Recent days have seen the cryptocurrency Ripple rise fast. Like the cryptocurrency Bitcoin, it’s underpinned by blockchain technology. The potential significance of cryptocurrency to the Caribbean was featured in The Star Businessweek edition of October 14, 2017, and this latest news has started a whole new conversation on cryptocurrency, specifically concerning the blockchain technology behind it.
The rise of Ripple has renewed attention on blockchain technology, and has left many in the Caribbean family looking to understand what blockchain is, how the various types differ, and what applications blockchain can have across the Caribbean.
In 2018 the pace and scale of economic change is blistering. Only a decade ago the first iPhone was launched, Twitter was just starting to grow, and Bitcoin had not even begun trading, so this current speed rapid rise of new tech can be difficult to understand.
While debates surrounding the long-term viability of Bitcoin, Ripple and other cryptocurrency will continue, what cannot be questioned is the potential for blockchain. It is a technology related to each cryptocurrency, but also independent of it. Blockchain is the technology that many cryptos are trading on, but there are actually a number of blockchains that exist for separate uses.
The difference from one blockchain to another notwithstanding, blockchain technology brings with it the prospect of revolutionary advances in how we live and work. Chiefly, it has the potential for its users to process data in a quicker, more efficient and accurate way.
Not only can blockchain technology process data faster, but it does so with greater automation. Thereafter, the accuracy of blockchain as a digital ledger is also promising.
It may sound funny in a time when so many businesses have made the shift from paper to digital, but even digital storage can have vulnerabilities. As a peer-to-peer ledger that each user can access, blockchain can store data accessible by all and, by virtue of being stored on all computers, secured by all. Say goodbye to the days of hard drive crashes seeing data lost.
For the Caribbean especially, blockchain brings with it the prospect of huge change to our two biggest industries: tourism and finance.
Already Aruba has began exploring the use of the Ethereum blockchain to cut out middlemen like Expedia and Priceline , a ledger used for trading of the cryptocurrency ether, but that also has business applications beyond it. The advantage of the Ethereum blockchain is the ability to create smart contracts – tech that can verify a transaction without the need of a third party – and, in so doing, remove the middleman from the equation.
In time, such technology could see the Caribbean as a whole have the chance to do away with middleman services like Expedia and other travel booking providers and, instead, deal with the customer one-to-one in a direct, secure and transparent way. This would not only benefit on a service basis, but ultimately see more profits made in the Caribbean stay in the Caribbean, instead of being shifted offshore.
Speaking of offshore, there is, of course, also the revolution of blockchain awaiting the financial industry and it comes at a particularly notable time for the Caribbean. In the post-GFC era, the local financial industry has been considerably damaged by the sweeping changes brought about as a result of de-risking; this alongside the added scrutiny and criticism generated by the Panama Papers in 2015 and, more recently, the Paradise Papers in November of 2017.
While there are shades of grey in the wider debate surrounding these leaks – and the ambitions of institutions like the EU to demand change in regional banking practices while ignoring those closer to home like the UK – overall the message is clear: in the months and years ahead pressure will grow for changes to banking and finance across the region.
When it comes to finance and blockchain, it has been declared ‘the sky is the limit’. Its speed alone is set to revolutionize asset trading, as settlement of individual trades could be shifted from taking days to complete, to just hours, minutes or even less.
Beyond a personal trader, even sizeable transactions, like a buyout of one company by another, could now be completed in minutes. However you define moments in a transaction, that’s essentially the speed that blockchain can bring, in the shift of transaction time.
PERMISSIONED AND PERMISSIONLESS
While blockchain has immense potential, it is also not without problems. Right now, this centres on the divide between what the technology signifies digitally, and the challenges of implementing it in a real-world setting.
Digitally speaking, the world is largely borderless. A look at the world map shows that this is not the case offline. Blockchain presents some unique challenges in this regard. A useful example is the difference between permissioned and permissionless blockchain.
Permissionless blockchains allow for any user to access the register; permissioned blockchains only provide access for authorized users. In some circumstances – such as intelligence agencies and other law enforcement bodies – it is fair and appropriate that a government uses a permissioned blockchain.
For all other government uses, though, it would be innocuous to think that the opportunity blockchain brings for greater transparency and accountability would not be acted upon. That is where permissionless blockchains offer such interest to those seeking greater transparency and accountability in government process.
Conversely, for some nations around the region, such as Cuba – even though the year ahead may see some changes to wider internet accessibility – the rise of blockchain brings with it a big threat. Suddenly there will be the technological capacity for citizens to see what government does in more ways, and no longer will old excuses of transparency being ‘too difficult’ suffice.
Ultimately, a region-wide approach to blockchain is compelling but difficult to envision soon. The offerings of the new technology are immense and diverse. The reality of gaining consensus and agreement among numerous Caribbean nations will be difficult. A cursory examination of the diverse views across the 50 states of the US shows attitudes towards blockchain among government can range from an embrace, to indifference, to fear.
This experience has been mirrored in other regions around the world, and so too is it seen throughout the Caribbean, even when the region-wide value of blockchain to tourism and finance is taken into consideration.
Challenges notwithstanding, the benefits of blockchain are considerable in the region, and those who would aspire for greater blockchain use already have a local champion in Bitt, the Barbados-based start-up seeking to create a settlement network that spans the region.
Oftentimes, the wheels of government can be slow to turn with the wheels of bureaucracy; this until a business in the private sector communicates to politicos and markets the real and enduring value of a new technology.
If not for Bitt, the further growth and development of blockchain business in the region will light a path for the technology. If businesses can light the spark and keep it alight, the potential for widespread use of blockchain across the Caribbean is incredibly promising. This field will perhaps prove the most important ‘watch this space’ within the Caribbean business community going forward.