Why Blockchain and Crypto Are Picking Up Steam in Tiny Countries
(Photo by Michael Gottschalk/Photothek via Getty Images)
Panelists and speakers at this week's Blockchain for Impact Summit, hosted at the United Nations, tried to answer different versions of the same questions: How can nations, companies, and organizations around the world do something with blockchain that actually matters and benefits everyone, not just the few?
"This digital technology is creating a new source of inequality," said Fabrizio Hochschild-Drummond, Under-Secretary General of the UN.
In his keynote speech, he spoke about the radical scale of change brought about by the internet, and the transformative power of blockchain's distributed ledger technology. But he also drew a parallel between the development of other key emerging technologies like artificial intelligence, and how the small group of powerful companies largely controlling AI's destiny focus more on commercial enterprises—like refining social media and online advertising to target your personal preferences—than solving global issues.
"While [blockchain] is having a global impact, those involved in the design and rollout come from a limited number of places with narrow areas of expertise. To leave development and distribution only in the hands of businessmen and engineers is risky; you need to bring political activists and social scientists into the game," said Hochschild-Drummond. "We need to urge this technology's investments and development to be aimed toward what really matters for humanity."
The UN has embraced blockchain over the past two years or so as a potential solution to a host of social problems and Sustainable Development Goals (SDGs) in developed and developing nations. The UN currently has more than 15 entities carrying out early stage blockchain initiatives, according to Robert Skinner, Executive Director of the United Nations Office for Partnerships.
This year's Blockchain for Impact Summit, organized by the UN Blockchain Commission for Sustainable Development (BCSD), brought together global nonprofits and international diplomats, tech companies like IBM and SAP, banking and financial institutions, a host of blockchain startups, as well as world leaders and ministers from countries including Liechtenstein, Monaco, and the Marshall Islands. The blockchain projects and regulation underway in these small nations serves as examples of the delicate partnership between governments and the private sector that's key to implementing any kind of new technology in subsantive ways, including blockchain.
Summit organizer Sergio Fernandez de Cordova, the Vice-Chair of the BCSD and Chairman of the nonprofit PVBLIC Foundation, drove that point home: "Without private sector engagement, without tech, we can't scale," he said.
Small Countries Operating Like Startups
City of Ruggell, Liechtenstein (Photo by Jan Hetfleisch/Getty Images)
Much of the summit focused on how small nations around the globe are moving the fastest on blockchain and cryptocurrency, either on the regulation front or in actually rolling out government-backed tokens and technology. Estonia, for instance, runs virtually its entire digital government infrastructure on blockchain.
Isabelle Pico, Monaco's Ambassador to the UN, said small financial haven nations like Monaco always need to reinvent themselves. Monaco has sponsored annual blockchain conferences for the past several years and has introduced several bills to serve as a framework for promoting friendly blockchain regulation, which Pico said will soon be presented to Monaco's prince. The nation's goal is to be a "digital knowledge hub," and to "harness the benefits of the blockchain industry without sacrificing transparency," she said.
Adrian Hasler, Prime Minister of Liechtenstein, announced in a video address that he will preside over a meeting this month to ratify a Blockchain Act, a regulation framework to promote activity in the country. Thomas Nagele, President of Liechtenstein's Crypto Country Association, was on hand to explain the details.
"We wanted to build a bridge between technology and the law. In 2016, the prime minister formed a working group to see if regulation is needed in a technology that is designed to get rid of intermediaries," said Nagele. "Now with an almost 400-page report in Parliament, we answered that question with a yes."
Liechtenstein is trying to build a solution for the token economy of the future, where every asset is digitized and ownership or shareholder rights can be represented as tokens and transferred from A to B the same as any other financial or physical asset. When you can "get nine people in a room to quickly make decisions," Nagele explained, small countries can move quickly on emerging technologies.
Government Capital Building in Majuro, Marshall Islands (Photo by: Education Images/UIG via Getty Images)
Barak Ben-Ezer described it using a startup versus corporation analogy. Small nations can pass regulations fast, and get all the right people in a room on the same day, which often isn't possible in large countries with slow-moving bureaucracies.
Ben-Ezer is the founder of the Sovereign (SOV) Global Fund, which was announced during the summit by Marshall Islands Finance Minister David Paul as "the first sovereign digital currency based on blockchain technology." Backed by the Marshall Islands, SOV tokens will form the financial basis of the country's new SOV Development Fund, with 30 percent of the initial currency supply endowed to the development fund.
Unlike other sovereign development funds, which can be opaquely run and sometimes rife with corruption, Ben-Ezer explained to PCMag that SOV will be fully transparent and direct funds to various development initiatives within the Marshall Islands, such as infrastructure. During his address, Minister Paul said the nation envisions the funds as a key investment source to help the island nation combat SDGs such as poverty and prepare for the rising challenges of climate change.
"If you really want impact on a global scale, especially in developing nations, you need the network effect," said Ben-Ezer. "We can put bandages on the problem or solve it at the most foundational level, which is money itself."
What Blockchain Companies Are Building
So much of the blockchain and crypto startup churn has been defined by companies raising money and touting a product that never materializes into applications people can actually use. Karen Ottoni, Director of Ecosystem at Hyperledger, said that while there are plenty of projects out there making an impact, the blockchain hype cycle is definitely in full swing.
In a number of panels during the summit, blockchain startups and tech companies talked about what they've actually built and how it's being used in the real world. IBM Chief Data Scientist Dr. Eva-Marie Muller-Stuler talked about blockchain as a way to make sure data is traceable, trusted, and transparent, while IBM Global Automative, Aerospace, and Defense CTO Naghmana Majed spoke about creating an internet of value.
But some of the most interesting blockchain and cryptocurrency examples making an impact around the world came from smaller regional companies and startups.
Fetch Blockchain: Fetch is a blockchain middleware company for real estate that's working with the Albanian government to change the way the country handles farming and housing. CEO Carmen Benitez explained that Fetch is launching a project fund management platform to manage the housing application process, as well as a farming initative to increase yields and send income back to municipalities.
"It allows people to have a direct connection with technologies that will impact them so they stay as close as possible to their governments, making sure taxes going into projects and funds benefit them as a society," she said.
Civic: A more well-known blockchain company, Civic is a secure identity platform used across a variety of applications. CEO Vinny Lingham talked about digital IDs tied to mobile devices for scenarios like automated retail and dispensing medication in Africa and rural areas where it's difficult to get medication, and aid from Western nations often doesn't get to the people who need it.
Ernest Vershiyi Mbenkum, founder of the Cameroon Business Blockchain Council, said companies like Civic building apps to solve real problems will be the best proof of what blockchain can actually do, rather than continuining to explain a theoretical technology.
Kinesis: CEO Thomas Coughlin described Kinesis as being in the final stages of rolling out a fiat-backed digital currency, which he said the company is working to implement as a monetary system with governments in Asia, Africa, and the Middle East. Coughlin spoke specifically about an extensive Kinesis rollout in Indonesia, where more than three-quarters of the population is unbanked or underbanked but 90 percent have smartphones.
"In Indonesia, there are people driving 500 kilometers to pay electricity bills with physical cash," he said. "We want to change that to, in a space of 30 seconds, paying that bill with their phones, or migrants sending [remittances] home for a fraction of the percent instead of being charged by Western Union."
NASGO: This self-funded startup launched in 2018 to build a blockchain ecosystem from scratch and the applications to run on it. Co-founder and CEO Eric Tippetts said NASGO aims to build a mass-market platform powering blockchain-based apps that people can actually use.
The company has launched two apps so far. One is an e-commerce marketplace called AMICO supporting merchant and payment processing with cryptocurrency. The other is VAPR, a peer-to-peer social app where creators shoot and upload content, and users unlock it with monetized tokens that compensate the creator for their work.
It's a bit like artist Imogen Heap's Mycelia platform, where musicians are compensated for their work with micro-transactions. Tippett said VAPR is a way to reward content creators versus on Facebook, Instagram, and Snapchat where "content creators are working three jobs with 3 million followers."
"I'm not not interested in blockchain, I'm interested in what's built on it, and what you do with it," said Tippetts. "Consensus algorithms are a bunch of crap that doesn't mean anything to anybody unless you talk about how to use it."
This article originally appeared on PCMag.com.