Blockchain: A revolution waiting to happen
Blockchain is the new black in the start-up world but its utility goes beyond the high-tech fashions of the day.
As an open, distributed ledger, blockchain ensures information is not controlled by any one entity, is public and can be easily checked — a gift, one might have thought, for people in the Arab world, who yearn for transparency, access and accountability.
“It is fair to say that some Arab countries are keeping an eye on the technology,” said Mohammed Mnif, co-founder of Tunis-based Dar Blockchain, an incubator for start-ups wishing to broaden use of blockchain. “Some are more into it. Dubai announced earlier this year that it aims to become the world’s first blockchain-powered city by 2020,”
Is the UAE the exception, rather than the rule? Yes, said Nassym Laroudi, co-founder of KDBox, a virtual bank with its own cryptocurrency and assets. “I think some MENA governments don’t understand blockchain or digital currencies,” he said.
Blockchain is mainly used in banking in MENA. Last August, the Bahraini Bank ABC became MENA’s first financial institution to join the R3 blockchain consortium, a distributed database technology company in New York.
In 2017, too, Qatar-based Commercial Bank completed an international money transfer pilot using blockchain and the National Bank of Abu Dhabi, the UAE’s largest bank, used the technology for cross-border payments.
Magnitt.com, an online guide to the MENA’s start-up eco-system, said there are a dozen blockchain start-ups focused mainly on cash transfers.
One key player is Dubai-based ArabianChain, a venture founded in 2016. It claims it wants “to revolutionise the way governments, businesses and individuals perceive and deal with economy, e-services and digital transformation by leading the way in entrepreneurial thinking and innovation in blockchain technology.”
This is in line with the capability and potential of blockchain, the technology at the heart of bitcoin and other virtual currencies, which allows information to be shared from a database hosted by millions of computers and which can record transactions between two parties efficiently and in a verifiable and permanent way.
Wamda, a platform for integrated programmes that aim to accelerate MENA entrepreneurship, is positive about finance start-ups. In its 2017 FinTech report, Wamda said regional finance start-ups raised more than $100 million in 10 years and the trend is accelerating because of blockchain’s growing prominence.
Accelerating, perhaps, but to whose benefit? As Mnif said, several Arab governments seem increasingly aware of blockchain’s potential to transform different business sectors. Laroudi said that blockchain could literally set the region free.
“It could alleviate the pains of the banking sector in our region because of the non-convertible nature of fiat currencies. Cryptocurrencies or assets could solve the problem for international trade like import-export because it provides liquidity and fewer complications, notably in inter-banking operations. Regulations could go faster if traditional banks are not seeing it as a threat,” he said.
Laroudi’s enthusiasm is understandable. Now 25, he moved from his native Algeria to Tunisia when the Algerian Central Bank banned money transfers without bank accounts. This was a facility offered by Laroudi’s now-defunct start-up KodePay. The Algerian authorities’ disapproval made it impossible to continue but Laroudi saw it as his mission to make banking and finance more accessible to ordinary people.
However, most people — and that includes politicians and government officials just as much as citizens on the street — have a very limited perspective on blockchain. Mostly, it is considered in the context of fraud, identity theft and nefarious purposes such as black-market trading.
Mnif said blockchain has more advantages than disadvantages, provided attention is paid to network architecture. “It could revolutionise everything you set your mind to,” he said. “Blockchain has infinite use cases from health care all the way to supply chain management. My favourite, however, is voting because it provides enhanced transparency, security, efficiency and hence absolute democracy.”
Laroudi added that blockchain could be especially useful to create an investment culture and to allow for money transfers between people who live deep in the hinterland and have little access to banks.
Technology, Mnif said, must be seen as the foundation for the regional infrastructure of tomorrow. “There are just some shifts and upgrades that need to happen over the next few years,” he said. “Trust me, it is only a matter of time.”