The #Blockchain is a revolutionary #technology that’s likely to change our lives even more than the internet has over the last twenty years. Ironically – or perhaps appropriately – it was born at a time when the global economy was hitting rock bottom with the collapse of Lehman Brothers in fall 2008.
In November that year, somebody called Satoshi Nakamoto published the white paper ‘#Bitcoin: A Peer-to-Peer Electronic Cash system’. The paper boldly proclaimed that, in the future, online payments could be sent directly from one party to another without going through a financial institution.
With the release of this whitepaper, the Blockchain technology was born and the 1999 vision of legendary economist Milton Friedman became reality: “One thing that’s missing but will soon be developed is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A – the way I can take a $20 bill and hand it over to you, and you may get that without knowing who I am”
Since then, Bitcoin has had a rocky ride due to a number of scandals and a lot of price volatility. Despite these problems the technology has grown in popularity. It has run stably without any outages since the first Bitcoin was mined (i.e. self-sufficiently produced) in January 2009. The total market capitalization of all Bitcoins mined since its release is now approx. US$10bn (September 2016).
In the meantime, many different versions of the original Bitcoin Blockchain have been developed and released – the most prominent examples being Ethereum and Ripple. Even the middlemen that were supposed to be replaced by it – financial institutions – have begun to embrace the Blockchain’s ‘distributed ledger technology’. They see the benefits of an efficiently run, shared, self-sufficient and self-governing distributed ledger infrastructure, and have begun to embrace it with a view to saving billions of dollars in future infrastructure costs.
Unfortunately however, many #banks have yet to understand the benefits of the original version of the technology – the Bitcoin Blockchain. This original version has the potential to open up radical new ways of doing business, allowing cross-border payment services that, through using Bitcoin and other cryptocurrencies, could eventually become free – just as communication via emails, voice over IP and other communication services became free through the internet.
The key principles behind the original Bitcoin Blockchain include decentralization (the network of participants run the technology and everybody can participate with their computer by downloading the open-source software package), trust (through algorithms and cryptography rather than middlemen like corporations acting as ‘agents of trust’), immutability (all transactions in the ledger are non-revocable once confirmed by the consensus mechanism of the Blockchain), transparency (all transactions are publicly observable) and privacy (the only aspect that is not publicly visible are the parties involved in the transactions).
So what does #Switzerland have to do with all of this?
Among the core values of Swiss society are neutrality, politico–economic stability,empowermentof its citizens through direct democracy and federalism and, above all, the right to privacy. While the latter is often confused internationally with the ‘right to hide and cheat’ when it comes to financial matters, this right is close to every Swiss citizen’s heart and has a strong historical pedigree. The fact that this right was abused by many, leading to the abolition of the Swiss banking secrecy law (for non-Swiss domiciled clients) in 2012 after severe international pressure has left many Swiss worried that this may be the beginning of the end of Swiss privacy laws. The loudest critics already believe Switzerland is heading in the direction of an NSA-like future of total government surveillance, and have launched a referendum campaign around protecting the privacy of the Swiss population through constitutional law.
When one compares the key principles of Blockchain technology with these traditional Swiss values, it becomes clear that there’s an almost magical symbiosis between the two. Blockchain aims to empower the individuals who use it, for the first time allowing peer-to-peer transactions to take place without the need for a middleman as an ‘agent of trust’. Early participants in the Bitcoin movement even dreamed of a future without banks and nation states. That future may be some way off. For now, a political system like the Swiss one, with its federalism and direct democracy, would already constitute a step forward for citizens that are suffering under government and public sector corruption.
Blockchain technology provides the possibility of transacting peer-to-peer in the public eye, thus preventing theft, fraud and corruption while theoretically* protecting the individual’s privacy in such transactions. These features of Blockchain technology go hand-in-hand with Swiss privacy laws that protect individuals from government surveillance while also defending them with from criminal activity.
Switzerland has a wonderful opportunity to build on this magical symbiosis between a revolutionary technology and the nation’s core values. In an area around Lake Zug, an area called the ‘Crypto Valley’ is emerging. The valley is home to a myriad Bitcoin and Blockchain companies. It counts more than 20 Blockchain companies, making it one of the biggest clusters in the world for this unique technology. Globally leading companies like Xapo and Ethereum are already calling the Crypto Valley their home.
Another key ingredient making Switzerland a leading Blockchain hub is that it’s home to some of the world’s best universities, both technical, like ETH Zurich and EPFL Lausanne, and business universities, like the University of Zurich and the University of St. Gallen. All these universities have already established dedicated teams that look closely into the technical and business aspects of Blockchain technology and how it will affect future business models of Switzerland’s Financial Services companies.
Switzerland boasts a vibrant innovation ecosystem which takes top spots in global league tables when it comes to competitiveness and innovation. As one of the world’s leading financial centers, Switzerland could play a leading role in supporting the development of Blockchain technology, with a view to making it a competitive advantage for its financial center and beyond. Switzerland could reap the benefits of the Blockchain in other key sectors of its economy too – such as its strong pharmaceutical and watch industries – by proactively embracing this technology for securing supply chains of medical and luxury goods.
But Blockchain technology will not only impact the Swiss economy – it will eventually impact every company and individual on this planet once Blockchain services for supply chain management and digital identity have matured. Once the provenance of any good can be publicly and safely registered on the Blockchain, counterfeiting goods will be a thing of the past.
- Access to Blockchain services can and should be regulated to protect consumers from criminals and as such KYC/AML rules should become applicable to Blockchain services as well.
[linkedinbadge URL=”https://www.linkedin.com/in/gasteiger” connections=”off” mode=”icon” liname=”Daniel Gasteiger”] is Co-Founder of nexussquared – Accelerating Blockchain Ideas
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