Cutting out the middle man

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Blockchain is already making a mark on the financial industry, and even though its effects will be hidden from end-consumers, it will no doubt revolutionize a lot of industries. WBJ talked to Paweł Kuskowski, CEO of Coinfirm, about the applications of blockchain and the future of cryptocurrencies

Interview by Beata Socha

WBJ: Blockchain has been called the biggest technological breakthrough since the invention of the internet. What is so revolutionary about it?

Paweł Kuskowski: A blockchain is a distributed, immutable ledger. That means it provides a digital record of any asset or transaction that can’t be unwritten, and that can be verified. It is revolutionary because there is no single authority behind it. Unlike a centralized system, there can be no single point of failure. What’s more, blockchain cuts out the need for a third party, which presents the potential to revolutionize any industry: payment providers, estate agents or even new radical platforms like Uber – they could all be replaced by new blockchain-based solutions.

How does it work?

It can be used in anything that involves an asset or a transaction – or both. Wherever value is perceived, the blockchain is invaluable because it can log ownership, then log the movement of value from one party to another. The provenance of food, clothes, precious gems and metals; ownership and possession of property; decentralized payments, credit, foreign exchange. You can build so-called “smart contracts” on the blockchain – a virtual contract that runs a set of rules – which opens up huge opportunities, like the ability to get paid for sharing your data, automated (and decentralized) trading, gaming and open-source supercomputing.

A good example of a blockchain solution that creates new value for all stakeholders is the recently announced implementation of our Trudatum platform by PKO BP. Thanks to Trudatum, PKO BP could use the blockchain infrastructure for all its documents – tens of millions of documents a year. Every document recorded in the blockchain (e.g. proof of a transaction or the bank’s terms and conditions for a given product) will be issued in the form of an irreversible abbreviation (“hash”) signed with the bank’s private key. This will allow a client to verify remotely if the files received from a business partner or from the bank are genuine or if a modification of the document has been attempted.

What can we do with blockchain now? How far is it from widespread implementation?

There are companies doing all of the above already. Most of them are still at the proof-of-concept stage, but you should expect to see widespread implementation within the next two years. The point of widespread implementation, however, is that, as a consumer, you won’t realize it’s happening. Blockchain will underpin the applications you use but, like any protocol, it will be invisible.

One of the effects visible for the customer could be better access to some existing services and lower prices, as one of the values of blockchain is cutting out third-party intermediaries from the value chain. Another positive effect is limiting the chances of fraud, especially the use of falsified documents.

“One of the effects visible for the customer could be better access to some existing services and lower prices.”

Which industries do you think will use it first?

The financial services industry is already using the technology via private blockchains that companies and consortiums like R3, which was financed by some major banks, are building themselves. These blockchains use the same technology but are permission-based – not open to anyone to view or transact on. Banks have already built these systems – the PKO BP implementation mentioned above is the first such broad application of the blockchain globally, but we are just months away from seeing at-scale implementation.

Blockchain is also very quickly changing other industries – media, advertising, gaming, IP rights protection and monetization, e-commerce and travel. Additionally, some private institutions like banks or big e-commerce businesses are at quite an advanced stage in the creation of their own digital currencies, which will revolutionize how we pay for things and exchange value.

Is Poland going to play a big role in the blockchain revolution?

Poland is already playing a role in the revolution. On one hand, our country has over a quarter of a million software engineers, who are winning global competitions. On the other hand, we also have a very innovative banking sector, which continues to be at the forefront of innovation and is very agile in testing new technologies – like PKO BP and Trudatum.

Given the instability of bitcoin that we’ve observed this year, do you think the cryptocurrency market will continue to grow?

Yes. Volatility is natural in any market that is as nascent as this one. Investors and innovators who are operating in this ecosystem usually don’t make their decisions with a short-term perspective in mind, though. The interesting question is how stable this new market will be in five or ten years’ time.

What we observe now is that individual countries such as Japan, Switzerland, Singapore, or even smaller ones like Gibraltar, are releasing regulations and guidelines around cryptocurrencies, while other countries or forums such as G20 are calling for global regulation. This is a very significant achievement compared to even two years ago. Once the global regulatory framework emerges, the whole market will become much more stable globally.

Do you think national cryptocurrencies will become a reality anytime soon?

At the moment it’s very difficult to predict the future of national currencies, but we can already see governments watching this space very closely and some of them are experimenting with accepting cryptocurrency payments. We strongly believe that governments will at some point implement a digital version of their own currency as it provides a lot of efficiency, is much more transparent and is much better suited to preventing money laundering and illegal activities in financing. We have already seen big players such as huge e-commerce businesses or big banks creating their own digital coins, and some of them are our clients.

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