As the switch to digital money via blockchain technology upends modern banking practices, many people are skeptical about whether to trust the security and privacy of transactions performed in a blockchain.
“It is as if every dollar bill in your pocket has a list written on it of all the transactions it was involved in prior to reaching your hands. The blockchain ledger infrastructure has huge potential to simplify.”
— Ted Halpern, www.nasdaq.com 03/29/17
Add to this some early notoriety gained by digital currencies like Bitcoin, and it’s easy to see why people remain cautious about this relatively new technology. Can we trust it? What is the “Internet of Value”? How can we separate the hype surrounding blockchain from its real benefits?
That was the topic on a recent episode of the thought-leadership roundtable program Coffee Break with Game-Changers, presented by SAP. On Money’s Digital Makeover, Part 2, host/moderator Bonnie D. Graham talked with three leading industry experts: Jeremy Epstein, chief executive officer, Never Stop Marketing; Alon Kantor, business development manager, Check Point; and Raimund Gross, innovation manager, SAP.
The show aired live on the World Talk Radio Business Channel on April 5, 2017. The recording is available on-demand at Money’s Digital Makeover, Part 2.
One point the panel was unanimous on: Blockchain technology is definitely on its way into our lives, especially in matters of verifying trust, payment, and asset transfer. Their advice: get comfortable with it.
Read on to find out what else these three experts are saying about this transformative technology.
Should we really put our faith in blockchain technology?
Epstein: Nothing’s perfect, and I would be naïve for saying this is a perfectly flawless system, because it’s not. It’s not 100% secure…We have to recognize that this [technology] is happening. The wave is coming.
Kantor: I agree that we have no other choice. This is probably going to change a lot of things in the financial industry. That said, there is a lot of risk with it, and it is important for us as security professionals to make sure that the implementations are secure. The concept itself has no threat to anyone. It’s a great concept and it works fairly well.
Gross: It sounds easy if you look at it, but it’s hard to actually do if you’re on it. Here is an example of innovation in action. I’ve been dealing with different innovation topics for 20 years now, and for the first time, here I see something that could be described as a “live experiment” that is a combination of economics, game theory, psychology, and computer science.
Why do we need an Internet of Value?
Epstein: You have to be 100% sure that everyone in the world, or everyone in the network, knows who the owner of that asset is, which is why [in the past] we’ve needed third parties for asset transfer and verification. Blockchains allow for the transfer of value directly between two people or institutions in the same way that we transfer information, but we’re doing it without any centralized party. Whereas we can send information in seconds, if I want to sell my house, probate a will, or settle a trade, these things take days, weeks, or months. That’s unacceptable if you believe time is money.
Gross: Yes, I would have a hard time disagreeing because it’s probably one of the early drivers of a whole topic: transfer of value. If you look at what the Internet can do and what IT infrastructures can do as of today, this is clearly the part that’s lacking, or always fell behind and was cumbersome and difficult to use. And you have to rely on third parties to do these things. Now blockchain promises the end user to make their life better. Obviously this is a strong indicator for me that this will be accepted in the long run.
While yes, you can transfer money and process payments online now, there is not the added layer of security that blockchain can provide, because the third party that performs the processing has access to all your data and financial information, including who you are making the payment to.
Epstein: You can certainly go down deep on the asset, but that same transfer that’s happening – it might be happening instantaneously – actually comes at a cost to the end user, which is basically our privacy and our security, because all of our information is actually going through Venmo, PayPal, or Visa.
How should we interpret publicity around Bitcoin?
Kantor: Bitcoins today are widely used and publicized by criminals – the bad guys, the bad girls. This is causing blockchain-based payment platforms to be associated notoriously with negative activities and far less with legitimate usages.
The two main issues that we saw with Bitcoin were the fluctuation in valuation, which brought a lot of speculative investment in the currency rather than actual usage, as well as a lot of criminal activity. Bitcoin became the number-one method of payment for ransomware finances. Today there are several competing coins or different financial institutions trying to overcome these issues and to become more legitimate, but still there are a lot of benefits in the anonymity and in this blockchain novel system that is attracting people who would like to remain unknown. It’s obvious that the anonymity is very attractive to those criminals.
Gross: I’ve seen progress over the last couple of months. If you just look back a year ago, this was a much tougher discussion to have – and they worked hard for that negative image. Fortunately, over the past year or so, there’s so much additional discussion of use cases, and things already branching out from the pure payment and Bitcoin example up to other industries.
I’m positive that over time we will be able to reduce that negative sentiment that was more prevalent a year ago or so and come up with other, more positive sentiments and more highlights to that technology.
Panelists’ comments have been edited for this space. To hear the full discussion, listen to the recording at Money’s Digital Makeover, Part 2. Part 1 is available at Money’s Digital Makeover, Part 1. Read the related blog on Part 1 here.