CONFIDENCE IN cryptocurrency markets may have taken a major hit in recent weeks, but the same cannot be said of the value of the technology it relies on – the blockchain.
Bitcoin’s price plunged this week to less than US$11,000, from almost US$20,000 in mid-December, after South Korea announced that all anonymous accounts, foreigners without local banking services and minors would be banned from trading on exchanges from January 30.
But, particularly in Southeast Asia, much confidence remains that the blockchain technology underlying bitcoin can be adapted to drive development in everything from bank remittances to electoral rolls and health care records.
Essentially, a blockchain is a digital ledger – a continuously growing list of records, called blocks, that are designed to be resistant to modification. Blockchains enable information to be shared in peer-to-peer networks, and because the data in any given block cannot be altered without altering all subsequent blocks, they are secure against fraud.
It’s this quality that has raised hopes it can be adapted for a wide range of uses beyond the financial sector.
In Singapore, the monetary authority has launched extensive blockchain research efforts, while its members have formed a blockchain-based trading network with Hong Kong, to be rolled out early next year.
Indonesia’s Central Bank is following Singapore’s lead with its own research programmes, according to Eni Panggabean, head of payment system policy and the oversight department.
“There is nothing wrong with the [blockchain] technology and it can be utilised in various sectors,” she said, adding that research was still in its early stages.
Malaysia, meanwhile, is seeking to develop global blockchain standards with industry groups predicting the technology will be in widespread use by 2025. In Australia, the government has invested A$8.6 million (US$6.9 million) into a blockchain project by Perth company Power Ledger, in which energy is exchanged between households during periods of excess or shortage.
And even in the midst of South Korea’s clampdown on bitcoin, the science and technology minister Yoo Young-min has gone on record as saying that blockchain should be considered quite separately from the volatile trading scene.
Rob Hanson, senior research consultant at Australia’s Commonwealth Scientific and Industrial Research Organisation (CSIRO), said blockchain’s potential was “fundamentally as an anti-fraud tool”.
“Blockchain is a term charged with excitement and confusion,” Hanson said. “It is a technology that lets anyone record transactions in a way everyone can see and trust … For governments, the obvious areas to focus blockchain research on are those where it would produce [the greatest] public good.”
Southeast Asia is ripe for such innovations.
“In Vietnam, health care records are a key area that blockchain could disrupt in public services,” said Nicole Nguyen, head of corporate marketing at Infinity Blockchain Labs in Ho Chi Minh City. “Regulation technology is also an area that government is very excited [about].”
Blockchain technology could also be used to host government registries, improve supply chain visibility and efficiency – especially in archipelago countries like Indonesia and the Philippines – and speed up international remittance payments, according to a CSIRO research paper.
And Steven Suhadi, chief executive of Jakarta-based blockchain start-up Blocktech, said it could boost traceability and transparency across governmental agencies, potentially helping with anti-corruption efforts.
Even so, multiple challenges remain before blockchain can achieve widespread adoption.
On a government level, Hanson said more research was needed to develop adequate regulation that ensured the technology was efficient and did not “erode trust and confidence in the democratic process – which ironically is what a blockchain would be trying to strengthen”.
“Blockchain uses a lot of computer power in order to create the trust we value. These costs are hidden in systems like bitcoin because of the cryptocurrency reward paid to the people who provide their computers for this purpose,” he said.
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Hanson said authorities needed to decide whether they were going to use a public network of computers to support their blockchains, or run all the computers themselves.
He urged governments not to act too hastily to adopt the technology.
“The problem with the amount of excitement around blockchain is that people are treating it like a silver bullet and are more interested in finding a use for blockchain than in finding the best way to solve the problems they face,” he said. “There should be a good reason for using a blockchain, and that reason should not be because other people are using it and you don’t want to miss out.”
For Nguyen, blockchain’s supporters must also overcome the uncertainty generated by the recent cryptocurrency trading frenzy – and the heavy-handed reaction from countries such as South Korea.
“If you deter the adoption of cryptocurrency, that would affect the blockchain industry,” she said. “But on the other hand, it could make more people intrigued by the ecosystem itself and deploy this tech for other applications. That’s where the magic of blockchain would kick in.” ■