Last time we discussed the emergence of FinTech and the growth of sharing economy. We also looked at some examples of Blockchain technology and how it is implemented in financial services. Today we will cover the future of Blockchain technology and the expansion of areas where it is implemented.
The Blockchain technology implemented to provide public ledgers for transparency and security, in order to resolve the issue of double billing on Bitcoin, is aggressively being developed for applications such as Bitcoin 2.0 and Ethereum to expand into other diverse fields beyond virtual currency.
In particular, the technological platform and development framework for encryption based virtual economy, Ethereum, has created a protocol to support verification and confirmation of contract relationships called ‘Smart contract’. Efforts for a colored coins method based on the previously validated Bitcoin network are using OP_Return data for other asset issuing records besides virtual currency.
In Korea, the LG CNS ‘unlisted stock platform’ uses a colored coin method asset protocol when issuing unlisted stocks that includes information about the companies listing shares in the OP_Return list.
Efforts are continuously be make to construct independent networks outside of the Bitcoin network. Recently, aside from the R3 CEV Consortium Private·Permissioned Blockchain, techniques such as Side-chain are being implemented to offer virtual currency and various autonomous asset issuing services.
Blockchain has become more involved in the IoT (Internet of Things) that advances virtual currency and ledgers. IBM demonstrated the creation, record and warranty service, Adept (Autonomous Decentralized P2P Telemetry) at CES in 2015.
Blockchain technology is quickly diversifying into applications business scenarios with the development of disruptive technologies other than double billing prevention and other fields where it was previously implemented.
Deloitte, one of the top 4 accounting firms in the world, announced that they are researching the use of Blockchain in corporate audits. As companies’ accounting records are registered in the Blockchain network, Deloitte hopes to increase the speed and objectivity of the process. By verifying detailed records using unaltered and chronological ledgers, audits are expected to be less expensive and more transparent.
The Berklee College of Music released plans to improve working conditions for musicians with a Blockchain technology based copyright payment system. The current structure supports sales of original music online through mediator sites and the majority of the profits go to the sites and not the artists. However, with Blockchain technology, musicians and consumers can buy and sell music directly adding transparency and making it possible to fairly distribute copyright profits.
Also, Blockchain uses transparent ledgers that make it possible to verify real estate deals, vehicle registration, voter registration and election votes as well as stockholder’s lists and meetings, which provides autonomous privacy protection and prevents data falsification.
Earlier this year, as interest in the R3 CEV consortium made up of 42 megabanks from the US, Europe and Japan, Korean banks and financial institutions planned to join the consortium but the reception at R3 was not good for the Korean organizations.
However, R3 recently visited Korean and are commending Korean banks and giving positive feedback about Korean institutions being inducted into the consortium. Aside from a few corporations, Korean financial organizations are postponing participation in the consortium to issues such as effectiveness and high entry fees.
As with the growth of SWIFT (Society for Worldwide Interbank Financial Telecommunication), additional participation fees are expected, and with uncertainty over issues such as technological compatibly and business success, spending large amounts on fees is difficult for many firms.
Under the current circumstances, with the new Blockchain based financial transaction infrastructure at the core of the finance in developed countries, it seems that Korean financial institutions will have no choice but to pay the fees and join the infrastructure. In order to prevent this, the Korean institutions are actively expressing the opinion that more detailed information is required about participation in the consortium and standardization of technology.
Until now, there has been interest in Korea in fields such as simplified payment and Internet banks and emphasis is being placed on the promotion of an incubating center for the sharing of ideas for collaboration between Korean FinTech companies as opposed to spending or investment. Ultimately, there is also the opinion that this trend of sharing ideas without expenditure will certainly cause hesitation concerning new investment at the next global Blockchain consortium as well.
Not only in financial institutions, but the aversion to invest in software by executives at most Korean companies is also driving focus on reducing fees for services. This attitude towards investment within Korean companies is the main factor in the standard of Korean software companies, manpower and technology dropping below the international standard.
Also, the concept of offering ideas for software at no cost through public goods is a major factor in the slow growth of startups that require new and imaginative ideas.
Korea is now at a crossroads where the Korean financial and software industries need to change their ideas starting with FinTech and Blockchain. The existing role of financial institutions should be abandoned and the emergence of a new direct transaction financial service based on Blockchain technology will not permit the current standard of small-scale development within financial institutions to continue by sharing the ideas of small to medium sized software companies.
When considering the rapid global expansion of Blockchain technology through various open source based applications fields, the collaboration of a diverse range of companies will only work to raise the standard of Korean financial software.
It is difficult to deny that the sharing economy, P2P and mobile based business model has absolutely taken hold. The interest and investment in Blockchain technology will cause a quantum jump in the future Korean financial industry to boost it up to the global standard through growth in financial software capabilities, big data, and artificial intelligence.
Written by Seung-Eun Baek, LG CNS
 Ethereum: Blockchain technology based cloud computing platform and programming language. [back to the article]
 Public Goods: Commodities and services that can be utilized jointly by anyone. No consumption benefit is excluded even without fees paid for the commodities or services. [back to the article]