Techsauce - The inevitability of blockchain and the digitalization of assets
Last month at the Techsauce Global Summit held in Bangkok, OmiseGO VP of Commercial and Business Development, Dennis Keller delivered a talk titled “Digitalizing the world of financial transactions, assets and payments. Can blockchain succeed?” In this article, we take a closer look at his talk, OmiseGO in the world of digitized assets, and the potential of blockchain to securely store, verify, and transact data.
In his talk, Dennis touched upon four main points: digitalization, security, scalability, and success factors. The first topic, “Digitalization is inevitable and transformative,” examined the significance of the internet across different industries: media, and how information sharing is now direct and immediate; entertainment, which gave us access to unlimited content, including music, videos, and shows; commerce, which has lessened the importance of a physical store presence as global commerce is now at our fingertips. Nevertheless, the Internet has yet to connect people financially: there are still those who belong in the “unbanked” category who have limited to no access to fast, fair, and safe financial services.
Entering an increasingly digitalized world
The world is seeing a trend where we’re moving away from fiat money towards digitized assets. A 2015 World Economic Forum (WEF) survey report indicated that 10% of the world’s GDP will be stored on blockchain technology by 2027, with 58% of all respondents seeing this shift to occur even earlier, by 2025. In addition to this, Deloitte’s 2019 blockchain survey reported that 53% of executives worldwide see blockchain as critically relevant – within the top 5 priorities to their companies and projects. One example that demonstrates this trend occurring at the consumer level is the emergence of cryptocurrencies as a burgeoning method of sending remittances in countries like the Philippines; international companies are making way to accommodate such transactions as reported by Coindesk.
So where does OmiseGO fit in the picture? We have the eWallet Suite, which is a white label, fully open-source and customizable eWallet where users are able to store digital assets such as cryptocurrencies, loyalty points, in-app tokens, and employee benefit points. While the eWallet Suite can stand alone without the need for our decentralized exchange (DEX), the currency-agnostic DEX does offer interoperability, allowing users to trade between fiat, points, crypto, or any other asset that has been digitized and stored on the OMG network.
Security is not a given
In his second topic, “Security is not a given,” we learned how usability challenges turn into security challenges. Anyone who has a crypto wallet knows the importance of protecting their seed recovery phrase. Yet humans are not perfect; errors can be made. These recovery phrases can either be lost or stolen. Conversely, in our daily lives, we conduct transactions digitally, whether for digital banking or internet shopping–activities equally prone to hacking.
Usability challenges turn into security challenges. Humans aren’t reliable… it is hard for us to manage and protect twelve random words.
Blockchain falls into the same category of digital banking and internet shopping; it simply adds an additional layer of technology which seeks to enable fast, seamless, and frictionless financial transactions.
Addressing scalability with Plasma
The usual issue with Blockchain is that due to the consensus process, transactions can be slow. So blockchain projects can opt to trade off security (sidechains) or decentralization (DPoS with small validator sets) to make up for this. OmiseGO addresses the blockchain scalability trilemma with plasma, which allows us to “borrow” the decentralized security from Ethereum. In the context of an exchange, with plasma we get a secondary layer where we can process clearing and settlement in a non-custodial manner. What this does is that it allows for faster transactions by matching orders off-chain and settling transactions on a child chain. We get speed thanks to centralized matching, increased settlement bandwidth by processing transactions in the child chain, without sacrificing security by still making commitments about the child chain blocks back to the root chain.
Rome was not built in a day
Last but not least, there are factors that come into play in how much the technology we’re building is going to succeed. Community and collaboration is equally important as development innovation. Regulators, developers, and community participants are highly needed to foster understanding, transparency, and clarity. Without one or the other, none of what we’re building matters.
Where blockchain and regulations meet, we believe the market for cryptocurrencies and blockchain will become increasingly regulated. As such we want to take a proactive approach on working closely across jurisdictions. Our CEO, Vansa Chatikavanij recently took part in the first Global Blockchain Council meeting convened by the World Economic Forum (WEF), and stated in her blog “Striking a balance between innovation and regulation,” that “it’s important that both sides, businesses and regulators, understand where each other is coming from and cooperate to shape a standard regulatory framework. Businesses must work with government to develop an optimal governance framework as neither side can tackle issues alone.”
Within the OmiseGO community, we have the OmiseGO Developer Program (ODP), which allows participants to participate as Alpha testers for early stage products and Proof-of-Concepts before they are released to the public. This opportunity creates a more cohesive communication channel between participants in the ecosystem as well as the product and engineering team at OmiseGO, allowing them to have a say in the development and integration process of different products and features.
Additionally, we’ve collaborated with UNICEF Innovation and UNICEF Thailand to launch the first ever SURGE Bangkok Hackathon. Our goal was to provide resources and tools to share information about blockchain as an emerging technology as well as help participants create better solutions for problems affecting their communities. Some of the teams that participated include EdChance, Children Future Fund (CFF), and iDonate. The first project solution aimed at funding migrant children’s education via Ethereum smart contracts, Status keycard, Gnosis’s safe, and much more. The second project is a savings solution in which a government issues a digital and e-crypto wallet for each child at birth. Last but not least, iDonate is a crowdfunding platform designed for teachers to raise funds for educational and teaching purposes. Ultimately, SURGE showed us the potential for blockchain technology to revolutionize different industries, changing the way we think, how we live and how we experience the world around us.
While there has been an increase in interest in the blockchain industry, user adoption, as with all new technology, will take some time. Even with proper regulations in set and technology ready, we still need to ensure mainstream usage. The moment mainstream adoption can finally be achieved with blockchain technology is when we can use it without knowing we’re actually using it. An example Dennis gives is that of the Internet: it’s something we use all the time, yet the majority of us probably don’t know what HTTP stands for, what IP routing is, how packets are transferred across the Internet, and so on. In a similar manner, people don’t necessarily need to know that the OmiseGO network and exchange is built on blockchain technology — they don’t even need to know their applications are using the network. All they need to know is the fact that they can transact fast and seamlessly through regions and timezones, with the peace of mind that their transactions are secure and fair. Hackathons and initiatives like the ODP are ways OmiseGO is helping to achieve this. The more minds we have collaborating, improving the technology and creating decentralized applications the more we improve on usability and user design and interface.
So…can blockchain succeed?
We certainly believe so. Blockchain technology is already, for lack of a more suitable term, “disrupting” the financial industry. Across the globe various companies starting to look into blockchain integration. Forbes has reported that from the Forbes 2000 list not only are all ten of the largest public companies in the world exploring blockchain, but at least 50 of the biggest names on the list are doing so as well. On top of this development within the private sector, several central banks and national stock exchanges all over the world — like Singapore, Japan, Thailand, the Philippines, Lithuania, and Canada to name a few, are starting to open up to digitalized assets. Now that they are seeing more usage, they are initiating programs and setting up regulations to aide in the use of digital assets.
The movement within the private Fintech space, the business industry at large, and of national and international government agencies is a testament to blockchain’s staying power and the inevitability of digitalized assets.