Shifting sands

Our weekly opinion piece and overview View this email in your browser February 5th, 2017 A global perspective   The potential of the blockchain is about much more than enhanced efficiencies and improved processes, as a recent announcement shows. It's also about consolidation and finding balance in shifting sands. (See below in THE TAKEAWAY for details.)   OUR SPONSOR LendIt USA is the world's biggest show in lending and fintech, and in 2017 the event will return to New York City with a new track specifically designed for blockchain thought-leaders. LendIt is proud to welcome CoinDesk as the track media partner, and CoinDesk will also feature in the agenda. Readers save 15% with VIP code Coindesk17USA.   TOP FIVE STORIES ON COINDESK Keep at it. At our inaugural Construct conference in San Francisco earlier this week, developers pressed forward in the face of big hurdles. Day 1: Did someone say SegWit? Beyond the potential to boost bitcoin's transaction capacity, it also could be the key to activation of other technical improvements such as the Lightning network. But will the bitcoin upgrade favored by its developers be deployed? Although political considerations seem to be holding it back, the community appears to believe that activation will happen, possibly soon. Read more. Day 2: As several projects tied to Hyperledger took the stage to discuss their contributions and roadmaps, it appeared increasingly likely that we will see production-scale blockchains within a year or two. Some believe that as the need for interoperability becomes more obvious, enterprises may eventually end up using both private and public blockchains. Read more.   Relationship counselling. In what could be a big step forward for enterprise applications of public blockchains, Zcash and ethereum are working on ways to improve compatibility between the two networks. CoinDesk spoke to insiders from both protocols on the progress and aims of the initiatives, and on the benefits of greater inter-operability between blockchains. Read more.    Overcoming barriers. Japan's technology sector has a reputation for being diverse but relatively isolated. In conversation with CoinDesk, Yoichiro Hirano – the founder of Japan's Blockchain Collaboration Consortium (BCCC) – highlighted the role the blockchain could play in helping Japanese technology companies interact more with the outside world. Greater collaboration will not only broaden opportunities and knowledge, he argues, but will also enhance network effects and boost development. Read more. Here we go again. The excitement around the increase in BTC's price this week to above $1,000 was more muted than a month ago, because we all remember what happened afterwards. Will this time be different? Market insiders spoke to CoinDesk about the significance of the $1,000 and the ¥7,000 breach. Another factor, they argue, is that fear that China's central bank will take drastic action against bitcoin seems to be diminishing. Read more.       See all CoinDesk stories JOB LISTINGS GENESIS TRADING - Sales Marketing Associate The Sales and Marketing Associate is a sales-support position, responsible for identifying and contacting prospects, with the expectation of bringing revenue-producing clients into Genesis' digital currency business lines. More info. GENESIS TRADING - Research Associate The Research Associate will support the continued growth and expansion of the business, and will proactively assess new market opportunities and products within the digital currency space. More info. QUOTE OF THE WEEK "Although the term 'blockchain' has generally been used as the umbrella name for a very broad collection of new technologies, it seems to me that our industry has not yet gone through the necessary objective scrutiny to separate the good, from the bad (and the ugly)." – Matthew Spoke, Why the Netflix "Model is the Future for Enterprise Blockchain", CoinDesk   THE TAKEAWAY  CoinDesk published a news item this week that, at first, seemed pretty ordinary. Dig deeper, though and you uncover an unusual development that highlights intriguing socio-economic and geo-political trends. To see what those are, and what lessons can be learned, let's look at the "what, where and why". What? A bank is implementing a blockchain-based cross-border payments system. The National Bank of Abu Dhabi (NBAD), the second largest lender of the United Arab Emirates (UAE), announced that it was introducing real-time cross-border payments using Ripple technology. It is the first bank in the Middle East to do this, and one of the few in the world with a working blockchain platform for remittances. Where? The UAE is the sixth largest originator of remittances in the world, sending approximately $19 billion a year (staggering given that it is the 93rd largest country in terms of number of people). This stems from the fact that 90% of the UAE's population are expats. Most are relatively low-paid workers from India, who help to fulfil the demand for labor generated by high infrastructure growth. The region's finance, technology, transport and energy sectors also attract a large community of foreign professionals. Why? It makes sense for banks to invest in a technology that can boost remittances in a region with such strong cross-border flows. And according to the bank's statement, the aim is to offer customers cheaper and faster payments. However, that's not the whole picture. NBAD already has an innovative remittance structure. Given the weight of cross border payments in bank activity, innovation in the sector has been flourishing, and prices have been under pressure due to stiff competition. Many bank cross-border payment services take less than an hour as it is. With prices coming down, margins are tight, and banks have a strong incentive to reduce the costs of managing remittances. So, it's likely that the move to the blockchain is more to do with the bank's profitability than the client's experience. Yet even that is unlikely to see a big immediate impact. To start with, NBAD will not be migrating its remittance services to the blockchain. Instead, it plans to integrate the new service into its current offering, which mitigates both risk and the benefit to the bottom line. While the effect will eventually be positive, the most interesting part of this step does not lie with the bank's business model. Let's take a look at the outlook for the region. While infrastructure growth is expected to remain strong at least until the 2020 World Expo, declining oil revenues cast clouds on the capacity of the government to maintain the same level of expenditure. A resulting drop in immigration would have a negative impact not only on bank profits but also on the region's GDP, compounding the effect of falling commodity prices and shifting international trade politics. Here's where we see a bigger picture emerge. Recently UAE institutions have shown increasing interest in blockchain technology and its use cases. Dubai's Ministry of Finance is co-hosting a blockchain conference later this month with the IMF. One of the UAE's largest telcos recently began securing health records on the blockchain. The Abu Dhabi Stock Exchange has launched a blockchain-based voting system. The government of Dubai is looking into the technology as part of its Smart Cities drive. And this is just scratching the surface…   So, the latest initiative seems to be part of a broader push to explore and implement a promising new technology, which itself is part of an even grander goal. With its future as a global energy center uncertain, the UAE has for some time been looking for other ways to maintain its role on the world stage. The flourishing communities of academia and research, a favorable tax regime, and the push to attract fintech and blockchain startups all point to a strategy of strengthening the emirates' position as a financial and technology hub. Assuming it succeeds, the resulting inflow of talent and investment will create a virtuous cycle of innovation and more investment, cementing the region's global reputation and relevance.   The lesson to all of us is that the blockchain is about much more than efficiency and innovation. It also is a powerful tool that can help to future-proof the growth and wealth of entire regions.   Share Tweet Beyond CoinDesk... OTHERS ARE TALKING ABOUT Wired wrote about how doctors hate data entry, and how the blockchain can ease their pain (geddit?). A timely piece appeared in American Banker about the problems of identity when crossing borders, and how the blockchain can help. And according to Finextra, plucky Liverpool has launched its own digital currency. Euromoney carried an article on the blockchain and trade finance that pointed out that uncertainty was good for the sector (more for the banks to insure). And Yahoo Finance reported that the biggest bitcoin news site (cough) bought the best bitcoin data app – yes, they're talking about us buying Lawnmower. 😊 UPCOMING EVENTS Feb 7 – Asia Mobile Commerce and Card-Linking Forum – Tokyo, Japan Feb 7-8 – Finovate Europe 2017 – London, UK Feb 8-10 – The Blockchain Event – Fort Lauderdale, FL Feb 13-15 – Global Summit on Blockchain in the Energy Sector – Vienna, Austria Feb 20-22 – Blockchain & Smart Contracts 2017 – Berlin, Germany Feb 21-22 – d10e-The Leading Conference on Decentralization – Bucharest, Romania REPORTS The U.S. Path to Faster Payments – Faster Payments Task Force of the Federal Reserve Building trust in government – IBM Blockchain Technology – What's in Store for Canada's Economy and Financial Markets? – C. D. Howe Institute   WHAT WE'VE BEEN UP TO Well, that was a blast… Thank you so much to all of you who made it out to San Francisco earlier this week for our inaugural Construct conference. We wouldn't have had nearly as much fun without you. In the end, we were totally sold out and standing room only. Which is just as well, because hangars are not known for their insulation properties. However, with some huddling together, lively discussion and lots of hot coffee, we managed to warm things up. Live drawings illustrating some of talks added a splash of color, and if that wasn't enough, it seems we had a pink unicorn. Throw in the audience's sense of humor and the brilliance of our speakers, and I'd say it was a sparkling success.   Copyright © 2017 CoinDesk, All rights reserved. You're receiving this email because you subscribed for updates on our website. Our mailing address is: CoinDesk 636 Avenue of the Americas New York City, NY 10011 Add us to your address book Want to change how you receive these emails? You can update your preferences or unsubscribe from this list Received this from a friend? Subscribe here.