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

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.

-------

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.”

-------

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.


New emissions blow for VW as German court backs damages claims

Updated 26 May 2020

New emissions blow for VW as German court backs damages claims

  • Scandal has already cost firm more than €30 billion; ruling serves as template for about 60,000 cases

KARLSRUHE, Germany: Volkswagen must pay compensation to owners of vehicles with rigged diesel engines in Germany, a court ruled on Monday, dealing a fresh blow to the automaker almost 5 years after its emissions scandal erupted.

The ruling by Germany’s highest court for civil disputes, which will allow owners to return vehicles for a partial refund of the purchase price, serves as a template for about 60,000 lawsuits that are still pending with lower German courts.

Volkswagen admitted in September 2015 to cheating in emissions tests on diesel engines, a scandal which has already cost it more than €30 billion ($33 billion) in regulatory fines and vehicle refits, mostly in the US.

US authorities banned the affected cars after the cheat software was discovered, triggering claims for compensation.

But in Europe vehicles remained on the roads, leading Volkswagen to argue compensation claims there were without merit. European authorities instead forced the company to update its engine control software and fined it for fraud and administrative lapses.

Volkswagen said on Monday it would work urgently with motorists on an agreement that would see them hold on to the vehicles for a one-off compensation payment.

It did not give an estimate of how much the ruling by the German federal court, the Bundesgerichtshof (BGH), might cost it.

Volkswagen shares were 0.5 percent lower. The BGH’s presiding judge had signaled earlier this month he saw grounds for compensation.

Costs mount

“The verdict by the BGH draws a final line. It creates clarity on the BGH’s views on the underlying questions in the diesel proceedings for most of the 60,000 cases still pending,” Volkswagen said.

A lower court in the city of Koblenz had previously ruled the owner of a VW Sharan minivan had suffered pre-meditated damage, entitling him to reimbursement minus a discount for the mileage the motorist had already
benefited from.

The court at the time said he should be awarded €25,600 for the used-car purchase he made for €31,500 in 2014.

“We have in principle confirmed the verdict from the Koblenz upper regional court,” said BGH presiding federal judge Stephan Seiters.

Volkswagen had petitioned for the ruling to be quashed altogether by the higher court, while the plaintiff had appealed to have the deduction removed.

A Volkswagen spokesman said that outside Germany, more than 100,000 claims for damages were still pending, of which 90,000 cases were in Britain.

The carmaker also said it had paid out a total of €750 million to more than 200,000 separate claimants in Germany who had opted against individual claims and instead joined a class action lawsuit brought by a German consumer group.

The carmaker said last month it would set aside a total of 830 million for that deal.

In a separate court, Volkswagen agreed last week to pay €9 million to end proceedings against its chairman and chief executive, who were accused of withholding market-moving information before the emissions scandal came to light.