Living in the digital age has brought changes to our lifestyles and societies that are both unprecedented and unexpected. In the span of a few short decades, we have completely altered the way we communicate, create and distribute knowledge, and even how we conceptualize security and privacy. While many of these changes are simply the natural progression of technology, there are others that require further efforts to understand.
In this article, Daydreaming in Paradise will take at the blockchain, a fairly new concept that promises to revolutionize information databases, and what that means for the Philippines
Digital Currency: A Brief Background
It’s difficult to talk about the concept of a blockchain without first introducing what popularized it: the Bitcoin.
As technology began to improve exponentially and alter the way society works in more visible and inescapable ways, the question of finances began to come up. If physical objects like photographs, books, and even correspondence could be made digital, could that technology be applied to money and finance? Would it be possible to make a currency that didn’t require any connection to the physical or traditional set-up of banks and wire transactions?
As shifts in the financial industry became more volatile, the concept of a truly digital currency became more and more attractive. According to Cointelegraph, there have been several previous attempts to create digital currency, most notably during the tech boom in the 1990s. Currencies like DigiCash and Beenz emerged for a brief time but then quickly floundered due to issues like fraud and financial problems. All of these early attempts also required a Trusted Third Party approach, or TTP.
Trusted Third Party approaches required a third party to verify and monitor transactions, much in the way a traditional bank does. While this prevented discrepancies in transactions, the downside was that the TTP— usually the company who created the digital currency— also affected the value of the currency, making it impossible to create one that was truly independent.
Realizing the difficulty in creating digital money without a TTP, the idea was shelved for a few years, until an anonymous group or individual named Satoshi Nakamoto exploded on the scene.
Cryptocurrency and the Blockchain
In 2008, Satoshi Nakamoto posted what would soon be known as the White Paper, an article that briefly described the idea of a truly electronic cash system that would work on a peer-to-peer basis. The idea of transacting peer-to-peer immediately eliminated the need for a TTP, which had been the hurdle for many digital currencies before.
Nakamoto’s invention soon came to be known as Bitcoin, which is the first and currently most prominent cryptocurrency. Investopedia describes a cryptocurrency as a digital currency is kept secure through cryptography. This makes it truly digital, with no need for anchors in the traditional financial system.
One of the main problems for digital currency was how to verify transactions. Traditional money is often valued through physical things like gold, to prevent people from simply printing more bills or minting more coins. If digital currency were truly digital, then what could prevent somebody from simply creating more of it, and thereby increasing inflation?
Nakamoto’s system introduced a concept that no other digital currency had been able to crack before: the blockchain. BitPinas describes a blockchain as something of a digital ledger, where all transactions are recorded and all people, also called nodes, can see and manage the transactions. Records of transactions form “blocks” which come together to create the full blockchain. Additionally, if one node fails, the blockchain still remains, unlike a traditional central server.
This system made the blockchain completely transparent and independent, transforming the idea of truly digital money from a mere concept into reality. The blockchain became the core behind the Bitcoin, and the rest— as this evidenced by this brief primer by Forbes magazine— is history.
The Blockchain and Its Possibilities
While Nakamoto’s invention soon became the core of the cryptocurrency movement, the creation of the Bitcoin wasn’t actually the intended result. Bitcoin was more of a happy accident, one currently valued at almost 290,000 Philippine pesos per coin. And although Bitcoin may be its most popular and visible application, the potential of the blockchain goes beyond cryptocurrency.
As the Bitcoin has begun to stabilize, moving on from its volatile valuing issues over the past few years and settling comfortably, questions about the possibilities behind the blockchain began to emerge. For example, if a ledger accessed and managed by several people could exist without being compromised by any single person, what could it mean for tech? For the financial industry? And for industries beyond that?
Consequently, the blockchain began to emerge as a hot topic of discussion. Papers, conferences, and seminars regarding the future of the technology began to emerge quickly over succeeding years. Its popularity has grown to the point that even notoriously isolationist North Korea played host to a blockchain conference in 2018.
A Growing Industry
As the potentials behind the blockchain begin to emerge, they bring into question what could be possible not only on an international scale, but on a local one as well. While the Philippines unfortunately has lagged behind in terms of the application of science and tech in daily life and operations, recent years have show that it’s been surprisingly open to the blockchain and cryptocurrency.
The Philippine Daily Inquirer reported that 2018 brought two major conventions on the blockchain to the Philippines, with the Global Blockchain Summit and the Inaugural Blockchain Achievement Exhibition both taking place in June. The second iteration of the Blockchain & Bitcoin Conference Philippines was also held in October of the same year, showing the slow but steady growth of interest in cryptocurrencies in the country.
The Securities and Exchanges Commission (SEC) also released new trading rules and regulations for cryptocurrencies in 2018, opening further potential for the widespread use of the currency in the country. This article by Fintech Singapore outlines no less than 41 crypto-businesses currently licensed in the Philippines in April of 2019, and that number is sure to grow in the future.
VOA News has stated that cryptocurrency exchanges are continuing to grow in the Philippines. While lagging behind East Asian nations like China and Korea, the Philippines may have the “first mover” advantage in Southeast Asia, and the growth of the industry is not to be underestimated. Thus, the potential of the blockchain in the country seems to know no boundaries. Below are listed some changes that the blockchain has or may bring to Philippine industries.
Blockchain in Philippine Finance
Perhaps the most visible and most obvious field for the growth of blockchain use in the Philippines is the financial industry, and with good reason. Its first application was in cryptocurrency, and there are now several tried and tested examples and standards across the globe that the Philippine government can base its cryptocurrency regulation on.
The Bangko Sentral ng Pilipinas has begun exploring the possibilities of the blockchain, stating that it could be used to smooth out some issues with correspondent banking. The BSP has shown positive reception to moving more and more transactions to the digital format, and the blockchain is one of many ways it can increase security and efficiency. In addition, the BSP has also approved a project centering around a real-time remittance corridor without a central operator, a process that can be further aided by blockchain technology.
In terms of private banking, UnionBank has led the way for cryptocurrency and blockchain use by private institutions in the country. Since 2018, they’ve launched several internal blockchain applications and plan to release several more to reduce costs. UnionBank has also launched a blockchain system that will aid in connecting rural banks.
Remittance giant Western Union is also on the blockchain train, having teamed up with cryptocurrency and digital money startup Coins.ph to increase the convenience and ease of online cash transactions. Transactions made via Western Union can now show up quickly in users’ Coins.ph wallets, further paving the way for the normalization of financial transactions in the country. This is especially important given the large number of overseas Filipino workers (OFWs) sending remittances back home.
Blockchain in Philippine Business
While the financial industry in the Philippines is pioneering blockchain use in the country, the business sector isn’t too far behind. According to CoinDesk, the blockchain has huge potential for growth in the Philippine market, with start-ups like Coins.ph and GOW making use of the technology to make cash transfers in the country more convenient, and at lower rates than traditional physical banking.
The blockchain can be especially useful for entrepreneurs, and in a country where the majority of licensed businesses tend to be small to medium enterprises (SMEs), that’s a huge deal. Competitions for the best start-up concepts that make use of the blockchain, as well as hackathons, have been increasing in popularity in recent months.
SCI Ventures recently launched an Enterprise and Blockchain Innovation division that seeks to aid SMEs in making the transition to blockchain technology. With the blockchain looking like the next frontier in the digital era, helping SMEs in the country uncover how they can utilize it to their own advantage only spells more positives for its inclusion in Philippine society and business.
In a study conducted by Cyberius, it was found that Philippine startups are beginning to use blockchain technology at an increasing rate. And with that continuing widespread use, the possibilities of blockchain integrating into standard business practice in the country seems more and more likely as each year passes.
Blockchain in Philippine Real Estate
The realm of business and finance isn’t the only area where blockchain technology seems to shine. In 2018, BusinessWorld reported the launch of a blockchain-powered real estate platform called AQWIRE, which seeks to link together real estate properties and transactions in Asia using the technology. This is one way for Philippine real estate agents to broker and sell to foreign buyers without the need for expensive trips and fees, using smart contract technology for cross-border transactions.
Blockchain in Philippine Politics
With the May 2019 elections coming up fast, the question of security is more relevant than ever. In a country where election fraud is rampant, the need for a system that is completely secure and difficult to hack undetected is more apparent than ever. Enter blockchain technology.
This piece in the Philippine Daily Inquirer explores the possibilities of using blockchain to verify and confirm electoral results, eliminating the chances of fraud and cheating. Smartmatic Philippines in particular has been eyeing the use of the tech to enable clean, fast, and safe elections that allow voters to send in their ballots from the safety of their own homes. While that future may be a little ways off for now, the possibilities are definitely exciting, and it remains a topic to keep an eye on in the succeeding years.
Blockchain in Philippine Services
The recent spate of water and electricity interruptions over recent months have prompted questions about the ways that social services and systems are constructed and provided in the country. Electricity distribution giant Meralco has been eyeing ways in which the use of blockchain technology and artificial intelligence (AI) can be used to increase the efficiency of its services. Meralco has been working to digitize its services and transactions since 2016, and the use of the blockchain may be the first in many steps to complete this process.
With more and more companies going the digital route, it seems that Meralco is only the first of many services that will be exploring the use of blockchain. Given that other countries like Germany are employing the same technology to great success, it would be useful for Philippine industries to follow their example.
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Daniel Ling is a tech writer, gamer, and cat dad. He graduated with a Bachelor of Science in Information Technology an indeterminate number of years ago, worked for a while in the IT industry, switched to startups, and now does writing in his spare time. If you want to catch up on the latest gossip about gadget releases, he probably already knows it, and if he doesn’t then he can at least Google it pretty quick. If you challenge him to a Star Wars trivia battle, you will lose.