Demystifying Blockchain Ecosystem and Distributed Ledgers in SEA
In 2008, a mysterious Satoshi Nakamoto published Bitcoin: A Peer-to-Peer Electronic Cash System unleashing on the world a new phenomenon: Blockchain.
Since then confusion around this technology has mounted. Bitcoin, blockchain, distributed ledgers, cryptocurrencies are a few of many keywords that we regularly hear. What are these terms and how do they all fit together?
Distributed Ledger Technologies (DLT) are simply put, a way of recording digital transactions on multiple computers simultaneously. Blockchain is just one type of DLT and a growing list of records, that underpins Bitcoin, which is merely one of the many cryptocurrencies. Less than a decade since Nakamoto’s white paper, blockchain has shown potential to completely revolutionise our interactions with data. Some say that blockchain will do for data, what the internet has done for information.
Let’s start by looking at some of the gains DLT can generate: the size of the blockchain market worldwide could reach up to 2,312.5 million USD by 2021. When it comes to investment, equity deals in blockchain startups exploded from $98 million in 50 deals in 2013 to $640 million in 144 deals in 2017. Aside from the money, blockchain could benefit all facets of society by reducing operational costs, shortening settlement time, reducing risk, creating revenue opportunities, reduction cost of capital.
In South East Asia (SEA) only 27% of 600 million people have a bank account, yet there are over 250 blockchain companies, most are in Singapore, Philippines, Vietnam, Malaysia and Thailand. The technology is very much still in its infancy in Lao PDR, Brunei, Cambodia and Myanmar.
Now for a technology that records transactions and data, FinTech is an obvious fit and cryptocurrencies have always had a cult following in Asia.
Let’s take a look at some of the most innovative FinTech companies using blockchain!
Founded in Singapore in 2016, LaLa World works to bridge the gap between cash and the digital world to support the inclusion of the unbanked, undocumented, students and all those excluded from the finance world and has expanded to hold offices in Malaysia, India, Dubai and the UK. AND Global is another interesting company to explore, a FinTech company that is quickly expanding across Asia, powered by machine learning and brilliant minds. Pundi X Labs is also working to make finance more accessible by empowering blockchain developers and token holders to transact cryptocurrency and services at any physical store in the world. Another Singaporean powerhouse to watch out for is OmiseGO, a company working to enable financial inclusion and interoperability through the public, decentralized OMG network.
But it’s not just about FinTech. Wherever there is data, blockchain can play a significant role and we know that data has now become integral to everything we do.
Given that the very nature of blockchain is to transform whole networks, it is no surprise that there are many business-to-business (B2B) uses of the technology. In the electricity market, Electrify was created to increase transparency and eliminate middlemen fees. The Singapore-based company raised $30 m in under ten days in a token sale. When it comes to tracking products, there are two companies to watch out for. Firstly, Malaysia-based LuxTag provides tamper proof certificate of authenticity so that luxury goods can have a better second-hand value and has so far raised $1.3. Secondly, Linfinity works to track cosmetics and pharmaceutical products, but where Linfinity stands out, is in evangelising retail investors and the community, providing audiences with education around blockchain to decrease distrust towards blockchain, that often stems from unpredictable crypto and unreliable founders who disappear after ICO.
But it isn’t just B2B blockchain businesses making noise; there are business-to-consumer (B2C) companies creating user-centric products and services for us to get our hands on, working to revolutionise our interactions with data and increase social connectivity. We have, of course, been watching the rivalry between Grab and Go-Jek in SEA, but two blockchain-enabled companies have recently emerged to give them a run for their money. DACSEE is the world’s first fully decentralised and autonomous social ride-sharing service and South Korean start-up MVL launched riding app, TADA, which turns points into coins and incentivises users for their custom. Indorse is another rising star, aiming to give ownership of data back to users and allow them to profit from sharing their skills and activities on the platform. On a slightly different note, Singapore-based, Enjin is the largest social gaming website platform where true ownership of Digital Items through blockchain technology.
As you may have noticed, Singapore is a shining star in this thriving ecosystem. There are two reasons for this. Firstly, Singapore holds the keys to a lot industries that stand to benefit from clearer supply chain networks; it is a key node in the trading of oil and gas and is looking to further expand in blockchain implementation. Secondly, Singapore has been most receptive to Initial Coin Offerings (ICOs) in SEA, which has been further increased since China banned them all together. What are ICOs, you might ask? They are a new fundraising mechanism for selling tokens in exchanges and are fast becoming more popular for blockchain companies than traditional equity venture capitalist funding.
We’ve seen some of the DLT innovative companies and uses of the tech, but why is it that SEA has the optimal environment for blockchain innovation? This success is brought on by the symbiotic relationship between government, regulators, banks and the startup community. These groups are working together to come up with solutions that work for all parties involved. All SEA governments have embraced this technology and created initiatives to increase innovation. In Singapore, the national trade platform (NTP) is based on the digital ledger. In the Philippines, blockchain is to be used in the procurement process. Thailand has launched Project Inthanon, a project with banks, a technology partner to enhance efficiency of the Thai financial market infrastructure. These government initiatives ensure that regulations are more clear cut in Asia and unambiguous,. There is an openness to knowledge exchange between all parties involved.
Even with government support, every new technological innovation comes with its own challenges.
The first of these is the reputational damage that some of the companies have to fight against, given the amount of distrust brought on by unscrupulous ICOs and the associations of Bitcoin with the dark web. Similarly, even in SEA where governments are embracing the technology, many regulatory challenges still remain and Statista found that around 39 percent of respondents to a recent Statista survey stated that regulatory issues were an issue for their organization when considering whether to increase investment in blockchain technology, hinting at a lack of regulatory clarity worldwide.
But the opportunities that blockchain can unlock in SEA far outweigh the challenges.
SEA is infamous for inventive on-demand, user-centric B2C products and services, think Lazada, Grab and Traveloka, all of which could be further strengthened by blockchain. As these companies increase their presence globally and offer more and more services, they will need to increase efficiencies by creating an immutable trail of transactions across multiple stakeholders. The technology can also increase provenance in food supply chains to ease Southeast Asian consumers’ increased weariness about mislabelled and contaminated foods, prompting to pilot blockchain in food supply chains.
But most importantly, blockchain can radically shift the economic foundation of SEA by creating opportunities for the unbanked to obtain the basic services they need to improve their financial situation. We will soon see an increase in the financial mobility of those who are unbanked and lack the opportunities they need to succeed in the current financial system. DLT can play a huge part in shifting the power dynamics to the 73% of people in SEA who remain unbanked.