Blockchain has been a buzzword in financial services for some time. As this technology matures, however, it is likely to become much more than just a buzzword. Technology startups utilising blockchain technologies hope to introduce substantial efficiencies into the banking and finance sector for the benefit of customers and businesses.
Part of a group of distributed ledger technologies, blockchain is a series of assets, called blocks, that clearly and publicly identify the current and previous owners of an asset, as well as documenting the asset's linear history.
Because blockchain may reduce the need for third-party verification of transactions, allowing sellers and buyers to directly connect, it challenges traditional banking and finance models where intermediaries manage the relationship between buyers and sellers.
While it's still very early days for this technology, businesses are emerging that build off of blockchain and all it has to offer. Here are three new companies doing just that.
Brontech addresses identity verification
Identity verification startup Brontech uses blockchain to decentralise data ownership. Emma Poposka, Co-Founder and CEO, explains her software allows people to prove who they are online, without the need for third-party verification.
One hypothetical application may be if a bank performs a 100-point know-your- customer check to verify a customer's identity. If tomorrow the customer wants to open another bank account with a different bank, with Brontech the client may be able to immediately prove identity without the second bank needing to do another 100-point check. In fact, any business — e-tailers, schools or government agencies — could check an individual's identity using this technology.
Blockchain may be a solution because its nature means there's no need for an outside party to verify proof of identity—institutions can verify identities themselves because the data is stored in a decentralised environment, which is the blockchain. Any party with access and authority could check someone's identity in the decentralised environment.
Poposka says banks won't necessarily be the first adopters of this tool because of the strict regulatory environment in which they operate. Instead she says, it's likely it will initially be used by other digital businesses – for instance to verify someone's identity when renting rooms on AirBnb or booking an Uber.
“One user group will be the sharing economy, where you need to trust the person you're interacting with, and you need to know who they are. So, that's where we see the biggest potential," she explains.
The software is fully developed and presently Poposka says she is negotiating commercial partnerships for pilot projects.
Says Poposka: “This is a problem businesses have been trying to solve since the beginning of the World Wide Web. It's not going to be about who's going to be the first to market as much as I think it's about who's going to offer the best solution."
Veredictum.io takes on digital piracy
Piracy was one of the internet's first problems. For instance, in the early days it was commonplace for people to 'share' their music through sites like Napster. While this site no longer exists, piracy remains an issue.
Research from MUSO's Global Piracy Insights Report 2017 estimates there were 34.2 billion visits to music piracy sites throughout 2016. According to this study, last year there was a marked rise in pirates ripping music from videos shared on websites such as YouTube over 2015.
Tim Lea's startup, Veredictum.io, aims to help resolve this problem for artists working across a number of fields.
“We're a blockchain-enabled software platform for film and video producers to protect them from theft and piracy, and we're looking at new distribution and monetisation models," he explains.
The business has a variety of techniques and tools it uses. For instance, it can create digital fingerprints for media such as videos, registered through a blockchain.
The way it works, users download software to their computer that will be able to search for pirated work on an ongoing basis.
“The decentralised structure will enable individuals affected by piracy to find their pirated content. The software searches the web for pirated content. If pirated content is found, the software rewards the finder with a crypto-currency coin such as a bitcoin, that has real-world value in the secondary crypto-currency market," Lea explains.
“We could not have done this without blockchain," he explains.
Fuzo reimagines smart cards
Leon-Gerard Vandenberg, CTO and Founder of Fuzo, has been working in the area of digital currencies since the turn of the millennium.
Back in 1999, he was involved in a project with the U.S. Navy called USNavyCash, which he explains was a way of digitising sailors' salaries who were based on navy ships and bases all around the world.
“We created an early stored value card, but that project highlighted some failures of this concept. Blockchain fixes some of these, notably the 'double spend' problem," Vandenberg says.
The double spend happens when two parties – say a sailor based on a ship for six months and his or her spouse – would both use the card. Before Blockchain, it was difficult to monitor spending on the card from two sources, other than through manual reconciliation. Blockchain is able to resolve this, Vandenberg explains.
“A blockchain has to be connected all the time for it to provide its core functionality of identifying transactions, including live ones. A smart card on a chip, which was the old approach, has the problem that it's disconnected from an external system when it's in your wallet. But if you use a sim card instead, it's always connected."
“My idea was to make digital money that can fit on a sim card, which is it's always connected. It delivers a heartbeat to a blockchain so that you always know how much money is on the card, no matter who has used it," he says.
The technology is delivered through an additional sim card that sits on top of the phone's main sim.
The business raised Ƀ200 initial seed funding from a company called Seedcoin in Hong Kong and it now has working demonstration software for electronic remittance.
Right now Vandenberg is focused on developing an ecosystem of software developers who can use the technology to build a new generation of financial services apps.
“We want to democratise access to financial services. But we're not building a bank; we're building the infrastructure for the bank. We're saying we want to be bricks and mortar, the wheelbarrows and pickaxes for this brand new way of looking at money," Vandenberg argues.
Future Scope of Blockchain Technology
Key Takeaways
- Blockchain is a distributed ledger technology with a series of assets, called blocks,
- Historical data captured by blockchain technology enables asset ownership verification.
- Businesses can potentially use blockchain technology to streamline financial processes.