Abu Dhabi, UAESunday 25 August 2019

How blockchain became the quiet disruptor amid the crypto crash

Even after the Bitcoin bubble burst, the use of decentralised ledger technology has continued at pace and relatively speaking, under the radar, Mustafa Alrawi found while in Davos

Joseph Lubin is a founder of blockchain builder ConsenSys and co-founder of the cryptocurrency Ethereum. Bloomberg
Joseph Lubin is a founder of blockchain builder ConsenSys and co-founder of the cryptocurrency Ethereum. Bloomberg

This will be a huge year for blockchain but in all likelihood you will not realise it, according to one of the pioneers of the distributed ledger technology.

Joseph Lubin, founder of ConsenSys, says that there are a number of apps currently being developed and released that run on blockchain but are not necessarily advertised as such to users. Gone are the hyped-up days when a cryptocurrency craze fuelled immense interest in the power of blockchain technology, which allows the storing, tracking and exchange of data for both physical digital assets in a much more secure and decentralised fashion.

Examples of existing blockchain-backed apps that are not marketed as such include a loyalty programme providing coupons at supermarkets for thousands of subscribers of a US mobile phone operator.

“They are downloading crypto-wallets to their phones without realising it's blockchain,” says Mr Lubin’s colleague Sophia Lopez, who is the co-founder of Kaleido, a ConsenSys ‘venture studio’ which builds blockchain networks and applications for clients. Ms Lopez has been working in blockchain since 2015, including while at IBM.

Other areas in which blockchain is currently being deployed in countries around the world such as China and Singapore include in digital collectibles, tuberculosis disease surveillance, genomics, precision medicine and in humanitarian relief efforts, she says. Blockchain is also supporting financial inclusion in the Philippines where 35 million people are unbanked.

Mr Lubin says that the current stage of development is akin to “the early days of what an app store looks like for blockchain applications”.

Not branding them as ‘blockchain’ is “what the serious people have been doing in the industry” for some time, he points out. During the Bitcoin price bubble of 2017, companies were desperate to shout about a connection to the technology behind the cryptocurrency, no matter how tenuous.

By the time Bitcoin’s price touched $20,000 in December 2017, the frenzy around blockchain had become so surreal that an ice tea brewer in the US had added the word to its brand name, sending its shares surging. Early in 2018, the bubble burst for Bitcoin and anyone looking to cash-in on the crypto and blockchain fashion. Last month, Long Blockchain Corp even sold its ice tea business. Compared to a year ago, the blockchain world is now a much less shouty place.

However, the development of blockchain technology and applications, says Mr Lubin, is “moving astonishingly quickly”.

He and his colleagues are speaking after a long day of networking at their Davos Promenade storefront pop-up lounge during the World Economic Forum. It is the second year they have set up in this way for the annual meeting; in 2018 it was off the back of the crypto bubble. This year, Mr Lubin has returned and been very happy with the interest shown in ConsenSys and blockchain from those attending the Forum.

Ms Lopez agrees and says she has never seen “so much interest at the c-suite level for blockchain. They don’t want to be disrupted. People are realising it is a business model shift [with] enterprise or government saying we want to move to these new technologies”.

One project that ConsenSys is involved in is Komgo, which is a blockchain-powered platform for commodity financing. It is backed by 15 shareholders which are some of the biggest players in the business: ABN Amro, BNP Paribas, Citi, Crédit Agricole, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Societe Generale.

Souleïma Baddi, Komgo’s chief executive, explains that it hopes “to tackle the inefficiencies in the way we operate in this industry that hasn’t changed over the past one hundred years”.

The issue with securing financing based wholly on documents like letters of credit (LCs) is that it can open up opportunities for fraud. Putting information on a blockchain will help stop the use of the same documents multiple times to borrow money from different institutions. As a result of the improved confidence in the information being provided and the efficiencies gained, transactions should become faster, says Ms Baddi, who was also a banker with SocGen for 18 years.

ConsenSys has helped build Komgo’s platform which went live in December. Another blockchain-based platform called Vakt, for the settlement of physical oil trading, backed by banks and traders, also launched last year.

Mr Lubin, who is also a co-founder of Ethereum, arguably the most well-known blockchain network aside from Bitcoin, says these developments are all part of a natural evolution.

I was aware five years ago, even before Ethereum started, that the technology was going to transform virtually everything over the next few decades and that I, personally, was going to have to have 50,000 conversations with people.

Joseph Lubin, founder of ConsenSys and co-founder of Ethereum

“Just as corporations moved from their own private internal systems to using the internet to [using the] cloud, it is a set of stepping stones that we are putting in place and enabling better systems to be built.”

Before blockchain, he says, systems were built as silos with little opportunity for collaboration between different institutions and companies.

“If we can bring more decentralisation to different projects, especially some projects that couldn’t really exist because of IP [intellectual property] concerns and where the machines are going to be and who is going to own certain pieces … it is a huge win and gets everybody thinking this is a new way of building collaborative structures and a way of running our businesses.”

However, Mr Lubin saw the future well before most others did.

“I was aware five years ago, even before Ethereum started, that the technology was going to transform virtually everything over the next few decades and that I, personally, was going to have to have 50,000 conversations with people. Pretty much everybody on the planet, we’re going to have to have 10 or 20 conversations about this technology before it really locks into [our] consciousness. You just have to talk through the ideas, talk about what’s going on, talk about what’s possible and the same thing happened with the internet.”

The internet was in existence for decades before the creation of the world wide web at the end of the 1980s. Less than ten years later, the internet had become mainstream. From there, inside a decade, social media platforms heralded the Web 2.0 era. Blockchain is another sea-change on this rapidly moving digital adoption curve, Mr Lubin says. It will transform the way the web works into a more 3-dimensional experience for users.

“Web 3.0, [the] de-centralised web will really be Web 3D because the ‘compute’ is going to be everywhere, in our phones, watches and clothing and we are going to be able to move compute back and forth, move storage back and forth. It’s not just going to be sitting in big server farms somewhere. There will be devices, sensors that are the tentacles of this Web 3D beast and they will all be feeding data into data markets. It is a vastly bigger endeavour than the internet, so it is going to take quite a while. The internet is pretty flat; it is not in your face at all. You have to go get it. Wait until you have your AR/VR contact lenses in and everything is sensing everything.”

ConsenSys is currently deploying new iterations of blockchain-related technology impacting security, scale, speed and energy use – the latter addressing the biggest criticism of the way Bitcoin’s network runs, absorbing larger and larger amounts of electricity as it grows.

“We’re ramping up pretty much everywhere,” Mr Lubin says. “My guess is that we will be four or five times busier in 2019 than in 2018.”

Smart Dubai and ConsenSys are already working together on a number of applications. Blockchain is being implemented throughout UAE government services as such as DubaiPay. The target is for half of all transactions to be performed on blockchain by 2021. Among local corporations, the Abu Dhabi National Oil Company, for example, is piloting a blockchain-based automated system with IBM to integrate across its entire value chain from oil and gas production all the way to the end customer.

The increased use of blockchain is an unstoppable tide, just don’t expect there to be much shouting about it.

Updated: February 7, 2019 10:51 AM

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