The blockchain has the ability to revolutionise the financial industry on a scale similar to what the Internet did to the media industry. This disruption is the evolution of an idea born from the ashes of the last financial crisis a decade ago. The birth of cryptocurrency and its underlying technology, the blockchain, has the potential to disrupt any industry that has a record-keeping element to it.
Capable of storing immutable, traceable and open records through the power of computing complicated cryptographic puzzles, the blockchain has countless applications limited only by the imagination. Not only will financial institutions be revolutionised by the blockchain, various other industries will be as well. Logistics, medical records, the legal industry, these are all just some of the applications that will potentially see the use of blockchain.
In an exclusive interview with Money Compass, Dr Eric Ong brings us through the new world of the blockchain. As an active member of the blockchain and cryptocurrency community since 2014, Dr Eric is also founder and CEO of Relianz Chain, a Malaysian homegrown blockchain that seeks to join the revolution.
Please share with us the scenario of the Blockchain Evolution, briefly elaborate on the past journey, present and future development of the blockchain?
This all began in the year 2008 during a financial crisis where a lot of companies and individuals lost money; this was due to the failure of mortgage-backed securities. However, after Satoshi Nakamoto released his white paper, Bitcoin was offered to the open-source community in the year 2009 – around the time Blockchain became the answer to digital trust. This was due to the fact that it documents vital data in a public space which is immutable and cannot be altered by anyone.
Initially used for money transactions, now the blockchain has evolved into automated contracting. For example, lawyers use it, supply chains use it, where you don’t need paperwork currently. In the future, even governments may use it whereby it may be implemented for voting systems. That will be very powerful.
During its first few years, a lot of people believed that blockchain and Bitcoin were the same thing even if they’re completely different. However, in 2014, people began to realize that the blockchain could be utilized for more than just cryptocurrency. Thus, people began investing and exploring how it could be used for more operations. In 2015, Ethereum (a second public blockchain) emerged. Compared to Bitcoin, Ethereum can be used to record other assets and not just cryptocurrency. It can also establish smart contracts which can be processed instantly based on specific criteria that has been set on the Ethereum blockchain.
Today, blockchain functions on a proof-of-stake (POS) idea where mining is not necessary to produce a block. Stakers will then solve a legitimate proof-of-stake problem and whoever solves this first receives a reward; the verified transaction will then be kept on the blockchain. Relianz Chain deploys the 3rd generation POS, abbreviated as SPOS. For the future, blockchain can go many ways but based on the Gartner survey, the value add of blockchain will develop to over $176 billion by the year 2025. It is also projected to exceed $3.1 trillion by the year 2030. More and more people consider blockchain to be promising to mass business sectors in the future, though others believe that it will disrupt countless industries.
We hear that there are now 4 main generations of Blockchains. Can you briefly elaborate on their differences?
The very first generation of blockchain was derived from Bitcoin. It focused on preferred payment systems, moving values, and maintaining a ledger. Its very first application was specifically for money wherein two parties can exchange money without requiring a bank or a third party. The second generation blockchain incorporated smart contracts that allow personalized transactions to fit the needs of all parties involved. Paperless documentation based on consensus was introduced during the second generation.
Third generation blockchain switched from Proof-of-Work to Proof-of-Stake, ultimately increasing transaction validations per second. It eliminated the need for ‘mining’ – instead the network achieves consensus based on the amount of coins held by different nodes on the network. The third generation blockchain can readily service a plethora of individuals and it has a self-governing system. The good thing about it being open source is that it provides developers the chance to see the design of a network, allowing them to make necessary changes to avoid future issues.
The fourth generation blockchain corrects the inadequacies of the first three by making the blockchain environment safe for consumers, as well as being economical and flexible for industry, enterprise, and institutional use. Relianz Chain successfully developed a masterpiece in blockchain revolution, with a scalable, smart and simplified protocol. Coupled with a high processing speed, it provides innovation solutions applicable to mass businesses adoption. Relianz officially opened it door to investors on 20th July 2018.
From a new investor’s standpoint, what are the main key points that a new investor needs to know in order to understand the main relationship between the Blockchain, Cryptocurrencies and ICOs? How are they related to one another?
A blockchain is considered as a digital ledger that can be set to record financial transactions and everything of value. A collection of computers utilizes the blockchain to control the database that documents transactions.
Cryptocurrency, on the other hand, is a tradable, divisible currency that is created from the blockchain. Bitcoin is a form of cryptocurrency, a digital asset that functions as a medium of exchange to safeguard transactions; it also creates more units of the currency and all of its transactions are documented on the blockchain. There are two aspects of cryptocurrency: coins and tokens. Coins are native to a certain blockchain, whereas tokens are derived from the fork of the blockchain. A good example would be Ethereum (the coin) and the numerous ERC20 tokens derived from it.
For ICOs or Initial Coin Offerings, this has gained popularity as a type of crowdfunding and it is also a way to fund cryptocurrency activities. This happens when new projects sell a portion of their cryptocurrency tokens in exchange for money. ICOs also provide ways for the creators of cryptocurrency projects to acquire funds for their operations, and most of these ICOs raise their funds via bitcoin or other forms of cryptocurrencies. Going back to tokens, ICOs are normally tokens derived from existing coins, such as Ethereum.
From an investors’ point of view, it is important that they do their due diligence to find out if a blockchain project is legitimate or not. For this, Relianz Chain has implemented security features in order for investors to choose a good ICO to invest in.
When it comes to ICOs, regulators are still very conservative about such an investment procedure. How would you suggest to regulators to be more open about this new technology in the future?
In order for regulators to be more open, and ICOs to be regulated in the correct manner, the best option, in my opinion, is for the regulators themselves to be involved in the blockchain. Regulators are conservative in nature, and although they receive expert advice about blockchain, they are still wary about coins, tokens, and ICOs. What I would say is, regulators should themselves get involved in the blockchain. We can work together to implement a blockchain pilot project so that they can see the benefits of the blockchain.
A good example would be to overhaul the voting system, where we could eliminate the process of queuing in the sun, in the rain etc. This process has already been implemented in other countries, so why not in Malaysia?
How is blockchain applicable to the real business world and please elaborate which sectors or industries that would benefit the most on applying the blockchain technology?
Blockchain technology is more than just digital currency. The utilization of property, machines, creating one’s identity, and even the way one can vote can be enhanced via blockchain. A lot of applications of this technology are leveraging hospitals, banking institutions, corporations, and can even power digit ID on the Internet of Things (IoT). Here are some industries or sectors that would benefit from the blockchain:
Fund Administration – there are a lot of challenges linked to this industry and one of its biggest challenges would be managing and tracking expenditures. With blockchain, we can solve such issues by decreasing data errors, producing better tracking for expenditure, and enhancing different operations for numerous enterprise applications.
Supply Chain – aspects that are vital for integrity and reliability for a supply chain are provided by the blockchain; all records on the blockchain cannot be deleted which makes it vital for any transparent supply chain. Tracking a product from the raw material stage, all the way to the end user, is a powerful application of blockchain. If there are any problems, it can be traced back to the source, and the problem rectified or improved.
Financial Services – the blockchain will provide closed-systems where linked blockchain networks will be closed to outsiders to guarantee that data does not reach the wrong hands. It could give an SME boost to open more affordable, non-bank financing to smaller/medium-sized firms.
With centralised financial institutions, we can reduce paperwork by recording policies, transactions etc on the blockchain. Transaction speed will also be faster. Traditionally, a fund transfer overseas takes 3-5 days to be verified, but with the blockchain, verification takes 30 seconds, a minute at most. It will also cut down on transaction fees.
The clarity of blockchain is also vital for consumers to know that they support companies/groups that share values of sustainable manufacturing. A good sample would be Relianz Chain – with its simplified yet smart protocol, optimized security systems coupled with excellent processing speed, it can be used for quality technological and financial-scientific services. Though it may work for some, blockchain can also disrupt some industries such as crowdfunding, virtual property, securities trading, etc.
Please define how Cryptocurrency as New Money can be an effective form of exchange as a store of value as well as a digital currency. Will it be able to replace fiat currency?
As far as fiat money is concerned, it will still exist. However, digital money will be the next evolution in a decentralised banking system. The problem with fiat money is that it is run by a central bank. Its value is controlled by the central bank’s monetary policy. In the 2008 financial crisis, various jurisdictions central banks’ handling of the crisis left a bad taste in the mouth of the public.
With cryptocurrency, now there are many coins and competing systems. I believe that, within five years, the field would have narrowed down to just a few well-known ones. Furthermore, as we now currently trade stocks and other equities, it is very possible that five years down the line we will be trading ICOs and tokens instead. It is a paradigm shift in evolution, comparable to the dawn of the Internet era. Relianz Chain is moving towards that goal, being recognised as a cryptocurrency and allowing for clients to store and transfer value, as well as trade and develop further on the Relianz blockchain.
Cryptocurrencies can solve the issues of completing payments in trustless environments. Various cryptocurrencies like Bitcoin are attempting to enhance convenience and scalability so these may eventually and realistically compete with today’s payment methods. Some also claim that cryptocurrencies will replace today’s currencies by the year 2030.
Disclaimer: The opinions expressed are not necessary those of the publisher and website owner. Readers and investors are advised to exercise due care and be responsible for their own investment decisions.