Blockchain: The Next 10 Years
10 years in, we are realizing the real power of blockchain smart contracts to streamline the process of governing, curb waste, and provide better services.
By Xische Editorial, December 11, 2018
Thinking about the last decade of blockchain, the oft-quoted Ernest Hemingway passage from the author’s seminal work The Sun Also Rises comes to mind. Speaking about a fortune lost, the novel’s protagonist says he lost everything "gradually and then suddenly". The rise of Blockchain technology and associated cryptocurrencies such as Bitcoin can best be described as gradual and then suddenly.
Through the work of a handful of gifted programmers emboldened by the decentralised potential of the internet, blockchain was initially shared by a select few. Bitcoin, the most popular and widely used cryptocurrency powered by a blockchain platform, slowly gained traction in the grey corners of the internet propelled by its anonymity. And then, seemingly out of nowhere, Bitcoin's value skyrocketed. Hundreds of other cryptocurrencies were created and the power of blockchain to change the way the world operates came into sharp focus.
A few definitions before we proceed. Bitcoin is the best-known cryptocurrency for which blockchain technology was invented. While it might sound complicated, blockchain is little more than an open-source digital ledger. Transactions take place in a ledger controlled by a global network of computers. Instead of a bank or government maintaining the ledger, this decentralised network of computers ensures all transactions are permitted and made on conditions agreed upon by all parties. All transactions are open source and you can even watch bitcoin transactions as they happen to live on the internet.
The computers verifying bitcoin transactions and maintaining the blockchain ledger are occasionally rewarded with new bitcoins in a practice called mining. This practice has resulted in miners situated all over the world eager to earn a bitcoin.
Most people associate blockchain with cryptocurrencies for good reason. In 10 years, cryptocurrencies have achieved total market cap of $120bn across 200 active exchanges and 2,000 active currencies. But the real power of blockchain is not solely in the realm of money but smart contracts. This is especially relevant to the work of governments. Through the use of smart contracts that are stored seamlessly on blockchains, governments at all levels are able to streamline the process of governing, curb waste, and provide better services.
Aside from Estonia, which has been a trailblazer in the use of technology to improve government services, the UAE has fully embraced the power and potential of blockchain to improve the lives of residents and citizens.
The Dubai Government's blockchain strategy demonstrates how leaders eager to embrace blockchain can have a real impact in society. According to initial research, each family in the UAE generates at least nine government transactions per year, which results in more than 100m government documents. Using a blockchain platform to organise these documents saves as much as AED5.5bn.
Introduced in 2016, the Dubai Government blockchain strategy has piloted the Dubai Pay Blockchain Settlement and Reconciliation System, which reduces reconciliation time from 45 days to mere seconds. Given the success of the pilot cases, the Dubai Government has set the ambitious target of a complete paperless government powered by blockchain for December 12, 2021. Dubai's leadership has facilitated a larger UAE-wide blockchain strategy launched in April 2018. With the stated goal of moving half of all government transactions to a blockchain platform by 2021, the UAE will save AED11bn in transaction costs, eliminate 398m printed documents annually and save more than 77m work hours in a year. These statistics speak for themselves in terms of the raw productivity power of blockchain.
With a top-down, government-led approach for technology innovators, the UAE is creating fertile conditions for tech’s next big invention. It is not simply that the government is using blockchain. It is that the leadership is willing to invest in enterprises like the Dubai Future Accelerators, Dubai Blockchain Challenge, and FinTech Hive. The volume of startups who progress through these incubators signal just how serious the UAE is about creating a knowledge economy that will be powered by blockchain. As the local blockchain ecosystem grows, the result will be UAE startups spreading beyond the country's borders. We have seen similar results in other Middle Eastern countries but few have the power of Dubai, given the city’s prime location at the nexus between East and West.
Recent years have also seen the UAE private sector embrace blockchain with the awareness that a blockchain for a single organisation is little more than a glorified excel spreadsheet. Blockchain thrives when multiple entities are using it and sharing data. Emirati companies such as Emirates NBD, Rakbank, Jibrel, and Addenda have all embraced blockchain as a way to revolutionise their businesses.
There are, however, challenges ahead for Blockchain’s second decade. The environmental impact of powering the technology is unsustainable in the long term. This challenge could be an opportunity for a country like the UAE, given its ample solar energy potential and traditional fossil fuel capacity. Additionally, blockchain still has a lot of maturing to do. Just like HTML in the early days, few can predict how blockchain platforms will look or operate in a decade. We do know that blockchains function best with more activity. Several blockchains today operate like their own intranets. There needs to be clear coalescence around the leading blockchains for genuine innovation to take hold. Security protocols will have to be upgraded as blockchains are not hack proof. Regardless of the changes that need to take hold and how platforms will look in a decade, blockchain will be everywhere before we know it. The last 10 years of activity has revealed who will be at the forefront of this transformation and who might be left behind. The UAE will certainly be a major player.