Editor’s note: e27 publishes relevant guest contributions from the community. Share your honest opinions and expert knowledge by submitting your content here.
As Southeast Asia is poised to become even more of a global powerhouse, it still lacks a fintech infrastructure. Blockchain, the core component of Bitcoin, can benefit the region immensely by creating truly transparent democratized systems and equal opportunities for all. Southeast Asia has an opportunity to build stronger financial, judicial, and individual processes by decentralizing systems and breaking down the barriers to entry in a variety of applications.
What, exactly, is Blockchain?
Blockchain, created in 2008, by Satoshi Nakamoto is a distributed database that maintains a growing list of ordered records called “blocks.” Each block contains a timestamp and link to a previous block. Once data is recorded, the data in a block cannot be altered retroactively. It’s essentially a distributed ledger that can record transactions between two parties in an efficient, verifiable, and permanent way. All data on blockchain is hosted by millions of computers and is accessible to anyone on the internet. Without a central server or need for “access control,” hackers cannot access a central version of the data since the blockchain database isn’t stored in one place.
How Blockchain works
Blockchain is transparent in nature and requires no centralized authority network. It cannot be altered and will always be accessible to all users. In action, it works like this:
- Digitally signed transaction initiation
- Transaction is sent to miner who verifies transaction
- Transaction is broadcast to all connected nodes as block
- Network accepts transaction if data is valid
- Receiver receives the transaction
Blockchain’s decentralized transactions
Blockchain’s decentralized transactions can help the region because they are more secure, faster, cheaper, and most importantly, transparent. Each transaction can be seen by each party and cannot be deleted or retroactively altered. Its is also:
- It is highly secure – once encrypted it cannot be modified reducing the risk of fraud.
- It provides faster turnaround time and removes the need for manual processing which improves delivery time.
- It allows for more transparency. All parties can see transaction flows making it easier to track.
- It offers lower operating costs, automates transactions, removing centralized institutions and manual processing.
Why Blockchain can transform Southeast Asia?
Instead of relying on a third party to conduct business, we can now rest assured knowing we are looking at the same data at the same time building trust amongst both parties. Since the 2008 crash, trust in financial institutions worldwide has decreased. In Southeast Asia, where trust was already lacking, this decrease has challenged the region’s ability to capitalize on its potential. Imagine a world that does not need to rely upon a central entity that runs the risk of being hacked or compromised. We gain financial freedom from unexpected fees, regulations, and barriers to entry such as having the legal documents to open a bank account, a common problem amongst many developing countries. Digital savvy Millennials in Southeast Asia are already embracing Bitcoin and Blockchain because they easily grasp not only its security, but the potential for growth.
Look at what the signatories of the World Economic Forum’s Global Futures Council on Blockchain have to say,
“If the blockchain becomes more widely used, billions of marginalized people will have a better chance of entering the global economy through financial inclusion and the strengthening of property rights.”
As corruption continues to plague much of Southeast Asia, the decentralization of blockchain empowers individuals by eliminating the need to deal with corrupt institutions.. Blockchain provides the opportunity for a true, global sharing economy, where autonomy and financial freedom are accessible to all. We will be paying close attention to Bitcoin’s role in fighting corruption in areas vulnerable to instability and corrupt governments.
Common misperceptions about Blockchain
The adoption rate of Blockchain and Bitcoin in Southeast Asia relies upon the education of the end user. Change of any kind is difficult, and there are many misconceptions that deter individuals and societies from investing in decentralized, changing systems. Blockchains usage is not limited to specific applications. Not just for governments and business, Blockchain can benefit individuals in their daily lives, but first, trust must be built. Global adoption can only happen if these misconceptions can be brought to light and explained in an easier, digestible manner.
Let’s clear up a few of things now.
Myth #1 Only B2B companies can use it
Myth #2 My private information is visible to everyone
No identities are revealed on blockchain transactions. The data that is visible is the amount of the transaction and a hash. It’s impossible to access more details with a hash alone.
Myth #3 Blockchain can only be public
There are three types of blockchains: public, private, and consortium. Public Blockchain is visible to anyone and people can expect to see their transactions to appear on the ledger. Anyone can participate in a public consensus process. Private Blockchain is used within companies and can be limited to specific member access. Consortium Blockchain does not allow everyone to participate in the consensus process. A limited number of nodes can be given in the process. In consortium, there needs to be a consensus to mark a block valid. One example is requiring X amount of participants to agree upon one transaction if they reach X then the block becomes valid.
Myth #4 Blockchain is only used in financial transactions
Any individual or entity can utilize blockchain. Musicians can get paid for their work around the globe without fees or legal barriers. An individual can create their own digital identity. Businesses can create smart legal documents to do business beyond their home country. An entrepreneur in a third world country can have the same opportunities as large corporations. Healthcare providers can provide better experiences for their patients using iOT and blockchain. The pharmaceutical industry can create transparency amongst drug producers protecting consumers from fraudulent drugs (a common problem today).
Blockchain’s global usage
The global adoption of blockchain and the usage of bitcoin is reliant upon industry experts working together to create best practices for new countries and individuals to follow. The Chamber of Digital Commerce is crucial to this success. They have created a few alliances to help provide the infrastructure and basic knowledge to new countries, governments, and individuals which Southeast Asian governments, businesses, and startups would be wise to explore.
Here are a few alliances created by the Chamber of Digital Commerce:
- Created public-private alliances to serve as a resource for law enforcement and regulatory agencies
- Created Smart Contracts Alliance to promote the use of smart contracts technologies to enhance the way business is conducted
- Created Global Blockchain Forum to develop industry standard practices with the world’s leading Blockchain policy experts and helps shape global regulatory interoperability
The need for decentralized systems is heavily correlated to the trust countries and individuals have with the market players, financial firms, and controllers of information.
“When I speak about it in the West, people say they trust Google, Facebook, or their banks. Blockchain’s opportunities are the highest in the countries that haven’t reached that level yet.” – Vitalik Buterin, co-founder of Ethereum.
OCBC was the first bank in Southeast Asia to use Blockchain for payment services.
Here is how they’ve been able to utilize blockchain to transfer money without intermediaries or centralized systems.
Blockchain is specifically relevant to Southeast Asia
If you believe that financial access is a basic human right, you’ll immediately understand the impact Blockchain can have on Southeast Asia. Consider that only 27 percent of Southeast Asia’s 600 million population have a bank account. According to a study done in 2016 by KPMG, this number falls to 5 percent in Cambodia.
A 2015 World Bank report showed a substantial increase in the number of adults with bank accounts, yet “half of adults in the poorest 40 percent of households in developing countries were still without accounts in 2014.” While East Asia and the Pacific region increased account holders by 25 percent since 2010, the report found real potential for the region’s 490 million unbanked adults.
In Southeast Asia, 46 percent of adults hold bank account, and increase of 32 percent from three years ago. Yet there is much need for improvement. In India, 43 percent of adults with bank accounts did not use them, and 230 million with accounts pay their bills with cash. The number of adults in South Asia who have a debit card (18 percent) falls far behind those in developing countries (31 percent). Obviously, there are still a trust issues in the region concerning financial institutions, and a lot of opportunity for growth if those issues can be resolved.
Poverty has been a longstanding problem for the region. Access to basic financial services provides more opportunities to use credit and increases the ability to save money, thus increasing living standards. Bitcoin’s use of Blockchain can help to transform Southeast Asia, and the world will be paying close attention because its application can be used in other regions facing similar challenges.
Corruption can be eradicated with safer transactions.
Government election processes can become more effective and transparent, making it easier to run a truly non corrupt democratic country. If each citizen has their own unique cryptographic signature, it would make the voting process anonymous yet verifiable. Paper transactions can be eliminated, creating more transparency between two parties and reducing any need for a centralized system. The creation of “Smart Contracts” can lead to real accountability amongst every contractor and supplier since each transaction is permanent and public. It would be impossible to destroy any trail of evidence as each public record is available for inspection.
Southeast Asia has been growing as a global player in the technology sector. The embrace of Bitcoin and Blockchain can speed up that growth and have repercussions throughout society. Along well as transforming a lagging financial system, Bitcoin and Blockchain represent the opportunity to build trust in financial institutions and create structures to accelerate economies.
Featured Image: 123RF