Erica Stanford cuts through blockchain BS
Wed 13 Feb 2019 | Erica Stanford
Erica Stanford, founder of the Crypto Curry Club, tracks her journey with blockchain technology, its real value and the enterprise path to adoption
I first heard about crypto through a friend. Infected and intrigued by her enthusiasm, I started researching digital currencies, blockchain, decentralisation, and soon saw what the potential of the technology was.
If you have ever spent a lot of time in Asia and South America, you are familiar with how hard it can be to get money from A to B, how extortionate remittance companies are, and how unreliable local services can be.
I once had three cards stolen in Guatemala. The third time I was staying in a remote village and had no other means of getting money to pay for anything, so I had to walk several miles through not the safest part of Guatemala to the nearest Western Union. My dad sent me some money from the UK- and it arrived 3 days later, but for that they charged 14 percent.
As soon as I read about digital currencies and blockchain and especially once I started playing with crypto and sending small transactions, I could see instantly that it had the potential to leverage something frustratingly absent from international finance. Not only for the 2.5 billion who don’t have access to banking around the world and who have historically been the biggest victims of the awful remittance companies, but how much better the experience and principle is of being able to send any amount of value to anyone else around the world, instantly, for free- and being in full control of that transaction.
I followed this up by researching other use cases. I discovered possibilities for improving supply chain provenance, ensuring sustainability and for improving competition in energy markets. Energy conglomerates have a huge monopoly over the market, blockchain and smart contracts can put energy suppliers direct to the users, potentially saving up to 60 percent capital of which would otherwise go to the energy company.
Not only is there immense value in direct transactions, especially for micropayments, but blockchain has a unique ability to safely and reliably connect users to suppliers without middlemen. Blockchain’s ability to show full transparency for all transactions could literally change voting, democracy, and reveal how much corruption and inefficiency there is in all banks, companies and charities. But for this vision to be realised it requires a radical overhaul of how all companies work.
The real value of cryptocurrencies and DLT
Cryptocurrencies have been until now mostly seen as a way to make money through fundraising for ICOs, investing or trading, but that’s missing the point.
Digital currencies have huge capabilities. It it is now possible to make free microtransactions, track and fully trace every transaction, apply rules onto a currency (by controlling how, where and when it can be spent) in ways that are totally impossible currently with fiat.
The use cases will be of particular significance in gaming and gambling where every transaction can be sent in real time, for free and tracked. This will provide much greater security for purchases of digital items.
Cryptocurrencies can also be used to provide 100 percent accountability in the supply chain. Using digital currencies as the payment tool allows one to view exactly how and what the money is being spent on, such as who is being paid and how much for labour.
“Think of the implications for child and slave labour if buyers have full insight into every granular detail of a good’s production”
There are companies working on this. Walmart is for example working with IBM on a blockchain solution for their supply chain. Walmart had had an issue involving bad vegetables which led to a huge and expensive product recall. Blockchain allows them to track every single item to a batch and a field and know exactly, in real time, where all its stock is and which batch and origin it is from.
Walmart has just gone to the first stage of what is possible. One of the core shortfalls of blockchain is that it doesn’t account for what happens before data is added onto blockchain. Once information (such as the journey of organic lemons from farmer to shop) has been added onto blockchain, that journey of those organic lemons can be tracked with full transparency. However, how can one prove that those lemons are organic? Walmart has been able to implement this because of its weight in the market. Other large retailers would be able to follow suit or go even further.
Where blockchain can change the supply chain is by adding tokenisation, which provides a means to track every spend throughout the journey of any product. Tokenisation – i.e. the addition of a digital currency linked to blockchain – allows full transparency of every spend. If farmers were paid in tokens, one would be able to see exactly what they spend their money on.
It would require a cultural shift towards the adoption of new working practices, but if successful it could prove, for example, that money went on organic fertiliser instead of chemicals. This also applies for labour in the supply chain. Think of the implications for child and slave labour if buyers have full insight into every granular detail of a good’s production. Addition of these features would allow for a gamified shopping experience, where customers would be able to scan products to instantly see their origins.
Currently, it is very hard for brands or retailers to be able to track their full supply chain and know who is working on their products. For clothing, there might be five or more middlemen between brand and factory and one line of clothing might be made by multiple small factories, all managed by local overseers. It is very hard for the brand to know for sure that there is no slave or child labour in the factories making their products, but if it is found out, the reputational damage is huge, as are the PR and legal costs.
Another working instance of blockchain in this field is in diamonds – tracking diamonds from mine to shop, providing a means to verify the location of diamonds and check for blood diamonds. Diamond firm De Beers and blockchain startup Everledger are both working on this.
Charity and digital rights
Cryptocurrencies can also be used to provide full transparency of how charitable donations are spent, or to prove that a grant has arrived at its intended project. Currently, 95 percent of donations don’t reach their intended projects and it is simply taken for granted that huge percentages of grants and donations are lost to inefficiencies, payoffs and corruption. If instead donations are tokenised, their entire journey can be tracked and donors can have proof of exactly what percentage of their donations arrive at their intended cause.
Tokenisation will also change how payments are made online. Instead of a subscription model, any digital content will be available on a pay per use model- with micropayments being made in live time to all relevant parties. Cryptocurrencies can thus help greatly with digital rights management, and create new and attractive business models.
For example, Spotify was recently sued $1.6 billion for digital rights infringements, for not being able to prove ownership rights or pay the correct royalties.
This simply wouldn’t be an issue on blockchain. On blockchain, ownership rights can be tracked and changed in live time, taking out any human or admin element.
Another clear advantage of tokenisation is that there is no cost to sending digital payments, even for tiny amounts. So on blockchain, every time a song is played, digitally, if that system is linked to the blockchain set up, royalties are paid out in real time.
“Cryptocurrencies have been until now mostly seen as a way to make money- through fundraising for ICOs, investing or trading, but that’s missing the point”
Currently, artists effectively have to hope that they are paid out correctly, and rely on managers and middlemen. Blockchain allows every invested party to be able to track their earnings and receive payments for every use of their work. We are currently working on a blockchain platform that will allow digital rights tracking and micropayments, for a variety of use cases, customisable to the end user.
Scams, UX and misunderstanding
As with any embryonic technologies, several hurdles need to be crossed before we encounter mass adoption. First off, crypto services are crying out for better UX. Users need wallets where one can sign in easily with facial recognition or with 2fA – as easily as into any other secure app, and where it is as easy as sending money to a friend by typing their name. Such wallets are already being built.
Second, sensible levels of regulation need to come in to prevent more scams and worthless projects. It’s no secret that during the ICO fever the majority of projects served no purpose. Many exchanges and blockchain/cryptocurrency related setups have been hacked, or are now facing SEC action. Once the markets and regulation shake out these projects, the real, serious and genuinely practical projects will be visible on the horizon.
Unfortunately, there is currently a lot of misunderstanding about what blockchain is.
Prominent members of the mainstream press such as the FT seemingly do not grasp the difference between bitcoin and blockchain. What they disregard is that many large, mainstream companies including Facebook have their own large blockchain teams developing their own blockchain projects. Once the media understand better what the tech and the possibilities are, we might begin to see the friction disappear and more serious, talented engineers getting involved.
Practically, building on blockchain is currently very complex. Blockchain projects can amass high costs and are dependent on expensive developers. There needs to be more plug and play customisable blockchain solutions which any company can access easily, so they can customise easily so as to suit their needs.
Currently, it is disproportionately expensive for many companies to incorporate blockchain. But there will be a tipping point where costs come down and the competitive advantage is such that more and more companies will incorporate blockchain solutions. But before the vision of an interconnected network of blockchains can really take hold, there also needs to be better interoperability where blockchain systems can work together and not just exclusively within their own ecosystems.
Another practical issue is insurance for the monetary value held in crypto wallets. Currently, there are very few if any insurance solutions for digital currencies held in wallets – be those on mobile apps or online on exchanges – and this will prevent mainstream adoption and also is the main barrier to people using these wallets as banks.
But once people have access to “mainstream” wallets that allow anyone to send any amount of money, pay direct debits, interchange between crypto and fiat seamlessly and with insurance- many if not all will have no need for an ordinary, day-to-day bank account ever again.
Tags:Blockchain cryptocurrency dlt supply chain
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