Myths and Apprehensions associated with Blockchain Adoption
R3’s country head – India, Mr. Vivekdeep Gupta at a fintech meetup, FINTEGRATE ZONE 2019, a 3-day event that took place at World Trade Center in Mumbai from February 27 to March 1, shared his views about the hype over blockchain. He says,
“We need to strip away all the hype around blockchain. It is the combination of technologies that have been existing since the 1970s, and we have managed to combine them in such a way that it allows distributed sharing of information and trust amongst parties. And what could this do? Well, while IT solves some organizational level problems, blockchain can help you solve intra-organization or industry level problems, thereby improving life to your consumers and improving your operational efficiencies.”
Is it the complexity or is it the simplicity of blockchain, that makes it so enigmatic for the common man? Ever since Bitcoin ushered into the market, blockchain has taken everyone by storm. Blockchain technology is already disrupting the traditional ways of doing business. However, an economist and an NYU professor at the Blockshow Conference denounced cryptocurrencies and blockchain, believing it to be some kind of a scam. Due to such critics and misconceptions, the common people hold myths and apprehensions on this amazing decentralized ledger technology. Let’s have a look at few,
MYTH – Blockchain is not really decentralized
REALITY – The biggest Bitcoin mines are situated in China. The mining pools in China control more than 70% of the Bitcoin network’s collective hash rate. People have a misconception that China controls the whole ecosystem. But this is completely false! Blockchain requires multiple nodes for validation and endorsement, before adding any block of transactions on to the chain. In a blockchain’s decentralized network, data is stored across multiple systems unlike centralized networks, which makes it impossible for hackers to hack and obtain any data. Blockchain offers robust applications in industries like finance, healthcare, marine, supply chain, etc. harnessed with advanced encryption techniques. The blockchain fundament will connect and develop the entire world with global currencies. Middlemen, with their economic inefficiencies, will be eliminated. The online marketplaces like eBay, AliExpress, etc. are big billion companies, but will eventually grapple to compete with blockchain based decentralized marketplaces of tomorrow. For example, independent parties use the 0x protocol to build decentralized exchanges on Ethereum. They are used to transact with cryptocurrencies in an easy and secure way.
MYTH – Blockchain is a hotbed of the dark web and illegal activities
REALITY – Yes, in past criminals had taken advantage of the anonymous feature of blockchain. But that’s not the only feature, right? If someone needs to transfer money to their parents based in another country, it will take a lot of time and extra fee by the middlemen. Also, there exist people who might not have access to banking services. How will they be able to transfer? Again through the time-consuming process of traditional banking systems? Not anymore! Such problems can be solved by blockchain. As blockchain facilitates peer-to-peer transactions, cross-border payments can be done rapidly, without any extra fee. With the advent of blockchain wallets, one can have full control of their own funds. There won’t be any need of the time consuming traditional banks, only internet based wallets would do!
MYTH – Blockchain projects are just a temporary hype
REALITY – We can see ample of blockchain projects striving to get positive changes to various conventional industries present. Partners involved in trading digital currencies can trust each other way more than they ever could before the decentralized blockchain technology was introduced. Back in Hyderabad, Tech Mahindra and the Telangana state government signed a memorandum of understanding at the International Blockchain Congress (IBC). They want to create a blockchain district which will stimulate and nurture blockchain startups. Not only Telangana, but even Uttar Pradesh government wants to utilize the decentralized ledger technology for land and revenue records. In Maharashtra, registrations of motor vehicles will be done using blockchain.
Indians collectively lose a lot of money during cross-border payments since banks charge almost 6% per remittance transaction. The processing fee is expensive and it takes a long time to clear payments. But with blockchain and digital assets, this problem can be easily solved. For instance,
- NRI’s can leverage Ripple’s xRapid protocol to send money to India. Ripple (XRP) is the third largest and strongest cryptocurrency and its token XRP can be used as on-demand liquidity for remittances.
- IndusInd bank also partnered with Ripple to resolve cross-border payments. This will result in faster settlement and will be cost effective as well.
- Kotak Mahindra has also collaborated with Ripple’s subsidiary, RippleNet for cross-border payment remittance system. xCurrent, a Ripple settlement solution will be employed for faster transactions. The entire transaction can be traced end to end. xCurrent will enable efficacious and transparent global payments. Kotak gets an opportunity to connect with other major banks on the RippleNet platform.
- Axis bank, being India’s third largest private sector bank has launched Ripple powered instantaneous payment service for both corporate and retail customers. It will provide a frictionless service.
Digital assets and blockchain can make the remittance system efficient and faster at low costs while ensuring security. Harnessing the solutions which crypto and blockchain bestow, will surely make an impact on the Indian economy and bring great affluence to its citizens.
We have witnessed a proof-of-concept application for KYC, successfully developed by R3 and its consortium members to address challenges that are associated with regulatory requirements. Users can easily and securely manage their own identities. On the other hand, to facilitate payment transactions, VISA developed a B2B Payment Solution on a blockchain platform, called VISA B2B Connect.
MYTH – Enterprise blockchain is no substance, just a ballyhoo
REALITY – Well, there are already existing transacting consortia running on the IBM Blockchain platform, doing wonders! The global trade finance has generated millions of blocks on the Hyperledger fabric. Members of the consortium yield real value from a blockchain solution, which has reduced the average time to settle disputes from 45 days to just 10 days.
Over 12 food industry leaders anchor the IBM Food Trust network, continuously generating blocks and growing the count of participants.
The blockchain services are providing support to ample of transacting consortia, where many institutions are deriving value every day.
MYTH – Enterprise blockchains are always private
REALITY – Enterprise blockchains are always permissioned, but all permissioned blockchains are not private. They can be public as well.
Permission is the key to enterprise blockchains. The decision of a public or private network depends on different boards or institutions. They have the authority to decide what data & information to be kept public, and what private.
MYTH – Smart contracts can be vulnerable to security
REALITY – This might be true in cases where the network governance was not taken seriously. The Ethereum DAO attack that happened on the public Ethereum network was due to flaw in governance of the DAO.
Legal frameworks and agreements, consortium characters and tooling are vital under governance. The decentralization checks and balances are maintained by the governance tools. Hence, governance is highly necessary.
Many enterprise blockchains do not fully support the processes involved in governance. But, Hyperledger Fabric does allow governance to be built on top of it. Especially the IBM Blockchain Platform (IBP) offers a rich set of governance tools that are required.
Blockchain, Distributed Ledger Technologies, APIs, Smart Contracts and IoTs can radically change the traditional ways of thinking way international payments are handled. There will be an immense lag in not adopting blockchain technology due to any myths or misconceptions.