Blockchain tech and the traditional financial system
A blockchain is a growing list of records, called blocks, but are linked using a set of techniques for secure communications (cryptograhpy) to ward off third parties, sometimes referred to as hackers. The blockchain technology that is readable and widely used by the public is the crypto-currency version.
But the assessed capability of the evolving technology seems to be highly adaptable to the existing traditional financial system, with the possibility of not only interfacing, but also cause a significant change for the benefit of all, when deployed knowledgably.
An expert, Adam Draper, said: “The blockchain does one thing: It replaces third-party trust with mathematical proof that something happened.”
But Fred Ehrsam added: “Everything will be tokenised and connected by blockchain one day.”
These popular quotes embody the capabilities of the blockchain technology, already described as a “tsunami-like phenomenon” that would soon sweep across the world, not for bad, but for good, with just right education, disrupting the traditional financial system- banking, finance, insurance, real estate, medical records, law, among others.
The Chief Disrupter of United States of America-based Veritaseum, Reggie Middleton, in a chat with The Guardian, in Lagos, at the weekend, said most small businesses fail because they lack operating capital and are faced with economic rent seekers.
“You can have a future of the Bill Gates, the Mark Zuckerberg or Aliko Dangote, but you just need to have the capital to get started. The economic rent seekers happen when people take advantage of your weak position to make money, charging more than the value that is brought to the table.
“So with Veritaseum, a sovereign financial platform, which allows people to do business without hitches and even without knowing each other, creates an application through the blockchain technology that facilitates, sort of bridge, to overcome such costs,” he said.
Noting that in the real world, economic rent seekers could be agents, brokers or business persons that exert charges to do something that may ordinarily costs nothing, but at higher prices, he insisted that the use of blockchain technology will eliminate unnecessary third parties, who seek profits and increase risks, as one can now decrease the risk and increase speed and reliability of every transaction.
Confidence and Security
Middleton said that most banks around the world, particularly in the United States, Australia and Europe are now using the blockchain technology to bolster their data security. All their computer systems are now being configured to cost efficient mode by using the technology. It is working for the banks that are willing to adopt the business model and embrace peer-to-peer technology and they are the ones that are going to excel going forward.
Speaking on the security and confidence issues of the Veritaseum propositions, he said that it is built on the blockchain technology, which he described as “mathematics” and does not need a regulator for a correct answer, adding that one-plus-one is always two.
“This does not mean that it is a way of avoiding regulation, because regulation is also necessary to encourage entities and other businesses to be comfortable moving into it. The blockchain is novena and like ‘bread from heaven’ for the regulator, because every transaction on the platform is recorded directly and true to its name, it works like a block and currently, every seven minutes, a block is written in the database and captured by computers across the world,” he said.
Middleton explained that the block, as its name implies, contains transactional information, as though it is written “I have bought a cellphone from you or I have paid for a transaction of such value to you”. And like the setting of block in building, this is done one after the other and recorded.
“To change or make an alteration in the first brick (transaction), you will have to get more than half of the computer systems involved in the recording, which are in thousands, to agree that there is verifiable reason to alter it, which will also involve passing through all the other bricks.
“This means that everyone would have to know that you are trying to change something by an automatic flagging, and every activity is visible on the Internet, thus ensuring that the blockchain is super secure.
“How much would a typical regulator put to set up a system that would show every single transaction that happen, but in the blockchain, you will see everything for free and transparently. Regulators should love this. No blockchain platform, till now, has been successfully hacked, not even once. There was a bug in the Bitcoin blockchain between five and seven years ago, resulting to 40 cents loss and was discovered in five hours.
“Right now, there is about $4 billion in the Bitcoin blockchain, which sounds like a very big attraction for some of those hackers, but they have not succeeded and cannot”.
According to him, JPMorgan, with its technological strength, records more than 250,000 hacking attempts everyday, but have been successfully hacked multiple times. Citibank too, has been hacked for both capital and user information; the Federal Reserve has been hacked too.
Middleton has said that people are better off with blockchain if they have the choice, but would need to be educated, pointing out that when Internet started, no one had confidence in it, but now in 2018, everybody haggles over it without thinking twice. This too, is going to bring about seamless, efficient and secure data transfer into the future, more than the Internet did.
The expert explained that the primary issue with blockchain technology is the level of education, which presently is low. “It is the basic knowledge about what it is and what it is not,” which bothers most on user-friendliness. For many blockchain applications, one needs to be expert or spend a lot of time learning it, but it is now coming in simple ways.
“I think the other challenge is that instead of telling the benefits and how safer the blockchain is by the media, people are speculating how the blockchain is hacked. Of course, individuals and entities are hacked for poor security purposes, but the blockchain has not been hacked.
“Technology has never put a company out of business, never destroyed any industry, but has enabled new business models and invariably, enables start-ups and competitors to change the rules of the game. This has happened for thousands of years and will continue thousands of years to come,” he said.
Explaining his proposition for the country, Middleton said his company has come to Nigeria to set up operations and small businesses can benefit from the Veritaseum plans built around the blockchain technology.
“We are a global company and it only takes your proposal reaching us, through the email. Give us your business plan and we will review it thoroughly and if we think it is deeper, we will talk to the regulators, create a sound box- basically to allow the regulator see what we are doing, but allow us to do it.
“If we are sure of how determined and safe the business is, we will raise capital for you from Nigeria and the rest of the world, as part of efforts to increase foreign investments for the country and raise employment opportunities, leading to increased consumption and growth.
“We can do this from small business level, to as high as infrastructure projects, which Nigeria really needs presently. We can propose and build super highway between here and Abuja, four lanes with automated tolls, funded with the token offering across the world. We can also create a high-speed light monorail, which will cut the nine-hour journey on the road to 45 minutes,” he said.
He said his visit to the country has nullified all the negative reports he has heard about Nigeria, as they are sharp contrast to “what I am experiencing in the country. That is what Veritaseum will show the world about the pan-African economic hub.”
He said that his findings now has shown that it is very possible to do something that will trickle down to larger percentage of the people, even as Veritaseum’s goal is to work with every government and enable them to do more with little.
Besides, he explained that the company’s goal is to create a pan-African economic tollgate that unites all the 54 countries in the region and allow all the countries to work with synergy in driving economic growth.
“We have done this before on other regions. We are starting with Nigeria and I mean from Lagos and gradually we shall move to Kenya, South Africa and the rest,” he added.
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