Blockchain technology and digital currencies are experiencing mass adoption across several industries. Inevitably, as the novel technologies that Blockchain and digital currencies are, innovative disruption is expected to ensue. This discourse aims to shed light on the applications of Blockchain technology and digital currencies that industry leaders should note.
Emerging Blockchain Technology Disruption
Blockchain technology is coming to disrupt your industry. Yes, we said it. But you don’t have to take our word for it. As any smart and agile business should do, investigating the nature of the Blockchain is crucial to stay ahead of the curve.
Blockchain records information in a verified digital ledger and is immutably recorded on several systems. This makes it perfect for keeping track of information like no technology before it.
Besides its renowned influence in the finance industry, Blockchain technology can also disrupt other spaces and processes like human resources, supply chain, ride-hailing, energy management, real estate, etc.
It’s no surprise then that 2021 saw investors pump $25.2B into Blockchain startups globally—a record 713% YoY growth according to CBInsights.
But in the banking industry, Blockchain technology may have a new disruptor.
Digital Currency Disruption – Fiats, Cryptos, Central Bank Digital Currency
According to the IMF, about 100 countries are currently exploring Central Bank Digital Currencies or CBDCs. Although CBDCs are digital currencies like cryptocurrencies, there’s a fundamental difference in the fact that a central bank backs the former while the latter is built on the blockchain architecture.
The emergence of CBDCs in addition to other digital currencies, spells a massive disruption, especially for fiat currencies.
Just like someone would label property with their name or attach a passport in their wallet, fiat money is the property of its government. We are just allowed to use it. So, eyebrows will indeed be raised when a new type of money comes along with nobody’s face on it. And it is even worse since this faceless money is accessible to everyone and depends on everyone, not a person or group of persons.
When you think of it, “faceless” is one word to explain the nature of cryptocurrencies since users remain anonymous. And this has raised concerns by several governments over the role that cryptocurrency plays in fraudulent activities. It is perceived as being bad for society and governance. Countries like India are even said to be planning a ban on bitcoin and other cryptocurrencies, with the plan to replace them with new digital money to be launched by the Reserve Bank of India (RBI).
With CBDCs, although it’s not a decentralized currency, it does solve the problem of the middleman, i.e., the banks. Spending with CBDCs ensures that transactions occur between buyer and seller directly.
How is Nigeria Positioned?
It is no longer news that Nigeria has launched the continent’s first digital currency, the e-Naira. The launch also ranks Nigeria among very few nations globally to adopt the electronic money system, which leaders hope will help boost the country’s GDP and fight inflation.
But are these allegations true? Are blockchain networks truly bad for governance? And are they the champion for masking illicit activities? Recalling illegal darknet platforms like Silk Road, these claims appear true on the surface. However, a look at that same platform reveals the potential of the Blockchain as a tool in government.
After the FBI took notice of the Silk Road in 2013, tracking the activities on the platform helped them take it down that same year. These illegal activities on the platform went down even further after the largest Darknet Market (DNM), AlphaBay, was also shut down in 2017 using similar tracking methods of transactions on the open ledger. Despite the extra anonymity on DNMs, and despite this being the early stages of blockchains’ development, criminal investigations still made much progress.
This is why CIA veteran, Michael Morell, published a study to fight this narrative despite being a former government agent. In this study, he not only claims that illicit activity on the blockchain network is overstated, but he also even goes further to state that blockchain analysis is an incredibly efficient crime-fighting tool. For perspective, fraudulent cryptocurrency activities in 2020 accounted for 0.34% or $10 billion. Meanwhile, according to the UN, $4 trillion or 5% of the global GDP accounts for money laundering and illegal activities every year. This clearly shows the gross misrepresentation of the roles that fiat currency and cryptocurrency play in illicit activities.
It also shows the success that the open ledger can bring to the government. Furthermore, smart contract technology brings the potential for citizens’ efficient, transparent, and safe governance. This is obvious since smart contracts perform the role of an incorruptible escrow to perform automatic transactions after conditions set by the parties involved are fulfilled.
This automates things like salary payment, taxation, dissemination of charity funds from bodies like WHO, and even businesses with other countries or organizations. And the best part is that everyone can see what is happening on the ledger.
Is the Disruption Here to Stay?
More governments have begun to pass legislation and invest in digital currency and Blockchain technologies every day. A good example is Project Aber, a joint digital currency and distributed ledger proof of concept project that enables cross border payments between the UAE and Saudi Arabia.
Today, the focus is on central bank digital currencies. For instance, Blockchain can significantly increase transaction volume and network resilience, facilitating central banks to process RTGS faster, with heightened security. This is achieved by the Real-time gross settlement, which is the continuous process of settling interbank payments in central bank records as opposed to settlement at the end of each day.
In conclusion, looking back at the claims about cryptocurrencies being bad for governance now seems ridiculous. After looking at all the potential good in crime investigation, the efficiency of governance and transparency, Blockchain can enable a significant increase in transaction volume and network resilience which can facilitate central banks to process RTGS faster, with heightened security. If the history of Blockchain’s adoption and persistence through crypto is anything to go by, then one thing is clear – the disruption is here to stay. There is hope for a better future if you consider how the Nigerian government is now open to even implementing e-naira.