News & Insight

Blockchain February 21, 2019
Blockchain community meet in Zurich asks: are we gaining traction?

Blockchain community meet in Zurich asks: are we gaining traction?

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his month, a mix of blockchain/crypto enthusiasts, professionals from a variety of sectors, from banking to marketing gathered in Zurich to attend UNICOM’s Blockchain Summit. A series of pitches, discussions and talks looked at where the industry is, what kind of traction it is achieving, and its potential impact on consumers.

Sponsored by Bitconsult, the official distributor of Ledger wallets in Switzerland, and Voltex, a blockchain-based energy management system, the conference started off with a number of ‘pitch-like’ presentations from speakers about the use their company makes of blockchain technology, followed by panel discussions and various talks.

Pitch presentations included Voltex, Wealth Initiative and Chain Security.

Voltex

Voltex is a blockchain-based energy management system with integrated peer-to-peer platform, allowing users to trade energy certificates freely without the need for intermediaries. The technology also ensures the traceability of the energy exchanged in this way, and users can pay in fiat as well as cryptocurrencies. The company concentrates on the power station stakeholders, industries and companies that produce, consume or trade in large amounts of electricity. It says annual energy consumption could be reduced by at least CHF 40 billion worldwide as a result of optimisation in the industrial sector.

Wealth Initiative

Douglas Azar, CEO of Wealth Initiative, hopes to revolutionise the way non-bankable assets are seen, used and traded through blockchain technology. Currently, in the art, real estate and collectables markets, intermediary fees are especially high, liquidity is low and sellers know everything about the asset, whereas buyers have very little to no information at all. Wealth Initiative aims to change that by tokenising non-bankable assets on blockchain.

Taking a piece of art for example, data from auction houses will be collected and put onto the blockchain and the nodes verifying data and transactions will be entities or individuals with deep knowledge of the market and high reputation within the industry such as Christies. Non-bankable asset tokenisation might be the new way forward, baked by the sharing economy trend on one side and the desire for higher liquidity on the other.

It also brings several interesting legal issues about. If I own 1% of your yacht and I am allowed to take it for a spin three or four times year, can I go in an adjacent jurisdiction with it? Do I pay for petrol? Do I need an insurance covering the yacht? Who makes sure I bring back the yacht at the time and place where you want it? And what if I contravene the rules? Smart contracts would need to legislate for these and other issues before blockchain can even begin to make it work.

Chain Security

Staying in the smart contracts field, it is now a known fact that over 90% of initial coin offerings (“ICOs”) fail, and 10% of the funds are lost due to hacks. Hacks in smart contracts are supposedly very appealing, because that is where the actual money is, and if carried out successfully, the hack is usually impossible to trace back to the perpetrator. Chain Security audits smart contracts projects for fintech companies, banks and ICOs before and after the launch, making sure the code is ‘hack-proof’.

According to Fabiola Imhof, business developer at Chain Security, if we compare blockchain technology to the internet, we are now in the 70s of blockchain’s history, and thus, a lot is yet to come. Notably, Chain Security might see a rapid growth in the demand for their services if quantum computers see the light of day, as quantum hacking would cause a great problem to cryptography.

Crypto – legal designation

On the legal side, Christopher Murrer, from Baker McKenzie (Zurich) gave an interesting talk about legal and regulatory issues surrounding blockchain and in particular security token offerings, comparing the US and Swiss regulations. He advocated in favour of ‘global token offerings’, which would comply with AML/KYC, securities laws, tax laws and data protection laws. He believes that eventually blockchain centred treaties would be required and would also like to see a standardised form for blockchain-based private placement memorandum.

Blockchain – revolution for consumers?

A panel discussion examined if – and how – blockchain would change customers’ life. Amongst others, the panellists talked about how blockchain could revolutionise education through storing learning paths and developing customised teaching methods, help automate complaint procedures in contracts for sale of goods and services through the use of smart contracts, simplify the way title to land is recorded, and simplify the AML/KYC processes through recording ID documents on a public blockchain, people would retain control of this information and share access with specific people for specific purposes.

Some of those use cases are already being implemented. There is a try-out of blockchain-based ID registration currently going on in Zoug, the Swiss canton now known as the ‘crypto valley’ (home to some of the world’s top blockchain companies). Haiti looked at the possibility of registering title to land on blockchain after the earthquake destroyed all title records. And Sweden has already started to record title to land on blockchain.

The panellists agreed that blockchain is an ‘internet-like’ revolution for transactions and ownership recording. However, they also noted that true revolution would only be possible once all stakeholders recognise each other’s standards and transactions, which may still take some time.

‘Stable coins’

The highlight of the conference in my view, however, was Athanasios Ladopoulos’s talk about ‘stable coins’. Bitcoin’s, Ethereum’s and other cryptocurrencies’ slumps in value over the last year has accelerated the rise of stable coins: ‘stable’ by opposition to existing crypto coins, whose value is highly volatile. And their numbers continue to grow.

A stable coin is cryptocurrency which is collateralised to an underlying asset. Meaning the value of the coin is linked to the underlying asset’s value. Thus, the more stable the underlying asset is, the more stable the coin is. However, currently most ‘stable coins’ are pegged to the US dollar, which is not the most stable asset out there.

Mr Ladopoulos appears to have carried out an in-depth analysis on the subject and shared a number of graphs with the audience. Throughout, he advocated in favour of an underlying asset being a combination of gold and the US dollar. Gold would provide for stability: the asset generally performs well and overperformed during a lot of global crises, whereas currencies took a plunge. And the US dollar would provide for liquidity.

All in all, an interesting conference, highly technical sometimes, with speakers who were asking the right questions.

If you are a blockchain venture or investor and want to speak to lawyers who understand how the blockchain ecosystem and its implications, then please get in touch at enquiries@humphreys.law.

This article was written by Hermance Schaerlig.

Humphreys Law