Many believe that blockchain will eventually eliminate the need for intermediaries in transactions and will transform not just our financial systems, but the whole economy, energy markets and supply chains. Photo: Pixabay
Many believe that blockchain will eventually eliminate the need for intermediaries in transactions and will transform not just our financial systems, but the whole economy, energy markets and supply chains. Photo: Pixabay

Tech News: The infinite applications of blockchain technology

By Opinion Time of article published Mar 19, 2021

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By Louis Fourie

The advent of the Internet has forever changed the way in which we share information. Blockchain is now changing the way we transact.

This form of distributed ledger technology (DLT) that employs state-of-the-art cryptography to store data across peer-to-peer computer networks, has been branded by many technology enthusiasts as the solution to almost every challenge known to mankind. Many believe that blockchain will eventually eliminate the need for intermediaries in transactions and will transform not just our financial systems, but the whole economy, energy markets and supply chains.

Although blockchain is the solution to many problems, it is not a cure-all and should not be considered as a single technology solution. Blockchain is still maturing, and the journey begun only recently. It has now surpassed its humble beginnings in cryptocurrency and banking and is transforming numerous other industries. After all, the application of a transparent, verifiable register of transaction data without central supervision is practically infinite.

Adoption across industries

Various industries and businesses are currently adopting the use of blockchain, such as stock trading and hedge funds, wills and inheritances, loans and credit, insurance, automotive manufacturing, trucking, air travel, accommodation bookings, construction, real estate, energy management, healthcare, government/public records, voting, gun tracking, law enforcement, retail, agriculture, mining, education, and entertainment, to name only a few.

The current speed at which blockchain technology is being adopted is unparalleled. There is a growing recognition amongst businesses and governments that this technology has profound implications in many areas.

Switzerland as crypto nation

Probably the most amazing example of the adoption of blockchain technology is Switzerland with 960 companies active in blockchain research. Zug, the heart of Crypto Valley, is currently the fastest-growing technology hub in Europe and has 433 companies, 4 400 employees, and a total valuation of the top 50 companies of R3.8 trillion in February 2021. In this canton, Bitcoin has been accepted as a form of payment for transactions and taxes.

The reasons for the attractiveness of Switzerland for blockchain innovations seem to be:

A progressive and supportive political system – Regulatory frameworks in Switzerland are extremely business-friendly and is currently the most advanced regulatory framework for digital financial assets and cryptocurrencies in the world. The Swiss Blockchain Federation (SBF), a public-private partnership bringing together stakeholders from the blockchain sector, business, academia, science and government, has been formed to create an innovative blockchain ecosystem and to promote Switzerland as a blockchain location. The SBF focus in particular on the token economy, token offerings, banking, cybersecurity, industry, value chains, and regulation.

Supportive private sector and economic incentives – The Swiss Franc is a strong and stable currency, and the country has a very high rate of productivity leading to the world’s highest GDP per capita. A friendly business environment is further created through excellent domestic and global business networks, flexible labour laws, low bureaucracy, a sophisticated and respected legal system, low corruption, availability of investment capital, low corporate and personal taxes, and high service levels. The introduction of the first two crypto banks globally (SEBA Bank and Sygnum Bank) is an indication of the maturity of the financial industry.

Attractiveness to tech talent – Switzerland is currently number one in the world for ease of attracting and retaining world-class talent. It has a high-quality education system and one of the highest investments per capita in research and development. It also boasts many Nobel laureates. Wage levels are high without increasing labour costs since productivity levels are exceptionally high.

Africa and South Africa

Although not nearly at the level of Switzerland, South Africa is no exception to the adoption of blockchain. Blockchain technology is therefore also indisputably disrupting the business and governmental arena in South Africa – especially in a time when the world is rife with countless corrupt deals, inadequate record-keeping and often untraceable transactions. The main reason for the growing adoption of blockchain is the bad track record of governments, institutions and organisations that resulted in citizens distrusting people in positions of power.

Despite many governments and businesses in Africa implementing appropriate and thorough processes, the multitude of non-compliant or untrustworthy stakeholders existing within the supply chain are often arduous to manage and can be detrimental to the name of the company or institution.

Already in 2018, President Cyril Ramaphosa made an announcement that a “Commission on the Fourth Industrial Revolution” would be established in partnership with the private sector to promote new technologies, such as blockchain. This 4IR commission was formed in April 2019 but has, until now, delivered very few concrete results, except for a report published in October 2020 with a high-level analysis of the Fourth Industrial Revolution and some recommendations.

Fortunately, some interesting uses of blockchain technology have seen the light in South Africa:

Authentication of diamonds across Africa

Some businesses operating in Africa are notorious for their non-adherence to regulatory standards, which resulted in a lack of trust in the authenticity and ethical sourcing of their products. Blockchain has proved itself as an excellent technology to mitigate these issues by verifying the origin and quality of the products.

South African-founded diamond company De Beers started using a blockchain platform called Tracr to ensure its diamonds are authentic, conflict-free and natural. Blockchain provides a permanent, unchangeable record for every diamond registered from the moment they are mined.

Blockchain-based property register

The Centre for Affordable Housing Finance in Africa (CAHF), research consultancy 71point4 and Seso Global formed a partnership to create South Africa’s first blockchain-based property register. The South African government has built more than three million RDP houses since 1994, but a scrutinising of deeds office data revealed that only 1.9 million of these properties have been registered. Administratively it is a complex task to register these properties, because many subsidy beneficiaries are no longer living in them. Properties are often rented out, informally sold, or the beneficiary has passed away. Blockchain technology helps to store the data in a decentralised, secure tamper-proof database that can be updated without any loss of historic data. The first phase consisted of almost 1 000 government subsidised properties located in Makhaza, Khayelitsha that have not been registered on the deeds registry for properties. Blockchain provided the City of Cape Town with an accurate and up-to-date record of property ownership, enabling them to collect revenue and facilitate building plan approvals.

A long way to go for South Africa

Although the South African blockchain ecosystem is growing and there is a tremendous amount of energy and enthusiasm, especially in the start-up sector, South Africa is still far behind Switzerland and even some countries in Africa. The regulatory framework in South Africa is unfriendly, government participation in the blockchain ecosystem is low, the economy is struggling, labour laws are inflexible, bureaucracy is rife, corruption is high, corporate and personal taxes are high, and service levels are extremely low. South Africa further has limited skilled technical blockchain resources and a limited capacity to attract world-class talent.

Although world class work has been done by the South African Reserve Bank, on the whole there is relatively little knowledge regarding blockchain and its potential in government. All sectors, institutions, and government departments therefore need to explore blockchain and DLT sufficiently to understand its significance and application.

The contribution of blockchain technology to a country plagued by corruption is immense. With blockchain there is no anonymity to hide behind – the immutability and transparency reduces the opportunity for fraud and corruption.

Blockchain is a complex technology that has the potential to disrupt many aspects of business, the economy and our society. It remains a highly versatile technology that can be designed to exactly match the requirements of its users.

While the outcomes of the blockchain race are still uncertain, the technology has a strong potential to redesign the way interaction between countries, businesses and individuals occurs across the globe. Smart risk management and a holistic view of operational exposures, legal and regulatory issues will be key to blockchain delivering measurable value in the future.

Considering that blockchain is already inspiring institutions, investors, brands and entrepreneurs across the world, South Africa might miss out if we do not take the bold step to see how it might enable better systems, transactions or operational processes in our country and organisations.

Prof Louis C H Fourie is a Technology Strategist

*The views expressed here are not necessarily those of IOL or of title sites

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