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maltatoday, SUNDAY, 22 JANUARY 2017 Business & Finance III Why blockchain will change the world Blockchain, essentially a giant network which records ownership and value, is being hailed as the second coming of the internet. What is the value and importance of Blockchain technology for financial markets and the world at large? Joseph Pullicino Grant Thornton Malta Partner, Business Risk and Outsourcing IF you have been reading in the global media over the last few years, all the blockchain stories, you can be forgiven for thinking that this is a major new technology, bring- ing a revolution in business and processes. But is that true? What is the actual importance of blockchain and why is it capturing so much attention from fintech firms and investing entrepreneurs? After steam, electricity and computing, it is the common creed that blockchain will soon become a symbol of the next industrial revolution. Industry experts pro- claim the emerging technology as the next big disruptor, with both established players and start-ups deep in thought and experiment- ing. The question is whether it will be a discrete, behind-the-scenes transformation within the benefi- ciary industries, or a loud uprising that will make blockchain the next decade's buzzword. The degree to which the fintech industry has changed over the last decade due to this disruptive tech- nology is off the scale. The world has witnessed the arrival of new currencies, technologies, business models and forms of transactions – all within an environment of global economic upheavals and increas- ingly comprehensive regulation. Much more is to follow. So what is blockchain? For several decades we have thought of the internet as a straight exchange of information. Varying assets – ranging from intellectual property to music, from money to publish- ing, from property deeds to health records – are all controlled by large intermediaries that handle the major processes involved in any one of many transactions. Practical examples include banks transferring money between individuals, businesses and coun- tries, and social media companies holding on to giant depositories of data, video and music streaming services. There are many transac- tions involved, both individually and institutionally, that include everything from authenticating, clearing, processing and bookkeep- ing. But these intermediaries are far from perfect and one of their big- gest flaws is centralisation. They are also slow and take a reasonably large cut from any of the business in these value exchanges. The idea behind blockchain is to do away with such centralised transaction systems and offer an alternative that is accessible, easily applicable and more secure. Blockchain technology's potential lies in its ability to create a distrib- uted ledger of transactions, in a secure manner without a central coordinating body. To really get blockchain explained, one can break the system down into its three most important parts: a network of com- puters/participants, a network pro- tocol and a consensus mechanism. Understanding how the system works is complex, but one should be more interested in its application and benefits. One of the first implementations of blockchain was Bitcoin, followed by a number of other cryptocurren- cies – but none as widespread to date. Bitcoin made its debut in rela- tive obscurity at the start of 2009, when the financial crisis was still raging. The bitcoin protocol and reference software was created by a person or group of persons known as Satoshi Nakamoto and released as open-source software. The idea was to take power out of the hands of the central bankers and govern- ments who usually control the flow of currency. A broad range of innovators are creating solutions beyond cryp- tocurrencies using blockchain technology. Digital content like music, movies, and online ads could use blockchain to prevent piracy. By using new file formats that can play the media and encode blockchain data that reflects intellectual prop- erty and payment history, musicians and filmmakers wouldn't be losing out on millions. In health and healthcare, block- chain technology has the potential to transform the healthcare sector, placing the patient at the centre of the healthcare ecosystem and increasing the security, privacy, and interoperability of health data. In medicine, blockchain technology is Grant Thornton - a multidisciplinary blockchain team Grant Thornton has created a multidisciplinary blockchain team in order to research about new use cases implementing distributed ledgers. The firm is covering the following areas: • Development. A team of experienced blockchain developers are carrying on proof-of-concepts in the multiple variations of blockchain. • Law and regulation. Technological lawyers with a large background in the blockchain ecosystem, are not only studying the legal impact of the regulation in new tech applications, but also designing improvements for the current legal framework. • Economy and finance. Experts in economy and finance are covering areas from the issuance of new financial products to the economic viability the products developed. • Consultancy. The firm is also taking an advisory approach on developing use cases into new business models. Grant Thornton strongly believes about the potential of this technology. Thus, specific departments of the firm are also involved in different research projects, carrying on project in specific areas, such as healthcare, insurance, real estate, financial services and automotive. Continues next page >