“You can not have an internet of things without an internet of value and an internet of trust.” – Chris Skinner
Everyone talks about blockchain technologies, though not many know what real impact blockchain will have for humanity in the future. Techsauce Summit 2016 invited prominent financial specialist & blogger Chris Skinner – named by the Wall Street Journal one of the most influential people in FinTech – to shed some light on the potential outcome of blockchain technology emergence.
The Network Revolution
According to Mr. Skinner, there are five major revolutions throughout time that will impact humanity and define our financial systems. The first three – the advent of shared beliefs, money as a control mechanism, and banks licensed by governments – have already occurred and now we are currently living during the fourth major revolution to hit humankind, the Network Revolution.
“We are on the ground floor of one of the most significant transitions in human history,” says Skinner. Touching the lives of almost every single being on the Earth, the Network revolution has given easy network access to practically the entire world. Whereas in the modern world a big chunk of the world population is still deprived of the financial services due to their price, network and mobile connectivity is becoming more and more accessible to the world’s poorest population.
In 2016, 82% of the African population has access to mobile networks, compared to 60% just a couple of years ago. This connectivity doesn’t apply just to telecommunications – it also means access to financial services via mobile wallets. This is where blockchain technology comes in, as it will further simplify, speed up and make access to the financial services cheaper or even free.
Blockchain technology offers an intriguing solution to one of the latest conundrums to hit the industry: how to offer ‘fintech for the unbanked’ – the major portion of the population which is the poorest, needs financial services such as microloans the most, but has to pay the highest cost to get to the money. Explains Mr. Skinner:
Half the world is unbanked because it’s not worth banking them – and as a result, the poor have to pay the most to move money, compared to us who have bank accounts. This is being revolutionized, even as we speak, by the mobile network. The network puts access to the financial services in the hands of everybody, no matter how poor. The cheapest android phone in the world costs 34 US dollars. For a lot of people, it is more important to have an android phone than a toothbrush, because it gives you access to the network – cheaply and easily, fast and free.
In Africa, across Sub-Saharan African nations, they are quickly becoming mobile social. Their access to the network has given them access to the smart network. They can transfer money through mobile wallets very easily. Nineteen countries in Sub-Saharan Africa have more people using mobile wallets than having a bank account.
One out of three Africans, when they get a mobile phone subscription, will promptly open a mobile wallet because it gives them access to cheap and easy money transfers. It also gives easy and cheap access to sales. Even a farmer on the plains in Africa can suddenly sell stuff from his farm across the country. Everyone becomes a merchant on the network. This is transformation. This is revolution. This means that 5 billion people that were underserved or ignored by the system during the industrial revolution are now being served and connected. Everyone is connected to everyone, in real time, immediately.
What is blockchain exactly?
According to Investopedia.com’s definition, “A blockchain is a public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as ‘completed’ blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order.”
Says Mr. Skinner, the blockchain came out of Bitcoin, and what came out of Bitcoin is the idea of having the network-authenticated transactions. Further, it did not take long for financial innovators to realize that Bitcoin technology can be applied to anything; it can be used to clear settlements in the securities markets for the banks, it can be exchanged as a record of the marriage or divorce, or any legal transaction, because Bitcoin has been authenticated by the network in the digital form. This revolutionizes all of the legal markets, because all the legal documentation also will be documented on the blockchain.
People think maybe it can solve hunger, maybe it can solve poverty, maybe it can solve every human issue in the world – it won’t; it is only a database, just a database on the internet, that is what the blockchain is – the shared ledger, the database record of proof that we can trust, that’s all it is. But it is revolution, because even when I say that’s all it is, it means we can have identities, financial transactions and any legal transaction recorded on the blockchain.
So, in summary, a few areas where blockchain technology use will break the status quo:
- Digital identity – It is difficult to believe; however, among the worldwide population of 7 billion people, 2.4 billion don’t have identity. This means that those people are not a part of the global exchange and network system.
The United Nations launched a program aiming to provide a legal digital identity for every person – including those who do not currently have identification whatsoever – by 2030. The information will be stored on the United Nations blockchain distributive ledger.
Where will this impact? This will mean that a lot of underprivileged people will become a part of society. They will be authorized to conduct financial transactions using their identity.
- Legal transactions/documentation – Blockchain technology will allow us to keep a record of all the legal documents and transactions without the need to physically document them. Derived from the Bitcoin, blockchain allows us to have the network of the documents, authenticated by the network in the digital form.
Where will this impact? Can you imagine the world of lawyers and notaries without the piles of documents? This development will save a lot of costs globally.
- Assets control – With the immense amount of assets and goods being involved in the economy, the possibility to track them in real time would have a tremendous benefit for the society. “One of the biggest banks has already rolled out a program for the corporate clients to record every part of the supply chain, as a real time means to control where the goods are at a certain point of time,” Skinner shared during his speech.
Where will this impact? This will change the way the global trade is conducted – the bills of lading and letters of credit won’t be necessary. There will be more trust between the seller and the buyer, as the goods are traceable at every single point in time.
A final application that we may see of blockchain is its potential to link one’s digital identity to the Internet of Things (IoT) for authentication of action:
How will the system of Internet of things will know my identity? That I authorized to order these goods and services at this time and that they can transact on my behalf? How will you know in this new factual transactional system whose things belong to whom? Everyone’s identity will be on the blockchain, because it is a shared ledger structure that will be globally recognized on the network as “me.” And through that, the financial system will recognize the legitimacy of my actions.
But instant value is the core of what I am talking about. You have to have the internet of value to have the internet of things. You cannot have the internet of things without the internet of value. And to have the internet of value you need to have trust. And trust will be created through the blockchain. This is the revolution on this network. You have to have the blockchain identity verification systems that are shared across the network to build the trust in my exchange of values with yours.
In conclusion, Mr. Skinner stated that the fourth network revolution started around 70 years ago with the arrival of the first computers. The fourth revolution’s order of things will last for another 20 years.
The blockchain has become an overwhelming media hype; everyone is saying this is amazing and good – and it is. But maybe because there is so much hype, there is little that has actually been delivered yet, because it will take long time to get this working. The reason is that it is a shared database, and a shared database is useless unless it is shared – and building those sharing structures will take time. For the banking system to do new database structure will take 5-10 years, but it is happening especially in the financial services. Having so many transactions on IoT we need easier and cheaper ways to record them.
You are probably curious what will happen next. Mr. Skinner predicts the arrival of the 5th revolution, when humans become almost immortal thanks to the development of the life sciences. Mr. Skinner continues, “This is not a science fiction, but science fact”.
If you want to know more about Chris Skinner’s views on the financial markets, check out his blog thefinanser.com, as well as his book “ValueWeb: How Fintech Firms Are Using Bitcoin, Blockchain and Mobile Technologies to Create the Internet of Value” on www.amazon.com.