[FOCUS] Blockchain in the Future – (1) Finance
주효림 기자 email@example.comApril 12. 2018
The blockchain industry is growing rapidly despite the frequent fluctuation in cryptocurrency value. Dailytoken investigated the three major industries that blockchain-based projects focus on. Finance is one of them. Blockchain technology is expected to reduce trading costs and improve security in the finance sector.
#Companies attending the Hey Blockchain Conference (March, Seoul) – ZPER, HYCON, UUNIO, NAM
#Companies attending the Tokyo Blockchain & Cryptocurrency Conference - (November 2017, Tokyo) – Over 40 companies including Medical Chain, FuzeX, Qtum
Hosting blockchain conferences has become a trend in Korea, Japan and other countries in the world since the last quarter of 2017 when the blockchain industry began to take off. These events have one thing in common. Most participating companies are developing a platform in the finance, medical or social media sector.
Medical Chain and NAM are medical, FuzeX and ZPER are financial and Qtum forms the basis of social media platforms UUNIO and Robin8.
The ICO projects’ concentration in the three sectors is statistically apparent as well. According to ICO research site next.autonomous.com, 4.27 billion dollars (4.553 trillion won) were raised in 2017 through ICO. The finance sector raised the most money. Of the total amount raised, market, investment and bank system platforms accounted for 36% with 1.566 billion dollars (1.67 trillion won). Social media platforms and medical platforms followed with 395.7 million dollars (421.8 billion won) and 386.9 million dollars (412.5 billion won), respectively.
The blockchain-based finance, medical and social media platforms offer outstanding privacy in the public service sector. Such an idea was first materialized by Satoshi Nakamoto in the Bitcoin whitepaper published in 2008. In it Nakamoto says, “Electronic signature is mandatory in the e-commerce process. If a third party is involved, however, the real benefits of the e-commerce vanish and the middleman takes all the money. The only way to solve the problem is to utilize the peer-to-peer network.”
The idea is to establish a direct transaction platform between the supplier and customer to eliminate the middleman including the government, financial institutions and distribution organizations, and prevent personal information leaks and reduce fees.
The finance sector involves the greatest volume of blockchain technology. This is because the finance sector can provide the greatest financial support and stable security. The POSCO Research Institute announced in a report that while it is difficult to predict when exactly the blockchain technology will be widely used, it is highly likely to be used in trade finance, liquidity management and asset monitoring. According to the report, “Blockchain technology will simplify the process and reduce costs in the trade finance sector, making payment and record management a lot easier and faster,” and “application in international remittance and overseas cash pooling (circulating surplus asset among affiliate companies to use it in short-term bank transactions) will lead to a reduction in liquidity risk and management cost.”
Blockchain is merely a tool to boost security at established financial institutions. Changes in the trade structure, which will lead to decentralization of financial transactions, will likely be led by platform developers who will apply blockchain to financial systems.
Peer-to-peer transaction has been attempted in many ways in the finance sector. Some companies already have an independent P2P finance platform or have formed a P2P finance alliance (A form of corporate partnership in which members provide convenience to each other but do not interfere in each other’s business. Airline alliance is an example.) featuring established small P2P finance companies.
CEO Park Seong-jun of ZPER (middle), CEO Nakano Teppei of NAM (second to right) introducing the blockchain technology at the Seoul Hey Blockchain conference held in March
CEO Park Seong-jun of decentralized P2P finance alliance network ZPER explained his business model as follows: “Conventional financial institutions have monopolized the market for too long and demand heavy charges to both investors and lenders. Those who are financially excluded suffer from disadvantages including unfairly high interest rates due to the conservative and arbitrary credit evaluation policy of financial institutions. The solution is the P2P finance transaction. Introducing blockchain and securing transaction safety will lead to easier lending and investment.” Global market survey company Research and Market has estimated that the global P2P market will grow at an annual average of 53.06% between 2016 and 2020.
An analyst from one financial institution said, “The blockchain technology is at a very early stage. However, since it is highly secure and eliminates the need to use a public key certificate and go through the Korea Securities Depository (KSD), clients will be able to use the platform conveniently.” This analyst also predicted, “Cryptocurrency, which has speculation issues due to price fluctuation, is just a small part of the blockchain technology. When the original technology for blockchain is developed, it will have infinite potential to be applied to other fields.”
Blockchain needs to jump over some hurdles before merging with the finance sector. The most urgent issue is improving its public image. Financial authorities and institutions tend to view the industry in a negative light. The financial authorities hold a negative view on cryptocurrency yet continue to promote blockchain-related businesses and host task force meetings because they acknowledge the high potential blockchain has in encryption technology and other applications. KSD’s participation in the blockchain-based Hyperledger project in 2016 is just one example. As of late, however, financial authorities are less than diligent in their efforts.
An asset management company representative who recently launched a blockchain fund as an investment product said, “A number of blockchain meetings hosted by the Financial Supervisory Service have been canceled and we don’t know when they will be carried out. A new trend will likely establish itself after the local elections. Right now, government officials are taking a step back and observing the political situation. I’m worried that Korea will be left behind in the fast-evolving blockchain game.”
Director Choi Gong-pil of the Korea Institute of Finance stated, “Blockchain will make financial services customer-centric,” adding that “Since the challenge will be for a new technology to enter a regulated industry, the government and related organizations will need to make a move fast.”
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