Blockchain, is a system of distributive ledgers containing information known as blocks that are saved simultaneously on all computers in a blockchain network. Its cryptography ensures that the information is easy to read but very difficult to manipulate. As such, it holds the potential to redefine everything from banking to supply chains to healthcare and law, by removing the need for intermediaries such as central banks, clearing houses and lawyers, and facilitating a move towards a peer-to-peer economy.
Although bitcoin and cryptocurrency made blockchain famous, its potential is far greater. Blockchain aids decentralised control, trust, lower costs, transparency and data resiliency, and as a result, industry leaders are investing in blockchain to improve their operations. Indeed, according to Gartner, two thirds of business leaders believe it is a business disruptor and have set budgets accordingly. As a result of this potential, investment in blockchain has ballooned.
For example, venture capital money is pouring into blockchain start-ups and according to the inaugural Worldwide Semiannual Blockchain Spending Guide, worldwide spending on blockchain solutions reached $2.1 billion in 2018, more than double the $945 million spent in 2017. In fact, the International Data Corporation (IDC) expects blockchain spending to continue to grow a this pace over the next few years leading to a five-year compound annual growth rate (CAGR) of 81.2% and total spending of $9.2 billion in 2021.
Many hold the impression that blockchain technologies are unregulated, yet this is untrue. For example, numerous federal and state agencies in the United States, as well as agencies in other countries, regulate applications for this technology, but there are gaps. Disparate approaches taken by different countries, or even by different agencies within a country, have led to confusion on the part of blockchain companies about the jurisdictions and regulatory regimes to which their products and services will be subject. Much work is being done to rectify this, however as legislators plan an approach that will enable universal legislation. In doing so, blockchain technology is likely to gain in public trust and growth opportunities which will likely attract more investors and entrepreneurs.
Berlin, Germany has carved out a role for itself out as the centre of new blockchain technology in Europe. Having established a dedicated ‘Hub’ for blockchain companies, the city has created an ecosystem of technology start-ups and established corporates looking to leverage this fourth industrial revolution technology across a multitude of sectors.
The success of the blockchain industry in Germany is primarily due to establishment and implementation of the German Federal Government’s blockchain strategy which enabled the country to become one of the first to unveil a blueprint for taking advantage of the opportunities that blockchain technology offers and for harnessing its potential to advance digital transformation. The strategy heavily promotes, supports and funds, blockchain innovation. It sets out clear regulation for crypto-currency business models, particularly in the financial sector, in an attempt to improve the predictability and reliability for entrepreneurs and investors. It has also pioneered an “Industry 4.0 Regulatory Testbed” for start-ups to develop and test their products such as ‘smart contracts’, in an experimental, less regulated environment.
Due to these infrastructural and regulatory conditions, Germany, and Berlin in particular, are an ideal location for blockchain companies. As a result, organisations such as EOS, a blockchain operating system for commercial-scale decentralised applications that is ranked fifth in the world with a market capitalization of $4.9 billion is based in Berlin. IOTA, a transactional settlement for the Internet of Things (IoT), is among the leading cryptocurrencies in the world with a market capitalization of $1.3 billion is also based at the Hub.
As a result of the new industry in their city, the wider Berlin ecosystem has also embraced the new technology – with several restaurants, bars, retailers and boutiques accepting virtual currency as means of payment. Large German corporates are also embracing this new technology as part of the government strategy, for example Daimler and automotive supplier Duerr recently completed a transaction via a blockchain-based platform, which enables processes to be significantly simplified and accelerated through smart contracts.
Key to the longevity of Berlin’s claim over the blockchain industry is its ability to lead the industry forward. As such, the German Government has publicly stated its commitment to work at European and international levels to ensure that blockchain technologies are adequately regulated and that stablecoins do not become alternative state currencies.
The application of blockchain technologies are enhancing our digital capabilities. Blockchain technologies not only increase productivity, trust and accountability, but they also hold the potential to reshape the relationship between individuals and businesses – the foundation of the evolution of a real digital economy that sees billions of people and tens of billions of smart devices, connected by hundreds of billions of smart contracts operating automatically and enabling global synergy.
The principle benefit of blockchain technology is its ability to spread trust and make trust a ubiquitous component of society. Consequently, as more organisations adopt blockchain technology, more people will benefit, and the future of society can become more inclusive, transparent and trustworthy.