For some time now, blockchain has been heralded as a technology with the power to transform not only the financial services industry, but many other sectors as well. But what effect could it have on the balance of employment across the economy? Jan Bellens, Asia-Pacific banking and capital markets leader, and global emerging markets leader at EY, provides a briefing on what the future may bring – and how close that future is.
What is blockchain?
Blockchain is a distributed ledger that receives, validates and stores transactions permanently. A good way to describe it is as an Excel spreadsheet that is agreed upon and duplicated across many different computers and can be changed only by those with the cryptographic key or password.
This is not just about banking and finance. The opportunity here is to do away with a lot of the middlemen and central ledgers that exist across all sectors. Of course there are lots of intermediaries, middlemen and central ledgers in finance – such as stock exchanges and payment platforms – but they are also common elsewhere, such as central ledgers for reward points and property valuations.
What sort of activities does this new way of recording transactions, contracts and events enable?
If you go on Airbnb, or you want to rent a car, and you combine that with blockchain technology, you can eliminate the need for a lot of the activity currently necessary. So you could, say, just go to the apartment or the car, and the contract would get executed automatically; you may get a key to enter the car or the apartment, the payment would happen automatically, and this would all be enabled by blockchain and internet-of-things technology.
What stage are we at in the evolving use of blockchain technology?
It’s been around for about seven years now and has gone from concept and idea to getting real-world investment. The World Economic Forum announced last year that close to US$1.5 billion had been invested in blockchain technology over the previous three years.
Certainly in the banking world, where I am most active, 80 per cent of banks will have started some sort of blockchain initiative by early 2017. We have already seen a number of use cases that have proven to be valid and are in use. But, at the moment, it’s too early to see large-scale, real-world applications.
This is a really exciting technology and what can really fast-track its adoption is finding the killer app. Given Hong Kong’s status as a global financial centre, it has the opportunity to play a key role in the adoption of blockchain technology.
Are the business opportunities opened up by this technology already discernible?
Some of the use cases I find the most exciting are in areas where, for certain reasons, no centralised stakeholder or middleman has had an economic incentive or the levels of investment to set up a centralised ledger.
The diamond registry Everledger is, effectively, a distributed ledger for tracking the diamond trade from an end-to-end perspective. Before this there was no centralised ledger for diamonds and now a new company has solved the problem of making sure there is a secure diamond trade around the world.
An area that has great potential for Hong Kong is around fragmentation and things like the fractional ownership of property. In the Australian market, for example, property is currently very expensive in the bigger cities and even young professionals may want to own property on a fractional basis. Buying a house together, you could spread the contract or the property rights across four or five people.
At the moment, the central property registry doesn’t necessarily allow for that. But with a distributed ledger this is an opportunity to create, on a full-contract basis, fractional ownership and manage it in a way that would have been impossible, not to mention too costly to handle, for a centralised ledger.
Beyond the jobs created, what other employment opportunities will be generated?
In terms of the actual code and the security component, the adoption of blockchain will create a need for pretty sophisticated computer science and technological talent. But at the same time, it will also require the sort of talent that we see in Silicon Valley and in other parts of the world.
Of course the computer engineering aspect of this is important, but I think the most successful companies, entrepreneurs and talent are those able to identify a business problem and then use a technology to solve it – rather than starting with the solution and then looking for a problem.
This article appeared in the Classified Post print edition as Blockchain reaction.
