X, and Mr. Jeff McDonald, Co-Founder of NEM Foundation; and moderated by Mr. Jason Hsu, Member of the Legislative Yuan also known as the Crypto Congressman.
A Solution Looking for Problems
Blockchain currently seem like a solution looking for problems; an inverse of the common method of creating solutions to an existing problems. However, blockchain has proven itself to be a powerful and versatile tool whose uses have not been completely explored yet. Mr. McDonald remarked that while the ultimate use of blockchain is not yet known, it is already revolutionizing not just money, but other things such as identity, voting, certificates, etc. He said that blockchain is almost guaranteed to gain traction and show improvements around the world.
Mr. Schiener commented that blockchain’s versatility means that they can be the solution of choice to solve problems. To him, blockchain is the best solution to solve the lack of trust in IoT devices by creating an ecosystem where machines can trade and transact with each other. A clear vision of machine economy will also be necessary to build a strong foundation for the system. The key for companies that want to use blockchain in their main product is to work for and with the industries. He stated that regardless of the technology used or the features; if the product cannot solve the industries’ problems, it will not be adopted.
Ms. Wan pointed out that because blockchain is a versatile solution, it is very possible to use it in conjunction with other technologies. For her company, they opted to use blockchain with hardware as a way to ease the adoption and ensure usage; especially as their aim is to use blockchain in transaction & fintech. The use cases she focused on are also where stringent regulations exist and need to be complied to.
Blockchain and Government
Ms. Hsu looked at things not only from a lawmaker’s perspective but also at how technologies can change the status quo; in personal lives, businesses, and economy. He said that as Taiwan aims to develop its own national e-ID system; blockchain can drastically change the way the economic system operates and provide a more efficient, better, and secured system for data collecting, sharing, and storage.
Mr. McDonald also commented how many governments around the world are also looking into deploying blockchain to help secure information; especially as information is valuable. Blockchain also helps as a way to mitigate damages incurred in the case of information theft; by making sure the identifications and information can be reissued and re-secured. Using blockchain also means the entire national ID system can be revamped for a much higher convenience by providing every citizen a 2 factor ID number: private and public. This system will allow citizens to give anyone their public ID number without fear of identity theft as long as the private number remains private.
According to Mr. Schiener, governments are the perfect partner for blockchain startups and companies. Currently not many governments have clearly defined regulations regarding blockchain and government will fulfill this role. Governments can also push the local ecosystem to work with one another and even provide the testbeds for innovators to test their technologies. This is beneficial because many blockchains and their applications are still in a proof-of-concept stage. In addition, blockchain as a technology also encourages governments to rethink the way they deliver services to the citizens while at the same time making the governments realize that they need to be on the side of innovation. Mr. Schiener added that as blockchain applications are decentralized, it means different governments can focus on different blockchain applications and accelerate the innovation pace together.
Ms. Wan’s focus in the panel was in financial inclusion and how government and blockchain can help with the issue. In several countries approximately 50% of the population is till unbanked, meaning that they have no access to bank accounts or to financial services. Governments may face difficulties trying to help them through conventional means, but creating tokens as a means of exchange can solve the issues and offer the unbanked population the same services as banks. By allowing citizen digitalization, blockchain will also increase the value of data and will make the government take data more seriously as well as share it among the permissioned parties.
Mr. Hsu also offered his opinion in this matter. As blockchain’s most famous application is cryptocurrency, some form of legislation is necessary and has been legislated in Taiwan; the first of its kind in Asia. To achieve the needed success, the governments also need to provide a regulatory environment where data can be protected and the technology & industry can develop. Regulations are necessary, but it must not be too restrictive. While anonymity is often a source of concern, it can definitely be useful for giving identity to people who must remain incognito for their survival such as refugees. Going forward, there are gaps that need to be filled between the regulators’ understanding of where the industry is headed and what the technology can or cannot do, as well as how the technology can add value to the existing system.
Privacy, Security, Blockchain
While touted as a significant game changer for much of the world, there are still some obstacles that blockchain has to overcome, especially in terms of privacy and security. With previous incidents of cyber-attacks to cryptocurrency exchange platforms, concern over securities and data protection is logical.
Mr. Schiener suggested that everyone must first understand what blockchain can and cannot do because often times, people overestimate blockchain and underestimate the work needed. For some applications, using blockchain in conjunction with other technologies as the current blockchain systems might not be ready and the application might not be scalable. The future of blockchain is also still uncertain and the security risks also exist. He suggested tackling the issue on a protocol level and making sure that all the data that sits on the ledger is encrypted to make sure only certain authorized parties can access the data. In the context of identity, blockchain can be used for verification purposes, but should not be used for data storage. For data & security on the corporate side, blockchain can be used to create an audit trail & tracking method. This will allow the process to be automated and the data to be shared. For blockchain, the focus should be on getting rid of inefficiencies and unnecessary complexities of the current process.
Ms. Wan’s concern for security in blockchain is the method to encrypt information and decrypt it. One way is to separate the information into multiple pieces and when it needs to be accessed, combine the pieces later with an authorized private key. The main job of blockchain in this context is to add an extra layer of encryption.
Mr. McDonald stated that the original blockchain was not built to specialize in anonymity. But certain versions, formats, and iterations exist that use what he believes is a secure enough system: zero-proof cryptography; which is indispensable for identity, voting, and ownership purposes. He added that when technologies are expanded and other services are added, that is when their full potentials are realized.
Barriers to Mass Adoption
Despite being much needed and largely popular; blockchain has not gained mass adoption like internet has. Even when it is combined with other technologies and hardware, it seems blockchain has still failed to gain mass appeal.
Mr. Schiener stated that there are still many developments that need to be done; especially to make blockchain enterprise & mainstream ready. Currently there are 3 main roadblocks: the technology itself, governance around the technology, and ecosystem. Further work and efforts are necessary on the technology side to prove the new system and making sure that blockchain truly is enterprise ready. There also needs to be a governance structure for the blockchain protocol and technology that is neutral; in which not a single party can decide what happens to the protocol, but instead the decisions are made by the ecosystem. On the ecosystem side; more projects and entities need to progress from the proof of concept stage and have willingness to trial the technology in a more productive environment. Mr. Schiener further added that Blockchain and Distributed Ledger Technology can only mature through government help; one of the help they can provide is by creating an environment where innovators can experiment and figure out what works and what does not. More governments today realize that they need to support the new industries and that they are here to stay; however it will still need help to grow, mature, and to create the envisioned impact.
Mr. McDonald said that blockchain is still at an early stage. Currently there is a blockchain triangle of security, scalability, and utility; no company can deliver all 3 to their fullest and must face a tradeoff. There are real companies doing real things with and on the blockchain, but even companies that have partnerships with large companies might not be too highly valued because there are focusing only on doing real blockchain. While companies can use existing blockchains, they can also build their own blockchain which allows them to have real adoption by real businesses.
Ms. Wan pointed out two of the largest issues with blockchain on fintech, which are the crypto to fiat exchange rate, along with the stringent regulations on the fiat side. Compliance to the regulations is vital to mass adoption and to create a user barrier for using a particular service. In addition, even if the transactions are done using blockchain, the possibilities for human errors still exist. For example; in the case of a user losing their private keys, what should be done to mitigate the issue? Blockchain’s current iteration is unfortunately still difficult to use for the regular users and need to be easier for the mainstream to adopt so they can use the technology more easily.
Mr. Hsu stated that blockchain perhaps need to be a lifestyle or at least affect people’s daily lives so they can understand the benefits of it much better. On the regulatory environment, he believed governments around the world need to create a regulatory sandbox to make sure the technologies can be tested in real-life applications. Taiwan has already legislated 2 regulatory sandboxes: in fintech and autonomous cars. He commented that regulators must learn with the industry and legislations must evolve as the technology itself evolves.
Where to Go from Here
Mr. Hsu pointed out that Taiwan’s government is ready to work with innovators and has built a center of excellence of blockchain with pioneering areas in agriculture, transportation, smart city, logistics, medical, and finance; creating a software – hardware integrated blockchain solution. In addition, Taiwan will soon create a regulation for security token offering; inviting global investors to explore opportunities in Taiwan. For blockchain to work in the future, the ecosystem will need to work together. Blockchain will give the opportunity to correct the mistakes made in the internet age where data is centralized and controlled by giant corporates. Blockchain can be an opportunity to share and develop coexistence; including creating a financially inclusive world where everyone can have access and liberty of their own data, as well as being able to transact money and live with dignity.
Mr. Schiener believes that in the future, there will be 2 to 3 permissionless ledgers that will survive while the other remaining ledgers will be permissioned for specific use cases. The permissionless ledgers will function as the backbone of the society and the system of systems of the future; where people do not know what happens or how it works, but they are certain that it works.
Mr. McDonald believes that blockchain will be able to make the world more secure, auditable, transparent, and fair. Current blockchain application is only starting to achieve it with money, but it can be expanded to anything imaginable that uses database or ledgers to secure the information.
Ms. Wan hopes that in the next 10 years, the devices made can make blockchain more adoptable and more importantly that more people get involved with blockchain & utilize the technology to make their information more valuable.
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