Blockchain revolution rolls on despite cryptocurrency crash

Bitcoin is down 80 percent from just under $20,000 12 months ago to about $3,500 in December. Similar falls have been recorded by other cryptos such as ethereum. (Shutterstock)
Updated 23 December 2018
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Blockchain revolution rolls on despite cryptocurrency crash

  • Bitcoin is down 80 percent from just under $20,000 12 months ago to about $3,500 in December
  • Despite the cryptocurrency crash, most observers agree that blockchain, the technology that underpins the new tokens, will continue to spur public and private investment

LONDON: It was the year cryptocurrencies fell to earth — the crash has been so severe that parallels have been drawn with the dotcom bust at the turn of the millennium.
Bitcoin is down 80 percent from just under $20,000 12 months ago to about $3,500 in December. Similar falls have been recorded by other cryptos such as ethereum.
The reasons for the bust are well rehearsed: Increased regulatory oversight, especially from the US and China, the emergence of scams linked to a proliferation of cryptocurrencies launched via initial coin offerings (ICOs), and disagreements among cryptocurrency’s developers about how to update the underlying software.
But interviewees told Arab News that the market would recover and that, just as the dotcom boom went on to produce Amazon, so the world of cryptocurrencies shouldn’t be written off.
Dubai-based entrepreneur and investor, Najam Kidwai, a board-adviser to Fusion.org, a not-for-profit foundation that aims to develop blockchain infrastructure for cryptofinance, told Arab News that all innovations needed time to mature and cryptocurrencies were no different.
He added: “Change needs to be regulated, but if you are doing
everything above board, new technology should enhance the user experience, that’s the idea of technology — to make life easier.”
In the interim, he predicted, institutional money will flow into “the crypto space,” even as retail investors take fright. Banks and hedge funds had been looking at cryptocurrencies, and building risk and compliance infrastructure to support trading, he said.
Chris Beauchamp, senior market analyst at London-based IG Group told Arab News: “They (cryptocurrencies) aren’t doomed, they’re just not going to change the world overnight. Bitcoin still has the heft to remain part of the financial world, but others will probably fade or evolve over time, like the airlines and car firms of old.”
Despite the cryptocurrency crash, most observers agree that blockchain, the technology that underpins the new tokens, will continue to spur public and private investment, and perhaps nowhere more so than in the Gulf.
Here, there have been some major developments in 2018. Abu Dhabi-headquartered Al Hilal Bank has carried out a blockchain-based transaction for an Islamic bond worth $500 million; Abu Dhabi National Oil Company (ADNOC) is collaborating with IBM to pilot a blockchain supply chain system; and KSA’s central bank has signed an agreement with US fintech company Ripple to run a pilot project to help banks settle payments using blockchain.
Kidwai said: “Cities like Dubai have bet very heavily on blockchain. A lot of proof of concept work is going on as Dubai wants paperless government, so there is an initiative here called Smart Dubai, driven by the ruler of Dubai. There is a desire for transparency and speed in government.”
At its heart, blockchain is a relatively straightforward concept. It’s a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers. This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government. Once published, the information can’t be changed.
Gartner analyst Rajesh Kandaswamy told Arab News that even though speculators had poured billions into cryptocurrencies, that didn’t “invalidate the underlying blockchain technology”.
“Blockchain could allow various parties in a supply chain to interact without a middleman — and for all records to be secured in one place. That allows for further streamlining, more efficiency and cost reductions,” said Kandaswamy.
Abdul Nasser Al Mughairbi, digital unit manager for Abu Dhabi National Oil Company (ADNOC) said that blockchain would “enhance our business processes with a shared, secure and transparent ledger.
“Blockchain is helping us track, irrefutably, every molecule of oil, and its value, from the well to the final customer,” he said in an emailed response to questions from Arab News.
He added: “Every day there are large and complex production and accounting transactions among all of our businesses…that need to be accounted for. Until now this has been a laborious process but the blockchain application we have developed is streamlining this in one platform.”
Operating costs could be cut via “eliminating time-consuming and labor-intensive processes.”
Blockchain would be a game-changer in oil and gas transactions, he said.

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GCC SEEKS GLOBAL BLOCKCHAIN STATUS

GCC states are spearheading developments in blockchain to underline their efforts to become a global tech hub that links trade and finance between East and West. Saudi Arabia, Bahrain and Kuwait have announced a number of initiatives adding to the blockchain buzz humming around the entire Arabian Peninsula. The UAE and KSA have launched a proof of concept (PoC) for experimenting with blockchain to help cross-border payments between the two countries.

Just this month, UAE Exchange and US start-up Ripple said they planned to launch cross-border remittances to Asia via blockchain from the first quarter of 2019. Dubai has long sought to cement its position at the heart of a trading superhighway that connects China, Africa, Europe and the United States.

It has even talked about launching its own digital currency to oil the wheels of world trade even as the US/China tit-for-tat tariffs war continues. Dubai is already home to a bitcoin exchange, BitOasis, and other start-ups and accelerators devoted to blockchain are springing up, as well. 

Dubai’s Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum has said he wants all government documentation — such as visa applications, bill payments and licence renewals — to be transacted digitally using blockchain by 2020. In a recent report, Ahmed Bin Sulayem, chairman of the Dubai Multi-Commodity Centre (DMCC), said: “Trade and trade finance will be revolutionised by blockchain and other emerging technologies.”

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Despite a huge increase in embryonic and pilot projects involving blockchain, Gartner’s Kandaswamy said to his knowledge there had been “very few large-scale investments” in blockchain by enterprises. True, blockchain had been the number one search term when people looked at the Gartner website.
But inquiries were more about curiosity surrounding the technology and “not about allocating capital.”
He added: “Our clients are struggling to see where blockchain would make sense in their business. When I did a webinar last year, firms were saying ‘lack of business case’ was the number one issue. They wanted to know how blockchain could do things better than other technologies already out there.”
However, he said that there were some unique selling points emerging with blockchain. For example: The ability of different parties in an ecosystem to have the same sense of proof, data held at a single point that couldn’t be tampered with.
Certainly, blockchain doesn’t look like going away anytime soon. Walmart recently became one of the first retailers to explain how it will be using the technology. The company said it would require lettuce suppliers to upload data about their foods to blockchain within a year. Large firms such as Accenture, Facebook, Google, IBM and Microsoft are developing patented products and services based on blockchain’s digital-ledger open-source technology.
Last month, Amazon said that it would offer blockchain for developers using its cloud-computing services.
The global market for blockchain-related products and services is about $700 million and is projected to exceed $60 billion annually in 2024, according to Wintergreen Research.
IBM and Microsoft have been leading global blockchain development projects in 2018, according to Wintergreen.
Kandaswamy said a distinction should be made between a public blockchain system and a private one. The latter was for internal business processes, such as IBM’s application enabling location and tracking of maritime shipments. The larger battlefield centered on public blockchain. For these public exchanges used for the likes of bitcoin, there was still work to be done following a number of hacking incidents in 2018.
Kidwai said custodial issues were “the biggest thing holding back cryptocurrencies — i.e. making sure that my crypto or bitcoin isn’t going to be stolen.”
Solutions to the problems were pending but not that far away, he said, perhaps no more than 12 months out.
Once the custodial issues were solved, “institutional capital would flow, if not gush into this space,” he said.
As with the Internet, blockchain technology will catch on — “and like the Internet, in a very big way,” said Kidwai.


INTERVIEW: Saadia Zahidi — A woman’s voice amid the macho power players at Davos

Updated 21 January 2019
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INTERVIEW: Saadia Zahidi — A woman’s voice amid the macho power players at Davos

  • Saadia Zahidi, 38-years-old, is a member of the WEF’s managing board
  • She agrees that the WEF has a challenge on the low level of female participation at Davos

DAVOS: The annual meeting of the World Economic Forum (WEF), which kicks off tomorrow in the Swiss resort of Davos, is predominantly a late-middle-aged male affair. About 78 percent of the attendees in 2019 are men, with an average age of 54.
Saadia Zahidi is a breath of Alpine fresh air in this clubby world of macho power players. The 38-year-old member of the WEF’s managing board, and head of its Center for the New Economy and Society, is a rising star at the forum, and a key shaper of its thinking on social, gender and employment issues.
She agrees that the WEF has a challenge on the low level of female participation at Davos. But she believes that only reflects the wider world, where despite years of recognizing the need for gender equality in politics, business and society at large, women are still a minority when it comes to the commanding heights of the policymaking process.
“There’s a long way to go to get to 50/50 participation at Davos, but that reflects a global problem, reflecting the practices of global leadership,” she said. Only single-digit percentage proportions of the leaders of the world’s biggest corporations are female, while only a slightly bigger number of heads of state are women, she said, adding: “We have quite a way to go.”
As she recognizes, it is not just a WEF problem. Last year, she published a seminal work on gender equality as it especially related to the Middle East and the wider Muslim world. It is entitled “Fifty Million Rising,” a reference to the number of women that have joined the workforce in Islamic economies.
The work was optimistic in tone, charting the progress of women as more equal participants in their economies, be they McDonald’s workers in Pakistan, IT technicians in Egypt, or running big conglomerates in Saudi Arabia. The underlying message was that the empowerment of women was inexorable.
By the end of last year, Zahidi seemed to have lost some of that positivity. A report authored by her for the WEF on the gender gap — the difference in pay and conditions for men and women doing more or less the same job — found that on average, female workers were paid just 63 percent of men’s wages for the same job.

The overall picture is that gender equality has stalled. The future of our labor market may not be as equal as the trajectory we thought we were on.

At current rates of progress, it would take 202 years to close that gap, leading her to conclude: “The overall picture is that gender equality has stalled. The future of our labor market may not be as equal as the trajectory we thought we were on.”
So what has gone wrong in the movement to empower women?
Zahidi identifies two main reasons for the lack of progress. “There have been big shifts in the labor market with greater use of technology and automation, and women have borne the greater brunt associated with those changes,” she said.
“There’s a perception that blue-collar men in manufacturing are being put out of work by automation, but many women in service sectors, especially in the emerging world, are feeling the effects just as much if not more.”
More women than ever are graduating from universities, but many are not qualified in the skills required in the modern digital world, in science, technology and maths.
The second reason is that many countries and societies are still not balancing domestic roles more efficiently between men and women. “It still seems to be women who have the main responsibility for unpaid care work, be it in child care, elder care or other aspects of home life,” she said.
“So women are less present in the paid economy than they are in the unpaid economy. It’s a structural factor, but you shouldn’t really need a business case to move forward on gender equality, because there’s also a very clear moral argument to be made.”
The movement for gender equality and female empowerment has been a factor in social and economic policymaking in many Arab Gulf economies, particularly in Saudi Arabia, where it is a prominent feature of the Vision 2030 reform plan.

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BIO

Born in Lahore, Pakistan, 1980

Education

•Smith College, Massachusetts, US — economics degree

•Graduate Institute, Geneva, Switzerland — master’s in international economics

•Harvard Kennedy School — master’s in public administration

Career

•Joined WEF as economist, 2003

•Currently head of WEF’s Center for the New Economy and Society; •member of managing board

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Zahidi agrees that there has been some progress in recent decades, with greater investment in girls’ education leading to more skilled women in employment and all the social and cultural changes that brings. That advancement can also lead to “pushback” by women against some of the cultural and social restraints imposed on them by conservative societies.
“It’s not surprising now that there are more questions being asked about the viability of something like the (Saudi) guardianship laws,” she said. “Largely speaking, the guardianship laws are an additional barrier, whether it’s a question of transport, the ability to get from point A to point B. Is it a question of availability of transport, or because you don’t have the permission of one person? It’s a barrier that women will face and men won’t face.”
Although probably best known for her work at the WEF on gender and employment issues, last year her role was broadened to take responsibility for the “new economics” that the forum views as essential in the age of the Fourth Industrial Revolution — the confluence of digital, technological and communications factors that the WEF sees as having a profound effect on economic relations.
In October 2018, Zahidi led a study group at a WEF meeting in Dubai on the subject of the new economy. Those deliberations resulted in the recent publication of a WEF white paper on the subject. Her enthusiasm on the topic is obvious and infectious.
“It was an exercise in how to offer newer as well as the traditional voices on how we manage and direct our economy,” she said. She believes that modern economies, under pressure from digitalization and technological change amid volatile geo-economic conditions, have to seek answers to four big questions.
“First, do we need to fundamentally rethink what constitutes economic value, and what practical avenues exist for doing so?” she asked. She believes that new types of assets and economic activity are not well understood, and that new sources of consumer welfare are not adequately measured.
“What’s the value of the open knowledge on Wikipedia, or the toll taken by the incursion of digital technology into our private lives?” she asked. The answers will have fundamental repercussions for traditional methods of valuing economic activity, such as gross domestic product (GDP) and the price mechanism, she believes.
Second, Zahidi posed the question of whether, in the age of Big Data, we need to address the issue of the market concentration created by online platforms. Digital platforms bring undoubted benefits in terms of new services, greater choice, faster access and lower costs.

 

There’s a long way to go to get to 50/50 participation or men and women at Davos, but that reflects a global problem.

“Yet at the same time, scale and the resulting concentration of market power can offset some of these benefits, with potential repercussions on innovation, quality and distributional outcomes,” she said, adding that we need to think again about the regulatory regimes that govern the digital economy.
Third, the new economics must consider whether policymakers need to put in place practical measures for job creation. Technology and automation are forcing major transformations on employment practices. “If managed wisely, these transformations could lead to a new age of good work, good jobs and improved quality of life for all. If managed poorly, they pose the risk of greater inequality and broader polarization,” she wrote in the white paper.
Finally, the new economics must consider the need for new social “safety nets” for those who get left behind by the rapidly changing digital transformation. “In developed economies, the efficacy of social insurance policies tied to formal work and stable employment contracts is depleting, as increasing numbers of people become displaced or experience insecure work, low pay and unequal access to good jobs,” she said.
“In developing economies, where work has largely been diverse and informal, technological advances look set to continue that trend and offer additional flexible work opportunities, leaving open the question of what a future social protection model might look like.”
These issues will be among the questions considered at Davos 2019. Despite the withdrawal from the annual meeting of some prominent regular attendees — most of the US government sector, for example — Zahidi is confident that it will be another success. “My main aim this year is to raise and discuss issues that are starting to pose challenges, and to build coalitions to tackle them,” she said.