Cool developments and major obstacles for blockchain in the autumn of 2020
It would overthrow governments and make banks obsolete. Libertines and anarchists saw blockchain technology as the means to strip both institutions of their power. It is therefore very interesting to see that banks and governments in 2020 are so proactive in experimenting and implementing the technology within their ranks. On the one hand, we are currently seeing how blockchain technology is beautifully used in the corona crisis, on the other hand, we are seeing beautiful blockchain companies falling over due to the same crisis. What can we expect in the near future? In this blog the 5 most important developments.
Where I wrote last year that many organizations were still looking for a successful business case, we see that blockchain has quickly changed from buzzword to business opportunity in the past year. A large Deloitte survey this year shows that 82% of the organizations surveyed spend money on the technology, just under 90% see a business case, half even see it as one of the top 5 priorities and the number of successful implementations in a year has doubled. Educational institutes join forces and offer massively training courses, SMEs are supported by the European Union in experimenting with the technology and dozens of startups in the Netherlands are building cool blockchain solutions.
“Blockchain has clearly proven itself, but there is still a lot of work to be done” — Dutch State Secretary Mona Keijzer
Central Banks and Their Digital Currency
In the early days of Bitcoin and the underlying blockchain technology, governments had good reasons to be wary. Research from Oxford shows that in the early years, half of Bitcoin payments can be linked to illegal activity. More than 85% of the blockchain startups that emerged during the hype in recent years turned out to be outright scams, causing investors (often consumers) to lose their money. Due to the lack of regulation, billions of dollars of money were laundered via digital currency.
However, due to the announcement of the Libra project, initiated by Facebook and the big turnaround of the Chinese government in blockchain from banning to embracing, digital currencies have quickly been taken out of the dark and put on the priority list by many central banks, as I wrote earlier.
“A digital euro was always swearing in church. Until Mark Zuckerberg got involved ”- The Correspondent
While Facebook has recently been pushed back hard by governments worldwide with its Libra project, governments have rapidly started designing their own digital currency and China has even successfully completed several tests. In addition to an “answer” to Libra, the disguised basic incomes that countries like Spain and the United States distribute to its population are seen as a motivational reason for governments to introduce digital currencies extra quickly.
The Chinese DCEP project is currently not only the most developed of all the so-called “Central Bank Digital Currencies”, but is also causing another power shift in the global geopolitical field from the United States to China. Backlight previously discussed this in “The Chinese Dollar” and predicted that in the foreseeable future, the Chinese Renminbi will replace the US Dollar as a world reserve currency. A game-changer that will cause a major financial earthquake worldwide. Of course, it remains special that a technology designed to make digital money possible without the intervention of governments is now being used by governments to gain control over this.
It is not only governments that provide innovation in the financial field. A rapidly emerging trend in blockchain land is “Decentralized Finance”; the ecosystem of financial applications, which is built on blockchain technology. Where digital currencies such as Bitcoin in principle became known for “peer-to-peer” payment, DeFi ensures that a large number of other, financial products, “peer-to-peer” are made possible. Do not pay negative bank interest, but simply receive interest on savings through companies such as Voluto, borrow money directly to another consumer through Compound, take out “fair” insurance through Etherisc or take out a cheap mortgage through Liquid. These are a few examples of cool, working DeFi solutions, of which new ones are added every day. A modest $ 2 billion is already in use and half a million people use the various platforms, which is currently growing exponentially. Both the strongly declining confidence in money, due to the printing of trillions of Dollars and Euros by governments from scratch, and the tremendous possibilities in the field of “remittance payments” for developing countries, may well stimulate this exponential growth in the near future.
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten” — Bill Gates
The education gap
Education is incredibly important in order to keep developing, taking steps and having an impact as innovative technology. To train new experts, to constantly update professionals and to make the technology understandable to a wider audience, such as users and investors. This is one of the biggest concerns of technology. Recent research by Nyenrode shows that 7/8 Dutch executives indicate that the knowledge level is very poor. Investors’ research also shows that their moderate level of knowledge is currently holding back large investments. There is also a major mismatch of blockchain experts, which research has identified as one of the biggest obstacles for executives to take next steps. Although the largest freelancing platform worldwide, UpWork, saw the number of people with blockchain skills on offer increase by a 6,000% last year, according to Linkedin, “blockchain” is still by far the most demanded skill of companies this year. Dozens of universities and other educational institutions in the Netherlands and worldwide now offer blockchain courses and the first students are gradually graduating from this. Major industry companies such as Binance and Tezos are setting up their own online “universities” to further support and accelerate the educational process. However, the gap between supply and demand will remain for some time, according to many experts, including IBM.
The pacing problem
The biggest obstacle for organizations to do something with the technology, according to many studies, including a large survey by the authoritative Blockchain Research Institute, are laws and regulations. A “pacing problem” has arisen because the technology has evolved so quickly that legislators simply cannot keep up. However, this is not only because legislators need and take time to legislate. Due to the many major global scandals in recent years, the various counter-reactions from governments have also put up barriers that are far from helping the development of the technology. We saw this with the major privacy scandals surrounding the tech companies and the subsequent GDPR legislation, which was immediately outdated in the field of blockchain technology at the launch. But the ‘Move fast and break things’ idea of companies such as Facebook, Amazon and Google around the design processes of its products and services is currently being curbed by many governments on a large scale. Also, a great many old laws, which mainly work in favour of traditional industries and not of new technologies, do not cooperate in this. Fortunately, many new laws and regulations have been announced, which in various areas will replace the old-fashioned rules for paper and mail for bits and bytes.
Every day, new experts, startups, organizations and other enthusiasts come with the most amazing solutions, breakthroughs and improvements in blockchain technology. From security to speed, from scalability to sustainability and practical business models. The technology is receiving more and more enthusiasm from all over the world because of its unique operation and possibilities, but also has a long way to go in terms of further development and maturing. The coming period is going to be an interesting one, due to the launch of many initiatives, products, services and other related elements. I follow this closely with enthusiasm!
Jan Scheele is CEO of International Blockchain Solutions and Bloqon. He is active in the blockchain industry since 2015 and is writing, training and speaking regularly about blockchain and digital assets all over the world. Furthermore, he is currently finalizing his book about the global impact of blockchain technology.